ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation) | (IRS Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
PART I | ||
Item 1 | ||
Item 1A | ||
Item 1B | ||
Item 2 | ||
Item 3 | ||
Item 4 | ||
PART II | ||
Item 5 | ||
Item 6 | ||
Item 7 | ||
Item 7A | ||
Item 8 | ||
Item 9 | ||
Item 9A | ||
Item 9B | ||
PART III | ||
Item 10 | ||
Item 11 | ||
Item 12 | ||
Item 13 | ||
Item 14 | ||
PART IV | ||
Item 15 | ||
Item 16 | ||
ITEM 1. | BUSINESS |
• | Biktarvy® is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Biktarvy is a single tablet regimen of a fixed-dose combination of our antiretroviral medications, bictegravir, emtricitabine and tenofovir alafenamide (TAF). |
• | Descovy® is an oral formulation indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection in certain patients. Descovy is a fixed-dose combination of our antiretroviral medications, emtricitabine and TAF. Descovy is also approved by U.S. Food and Drug Administration (FDA) for a pre-exposure prophylaxis (PrEP) indication to reduce the risk of sexually acquired HIV-1 infection in certain at-risk patients. |
• | Odefsey® is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Odefsey is a single tablet regimen of a fixed-dose combination of our antiretroviral medications, emtricitabine and TAF, and rilpivirine marketed by Janssen Sciences Ireland UC, one of the Janssen Pharmaceutical Companies of Johnson & Johnson (Janssen). |
• | Genvoya® is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Genvoya is a single tablet regimen of a fixed-dose combination of our antiretroviral medicines, elvitegravir, cobicistat, emtricitabine and TAF. |
• | Stribild® is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Stribild is a single tablet regimen of a fixed-dose combination of our antiretroviral medications, elvitegravir, cobicistat, tenofovir disoproxil fumarate (TDF) and emtricitabine. |
• | Complera®/Eviplera® is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. The product, marketed in the United States as Complera and in Europe as Eviplera, is a single tablet regimen of a fixed-dose combination of our antiretroviral medications, TDF and emtricitabine, and Janssen’s rilpivirine hydrochloride. |
• | Atripla® is an oral formulation indicated as a complete regimen for the treatment of HIV-1 infection in certain patients. Atripla is a fixed-dose combination of our antiretroviral medications, TDF and emtricitabine, and Bristol-Myers Squibb Company (BMS)’s efavirenz. |
• | Truvada® is an oral formulation indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection in certain patients. It is a fixed-dose combination of our antiretroviral medications, TDF and emtricitabine. Truvada is also approved by FDA for a PrEP indication, in combination with safer sex practices, to reduce the risk of sexually acquired HIV-1 infection in certain at-risk patients. |
• | Vosevi® is an oral formulation of a once-daily, single tablet regimen of sofosbuvir, velpatasvir and voxilaprevir for the re-treatment of chronic hepatitis C virus (HCV) infection in adults: (i) with genotype 1, 2, 3, 4, 5 or 6 previously treated with an NS5A inhibitor-containing regimen or (ii) with genotype 1a or 3 previously treated with a sofosbuvir-containing regimen without an NS5A inhibitor. |
• | Epclusa® is an oral formulation of a once-daily single tablet regimen of sofosbuvir and velpatasvir for the treatment of chronic HCV infection in adults with genotype 1, 2, 3, 4, 5 or 6: (i) without cirrhosis or with compensated cirrhosis or (ii) with decompensated cirrhosis for use in combination with ribavirin. |
• | Harvoni® is an oral formulation of a once-daily, single tablet regimen of ledipasvir and sofosbuvir for the treatment of chronic HCV infection in: (i) adults with genotype 1, 4, 5 or 6 without cirrhosis or with compensated cirrhosis, (ii) adults with genotype 1 infection with decompensated cirrhosis, in combination with ribavirin, (iii) adults with genotype 1 or 4 |
• | Vemlidy® is an oral formulation of TAF dosed once a day for the treatment of chronic hepatitis B virus (HBV) infection in adults with compensated liver disease. |
• | Viread® is an oral formulation of TDF dosed once a day for the treatment of chronic HBV infection in adults and certain pediatric patients. |
• | Yescarta® (axicabtagene ciloleucel) is a chimeric antigen receptor (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. |
• | Zydelig® (idelalisib) is an oral formulation of a kinase inhibitor for the treatment of patients with: (i) relapsed chronic lymphocytic leukemia (CLL), in combination with rituximab, for whom rituximab alone would be considered appropriate therapy due to other co-morbidities, (ii) relapsed follicular B-cell non-Hodgkin lymphoma (FL) in patients who have received at least two prior systemic therapies or (iii) relapsed small lymphocytic lymphoma who have received at least two prior systemic therapies. |
• | Letairis® (ambrisentan) is an oral formulation of an endothelin receptor antagonist for the treatment of pulmonary arterial hypertension (PAH) (WHO Group I) (i) to improve exercise capacity and delay clinical worsening or (ii) in combination with tadalafil to reduce the risks of disease progression and hospitalization for worsening PAH, and to improve exercise ability. |
• | Ranexa® (ranolazine) is an oral formulation of an extended-release tablet of an antianginal for the treatment of chronic angina. |
• | AmBisome® (amphotericin B liposome for injection) is a proprietary liposomal formulation of amphotericin B, an antifungal agent, for the treatment of serious invasive fungal infections caused by various fungal species in adults. |
Product Candidates | Description | |
Phase 2 | ||
GS-6207 | GS-6207, a capsid inhibitor, is being evaluated for the treatment of HIV infection. | |
Selgantolimod | Selgantolimod, a TLR-8 agonist, is being evaluated for the treatment of chronic HBV infection. | |
Phase 1 | ||
Vesatolimod | Vesatolimod, a TLR-7 agonist, is being evaluated as a potential cure for HIV infection. | |
Elipovimab | Elipovimab, a broadly neutralizing antibody, is being evaluated as a potential cure for HIV infection. | |
GS-4224 | GS-4224, a PD-L1 inhibitor, is being evaluated for the treatment of chronic HBV infection. |
Product Candidates | Description | |
Phase 3 | ||
Filgotinib | Filgotinib, a JAK1 inhibitor, is being evaluated for the treatment of (i) Crohn’s disease, (ii) ulcerative colitis and (iii) psoriatic arthritis. | |
Cilofexor | Cilofexor, a FXR agonist, is being evaluated for the treatment of primary sclerosing cholangitis. | |
GLPG-1690(2) | GLPG-1690, an autotaxin inhibitor, is being evaluated for the treatment of idiopathic pulmonary fibrosis. | |
Phase 2 | ||
Filgotinib | Filgotinib is being evaluated for the treatment of (i) ankylosing spondylitis and (ii) uveitis. | |
GS-4875 | GS-4875, a TPL2 inhibitor, is being evaluated for the treatment of ulcerative colitis. | |
GLPG-1972(1) | GLPG-1972, an ADAMTS-5 inhibitor, is being evaluated for the treatment of osteoarthritis. | |
Selonsertib | Selonsertib, an ASK-1 inhibitor, is being evaluated for the treatment of diabetic kidney disease. | |
Cilofexor, firsocostat and selonsertib combinations | Cilofexor, firsocostat (an ACC inhibitor) and selonsertib combinations are being evaluated for the treatment of nonalcoholic steatohepatitis (NASH). | |
GLPG-1690(2) | GLPG-1690 is being evaluated for the treatment of systemic sclerosis. | |
GLPG-1205(1) | GLPG-1205, a GPR84 inhibitor, is being evaluated for the treatment of idiopathic pulmonary fibrosis. | |
Phase 1 | ||
GLPG-0555(1) | GLPG-0555 is being evaluated for the treatment of inflammatory diseases. | |
GLPG-3312(1) | GLPG-3312 is being evaluated for the treatment of inflammatory diseases. | |
GLPG-3970(1) | GLPG-3970 is being evaluated for the treatment of inflammatory diseases. | |
GLPG-3667(1) | GLPG-3667 is being evaluated for the treatment of inflammatory diseases. |
Product Candidates | Description | |
Phase 3 | ||
Axicabtagene ciloleucel | Axicabtagene ciloleucel is being evaluated for the treatment of second line DLBCL. | |
Phase 2 | ||
Axicabtagene ciloleucel | Axicabtagene ciloleucel is being evaluated for the treatment of indolent non-Hodgkin lymphoma. Axicabtagene ciloleucel is also being evaluated for the treatment of (i) first line DLBCL and (ii) DLBCL in combination with either rituximab or lenalidomide. | |
KTE-X19 | KTE-X19, a CAR T cell therapy, is being evaluated for the treatment of (i) adult and pediatric acute lymphoblastic leukemia and (ii) CLL. | |
Phase 1 | ||
Axicabtagene ciloleucel | Axicabtagene ciloleucel is being evaluated for the treatment of DLBCL in combination with utomilumab. | |
KITE-718 | KITE-718, a MAGE A3/A6, is being evaluated for the treatment of solid tumors. | |
KITE-439 | KITE-439, an HPV E7, is being evaluated for the treatment of solid tumors. | |
GS-1423 | GS-1423, a bi-specific antibody, is being evaluated for the treatment of solid tumors. | |
GS-4224 | GS-4224, an oral PD-L1 inhibitor, is being evaluated for the treatment of solid tumors. | |
AGEN1223(1) | AGEN1223, a bi-specific mAb, is being evaluated for the treatment of multiple indications in oncology. | |
AGEN2373(1) | AGEN2373, an anti-CD137 mAb, is being evaluated for the treatment of multiple indications in oncology. |
(1) | Optionable partner program |
(2) | Optioned partner program |
Phase 3 Product Candidates | Patent Expiration | |||||
U.S. | E.U. | |||||
Product Candidates in Inflammatory and Fibrotic Diseases: | ||||||
Filgotinib for the treatment of rheumatoid arthritis, Crohn’s disease, ulcerative colitis and psoriatic arthritis | 2030 | 2030 | ||||
GLPG-1690 for the treatment of idiopathic pulmonary fibrosis | 2034 | 2034 | ||||
Cilofexor for the treatment of primary sclerosing cholangitis | 2032 | 2032 | ||||
Product Candidate in Oncology: | ||||||
Axicabtagene ciloleucel for the treatment of second line DLBCL | 2027 | * |
* | The composition of matter patent has expired in the European Union. In the European Union and the United States, patent applications are pending relating to proprietary manufacturing processes of Kite, a Gilead company. |
Products | Patent Expiration | |||||
U.S. | E.U. | |||||
Letairis | 2018 | (1) | 2020 | |||
Ranexa | 2019 | (2) | 2023 | |||
Atripla | 2021 | (3) | 2017 | |||
Truvada | 2021 | (3) | 2017 | (4) | ||
Descovy | 2022 | (5) | 2026 | |||
Vemlidy | 2022 | (5) | 2026 | |||
Complera/Eviplera | 2025 | 2026 | ||||
Zydelig | 2025 | (6) | 2025 | (6) | ||
Odefsey | 2025 | 2026 | ||||
Yescarta | 2027 | (6) | - | (7) | ||
Stribild | 2029 | 2028 | ||||
Genvoya | 2029 | 2028 | ||||
Harvoni | 2030 | 2030 | (6) | |||
Epclusa | 2032 | 2032 | ||||
Biktarvy | 2033 | 2033 | ||||
Vosevi | 2034 | 2033 | ||||
_________________________________________ | ||||||
These estimated expiration dates do not include any potential additional exclusivity (e.g., patent term extensions, supplementary protection certificates or pediatric exclusivity) that has not yet been granted. |
(1) | In 2017, Gilead and Watson Laboratories, Inc. reached an agreement to settle a patent litigation matter related to Letairis. |
(2) | In 2013, Gilead and Lupin Limited reached an agreement to settle a patent litigation matter related to Ranexa. |
(3) | In 2014, Gilead and Teva Pharmaceuticals reached an agreement to settle the patent litigation concerning patents that protect emtricitabine in our Truvada and Atripla products. For additional information, see Item 1A. Risk Factors “We face significant competition.” |
(4) | Supplementary protection certificates (SPCs) have been granted in several European countries. The validity of these SPCs has been challenged by several generic manufacturers, many of whom launched their competing products in 2017. |
(5) | An application for patent term extension was filed in the United States that, if granted, would extend the U.S. expiration date to at least 2025. |
(6) | Applications for patent term extensions are pending in the United States and/or SPCs are pending in one or more countries in the European Union for these products. |
(7) | The composition of matter patent has expired in the European Union. In the European Union and the United States, patent applications are pending relating to proprietary manufacturing processes of Kite. |
• | Foster City, California: We conduct process chemistry research and formulation development activities, manufacture API and drug product for our clinical trials and oversee our third-party contract manufacturers. |
• | San Dimas and La Verne, California: We manufacture AmBisome and also package and label the majority of our commercial products for distribution to the Americas and Pacific Rim. |
• | Oceanside, California: We utilize the facility for clinical manufacturing and process development of our biologics candidates. |
• | El Segundo, California: We utilize the facility for clinical and commercial manufacturing and processing of Yescarta. |
• | Cork and Dublin, Ireland: We utilize the Cork facility for commercial manufacturing, packaging and labeling of our products. We also perform quality control testing, labeling, packaging and final release of many of our products for distribution to the European Union and other international markets. The Dublin facility is also responsible for distribution activities for our products. |
• | Edmonton, Canada: We conduct process chemistry research and scale-up activities for our clinical development candidates, manufacture API for both investigational and commercial products and conduct chemical development activities to improve existing commercial manufacturing processes. |
• | Hoofddorp, Netherlands: We utilize the facility for commercial manufacturing and processing of Yescarta. |
• | Phase 1. The drug candidate is given to a small number of healthy human control subjects or patients suffering from the indicated disease, to test for safety, dose tolerance, pharmacokinetics, metabolism, distribution and excretion. |
• | Phase 2. The drug candidate is given to a limited patient population to determine the effect of the drug candidate in treating the disease, the best dose of the drug candidate, and the possible side effects and safety risks of the drug candidate. It is not uncommon for a drug candidate that appears promising in Phase 1 clinical trials to fail in the more rigorous and extensive Phase 2 clinical trials. |
• | Phase 3. If a drug candidate appears to be effective and safe in Phase 2 clinical trials, Phase 3 clinical trials are commenced to confirm those results. Phase 3 clinical trials are conducted over a longer term, involve a significantly larger population, are conducted at numerous sites in different geographic regions and are carefully designed to provide reliable and conclusive data regarding the safety and benefits of a drug candidate. It is not uncommon for a drug candidate that appears promising in Phase 2 clinical trials to fail in the more rigorous and extensive Phase 3 clinical trials. |
ITEM 1A. | RISK FACTORS |
• | As our products are used over a longer period of time in many patients and in combination with other products, and additional studies are conducted, new issues with respect to safety, resistance and interactions with other drugs may arise, which could cause us to provide additional warnings or contraindications on our labels, narrow our approved indications or halt sales of a product, each of which could reduce our revenues. |
• | As our products mature, private insurers and government payers often reduce the amount they will reimburse patients for these products, which increases pressure on us to reduce prices. |
• | If physicians do not see the benefit of our HIV products, the sales of our HIV products will be limited. |
• | As new branded or generic products are introduced into major markets, our ability to maintain pricing and market share may be affected. |
• | educating and certifying medical personnel regarding the procedures and the potential side effect profile of our therapy, such as the potential adverse side effects related to cytokine release syndrome and neurologic toxicities, in compliance with the Risk Evaluation and Mitigation Strategy program required by FDA for Yescarta; |
• | using medicines to manage adverse side effects of our therapy, such as tocilizumab and corticosteroids, which may not be available in sufficient quantities, may not adequately control the side effects and/or may have a detrimental impact on the efficacy of the treatment; |
• | developing a robust and reliable process, while limiting contamination risks, for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient; and |
• | conditioning patients with chemotherapy in advance of administering our therapy, which may increase the risk of adverse side effects. |
• | Foreign Currency Exchange: In 2019, approximately 25% of our product sales were outside the United States. Because a significant percentage of our product sales is denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates. Overall, we are a net receiver of foreign currencies, and therefore, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar. While we use foreign currency exchange forward and options contracts to hedge a percentage of our forecasted international sales, our hedging program does not eliminate our exposure to currency fluctuations. We cannot predict future fluctuations in the foreign currency exchange rates of the U.S. dollar. If the U.S. dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation, our results of operations will be adversely affected and our stock price may decline. |
• | Anti-Bribery: We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws that govern our international operations with respect to payments to government officials. Our international operations are heavily regulated and require significant interaction with foreign officials. Though our policies mandate compliance with these anti-bribery laws, we operate in parts of the world that have experienced governmental corruption to some degree. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than local custom. It is possible that certain of our practices may be challenged under these laws. In addition, despite our training and compliance program, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees and agents. Enforcement activities under anti-bribery laws could subject us to administrative and legal proceedings and actions, which could result in civil and criminal sanctions, including monetary penalties and exclusion from health care programs. |
• | Other risks inherent in conducting a global business include: |
◦ | Our international operations, including the use of third-party manufacturers, distributors and collaboration arrangements outside the United States, expose us to increased risk of theft of our intellectual property and other proprietary technology, particularly in jurisdictions with less robust intellectual property protections than the United States, as well as restrictive government actions against our intellectual property and other foreign assets such as nationalization, expropriation or the imposition of compulsory licenses. |
◦ | We may be subject to protective economic policies taken by foreign governments, such as trade protection measures and import and export licensing requirements, which may result in the imposition of trade sanctions or similar restrictions by the United States or other governments. |
◦ | Our operations may be adversely affected if there is instability, disruption or destruction in a geographic region where we operate, regardless of cause, including war, terrorism, social unrest and political changes and instability. For example, on January 31, 2020, the United Kingdom (UK) withdrew from the European Union (EU), which initiated a transition period during which the UK and EU will negotiate their future relationship. There is uncertainty concerning any changes in the laws and regulations governing the conduct of clinical trials and marketing of medicinal products in the UK following the country’s exit from the EU. This uncertainty may lead to significant complexity and risks for our company and our ability to research, develop and market medicinal products in the EU and the UK. See also “Business disruptions from natural or man-made disasters may adversely affect our revenues and materially reduce our earnings.” |
• | we are unable to control the resources our corporate partners devote to our programs or products; |
• | disputes may arise with respect to the ownership of rights to technology developed with our corporate partners; |
• | disagreements with our corporate partners could cause delays in, or termination of, the research, development or commercialization of product candidates or result in litigation or arbitration; |
• | contracts with our corporate partners may fail to provide significant protection or may fail to be effectively enforced if one of these partners fails to perform; |
• | our corporate partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue alternative technologies or products either on their own or in collaboration with our competitors; |
• | our corporate partners with marketing rights may choose to pursue competing technologies or to devote fewer resources to the marketing of our products than they do to products of their own development; and |
• | our distributors and our corporate partners may be unable to pay us. |
• | obtain patents and licenses to patent rights; |
• | preserve trade secrets and internal know-how; |
• | defend against infringement of our patents and efforts to invalidate them; and |
• | operate without infringing on the intellectual property of others. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
(1) | This section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any of our filings under the Securities Act or the Exchange Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
(2) | Shows the cumulative return on investment assuming an investment of $100 in our common stock, the NBI Index and the S&P 500 Index on December 31, 2014, and assuming that all dividends were reinvested. |
Number of Common Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-average Exercise Price of Outstanding Options, Warrants and Rights(1) | Number of Common Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) | ||||||||
Plan Category | (a) | (b) | (c) | |||||||
Equity Compensation plans approved by security holders: | ||||||||||
2004 Equity Incentive Plan | 19.5 | $ | 61.35 | 79.2 | ||||||
Employee Stock Purchase Plan(2) | 8.9 | |||||||||
Total equity compensation plans approved by security holders | 19.5 | $ | 61.35 | 88.1 | ||||||
Equity Compensation plans not approved by security holders | — | — | — | |||||||
Total | 19.5 | $ | 61.35 | 88.1 | ||||||
_________________________________________ |
(1) | Does not take into account 18 million restricted stock units, performance share awards or units and phantom shares, which have no exercise price and were granted under our 2004 Equity Incentive Plan. |
(2) | Under our Employee Stock Purchase Plan, participants are permitted to purchase our common stock at a discount on certain dates through payroll deductions within a pre-determined purchase period. Accordingly, these numbers are not determinable. |
Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of a Publicly Announced Program | Maximum Fair Value of Shares that May Yet Be Purchased Under the Program | |||||||||||
October 1 - October 31, 2019 | 712 | $ | 63.84 | 688 | $ | 3,459 | ||||||||
November 1 - November 30, 2019 | 768 | $ | 65.14 | 557 | $ | 3,423 | ||||||||
December 1 - December 31, 2019 | 393 | $ | 66.59 | 372 | $ | 3,398 | ||||||||
Total | 1,873 | (1) | $ | 64.95 | 1,617 | (1) | ||||||||
_________________________________________ |
(1) | The difference between the total number of shares purchased and the total number of shares purchased as part of a publicly announced program is due to shares of common stock withheld by us from employee restricted stock unit awards in order to satisfy applicable tax withholding obligations. |
ITEM 6. | SELECTED FINANCIAL DATA |
Year Ended December 31, | |||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
CONSOLIDATED STATEMENT OF INCOME DATA(1): | |||||||||||||||||||
Total revenues (2) | $ | 22,449 | $ | 22,127 | $ | 26,107 | $ | 30,390 | $ | 32,639 | |||||||||
Total costs and expenses | $ | 18,162 | $ | 13,927 | $ | 11,983 | $ | 12,757 | $ | 10,446 | |||||||||
Income from operations(2) | $ | 4,287 | $ | 8,200 | $ | 14,124 | $ | 17,633 | $ | 22,193 | |||||||||
Provision for income taxes(3) | $ | (204 | ) | $ | 2,339 | $ | 8,885 | $ | 3,609 | $ | 3,553 | ||||||||
Net income(2)(3)(4) | $ | 5,364 | $ | 5,460 | $ | 4,644 | $ | 13,488 | $ | 18,106 | |||||||||
Net income attributable to Gilead(2)(3)(4) | $ | 5,386 | $ | 5,455 | $ | 4,628 | $ | 13,501 | $ | 18,108 | |||||||||
Net income per share attributable to Gilead common stockholders - basic(2)(3)(4) | $ | 4.24 | $ | 4.20 | $ | 3.54 | $ | 10.08 | $ | 12.37 | |||||||||
Shares used in per share calculation - basic | 1,270 | 1,298 | 1,307 | 1,339 | 1,464 | ||||||||||||||
Net income per share attributable to Gilead common stockholders - diluted(2)(3)(4) | $ | 4.22 | $ | 4.17 | $ | 3.51 | $ | 9.94 | $ | 11.91 | |||||||||
Shares used in per share calculation - diluted | 1,277 | 1,308 | 1,319 | 1,358 | 1,521 | ||||||||||||||
Cash dividends declared per share | $ | 2.52 | $ | 2.28 | $ | 2.08 | $ | 1.84 | $ | 1.29 |
December 31, | |||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
CONSOLIDATED BALANCE SHEET DATA(1): | |||||||||||||||||||
Cash, cash equivalents and marketable debt securities(5) | $ | 25,840 | $ | 31,512 | $ | 36,694 | $ | 32,380 | $ | 26,208 | |||||||||
Working capital(3)(4)(5)(6) | $ | 20,537 | $ | 25,231 | $ | 20,188 | $ | 10,370 | $ | 14,044 | |||||||||
Total assets(5)(6) | $ | 61,627 | $ | 63,675 | $ | 70,283 | $ | 56,977 | $ | 51,716 | |||||||||
Other long-term obligations(6) | $ | 1,009 | $ | 1,040 | $ | 558 | $ | 297 | $ | 395 | |||||||||
Long-term debt, including current portion(5) | $ | 24,593 | $ | 27,322 | $ | 33,542 | $ | 26,346 | $ | 22,055 | |||||||||
Retained earnings(2)(3)(4)(6) | $ | 19,388 | $ | 19,024 | $ | 19,012 | $ | 18,154 | $ | 18,001 | |||||||||
Total stockholders’ equity(2)(3)(4)(6) | $ | 22,650 | $ | 21,534 | $ | 20,501 | $ | 19,363 | $ | 19,113 |
_________________________________________ | |
(1) | See Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Annual Report on Form 10-K for a description of our results of operations for 2019. |
(2) | In 2018, we adopted Accounting Standards Update No. 2014-09 (Topic 606) “Revenue from Contracts with Customers” using the modified retrospective method. As such, results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 605 “Revenue Recognition.” |
(3) | In December 2019, we recorded a deferred tax benefit of $1.2 billion related to intangible asset transfers from a foreign subsidiary to Ireland and the United States. In 2018, we recorded a deferred tax charge of $588 million related to a transfer of acquired intangible assets from a foreign subsidiary to the United States. In December 2017, we recorded an estimated $5.5 billion net charge related to the enactment of the Tax Cuts and Jobs Act (Tax Reform). Tax Reform also lowered the corporate tax rate in the United States from 35% to 21% effective for tax years beginning after December 31, 2017. See Note 19. Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional details. |
(4) | Investments in equity securities, other than equity method investments, for which we have not elected the fair value method of accounting, are recorded at fair market value, if fair value is readily determinable and, beginning January 1, 2018, unrealized gains and losses are included in Other income (expense), net on our Consolidated Statements of Income. For periods presented prior to January 1, 2018, unrealized gains and losses were included in accumulated other comprehensive income as a separate component of stockholders’ equity. |
(5) | In 2019, we repaid $2.8 billion principal amount of our senior unsecured notes at maturity. In 2018, we repaid $1.8 billion principal amount of our senior unsecured notes at maturity and repaid $4.5 billion of term loans borrowed in connection with our acquisition of Kite Pharma, Inc. In 2017, in connection with the acquisition of Kite Pharma, Inc., we issued $3.0 billion aggregate principal amount of senior unsecured notes and borrowed $6.0 billion aggregate principal amount term loan facility credit agreement, of which $1.5 billion was repaid in 2017. In 2016, we issued $5.0 billion principal amount of senior unsecured notes and repaid $285 million of principal balance of convertible senior notes and $700 million of principal balance of senior unsecured notes at maturity. In 2015, we issued $10.0 billion principal amount of senior unsecured notes and repaid $213 million of principal balance of convertible senior notes at maturity. |
(6) | In 2019, we adopted Accounting Standards Update No. 2016-02 (Topic 842) “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities for operating leases with a lease term greater than one year. We adopted Topic 842 using the modified retrospective method. As such, results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 840 “Leases.” See Note 1. Organization and Summary of Significant Accounting Policies and Note 13. Leases, of the Notes to Consolidated Financial Statements included in Item 8 of our Annual Report on Form 10-K for further information. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
• | Licensing and collaboration agreements with The Rockefeller University, Novartis AG and Lyndra Therapeutics, Inc. |
• | Approval of Vosevi and Biktarvy by the China National Medical Products Administration. |
• | Approval of a PrEP indication for Descovy by FDA. |
• | Approval of Biktarvy and Epclusa by Japan’s Ministry of Health, Labour and Welfare (MHLW). |
• | Collaborations with Kyverna Therapeutics, Inc. Glympse Bio, Inc., Renown Institute for Health Innovation, Goldfinch Bio, Inc., Insitro, Inc., Novo Nordisk A/S and Yuhan Corporation. |
• | Agreement with Eisai Co., Ltd. for the distribution and co-promotion of filgotinib in Japan, pending regulatory approval from Japan’s MHLW, for the treatment of RA. |
• | Submission of a New Drug Application (NDA) under priority review to FDA and submission of a NDA to Japan’s MHLW for filgotinib. |
• | 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 NASH. While the study did not meet its primary endpoint, we continued to analyze the ATLAS data to determine appropriate next steps for these therapies. |
• | Collaboration with Galapagos and equity investment in Galapagos to gain access to Galapagos’ current and future product portfolio. See Note 11. Collaborative and Other Arrangements of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. |
• | European Medicines Agency’s validation of the marketing authorization application for filgotinib; the application is now under evaluation by the Agency. |
• | FDA’s acceptance of our Biologics License Application and granting Priority Review designation for KTE-X19 for the treatment of adult patients with relapsed or refractory MCL. |
• | European Medicines Agency’s validation of the marketing authorization application for KTE-X19; the application is now under evaluation by the Agency. |
• | Collaborations with Carna Biosciences Inc., Nurix Therapeutics, Inc., Humanigen, Inc. and Kiniksa Pharmaceuticals, Ltd. |
• | We have put in place a diverse, highly experienced leadership team. Senior leadership changes in 2019 included the appointment of Daniel P. O’Day as Chairman and Chief Executive Officer, Andrew D. Dickinson as Executive Vice President and Chief Financial Officer, Merdad V. Parsey as Chief Medical Officer, Christi L. Shaw as Chief Executive Officer of Kite, Johanna Mercier as Chief Commercial Officer; the departures of John G. McHutchison, Chief Scientific Officer and Head of Research and Development, Gregg H. Alton, Chief Patient Officer, and Katie L. Watson, Executive Vice President, Human Resources; and the planned retirement of Robin L. Washington from her role as Executive Vice President and Chief Financial Officer. |
• | Donation to the U.S. Centers for Disease Control and Prevention of up to 2.4 million bottles of Truvada and Descovy annually until 2030 for uninsured Americans at risk for HIV. |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Revenues: | ||||||||||||||||||
Product sales | $ | 22,119 | 2 | % | $ | 21,677 | (16 | )% | $ | 25,662 | ||||||||
Royalty, contract and other revenues | 330 | (27 | )% | 450 | 1 | % | 445 | |||||||||||
Total revenues | $ | 22,449 | 1 | % | $ | 22,127 | (15 | )% | $ | 26,107 |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Atripla | $ | 600 | (50 | )% | $ | 1,206 | (33 | )% | $ | 1,806 | ||||||||
Biktarvy | 4,738 | * | 1,184 | * | — | |||||||||||||
Complera/Eviplera | 406 | (38 | )% | 653 | (32 | )% | 966 | |||||||||||
Descovy | 1,500 | (5 | )% | 1,581 | 30 | % | 1,218 | |||||||||||
Genvoya | 3,931 | (15 | )% | 4,624 | 26 | % | 3,674 | |||||||||||
Odefsey | 1,655 | 4 | % | 1,598 | 44 | % | 1,106 | |||||||||||
Stribild | 369 | (43 | )% | 644 | (39 | )% | 1,053 | |||||||||||
Truvada | 2,813 | (6 | )% | 2,997 | (4 | )% | 3,134 | |||||||||||
Other HIV(1) | 47 | (23 | )% | 61 | 5 | % | 58 | |||||||||||
Revenue share - Symtuza(2) | 379 | * | 79 | * | — | |||||||||||||
Total HIV | 16,438 | 12 | % | 14,627 | 12 | % | 13,015 | |||||||||||
AmBisome | 407 | (3 | )% | 420 | 15 | % | 366 | |||||||||||
Ledipasvir/Sofosbuvir(3) | 643 | (47 | )% | 1,222 | (72 | )% | 4,370 | |||||||||||
Letairis | 618 | (34 | )% | 943 | 6 | % | 887 | |||||||||||
Ranexa | 216 | (72 | )% | 758 | 6 | % | 717 | |||||||||||
Sofosbuvir/Velpatasvir(4) | 1,965 | — | % | 1,966 | (44 | )% | 3,510 | |||||||||||
Vemlidy | 488 | 52 | % | 321 | * | 122 | ||||||||||||
Viread | 243 | (21 | )% | 307 | (71 | )% | 1,046 | |||||||||||
Vosevi | 257 | (35 | )% | 396 | 35 | % | 293 | |||||||||||
Yescarta | 456 | 73 | % | 264 | * | 7 | ||||||||||||
Zydelig | 103 | (23 | )% | 133 | (11 | )% | 149 | |||||||||||
Other(5) | 285 | (11 | )% | 320 | (73 | )% | 1,180 | |||||||||||
Total product sales | $ | 22,119 | 2 | % | $ | 21,677 | (16 | )% | $ | 25,662 |
_________________________________________ | |
* | Percentage is greater than 100% |
(1) | Includes Emtriva and Tybost |
(2) | Represents our revenue from cobicistat (C), emtricitabine (FTC) and tenofovir alafenamide (TAF) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland UC |
(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 Cayston, Hepsera and Sovaldi |
• | Descovy (FTC/TAF)-based products: Biktarvy, Descovy, Genvoya, Odefsey and Revenue Share - Symtuza |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
U.S. | $ | 9,716 | 34 | % | $ | 7,261 | 47 | % | $ | 4,955 | ||||||||
Europe | 1,857 | 22 | % | 1,528 | 71 | % | 892 | |||||||||||
Other locations | 630 | 127 | % | 277 | 83 | % | 151 | |||||||||||
Total | $ | 12,203 | 35 | % | $ | 9,066 | 51 | % | $ | 5,998 | ||||||||
% of total product sales | 55 | % | 42 | % | 23 | % | ||||||||||||
% of HIV product sales | 74 | % | 62 | % | 46 | % |
• | Truvada (FTC/TDF)-based products: Atripla, Complera/Eviplera, Stribild and Truvada |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
U.S. | $ | 3,569 | (18 | )% | $ | 4,353 | (9 | )% | $ | 4,771 | ||||||||
Europe | 450 | (45 | )% | 815 | (51 | )% | 1,677 | |||||||||||
Other locations | 169 | (49 | )% | 332 | (35 | )% | 511 | |||||||||||
Total | $ | 4,188 | (24 | )% | $ | 5,500 | (21 | )% | $ | 6,959 | ||||||||
% of total product sales | 19 | % | 25 | % | 27 | % |
• | HCV products: Epclusa, Harvoni, Sovaldi, Vosevi and Authorized Generics of Epclusa and Harvoni |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
U.S. | $ | 1,465 | (28 | )% | $ | 2,023 | (65 | )% | $ | 5,854 | ||||||||
Europe | 742 | (17 | )% | 896 | (52 | )% | 1,853 | |||||||||||
Other locations | 729 | (5 | )% | 767 | (46 | )% | 1,430 | |||||||||||
Total | $ | 2,936 | (20 | )% | $ | 3,686 | (60 | )% | $ | 9,137 | ||||||||
% of total product sales | 13 | % | 17 | % | 36 | % |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Total product sales | $ | 22,119 | 2 | % | $ | 21,677 | (16 | )% | $ | 25,662 | ||||||||
Cost of goods sold | $ | 4,675 | (4 | )% | $ | 4,853 | 11 | % | $ | 4,371 | ||||||||
Product gross margin | 79 | % | 78 | % | 83 | % |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
R&D expenses | $ | 9,106 | 81 | % | $ | 5,018 | 34 | % | $ | 3,734 |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Up-front collaboration and licensing expenses | $ | 4,251 | * | $ | 278 | 25 | % | $ | 222 | |||||||||
Personnel, infrastructure and other expenses | 2,016 | 7 | % | 1,876 | 34 | % | 1,399 | |||||||||||
Clinical studies and outside services | 1,750 | 5 | % | 1,665 | (11 | )% | 1,881 | |||||||||||
IPR&D impairment charges | 800 | (2 | )% | 820 | * | — | ||||||||||||
Stock-based compensation expenses | 289 | (24 | )% | 379 | 63 | % | 232 | |||||||||||
Total | $ | 9,106 | 81 | % | $ | 5,018 | 34 | % | $ | 3,734 |
_________________________________________ | |
* | Percentage is greater than 100% |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
SG&A expenses | $ | 4,381 | 8 | % | $ | 4,056 | 5 | % | $ | 3,878 |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Other income (expense), net | $ | 1,868 | 176 | % | $ | 676 | 29 | % | $ | 523 |
(In millions, except percentages) | 2019 | Change | 2018 | Change | 2017 | |||||||||||||
Effective tax rate | (4.0 | )% | (34.0 | )% | 30.0 | % | (35.7 | )% | 65.7 | % | ||||||||
Provision for income taxes | $ | (204 | ) | $ | 2,339 | $ | 8,885 |
December 31, | |||||||||
(In millions) | 2019 | 2018 | |||||||
Cash, cash equivalents and marketable debt securities | $ | 25,840 | $ | 31,512 | |||||
Working capital | $ | 20,537 | $ | 25,231 |
(In millions) | 2019 | 2018 | 2017 | ||||||||||
Cash provided by (used in): | |||||||||||||
Operating activities | $ | 9,144 | $ | 8,400 | $ | 11,898 | |||||||
Investing activities | $ | (7,817 | ) | $ | 14,355 | $ | (16,069 | ) | |||||
Financing activities | $ | (7,634 | ) | $ | (12,318 | ) | $ | 3,393 |
• | the commercial performance of our current and future products; |
• | the progress and scope of our R&D efforts, including preclinical studies and clinical trials; |
• | the cost, timing and outcome of regulatory reviews; |
• | the expansion of our sales and marketing capabilities; |
• | the possibility of acquiring additional manufacturing capabilities or office facilities; |
• | the possibility of acquiring other companies or new products; |
• | debt service requirements; |
• | the establishment of additional collaborative relationships with other companies; and |
• | costs associated with the defense, settlement and adverse results of government investigations and litigation. |
(in millions) | Balance at Beginning of Year | Decrease/(Increase) to Product Sales | Payments | Balance at End of Year | ||||||||||||
Year ended December 31, 2019: | ||||||||||||||||
Activity related to 2019 sales | $ | — | $ | 13,791 | $ | (9,920 | ) | $ | 3,871 | |||||||
Activity related to sales prior to 2019 | 4,420 | (279 | ) | (3,904 | ) | 237 | ||||||||||
Total | $ | 4,420 | $ | 13,512 | $ | (13,824 | ) | $ | 4,108 | |||||||
Year ended December 31, 2018: | ||||||||||||||||
Activity related to 2018 sales | $ | — | $ | 14,784 | $ | (10,953 | ) | $ | 3,831 | |||||||
Activity related to sales prior to 2018 | 5,044 | 41 | (4,496 | ) | 589 | |||||||||||
Total | $ | 5,044 | $ | 14,825 | $ | (15,449 | ) | $ | 4,420 |
• | estimates of revenues and operating profits related to the products or product candidates; |
• | the probability of technical and regulatory success for unapproved product candidates considering their stages of development; |
• | the time and resources needed to complete the development and approval of product candidates; |
• | the life of the potential commercialized products and associated risks, including the inherent difficulties and uncertainties in developing a product candidate such as obtaining FDA and other regulatory approvals; and |
• | risks related to the viability of and potential alternative treatments in any future target markets. |
Payments due by Period | ||||||||||||||||||||
(In millions) | Total | 2020 | 2021-2022 | 2023-2024 | Thereafter | |||||||||||||||
Debt(1) | $ | 38,123 | $ | 3,456 | $ | 5,421 | $ | 3,962 | $ | 25,284 | ||||||||||
Operating lease obligations(2) | 850 | 125 | 226 | 187 | 312 | |||||||||||||||
Purchase obligations(3) | 1,682 | 1,315 | 267 | 84 | 16 | |||||||||||||||
Transition tax payable(4) | 4,639 | 148 | 946 | 2,068 | 1,477 | |||||||||||||||
Total(5)(6) | $ | 45,294 | $ | 5,044 | $ | 6,860 | $ | 6,301 | $ | 27,089 |
_________________________________________ | |
(1) | Debt consists of senior unsecured notes and includes principal and future interest payments. Interest payments for our fixed rate senior unsecured notes are incurred and calculated based on terms of the related notes. See Note 12. Debt and Credit Facilities of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. |
(2) | See Note 13. Leases of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. |
(3) | Amounts primarily relate to capital commitments, active pharmaceutical ingredients (API) with minimum purchase commitments and certain inventory-related items, advertising and R&D commitments. Significant R&D commitments related to clinical studies performed by contract research organizations (CROs) are excluded from the table as material CRO contracts are cancelable by us. In addition, the table does not reflect approximately $220 million of additional minimum purchase commitments resulting from an API contract amended in January 2020. |
(4) | In connection with Tax Reform we recorded a federal income tax payable for transition tax on the mandatory deemed repatriation of foreign earnings that is payable over an eight-year period. The amounts included in the table above represent the remaining federal income tax payable at December 31, 2019. |
(5) | As of December 31, 2019, our long-term income taxes payable includes unrecognized tax benefits, interest and penalties totaling $1.6 billion. Due to the high degree of uncertainty on the timing of future cash settlement and other events that could extinguish these unrecognized tax benefits, we are unable to estimate the period of cash settlement and therefore we have excluded these unrecognized tax benefits. |
(6) | We have committed to make potential future milestone and other payments to third parties as part of licensing, collaboration, development and other arrangements. Payments under these agreements generally are contingent upon certain future events including achievement of certain developmental, regulatory or commercial milestones. Because the achievement of these events is neither probable nor reasonably estimable and such potential payments have not been recorded in our Consolidated Balance Sheets, they have not been included in the table above. |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
• | safety and preservation of principal and diversification of risk; |
• | liquidity of investments sufficient to meet cash flow requirements; and |
• | competitive after-tax rate of return. |
Expected Maturity | Total Fair Value | |||||||||||||||||||||||||||||||
(In millions, except percentages) | 2020 | 2021 | 2022 | 2023 | 2024 | Thereafter | Total | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Available-for-sale debt securities | $ | 15,012 | $ | 1,453 | $ | 5 | $ | 3 | $ | 4 | $ | 23 | $ | 16,500 | $ | 16,500 | ||||||||||||||||
Average interest rate | 1.88 | % | 1.98 | % | 2.04 | % | 3.50 | % | 3.53 | % | 2.18 | % | ||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Fixed rate long-term debt, including current portion(1): | $ | 2,500 | $ | 2,250 | $ | 1,500 | $ | 750 | $ | 1,750 | $ | 16,000 | $ | 24,750 | $ | 27,298 | ||||||||||||||||
Average interest rate | 2.51 | % | 4.44 | % | 2.82 | % | 2.50 | % | 3.70 | % | 4.21 | % |
_________________________________________ | |
(1) | Amounts represent principal balances. In addition to the fixed rate long-term debt, we have a $2.5 billion five-year revolving credit facility that matures in May 2021. There were no amounts outstanding under the five-year revolving credit facility as of December 31, 2019. See Note 12. Debt and Credit Facilities of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
Government and commercial rebates | ||
Description of the Matter | As more fully described in Note 1, the Company estimates reductions to its revenues for amounts payable to payers and healthcare providers in the United States under various government and commercial rebate programs in the period that the related sales occur. Rebates may vary by product, payer and individual payer plans, which may not be known at the point of sale. Estimated reductions to revenue are based on products sold, historical payer mix, historical discount rates, and various other estimated and actual data, adjusted for current period expectations. Auditing the Company’s estimated reductions to revenue for rebates was complex and involved significant judgment, particularly in assessing the reasonableness of estimated payer utilization and discount rates applied to sales during the period. These estimates rely heavily on historical data that is adjusted for changes in utilization and discount rates over time. |
How We Addressed the Matter in Our Audit | We evaluated and tested the design and operating effectiveness of the Company’s internal controls over management’s estimation and review of reductions from revenue for rebate programs, including controls to assess the utilization rate and discount rate assumptions. We also tested the completeness and accuracy of data utilized in the controls, and the accuracy of calculations supporting management’s estimates. To test management’s estimation methodology for determining the utilization and discount rates, our audit procedures included, among others, evaluating evidence contrary to the estimated amounts, performing a sensitivity analysis on the rates used in the estimates and performing a comparison of actual payments related to amounts accrued during the current and prior year. | |
Valuation of in-process research and development intangible assets | ||
Description of the Matter | At December 31, 2019, the Company’s in-process research and development (IPR&D) intangible assets were $1.1 billion. The Company recorded an impairment charge of $800 million during the year. As discussed in Note 1, intangible assets with indefinite useful lives related to purchased IPR&D projects are measured at their respective fair values as of the acquisition date and are considered indefinite-lived until the completion or abandonment of the associated R&D efforts. The Company tests indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if they become aware of any events or changes that would indicate the fair values of the assets are below their carrying amounts. Auditing the impairment tests was complex due to the significant judgment required in estimating the fair values of the IPR&D intangible assets. In particular, the fair value estimates were sensitive to significant assumptions (e.g., discount rate, projected research and development costs, probability of technical success, addressable patient population, projected market share and product profitability), which were affected by expected future market or economic conditions. | |
How We Addressed the Matter in Our Audit | We evaluated and tested the design and operating effectiveness of the Company’s internal controls over the determination of the estimated fair value of the IPR&D intangible assets. For example, we tested controls over management’s review of the valuation models and the significant assumptions used to develop the fair value estimates of the indefinite lived intangible assets. We also tested management’s controls to validate that the data used in the fair value estimates were complete and accurate. To test the estimated fair value of the Company’s IPR&D intangible assets, our audit procedures included, among others, evaluating the Company’s use of appropriate valuation methodologies with the assistance of a valuation specialist, testing the significant assumptions discussed above and testing the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, to historical results of the Company’s business and other guideline companies within the same industry and to other relevant factors. In addition, to evaluate the probability of technical success, we considered the phase of development of the IPR&D projects, and the Company’s history of obtaining regulatory approval. We also performed a sensitivity analysis of the significant assumptions to evaluate the change in the estimated fair values of the IPR&D intangible assets resulting from changes in the assumptions. |
December 31, | |||||||
2019 | 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | $ | |||||
Short-term marketable securities | |||||||
Accounts receivable, net of allowances of $758 and $583, respectively | |||||||
Inventories | |||||||
Prepaid and other current assets | |||||||
Total current assets | |||||||
Property, plant and equipment, net | |||||||
Long-term marketable securities | |||||||
Intangible assets, net | |||||||
Goodwill | |||||||
Other long-term assets | |||||||
Total assets | $ | $ | |||||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | $ | |||||
Accrued government and other rebates | |||||||
Other accrued liabilities | |||||||
Current portion of long-term debt and other obligations, net | |||||||
Total current liabilities | |||||||
Long-term debt, net | |||||||
Long-term income taxes payable | |||||||
Other long-term obligations | |||||||
Commitments and contingencies (Note 14) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, par value $0.001 per share; 5 shares authorized; none outstanding | |||||||
Common stock, par value $0.001 per share; 5,600 authorized; 1,266 and 1,282 shares issued and outstanding, respectively | |||||||
Additional paid-in capital | |||||||
Accumulated other comprehensive income | |||||||
Retained earnings | |||||||
Total Gilead stockholders’ equity | |||||||
Noncontrolling interest | |||||||
Total stockholders’ equity | |||||||
Total liabilities and stockholders’ equity | $ | $ |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Revenues: | ||||||||||||
Product sales | $ | $ | $ | |||||||||
Royalty, contract and other revenues | ||||||||||||
Total revenues | ||||||||||||
Costs and expenses: | ||||||||||||
Cost of goods sold | ||||||||||||
Research and development expenses | ||||||||||||
Selling, general and administrative expenses | ||||||||||||
Total costs and expenses | ||||||||||||
Income from operations | ||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ||||||
Other income (expense), net | ||||||||||||
Income before provision for income taxes | ||||||||||||
Provision for income taxes | ( | ) | ||||||||||
Net income | ||||||||||||
Net (loss) income attributable to noncontrolling interest | ( | ) | ||||||||||
Net income attributable to Gilead | $ | $ | $ | |||||||||
Net income per share attributable to Gilead common stockholders - basic | $ | $ | $ | |||||||||
Shares used in per share calculation - basic | ||||||||||||
Net income per share attributable to Gilead common stockholders - diluted | $ | $ | $ | |||||||||
Shares used in per share calculation - diluted |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | $ | $ | |||||||||
Other comprehensive income (loss): | ||||||||||||
Net foreign currency translation gain (loss), net of tax | ( | ) | ( | ) | ||||||||
Available-for-sale debt securities: | ||||||||||||
Net unrealized gain, net of tax | ||||||||||||
Reclassifications to net income, net of tax | ( | ) | ( | ) | ||||||||
Net change | ||||||||||||
Cash flow hedges: | ||||||||||||
Net unrealized gain (loss), net of tax | ( | ) | ||||||||||
Reclassification to net income, net of tax | ( | ) | ||||||||||
Net change | ( | ) | ( | ) | ||||||||
Other comprehensive income (loss) | ( | ) | ||||||||||
Comprehensive income | ||||||||||||
Comprehensive (loss) income attributable to noncontrolling interest | ( | ) | ||||||||||
Comprehensive income attributable to Gilead | $ | $ | $ |
Gilead Stockholders’ Equity | Noncontrolling Interest | Total Stockholders’ Equity | |||||||||||||||||||||||||
Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | ||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||
Balance at December 31, 2016 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Change in noncontrolling interest | — | — | ( | ) | — | — | ( | ) | ( | ) | |||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||
Issuances under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||
Issuances under equity incentive plans | — | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Repurchases of common stock | ( | ) | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||||
Dividends declared ($2.08 per share) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Balance at December 31, 2017 | |||||||||||||||||||||||||||
Change in noncontrolling interest | — | — | — | — | |||||||||||||||||||||||
Net income | — | — | — | — | |||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | ||||||||||||||||||||||
Issuances under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||
Issuances under equity incentive plans | — | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Repurchases of common stock | ( | ) | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||||
Dividends declared ($2.28 per share) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Cumulative effect from the adoption of new accounting standards | — | — | — | ( | ) | — | |||||||||||||||||||||
Balance at December 31, 2018 | |||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | ( | ) | |||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | — | — | ||||||||||||||||||||||
Issuances under employee stock purchase plan | — | — | — | — | |||||||||||||||||||||||
Issuances under equity incentive plans | — | — | — | — | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||
Repurchases of common stock | ( | ) | — | ( | ) | — | ( | ) | — | ( | ) | ||||||||||||||||
Dividends declared ($2.52 per share) | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||
Cumulative effect from the adoption of new accounting standards (Note 1) | — | — | — | — | — | ||||||||||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ | $ | $ |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Operating Activities: | ||||||||||||
Net income | $ | $ | $ | |||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation expense | ||||||||||||
Amortization expense | ||||||||||||
Stock-based compensation expense | ||||||||||||
Deferred income taxes | ( | ) | ( | ) | ||||||||
Net gains from equity securities | ( | ) | ( | ) | ||||||||
Up-front and milestone expense related to collaborative and other arrangements | ||||||||||||
In-process research and development impairment | ||||||||||||
Write-downs for slow moving and excess raw material and work in process inventory | ||||||||||||
Other | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable, net | ( | ) | ||||||||||
Inventories | ( | ) | ( | ) | ( | ) | ||||||
Prepaid expenses and other | ( | ) | ||||||||||
Accounts payable | ( | ) | ( | ) | ( | ) | ||||||
Income taxes payable | ( | ) | ||||||||||
Accrued liabilities | ( | ) | ( | ) | ( | ) | ||||||
Net cash provided by operating activities | ||||||||||||
Investing Activities: | ||||||||||||
Purchases of marketable debt securities | ( | ) | ( | ) | ( | ) | ||||||
Proceeds from sales of marketable debt securities | ||||||||||||
Proceeds from maturities of marketable debt securities | ||||||||||||
Up-front and milestone payments related to collaborative and other arrangements | ( | ) | ||||||||||
Purchases of equity securities | ( | ) | ( | ) | ||||||||
Acquisitions, net of cash acquired | ( | ) | ||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ||||||
Other | ( | ) | ( | ) | ||||||||
Net cash (used in) provided by investing activities | ( | ) | ( | ) | ||||||||
Financing Activities: | ||||||||||||
Proceeds from debt financing, net of issuance costs | ||||||||||||
Proceeds from issuances of common stock | ||||||||||||
Repurchases of common stock | ( | ) | ( | ) | ( | ) | ||||||
Repayments of debt and other obligations | ( | ) | ( | ) | ( | ) | ||||||
Payment of dividends | ( | ) | ( | ) | ( | ) | ||||||
Other | ( | ) | ( | ) | ( | ) | ||||||
Net cash (used in) provided by financing activities | ( | ) | ( | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||||||
Net change in cash and cash equivalents | ( | ) | ( | ) | ||||||||
Cash and cash equivalents at beginning of period | ||||||||||||
Cash and cash equivalents at end of period | $ | $ | $ | |||||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Interest paid, net of amounts capitalized | $ | $ | $ | |||||||||
Income taxes paid | $ | $ | $ |
1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
• | We account for shipping and handling activities that are performed after a customer has obtained control of a good as fulfillment costs rather than as separate performance obligations; and |
• | If we expect, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, we do not adjust the amount of consideration for the effects of a significant financing component. |
Description | Estimated Useful Life |
Buildings and improvements | Shorter of 35 years or useful life |
Laboratory and manufacturing equipment | 4-10 |
Office and computer equipment | 3-7 |
Leasehold improvements | Shorter of useful life or lease term |
2. | REVENUES |
Year Ended December 31, 2019 | Year Ended December 31, 2018 | Year Ended December 31, 2017(6) | ||||||||||||||||||||||||||||||||||||||||||||||
U.S. | Europe | Other International | Total | U.S. | Europe | Other International | Total | U.S. | Europe | Other International | Total | |||||||||||||||||||||||||||||||||||||
Product Sales: | ||||||||||||||||||||||||||||||||||||||||||||||||
Atripla | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||
Biktarvy | ||||||||||||||||||||||||||||||||||||||||||||||||
Complera/Eviplera | ||||||||||||||||||||||||||||||||||||||||||||||||
Descovy | ||||||||||||||||||||||||||||||||||||||||||||||||
Genvoya | ||||||||||||||||||||||||||||||||||||||||||||||||
Odefsey | ||||||||||||||||||||||||||||||||||||||||||||||||
Stribild | ||||||||||||||||||||||||||||||||||||||||||||||||
Truvada | ||||||||||||||||||||||||||||||||||||||||||||||||
Other HIV(1) | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenue share – Symtuza(2) | ||||||||||||||||||||||||||||||||||||||||||||||||
AmBisome | ||||||||||||||||||||||||||||||||||||||||||||||||
Ledipasvir/Sofosbuvir(3) | ||||||||||||||||||||||||||||||||||||||||||||||||
Letairis | ||||||||||||||||||||||||||||||||||||||||||||||||
Ranexa | ||||||||||||||||||||||||||||||||||||||||||||||||
Sofosbuvir/Velpatasvir(4) | ||||||||||||||||||||||||||||||||||||||||||||||||
Vemlidy | ||||||||||||||||||||||||||||||||||||||||||||||||
Viread | ||||||||||||||||||||||||||||||||||||||||||||||||
Vosevi | ||||||||||||||||||||||||||||||||||||||||||||||||
Yescarta | ||||||||||||||||||||||||||||||||||||||||||||||||
Zydelig | ||||||||||||||||||||||||||||||||||||||||||||||||
Other(5) | ||||||||||||||||||||||||||||||||||||||||||||||||
Total product sales | ||||||||||||||||||||||||||||||||||||||||||||||||
Royalty, contract and other revenues | ||||||||||||||||||||||||||||||||||||||||||||||||
Total revenues | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ |
_________________________________________ | |
(1) | Includes Emtriva and Tybost. |
(2) | Represents our revenue from cobicistat (C), emtricitabine (FTC) and tenofovir alafenamide (TAF) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland UC (Janssen). |
(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 Cayston, Hepsera and Sovaldi. |
(6) | The information for the year ended December 31, 2017 has not been adjusted in accordance with our modified retrospective adoption of Topic 606 and continues to be reported in accordance with our historical accounting under Topic 605. |
3. | FAIR VALUE MEASUREMENTS |
• | Level 1 inputs include quoted prices in active markets for identical assets or liabilities; |
• | Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For our marketable securities, we review trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and |
• | Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation. |
December 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||
Available-for-sale debt securities: | |||||||||||||||||||||||||||||||
U.S. treasury securities | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Certificates of deposit | |||||||||||||||||||||||||||||||
U.S. government agencies securities | |||||||||||||||||||||||||||||||
Non-U.S. government securities | |||||||||||||||||||||||||||||||
Corporate debt securities | |||||||||||||||||||||||||||||||
Residential mortgage and asset-backed securities | |||||||||||||||||||||||||||||||
Equity securities: | |||||||||||||||||||||||||||||||
Equity investment in Galapagos | |||||||||||||||||||||||||||||||
Money market funds | |||||||||||||||||||||||||||||||
Other publicly traded equity securities | |||||||||||||||||||||||||||||||
Deferred compensation plan | |||||||||||||||||||||||||||||||
Foreign currency derivative contracts | |||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||
Deferred compensation plan | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Foreign currency derivative contracts | |||||||||||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ | $ | $ |
December 31, 2019 | December 31, 2018 | ||||||
Prepaid and other current assets | $ | $ | |||||
Other long-term assets | |||||||
Total | $ | $ |
December 31, 2019 | December 31, 2018 | ||||||
Cash and cash equivalents | $ | $ | |||||
Prepaid and other current assets | |||||||
Other long-term assets | |||||||
Total | $ | $ |
December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||||||||||||
U.S. treasury securities | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||
Certificates of deposit | ||||||||||||||||||||||||||||||||
U.S. government agencies securities | ( | ) | ||||||||||||||||||||||||||||||
Non-U.S. government securities | ( | ) | ||||||||||||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Residential mortgage and asset-backed securities | ( | ) | ||||||||||||||||||||||||||||||
Total | $ | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ |
December 31, 2019 | December 31, 2018 | ||||||
Cash and cash equivalents | $ | $ | |||||
Short-term marketable securities | |||||||
Long-term marketable securities | |||||||
Total | $ | $ |
December 31, 2019 | |||||||
Amortized Cost | Fair Value | ||||||
Within one year | $ | $ | |||||
After one year through five years | |||||||
After five years | |||||||
Total | $ | $ |
Less Than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Corporate debt securities | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
December 31, 2018 | ||||||||||||||||||||||||
U.S. treasury securities | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||
U.S. government agencies securities | ( | ) | ( | ) | ||||||||||||||||||||
Non-U.S. government securities | ( | ) | ( | ) | ||||||||||||||||||||
Corporate debt securities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
Residential mortgage and asset-backed securities | ( | ) | ( | ) | ||||||||||||||||||||
Total | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | $ |
5. | DERIVATIVE FINANCIAL INSTRUMENTS |
December 31, 2019 | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Classification | Fair Value | Classification | Fair Value | |||||||||
Derivatives designated as hedges: | ||||||||||||
Foreign currency exchange contracts | Other current assets | $ | Other accrued liabilities | $ | ( | ) | ||||||
Foreign currency exchange contracts | Other long-term assets | Other long-term obligations | ( | ) | ||||||||
Total derivatives designated as hedges | ( | ) | ||||||||||
Derivatives not designated as hedges: | ||||||||||||
Foreign currency exchange contracts | Other current assets | Other accrued liabilities | ||||||||||
Total derivatives not designated as hedges | ||||||||||||
Total derivatives | $ | $ | ( | ) |
December 31, 2018 | ||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||
Classification | Fair Value | Classification | Fair Value | |||||||||
Derivatives designated as hedges: | ||||||||||||
Foreign currency exchange contracts | Other current assets | $ | Other accrued liabilities | $ | ( | ) | ||||||
Foreign currency exchange contracts | Other long-term assets | Other long-term obligations | ||||||||||
Total derivatives designated as hedges | ( | ) | ||||||||||
Derivatives not designated as hedges: | ||||||||||||
Foreign currency exchange contracts | Other current assets | Other accrued liabilities | ||||||||||
Total derivatives not designated as hedges | ||||||||||||
Total derivatives | $ | $ | ( | ) |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Derivatives designated as hedges: | ||||||||||||
Gain (loss) recognized in AOCI | $ | $ | $ | ( | ) | |||||||
Gain (loss) reclassified from AOCI into product sales | $ | $ | ( | ) | $ | ( | ) | |||||
Gain recognized in Other income (expense), net | $ | $ | $ | |||||||||
Derivatives not designated as hedges: | ||||||||||||
Gain (loss) recognized in Other income (expense), net | $ | $ | ( | ) | $ | ( | ) |
Gross Amounts Not Offset on the Consolidated Balance Sheets | ||||||||||||||||||||||||
Description | Gross Amounts of Recognized Assets/Liabilities | Gross Amounts Offset on the Consolidated Balance Sheets | Amounts of Assets/Liabilities Presented on the Consolidated Balance Sheets | Derivative Financial Instruments | Cash Collateral Received/Pledged | Net Amount (Legal Offset) | ||||||||||||||||||
As of December 31, 2019 | ||||||||||||||||||||||||
Derivative assets | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
Derivative liabilities | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
As of December 31, 2018 | ||||||||||||||||||||||||
Derivative assets | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||
Derivative liabilities | ( | ) | ( | ) |
Cash and cash equivalents | $ | |||
Identifiable intangible assets | ||||
Indefinite-lived intangible assets - IPR&D | ||||
Outlicense acquired | ||||
Deferred income taxes | ( | ) | ||
Other assets acquired (liabilities assumed), net | ||||
Total identifiable net assets | ||||
Goodwill | ||||
Total consideration transferred | $ |
7. | INVENTORIES |
December 31, | ||||||||
2019 | 2018 | |||||||
Raw materials | $ | $ | ||||||
Work in process | ||||||||
Finished goods | ||||||||
Total | $ | $ | ||||||
Reported as: | ||||||||
Inventories | $ | $ | ||||||
Other long-term assets | ||||||||
Total | $ | $ |
8. | PROPERTY, PLANT AND EQUIPMENT |
December 31, | ||||||||
2019 | 2018 | |||||||
Land and land improvements | $ | $ | ||||||
Buildings and improvements (including leasehold improvements) | ||||||||
Laboratory and manufacturing equipment | ||||||||
Office and computer equipment | ||||||||
Construction in progress | ||||||||
Subtotal | ||||||||
Less accumulated depreciation and amortization | ( | ) | ( | ) | ||||
Total | $ | $ |
9. | INTANGIBLE ASSETS |
December 31, 2019 | December 31, 2018 | |||||||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Foreign Currency Translation Adjustment | Net Carrying Amount | |||||||||||||||||||||||||
Finite-lived assets | ||||||||||||||||||||||||||||||||
Intangible asset - sofosbuvir | $ | $ | ( | ) | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
Intangible asset - axicabtagene ciloleucel (DLBCL) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Intangible asset - Ranexa | ( | ) | ( | ) | ||||||||||||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Total finite-lived assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
Indefinite-lived assets - IPR&D | — | ( | ) | — | ( | ) | ||||||||||||||||||||||||||
Total intangible assets | $ | $ | ( | ) | $ | ( | ) | $ | $ | $ | ( | ) | $ | ( | ) | $ |
Fiscal Year | Amount | ||
2020 | $ | ||
2021 | |||
2022 | |||
2023 | |||
2024 | |||
Thereafter | |||
Total | $ |
10. | OTHER FINANCIAL INFORMATION |
December 31, | ||||||||
2019 | 2018 | |||||||
Compensation and employee benefits | $ | $ | ||||||
Income taxes payable | ||||||||
Accrued payment for marketing-related rights acquired from Japan Tobacco Inc. | ||||||||
Other accrued expenses | ||||||||
Total | $ | $ |
11. | COLLABORATIVE AND OTHER ARRANGEMENTS |
12. | DEBT AND CREDIT FACILITIES |
December 31, | ||||||||||||||
Type of Borrowing | Issue Date | Due Date | Interest Rate | 2019 | 2018 | |||||||||
Senior Unsecured | September 2017 | March 2019 | 3-month LIBOR + 0.22% | $ | $ | |||||||||
Senior Unsecured | March 2014 | April 2019 | ||||||||||||
Senior Unsecured | September 2017 | September 2019 | ||||||||||||
Senior Unsecured | September 2017 | September 2019 | 3-month LIBOR + 0.25% | |||||||||||
Senior Unsecured | November 2014 | February 2020 | ||||||||||||
Senior Unsecured | September 2015 | September 2020 | ||||||||||||
Senior Unsecured | March 2011 | April 2021 | ||||||||||||
Senior Unsecured | December 2011 | December 2021 | ||||||||||||
Senior Unsecured | September 2016 | March 2022 | ||||||||||||
Senior Unsecured | September 2015 | September 2022 | ||||||||||||
Senior Unsecured | September 2016 | September 2023 | ||||||||||||
Senior Unsecured | March 2014 | April 2024 | ||||||||||||
Senior Unsecured | November 2014 | February 2025 | ||||||||||||
Senior Unsecured | September 2015 | March 2026 | ||||||||||||
Senior Unsecured | September 2016 | March 2027 | ||||||||||||
Senior Unsecured | September 2015 | September 2035 | ||||||||||||
Senior Unsecured | September 2016 | September 2036 | ||||||||||||
Senior Unsecured | December 2011 | December 2041 | ||||||||||||
Senior Unsecured | March 2014 | April 2044 | ||||||||||||
Senior Unsecured | November 2014 | February 2045 | ||||||||||||
Senior Unsecured | September 2015 | March 2046 | ||||||||||||
Senior Unsecured | September 2016 | March 2047 | ||||||||||||
Total debt, net | ||||||||||||||
Less current portion | ||||||||||||||
Total long-term debt, net | $ | $ |
2020 | 2021 | 2022 | 2023 | 2024 | ||||||||||||||||
Contractual Maturities | $ | $ | $ | $ | $ |
13. | LEASES |
Classification | Amount | |||||
Right-of-use assets, net | Other long-term assets | $ | ||||
Lease liabilities - current | Other accrued liabilities | $ | ||||
Lease liabilities - noncurrent | Other long-term obligations | $ | ||||
Weighted average remaining lease term | ||||||
Weighted average discount rate | % |
Year Ended | ||||
December 31, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities | $ | |||
Right-of-use assets obtained in exchange for lease liabilities | $ |
Fiscal Year | Amount | |||
2020 | $ | |||
2021 | ||||
2022 | ||||
2023 | ||||
2024 | ||||
Thereafter | ||||
Total undiscounted lease payments | ||||
Less: imputed interest | ( | ) | ||
Total discounted lease payments | $ |
Fiscal Year | Amount | ||
2019 | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total minimum lease payments | $ |
14. | COMMITMENTS AND CONTINGENCIES |
15. | STOCKHOLDERS’ EQUITY |
Year ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Shares repurchased and retired | ||||||||||||
Amount | $ | $ | $ | |||||||||
Average price per share | $ | $ | $ |
Year ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Reduction of common stock and APIC | $ | $ | $ | |||||||||
Charge to retained earnings | $ | $ | $ |
2019 | 2018 | |||||||||||||||
Dividend Per Share | Amount | Dividend Per Share | Amount | |||||||||||||
First quarter | $ | $ | $ | $ | ||||||||||||
Second quarter | ||||||||||||||||
Third quarter | ||||||||||||||||
Fourth quarter | ||||||||||||||||
Total | $ | $ | $ | $ |
Foreign Currency Translation | Unrealized Gains and Losses on Available-for-Sale Debt Securities | Unrealized Gains and Losses on Cash Flow Hedges | Total | |||||||||||||
Balance at December 31, 2017 | $ | $ | $ | ( | ) | $ | ||||||||||
Reclassifications to retained earnings as a result of the adoption of new accounting standards | ( | ) | ( | ) | ||||||||||||
Balance at January 1, 2018 | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
Net unrealized (loss) gain | ( | ) | ||||||||||||||
Reclassifications to net income | ||||||||||||||||
Net current period other comprehensive (loss) income | ( | ) | ||||||||||||||
Balance at December 31, 2018 | $ | $ | ( | ) | $ | $ | ||||||||||
Net unrealized gain | ||||||||||||||||
Reclassifications to net income | ( | ) | ( | ) | ( | ) | ||||||||||
Net current period other comprehensive income (loss) | ( | ) | ||||||||||||||
Balance at December 31, 2019 | $ | $ | $ | $ |
Shares (in millions) | Weighted- Average Exercise Price (in dollars) | Weighted-Average Remaining Contractual Term (years) | Aggregate Intrinsic Value (in millions) | ||||||||||
Outstanding at December 31, 2018 | $ | ||||||||||||
Granted | $ | ||||||||||||
Forfeited | ( | ) | $ | ||||||||||
Expired | ( | ) | $ | ||||||||||
Exercised | ( | ) | $ | ||||||||||
Outstanding at December 31, 2019 | $ | $ | |||||||||||
Exercisable at December 31, 2019 | $ | $ | |||||||||||
Expected to vest, net of estimated forfeitures at December 31, 2019 | $ | $ |
RSUs | PSUs | |||||||||||||
Shares | Weighted- Average Grant Date Fair Value Per Share | Shares (1) | Weighted- Average Grant Date Fair Value Per Share(1) | |||||||||||
Outstanding at December 31, 2018 | $ | $ | ||||||||||||
Granted | $ | $ | ||||||||||||
Vested | ( | ) | $ | ( | ) | $ | ||||||||
Forfeited | ( | ) | $ | ( | ) | $ | ||||||||
Outstanding at December 31, 2019 | $ | $ | ||||||||||||
_________________________________________ |
(1) |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Cost of goods sold | $ | $ | $ | |||||||||
Research and development expenses | ||||||||||||
Selling, general and administrative expenses | ||||||||||||
Stock-based compensation expense included in total costs and expenses | ||||||||||||
Income tax effect(1) | ( | ) | ( | ) | ||||||||
Stock-based compensation expense, net of tax | $ | $ | $ | |||||||||
_______________________ |
(1) | Income tax effect for the year ended December 31, 2019 included a $ |
Year Ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
Expected volatility: | |||||||||
Stock options | % | % | % | ||||||
ESPP | % | % | % | ||||||
Expected term in years: | |||||||||
Stock options | |||||||||
ESPP | |||||||||
Risk-free interest rate: | |||||||||
Stock options | % | % | % | ||||||
ESPP | % | % | % | ||||||
Expected dividend yield | % | % | % |
17. | NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income attributable to Gilead | $ | $ | $ | |||||||||
Shares used in per share calculation - basic | ||||||||||||
Dilutive effect of stock options and equivalents | ||||||||||||
Shares used in per share calculation - diluted | ||||||||||||
Net income per share attributable to Gilead common stockholders - basic | $ | $ | $ | |||||||||
Net income per share attributable to Gilead common stockholders - diluted | $ | $ | $ |
18. | SEGMENT INFORMATION |
Year Ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
AmerisourceBergen Corp. | % | % | % | ||||||
Cardinal Health, Inc. | % | % | % | ||||||
McKesson Corp. | % | % | % |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Domestic | $ | $ | $ | |||||||||
Foreign | ||||||||||||
Income before provision for income taxes | $ | $ | $ |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Federal: | ||||||||||||
Current | $ | $ | $ | |||||||||
Deferred | ( | ) | ( | ) | ||||||||
State: | ||||||||||||
Current | ||||||||||||
Deferred | ( | ) | ( | ) | ( | ) | ||||||
Foreign: | ||||||||||||
Current | ||||||||||||
Deferred | ( | ) | ( | ) | ||||||||
( | ) | |||||||||||
Provision for income taxes | $ | ( | ) | $ | $ |
Year Ended December 31, | |||||||||
2019 | 2018 | 2017 | |||||||
Federal statutory rate | % | % | % | ||||||
State taxes, net of federal benefit | % | % | % | ||||||
Foreign earnings at different rates | ( | )% | ( | )% | ( | )% | |||
Research and other credits | ( | )% | ( | )% | ( | )% | |||
US tax on foreign earnings | % | % | % | ||||||
Deferred tax - intra-entity transfer of intangible assets | ( | )% | % | % | |||||
Transition tax | % | ( | )% | % | |||||
Deferred tax revaluation | % | % | ( | )% | |||||
Settlement of tax examinations | ( | )% | ( | )% | % | ||||
Other | % | % | % | ||||||
Effective tax rate | ( | )% | % | % |
December 31, | ||||||||
2019 | 2018 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carryforwards | $ | $ | ||||||
Stock-based compensation | ||||||||
Reserves and accruals not currently deductible | ||||||||
Excess of tax basis over book basis of intangible assets | ||||||||
Up-front and milestone payments | ||||||||
Research and other credit carryforwards | ||||||||
Other, net | ||||||||
Total deferred tax assets before valuation allowance | ||||||||
Valuation allowance | ( | ) | ( | ) | ||||
Total deferred tax assets | ||||||||
Deferred tax liabilities: | ||||||||
Property, plant and equipment | ( | ) | ( | ) | ||||
Excess of book basis over tax basis of intangible assets | ( | ) | ( | ) | ||||
Other | ( | ) | ( | ) | ||||
Total deferred tax liabilities | ( | ) | ( | ) | ||||
Net deferred tax assets (liabilities) | $ | $ | ( | ) |
Year Ended December 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Balance, beginning of period | $ | $ | $ | |||||||||
Tax positions related to current year: | ||||||||||||
Additions | ||||||||||||
Reductions | ||||||||||||
Tax positions related to prior years: | ||||||||||||
Additions | ||||||||||||
Reductions | ( | ) | ||||||||||
Settlements | ( | ) | ( | ) | ( | ) | ||||||
Lapse of statute of limitations | ( | ) | ( | ) | ( | ) | ||||||
Balance, end of period | $ | $ | $ |
1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter | |||||||||||||
2019 | ||||||||||||||||
Total revenues | $ | $ | $ | $ | ||||||||||||
Gross profit on product sales | $ | $ | $ | $ | ||||||||||||
Net income (loss)(1)(2) | $ | $ | $ | ( | ) | $ | ||||||||||
Net income (loss) attributable to Gilead(1)(2) | $ | $ | $ | ( | ) | $ | ||||||||||
Net income (loss) per share attributable to Gilead common stockholders - basic(1)(2)(3) | $ | $ | $ | ( | ) | $ | ||||||||||
Net income (loss) per share attributable to Gilead common stockholders - diluted(1)(2)(3) | $ | $ | $ | ( | ) | $ | ||||||||||
2018 | ||||||||||||||||
Total revenues | $ | $ | $ | $ | ||||||||||||
Gross profit on product sales | $ | $ | $ | $ | ||||||||||||
Net income(4) | $ | $ | $ | $ | ||||||||||||
Net income attributable to Gilead(4) | $ | $ | $ | $ | ||||||||||||
Net income per share attributable to Gilead common stockholders - basic(4)(5) | $ | $ | $ | $ | ||||||||||||
Net income per share attributable to Gilead common stockholders - diluted(4)(5) | $ | $ | $ | $ | ||||||||||||
_________________________________________ |
(1) | Amounts for the third quarter of 2019 included up-front collaboration and licensing expenses of $ |
(2) | Amounts for the fourth quarter of 2019 included a $ |
(3) | Amounts for the fourth quarter of 2019 included a net favorable impact of $ |
(4) | Amounts for the fourth quarter of 2018 included an $ |
(5) | Amounts for the fourth quarter of 2018 included an unfavorable impact of $ |
Balance at Beginning of Period | Additions/Charged to Expense | Deductions | Balance at End of Period | |||||||||||||
Year ended December 31, 2019: | ||||||||||||||||
Accounts receivable allowances(1) | $ | $ | $ | $ | ||||||||||||
Sales return allowance | $ | $ | $ | $ | ||||||||||||
Valuation allowances for deferred tax assets | $ | $ | $ | $ | ||||||||||||
Year ended December 31, 2018: | ||||||||||||||||
Accounts receivable allowances(1) | $ | $ | $ | $ | ||||||||||||
Sales return allowance | $ | $ | $ | $ | ||||||||||||
Valuation allowances for deferred tax assets | $ | $ | $ | $ | ||||||||||||
Year ended December 31, 2017: | ||||||||||||||||
Accounts receivable allowances(1) | $ | $ | $ | $ | ||||||||||||
Sales return allowance | $ | $ | $ | $ | ||||||||||||
Valuation allowances for deferred tax assets | $ | $ | $ | $ | ||||||||||||
_________________________________________ |
(1) | Allowances are for doubtful accounts, cash discounts and chargebacks. |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
Exhibit Footnote | Exhibit Number | Description of Document | ||
(1) | 3.1 | |||
(1) | 3.2 | |||
4.1 | Reference is made to Exhibit 3.1 and Exhibit 3.2 | |||
(2) | 4.2 | |||
(2) | 4.3 | |||
(3) | 4.4 | |||
(4) | 4.5 | |||
(5) | 4.6 | |||
(6) | 4.7 | |||
(7) | 4.8 | |||
4.9** | ||||
(8) | 10.1* | |||
(9) | 10.2* | |||
(10) | 10.3* | |||
(11) | 10.4* | |||
(12) | 10.5* | |||
(13) | 10.6* | |||
(14) | 10.7* | |||
(14) | 10.8* | |||
(15) | 10.9* | |||
(11) | 10.10* | |||
(16) | 10.11* | |||
(16) | 10.12* | |||
(11) | 10.13* | |||
(16) | 10.14* | |||
(16) | 10.15* | |||
(11) | 10.16* | |||
(10) | 10.17* | |||
(11) | 10.18* | |||
(12) | 10.19* | |||
(12) | 10.20* | |||
(11) | 10.21* | |||
(18) | 10.22* | |||
(11) | 10.23* | |||
(12) | 10.24* | |||
(18) | 10.25* | |||
(19) | 10.26* | |||
(20) | 10.27* | |||
10.28*,** | ||||
10.29*, ** | ||||
(12) | 10.30* | |||
(12) | 10.31* | |||
(21) | 10.32* | |||
(11) | 10.33* | |||
(11) | 10.34* | |||
(11) | 10.35* | |||
(11) | 10.36* | |||
(11) | 10.37* | |||
(22) | 10.38* | Form of Indemnity Agreement entered into between Registrant and its directors and executive officers | ||
(22) | 10.39* | Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees | ||
(23) | 10.40* | |||
+(24) | 10.41 | Amendment Agreement, dated October 25, 1993, between Registrant, the Institute of Organic Chemistry and Biochemistry (IOCB) and Rega Stichting v.z.w. (REGA), together with the following exhibits: the License Agreement, dated December 15, 1991, between Registrant, IOCB and REGA (the 1991 License Agreement); the License Agreement, dated October 15, 1992, between Registrant, IOCB and REGA (the October 1992 License Agreement); and the License Agreement, dated December 1, 1992, between Registrant, IOCB and REGA (the December 1992 License Agreement) | ||
+(25) | 10.42 | |||
+(26) | 10.43 | |||
+(27) | 10.44 | |||
+(28) | 10.45 | |||
+(29) | 10.46 | |||
+(29) | 10.47 | |||
++(30) | 10.48 | |||
++(30) | 10.49 | |||
+(31) | 10.50 | |||
+(32) | 10.51 | |||
++(12) | 10.52 | |||
21.1** | ||||
23.1** | ||||
31.1** | ||||
31.2** | ||||
32*** | ||||
101.INS** | XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |||
101.SCH** | Inline XBRL Taxonomy Extension Schema Document | |||
101.CAL** | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||
101.DEF** | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||
101.LAB** | Inline XBRL Taxonomy Extension Label Linkbase Document | |||
101.PRE** | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||
104 | The cover page from the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, formatted in Inline XBRL |
(1) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 9, 2019, and incorporated herein by reference. |
(2) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 1, 2011, and incorporated herein by reference. |
(3) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 13, 2011, and incorporated herein by reference. |
(4) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 7, 2014, and incorporated herein by reference. |
(5) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on November 17, 2014, and incorporated herein by reference. |
(6) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 14, 2015, and incorporated herein by reference. |
(7) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 20, 2016, and incorporated herein by reference. |
(8) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 12, 2017, and incorporated herein by reference. |
(9) | Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference. |
(10) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference. |
(11) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, and incorporated herein by reference. |
(12) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and incorporated herein by reference. |
(13) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference. |
(14) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference |
(15) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and incorporated herein by reference. |
(16) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, and incorporated herein by reference. |
(17) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 8, 2015, and incorporated herein by reference. |
(18) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and incorporated herein by reference. |
(19) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2018, and incorporated herein by reference. |
(20) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and incorporated herein by reference. |
(21) | Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 10, 2018, and incorporated herein by reference. |
(22) | Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (No. 33-55680), as amended, and incorporated herein by reference. |
(23) | Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference. |
(24) | Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994, and incorporated herein by reference. |
(25) | Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference. |
(26) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference. |
(27) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference. |
(28) | Filed as an exhibit to Triangle Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q/A filed on November 3, 1999, and incorporated herein by reference. |
(29) | Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference. |
(30) | Filed as an exhibit to Registrant’s Amendment No. 1 to Annual Report on Form 10-K/A filed on April 18, 2019, and incorporated herein by reference. |
(31) | Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference. |
(32) | Filed as an exhibit to Kite Pharma, Inc.’s Registration Statement on Form S-1/A (No. 333-196081) filed on June 17, 2014, and incorporated herein by reference. |
* | Management contract or compensatory plan or arrangement. |
** | Filed herewith. |
*** | Furnished herewith. |
+ | Certain confidential portions of this Exhibit were omitted by means of marking such portions with an asterisk (the Mark). This Exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to Registrant’s Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended. |
++ | Certain confidential portions of this Exhibit were omitted by means of marking such portions with the Mark because the identified confidential portions are (i) not material and (ii) would be competitively harmful if publicly disclosed. |
ITEM 16. | FORM 10-K SUMMARY |
GILEAD SCIENCES, INC. | |
By: | /s/ DANIEL P. O’DAY |
Daniel P. O’Day Chairman and Chief Executive Officer |
Signature | Title | Date | ||
/s/ DANIEL P. O’DAY | Chairman and Chief Executive Officer | February 24, 2020 | ||
Daniel P. O’Day* | (Principal Executive Officer) | |||
/s/ ANDREW D. DICKINSON | Executive Vice President and Chief Financial Officer | February 24, 2020 | ||
Andrew D. Dickinson | (Principal Financial Officer) | |||
/s/ DIANE E. WILFONG | Senior Vice President and Chief Accounting Officer | February 24, 2020 | ||
Diane E. Wilfong | (Principal Accounting Officer) | |||
/s/ JOHN F. COGAN | Director | February 24, 2020 | ||
John F. Cogan, Ph.D.* | ||||
/s/ KELLY A. KRAMER | Director | February 24, 2020 | ||
Kelly A. Kramer* | ||||
/s/ KEVIN E. LOFTON | Director | February 24, 2020 | ||
Kevin E. Lofton* | ||||
/s/ HARISH MANWANI | Director | February 24, 2020 | ||
Harish Manwani* | ||||
/s/ RICHARD J. WHITLEY | Director | February 24, 2020 | ||
Richard J. Whitley, M.D.* | ||||
/s/ GAYLE E. WILSON | Director | February 24, 2020 | ||
Gayle E. Wilson* | ||||
/s/ PER WOLD-OLSEN | Director | February 24, 2020 | ||
Per Wold-Olsen* |
• | dividend rights; |
• | dividend rate; |
• | conversion rights; |
• | voting rights; |
• | rights and terms of redemption; |
• | redemption price or prices; |
• | the liquidation preferences of any wholly unissued series of preferred stock; and |
• | the number of shares constituting any series or the designation of such series. |
• | the board of directors is authorized to issue preferred stock without stockholder approval; |
• | the board of directors is expressly authorized to make, alter or repeal any provision of our bylaws; |
• | stockholders may not cumulate votes in the election of directors; |
• | special meetings of the stockholders may be called by the stockholders only upon the written request of one or more stockholders of record that own, or who are acting on behalf of persons who own, shares representing 20% or more of the voting power of the then outstanding shares of capital stock entitled to vote on the matter or matters to be brought before the proposed special meeting, and otherwise in accordance with the certificate and bylaws; |
• | stockholders must satisfy advance notice procedures to submit proposals or nominate directors for consideration at a stockholders’ meeting; and |
• | we will indemnify officers and directors against losses that they may incur as a result of investigations and legal proceedings resulting from their services to us, which may include services in connection with takeover defense measures. |
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1. | Hamill’s Release of Claims. |
2. | Revocation and Effective Date. |
By: | Katie Watson |
SUBSIDIARIES OF GILEAD SCIENCES, INC. | |
(as of December 31, 2019) | |
NAME OF SUBSIDIARY | COUNTRY OF FORMATION |
Asegua Therapeutics, LLC | United States |
Gilead Sciences, LLC | United States |
Gilead Alberta, LLC | United States |
Gilead Apollo, LLC | United States |
Gilead Calistoga, LLC | United States |
Gilead Connecticut, Inc. | United States |
Gilead Holdings, LLC | United States |
Gilead Pharmasset LLC | United States |
Gilead Sciences Holding, LLC | United States |
Kite Pharma, Inc. | United States |
Kite Pharma, LLC | United States |
neoKite, Inc. | United States |
Gilead Biopharmaceutics US LLC | United States |
Gilead Sciences Argentina S.R.L. | Argentina |
Cytopia Pty. Ltd. | Australia |
Gilead Sciences Pty. Ltd. | Australia |
Gilead Sciences YM Australia Pty. Ltd. | Australia |
YM BioSciences Australia Pty. Ltd. | Australia |
Gilead Sciences GesmbH. | Austria |
Gilead Sciences Belgium BVBA | Belgium |
Gilead Sciences Farmacêutica do Brasil Ltda. | Brazil |
Gilead Alberta ULC | Canada |
Gilead Sciences Canada, Inc. | Canada |
Gilead YM ULC | Canada |
Fosun Pharma Kite Biotechnology Co., Ltd. | China |
Gilead Sciences (Shanghai) Consulting Co., Ltd. | China |
Gilead Sciences Hangzhou Pharmaceutical Co., Ltd. | China |
Gilead Sciences Shanghai Pharmaceutical Technology Co., Ltd. | China |
Gilead Sciences s.r.o. | Czech Republic |
EpiTherapeutics ApS | Denmark |
Gilead Sciences Denmark ApS | Denmark |
Gilead Sciences Finland Oy | Finland |
Gilead Sciences SAS | France |
Gilead Sciences GmbH | Germany |
Gilead Sciences Hellas EPE | Greece |
Gilead Sciences Hong Kong Limited | Hong Kong |
Gilead Sciences India Private Limited | India |
Bristol-Myers Squibb and Gilead Sciences Limited | Ireland |
Gilead Apollo Unlimited Company | Ireland |
Gilead Biopharmaceutics Ireland UC | Ireland |
Gilead Ireland Research UC | Ireland |
Gilead Oncology Ireland UC | Ireland |
Gilead Sciences Ireland UC | Ireland |
SUBSIDIARIES OF GILEAD SCIENCES, INC. (continued) | |
(as of December 31, 2019) | |
NAME OF SUBSIDIARY | COUNTRY OF FORMATION |
Gilead Therapeutics A1 Unlimited Company | Ireland |
Gilead Therapeutics A2 Unlimited Company | Ireland |
Tri-Supply Limited | Ireland |
Gilead Sciences Israel Limited | Israel |
Gilead Sciences S.r.l. | Italy |
Gilead Sciences KK | Japan |
Gilead Sciences Luxembourg S.a.r.l. | Luxembourg |
Gilead Sciences Malaysia Sdn. Bhd. | Malaysia |
Gilead Sciences Mexico S. de R.L. de C.V. | Mexico |
Gilead Sciences Netherlands BV | Netherlands |
Kite Pharma EU B.V. | Netherlands |
KP EU C.V. | Netherlands |
Gilead Sciences (NZ) | New Zealand |
Gilead Sciences Norway AS | Norway |
Gilead Sciences Americas S. de R.L. | Panama |
Gilead Sciences Poland Sp. z o.o. | Poland |
Gilead Sciences Lda. | Portugal |
Gilead Sciences Russia LLC | Russia |
Gilead Sciences Singapore Pte. Ltd. | Singapore |
Gilead Sciences Slovakia s.r.o. | Slovakia |
Gilead Sciences South Africa (Pty) Ltd. | South Africa |
Gilead Sciences Korea Limited | South Korea |
Gilead Sciences S.L. | Spain |
Gilead Sciences Sweden AB | Sweden |
Gilead Sciences Switzerland Sarl | Switzerland |
Gilead Sciences llac Ticaret Limited Sirketi | Turkey |
Gilead Sciences Europe Limited | United Kingdom |
Gilead Sciences International Limited | United Kingdom |
Gilead Sciences Limited | United Kingdom |
Kite Pharma UK, Ltd* | United Kingdom |
*Liquidation and winding down in process |
Date: | February 24, 2020 | /s/ DANIEL P. O’DAY |
Daniel P. O’Day Chairman and Chief Executive Officer |
Date: | February 24, 2020 | /s/ ANDREW D. DICKINSON |
Andrew D. Dickinson Executive Vice President and Chief Financial Officer |
/s/ DANIEL P. O’DAY | /s/ ANDREW D. DICKINSON | |
Daniel P. O’Day Chairman and Chief Executive Officer | Andrew D. Dickinson Executive Vice President and Chief Financial Officer |
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Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Repurchases | The following table summarizes our stock repurchases under the 2016 Program (in millions, except per share amounts):
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Reduction to common stock and APIC as a result of stock repurchases | The following table summarizes the reduction of common stock and APIC and the charge to retained earnings as a result of our stock repurchases (in millions):
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Schedule of Dividends Declared | The following table summarizes cash dividends declared on our common stock (in millions, except per share amounts):
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Schedule of accumulated OCI by component | The following table summarizes the changes in AOCI by component, net of tax (in millions):
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Income Taxes (Tables) |
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Dec. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Income before Income Tax, Domestic and Foreign | Income before provision for income taxes consists of the following (in millions):
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Schedule Of Provision For Income Taxes |
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Schedule Of Difference Between Provision For Income Taxes And Federal Statutory Income Tax Rate To Income Before Provision For Income Taxes | The reconciliation between the federal statutory tax rate applied to income before taxes and our effective tax rate is summarized as follows:
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Schedule of Deferred Tax Assets and Liabilities | Significant components of our deferred tax assets and liabilities are as follows (in millions):
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Schedule Of Unrecognized Tax Benefits Roll Forward | The following is a rollforward of our total gross unrecognized tax benefits (in millions):
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Derivative Financial Instruments - Summary of Effect of Foreign Currency Exchange Contracts (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||
Gains (losses) recognized in AOCI | $ 76 | $ 114 | $ (315) |
Gains (losses) reclassified from AOCI into product sales | 127 | (87) | (28) |
Gains recognized in Other income (expense), net | 0 | 0 | 41 |
Gains (losses) recognized in Other income (expense), net | $ 22 | $ (2) | $ (113) |
Stockholders' Equity - Impact to Equity as a Result of Stock Repurchases (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Equity, Repurchased Stock [Line Items] | |||
Stock Repurchased and Retired During Period, Value | $ 1,749 | $ 2,900 | $ 954 |
Common Stock Including Additional Paid in Capital [Member] | |||
Equity, Repurchased Stock [Line Items] | |||
Stock Repurchased and Retired During Period, Value | 77 | 112 | 34 |
Retained Earnings [Member] | |||
Equity, Repurchased Stock [Line Items] | |||
Stock Repurchased and Retired During Period, Value | $ 1,791 | $ 2,940 | $ 1,028 |
Available-for-Sale Debt Securities - Summary of Available-for-Sale Debt Securities by Contractual Maturity (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Amortized Cost | ||
Within one year | $ 15,011 | |
After one year through five years | 1,465 | |
After five years | 23 | |
Amortized Cost | 16,499 | $ 24,216 |
Fair Value | ||
Within one year | 15,012 | |
After one year through five years | 1,465 | |
After five years | 23 | |
Available-for-sale debt securities | $ 16,500 | $ 24,164 |
Segment Information - Narrative (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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U.S. | |||
Segment Reporting Information [Line Items] | |||
Long-Lived Assets | $ 3,500 | $ 3,200 | $ 2,600 |
Non-US [Member] | |||
Segment Reporting Information [Line Items] | |||
Long-Lived Assets | $ 791 | $ 620 | $ 520 |
Segment Information |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure | SEGMENT INFORMATION We have one operating segment, which primarily focuses on the discovery, development and commercialization of innovative medicines in areas of unmet medical need. Our Chief Executive Officer (CEO), as the chief operating decision-maker, manages and allocates resources to the operations of our company on an entity-wide basis. Managing and allocating resources on an entity-wide basis enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions and R&D projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities to best support the long-term growth of our business. See Note 2. Revenues for a summary of disaggregated revenues by product and geographic region. Revenues From Major Customers The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our total revenues (as a percentage of total revenues):
Long-Lived Assets The net book value of our property, plant and equipment (less office and computer equipment) in the United States was $3.5 billion as of December 31, 2019, $3.2 billion as of December 31, 2018 and $2.6 billion as of December 31, 2017. The corresponding amount in international locations was $791 million as of December 31, 2019, $620 million as of December 31, 2018 and $520 million as of December 31, 2017. All individual international locations accounted for less than 10% of the total balances.
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Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | COMMITMENTS AND CONTINGENCIES Legal Proceedings We are a party to various legal actions. The most significant of these are described below. We recognize accruals for such actions to the extent that we conclude that a loss is both probable and reasonably estimable. We accrue for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, then we accrue the minimum amount in the range. If we determine that a loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss. Unless otherwise noted, it is not possible to determine the outcome of these matters, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss. We did not have any material accruals for the matters described below in our Consolidated Balance Sheets as of December 31, 2019 and 2018. Litigation Related to Sofosbuvir In 2012, we acquired Pharmasset, Inc. (Pharmasset). Through the acquisition, we acquired sofosbuvir, a nucleotide analog that acts to inhibit the replication of the HCV. In 2013, we received approval from FDA for sofosbuvir, now known commercially as Sovaldi. Sofosbuvir is also included in all of our marketed HCV products. We have received a number of litigation claims regarding sofosbuvir. While we have carefully considered these claims both prior to and following the acquisition and believe they are without merit, we cannot predict the ultimate outcome of such claims or range of loss. We are aware of patents and patent applications owned by third parties that have been or may in the future be alleged by such parties to cover the use of our HCV products. If third parties obtain valid and enforceable patents, and successfully prove infringement of those patents by our HCV products, we could be required to pay significant monetary damages. We cannot predict the ultimate outcome of intellectual property claims related to our HCV products. We have spent, and will continue to spend, significant resources defending against these claims. Litigation with Idenix Pharmaceuticals, Inc. (Idenix), Universita Degli Studi di Cagliari (UDSG), Centre National de la Recherche Scientifique and L’Université Montpellier II In 2013, Idenix, UDSG, Centre National de la Recherche Scientifique and L’Université Montpellier II sued us in U.S. District Court for the District of Delaware alleging that the commercialization of sofosbuvir infringes U.S. Patent No. 7,608,600 (the ‘600 patent). We prevailed at all phases of litigation concerning the ‘600 patent, and in 2018, the U.S. Supreme Court denied Idenix’s petition for certiorari. Also in 2013, Idenix and UDSG sued us in the U.S. District Court for the District of Massachusetts alleging that the commercialization of sofosbuvir infringes U.S. Patent Nos. 6,914,054 (the ‘054 patent) and 7,608,597 (the ‘597 patent). In 2014, the court transferred the Massachusetts litigation to the U.S. District Court for the District of Delaware. Prior to trial in 2016, Idenix committed to give us a covenant not to sue with respect to any claims arising out of the ‘054 patent related to sofosbuvir and withdrew that patent from the trial. A jury trial was held in 2016 on the ‘597 patent, and the jury found that we willfully infringed the asserted claims of the ‘597 patent and awarded Idenix $2.54 billion in past damages. In 2018, the judge invalidated Idenix’s ‘597 patent and vacated the jury’s award of $2.54 billion in past damages. Idenix appealed this decision to the U.S. Court of Appeals for the Federal Circuit (CAFC), and in October 2019, the CAFC issued an opinion affirming the trial court’s decision that the ‘597 patent is invalid. Idenix has petitioned for rehearing by the CAFC en banc and may seek review by the U.S. Supreme Court. Litigation with the University of Minnesota The University of Minnesota (the University) has obtained U.S. Patent No. 8,815,830 (the ‘830 patent), which purports to broadly cover nucleosides with antiviral and anticancer activity. In 2016, the University filed a lawsuit against us in the U.S. District Court for the District of Minnesota, alleging that the commercialization of sofosbuvir-containing products infringes the ‘830 patent. We believe the ‘830 patent is invalid and will not be infringed by the continued commercialization of sofosbuvir. In 2017, the court granted our motion to transfer the case to California. We have also filed four petitions for inter partes review with the U.S. Patent and Trademark Office (USPTO) Patent Trial and Appeal Board (PTAB) alleging that all asserted claims are invalid for anticipation and obviousness. In 2018, the U.S. District Court for the Northern District of California stayed the litigation until after the PTAB rules on our petitions for inter partes review. Litigation Related to Axicabtagene Ciloleucel We own patents and patent applications that protect our axicabtagene ciloleucel chimeric DNA segments. Third parties may have, or may obtain rights to, patents that allegedly could be used to prevent or attempt to prevent us from commercializing axicabtagene ciloleucel or to require us to obtain a license in order to commercialize axicabtagene ciloleucel. In October 2017, Juno Therapeutics, Inc. and Sloan Kettering Cancer Center (collectively, Juno) filed a lawsuit against us in the U.S. District Court for the Central District of California, alleging that the commercialization of axicabtagene ciloleucel, sold commercially as Yescarta, infringes on U.S. Patent No. 7,446,190 (the ‘190 patent). A jury trial was held on the ‘190 patent, and in December 2019, the jury found that the asserted claims of the ‘190 patent were valid, and that we willfully infringed the asserted claims of the ‘190 patent. The jury also awarded Juno damages in amounts of $585 million in an up-front payment and a 27.6% running royalty from October 2017 through the date of the jury’s verdict. The parties filed post-trial motions in January 2020 and will file further briefing during the first quarter of 2020, and we expect the judge to rule on these matters later in 2020. Once the district court has issued these rulings and has entered judgment, the case may be appealed to the CAFC. Although we cannot predict with certainty the ultimate outcome of this litigation, we believe the jury’s verdict to be in error, and we also believe that errors were made by the court with respect to certain rulings before and during trial. In assessing whether we should accrue a liability for this litigation in our consolidated financial statements, we considered various factors, including the legal and factual circumstances of the case, the jury’s verdict, the district court’s pre- and post-trial orders, the current status of the proceedings, applicable law, the views of legal counsel and the likelihood that the jury’s verdict will be upheld on appeal. As a result of this review, we have determined, in accordance with applicable accounting standards, that it is not probable that we will incur a material loss as a result of this litigation. If the jury’s verdict is not upheld on appeal, the loss will be zero, If the jury’s verdict is upheld in its entirety on appeal, we estimate the upper end of the range of possible loss through December 31, 2019 to be approximately $1.6 billion, which consists of (i) the $585 million up-front payment determined by the jury, (ii) approximately $200 million, which represents estimated royalties on our adjusted revenues from Yescarta from October 18, 2017 through December 31, 2019, and (iii) enhanced damages requested by Juno of up to two times the sum of (i) and (ii) above as a result of the jury’s finding of willfulness. This sum excludes costs and pre-judgment interest. Supplemental damages consisting of royalties on sales of Yescarta after December 13, 2019 through the date of judgment could be subject to the 27.6% royalty in the jury’s verdict, the 33.1% prospective royalty proposed by Juno, or to enhancement. Any post-judgment sales of Yescarta would be subject to prospective royalties, which we have estimated could be up to 33.1%, and which would be payable on adjusted Yescarta revenues after the judgment in 2020 until the expiry of the ‘190 patent in August 2024. We expect the judge to rule on the amount of prospective royalties and any enhanced damages in the course of deciding the post-trial motions. The court’s determination of prospective royalties and enhanced damages, if any, can also be appealed. Litigation Related to Bictegravir In 2018, ViiV Healthcare Company (ViiV) filed a lawsuit against us in the U.S. District Court of Delaware, alleging that the commercialization of bictegravir, sold commercially in combination with tenofovir alafenamide and emtricitabine as Biktarvy, infringes ViiV’s U.S. Patent No. 8,129,385 (the ‘385 patent) covering ViiV’s dolutegravir. Bictegravir is structurally different from dolutegravir, and we believe that bictegravir does not infringe the claims of the ‘385 patent. To the extent that ViiV’s patent claims are interpreted to cover bictegravir, we believe those claims are invalid. The court has set a trial date of September 2020 for this lawsuit. In 2018, ViiV also filed a lawsuit against us in the Federal Court of Canada, alleging that our activities relating to our bictegravir compound have infringed ViiV’s Canadian Patent No. 2,606,282 (the ‘282 patent), which was issued to Shionogi & Co. Ltd. and ViiV. The ‘282 patent is the compound patent covering ViiV’s dolutegravir. We believe that bictegravir does not infringe the claims of the ‘282 patent. In January 2020, the court held a summary trial to assess ViiV’s infringement allegations. The court’s decision is expected in March 2020. In November and December 2019, ViiV filed lawsuits in France, Germany, Ireland and the UK asserting the relevant national designations of European Patent No. 3 045 206; in Australia asserting Australian Patent No. 2006239177; in Japan asserting Japanese Patent No. 4295353; and in Korea asserting Korean Patent Nos. 1848819 and 1363875. These patents all relate to molecules which ViiV claim would act as integrase inhibitors. We believe that bictegravir does not infringe the claims of any of ViiV’s patents. In all jurisdictions, to the extent that the claims of ViiV’s patents are interpreted to cover bictegravir, we believe that those claims are invalid. We cannot predict the ultimate outcome of intellectual property claims related to bictegravir. Litigation Relating to Pre-Exposure Prophylaxis In August 2019, we filed petitions requesting inter partes review of U.S. Patent Nos. 9,044,509, 9,579,333, 9,937,191 (‘191 patent) and 10,335,423 (‘423 patent) (collectively, HHS Patents) by PTAB. The HHS Patents are assigned to the U.S. Department of Health and Human Services and purport to claim a process of protecting a primate host from infection by an immunodeficiency retrovirus by administering a combination of emtricitabine and tenofovir or TDF prior to exposure of the host to the immunodeficiency retrovirus, a process commonly known as pre-exposure prophylaxis (PrEP). In November 2019, the U.S. Department of Justice filed a lawsuit against us in the U.S. District Court of Delaware, alleging that the sale of Truvada and Descovy for use as PrEP infringes the HHS Patents. In February 2020, PTAB declined to institute our petitions for inter partes review of the HHS Patents. Although we cannot predict with certainty the ultimate outcome of this litigation, we believe that Truvada and Descovy do not infringe the HHS Patents and that the HHS Patents are invalid over prior art descriptions of Truvada’s use for PrEP and post-exposure prophylaxis, and because physicians and patients were using the claimed methods years before the Centers for Disease Control and Prevention filed the applications for the patents. Litigation with Generic Manufacturers As part of the approval process for some of our products, FDA granted us a New Chemical Entity (NCE) exclusivity period during which other manufacturers’ applications for approval of generic versions of our product will not be approved. Generic manufacturers may challenge the patents protecting products that have been granted NCE exclusivity one year prior to the end of the NCE exclusivity period. Generic manufacturers have sought and may continue to seek FDA approval for a similar or identical drug through an abbreviated new drug application (ANDA), the application form typically used by manufacturers seeking approval of a generic drug. The sale of generic versions of our products earlier than their patent expiration would have a significant negative effect on our revenues and results of operations. To seek approval for a generic version of a product having NCE status, a generic company may submit its ANDA to FDA four years after the branded product’s approval. Starting in December 2019, we received letters from Lupin Ltd., Apotex Inc., Shilpa Medicare Ltd., Sunshine Lake Pharma Co. Ltd., Laurus Labs, Natco Pharma Ltd. and Cipla Ltd. (collectively, generic manufacturers) indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of certain of our tenofovir alafenamide (TAF)-containing products. Between them, these generic manufacturers seek to market generic versions of Odefsey, Descovy and Vemlidy. Some generic manufacturers have challenged the validity of four patents listed on the Orange Book and associated with TAF, while others have challenged the validity of two of our Orange Book-listed patents associated with TAF. We are evaluating the letters and intend to enforce and defend our intellectual property. European Patent Claims In 2015, several parties filed oppositions in the European Patent Office (EPO) requesting revocation of one of our granted European patents covering sofosbuvir that expires in 2028. In 2016, the EPO upheld the validity of certain claims of our sofosbuvir patent. We have appealed this decision, seeking to restore all of the original claims, and several of the original opposing parties have also appealed, requesting full revocation. The appeal hearing is scheduled for July 2020. In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024. The EPO conducted an oral hearing for this opposition in 2018 and upheld the claims. Two of the original opposing parties have appealed, requesting full revocation. In 2016, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering TAF that expires in 2026. In 2017, the EPO upheld the validity of the claims of our TAF patent. Three parties have appealed this decision. In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032. In 2019, the EPO upheld the validity of the claims of our TAF hemifumarate patent. Three parties have appealed this decision. In 2016, three parties filed oppositions in the EPO requesting revocation of our granted European patent covering cobicistat that expires in 2027. In 2017, the EPO upheld the validity of the claims of our cobicistat patent. Two parties have appealed this decision. The appeal process may take several years for all EPO opposition proceedings. While we are confident in the strength of our patents, we cannot predict the ultimate outcome of these oppositions. If we are unsuccessful in defending these oppositions, some or all of our patent claims may be narrowed or revoked and the patent protection for sofosbuvir, TAF, TAF hemifumarate and cobicistat in the European Union could be substantially shortened or eliminated entirely. If our patents are revoked, and no other European patents are granted covering these compounds, our exclusivity may be based entirely on regulatory exclusivity granted by the European Medicines Agency. If we lose patent protection for any of these compounds, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost. Government Investigations and Related Litigation In 2011, we received a subpoena from the U.S. Attorney’s Office for the Northern District of California requesting documents related to the manufacture, and related quality and distribution practices, of Complera, Atripla, Truvada, Viread, Emtriva, Hepsera and Letairis. We cooperated with the government’s inquiry. In 2014, the U.S. Department of Justice informed us that, following an investigation, it declined to intervene in a False Claims Act lawsuit filed by two former employees. Also in 2014, the former employees served a First Amended Complaint, and the U.S. District Court for the Northern District of California issued an order granting in its entirety, without prejudice, our motion to dismiss the First Amended Complaint. In 2015, the plaintiffs filed a Second Amended Complaint, and the District Court issued an order granting our motion to dismiss the Second Amended Complaint. The plaintiffs then filed a notice of appeal in the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit). In 2017, the Ninth Circuit granted our motion to stay the case pending an appeal to the U.S. Supreme Court, and we filed a Petition for a Writ of Certiorari to the U.S. Supreme Court. In 2018, the Solicitor General submitted a brief for the United States to the U.S. Supreme Court stating its intention to file a motion to dismiss under the federal False Claims Act. In January 2019, the U.S. Supreme Court denied the petition and the case has been remanded to the District Court. In March 2019, the Department of Justice filed a motion to dismiss the Second Amended Complaint. The District Court granted the Department of Justice’s motion to dismiss in November 2019, dismissing relators’ federal False Claims Act claims. In 2016, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our support of 501(c)(3) organizations that provide financial assistance to patients and documents concerning our provision of financial assistance to patients for our HCV products. We are cooperating with this inquiry. In 2017, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our copay coupon program and Medicaid price reporting methodology. We are cooperating with this inquiry. In 2017, we received a voluntary request for information from the U.S. Attorney’s Office for the Eastern District of Pennsylvania requesting information related to our reimbursement support offerings, clinical education programs and interactions with specialty pharmacies for Sovaldi and Harvoni. In 2018, we received another voluntary request for information related to our speaker programs and advisory boards for our HCV and hepatitis B virus products. We are cooperating with these voluntary requests. In October 2019, the U.S. Department of Justice informed us that, following an investigation, it declined to intervene in a False Claims Act lawsuit against us relating to hepatitis B speaker programs and advisory boards brought by two plaintiffs in the U.S. District Court for the Eastern District of Pennsylvania. Notwithstanding the government’s declination, plaintiffs have continued to pursue the lawsuit and served us with the Seconded Amended Complaint in November 2019. Although we cannot predict the ultimate outcome of this lawsuit, we believe the action is without merit and we intend to vigorously defend against it. In 2017, we received a subpoena from the California Department of Insurance and the Alameda County District Attorney’s Office requesting documents related to our marketing activities, reimbursement support offerings, clinical education programs and interactions with specialty pharmacies for Harvoni and Sovaldi. We are cooperating with this inquiry. In 2017, we also received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents related to our promotional speaker programs for HIV. We are cooperating with this inquiry. Product Liability We have been named as a defendant in one class action lawsuit and various product liability lawsuits related to Viread, Truvada, Atripla, Complera and Stribild. Plaintiffs allege that Viread, Truvada, Atripla, Complera and/or Stribild caused them to suffer kidney and/or bone injuries. The lawsuits, which are pending in state or federal court in California, Delaware or Florida, involve thousands of plaintiffs. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. We intend to vigorously defend ourselves in these actions. While we believe these cases are without merit, we cannot predict the ultimate outcome. If plaintiffs are successful in their claims, we could be required to pay significant monetary damages. Antitrust and Consumer Protection We (along with Japan Tobacco, BMS and Johnson & Johnson, Inc.) have been named as defendants in a class action lawsuit filed in 2019 related to various drugs used to treat HIV, including drugs used in combination antiretroviral therapy. Plaintiffs allege that we (and the other defendants) engaged in various conduct to restrain competition in violation of federal and state antitrust laws and state consumer protection laws. The lawsuit, a consolidated action pending in the U.S. District Court for the Northern District of California, seeks to bring claims on behalf of a nationwide class of end-payor purchasers. A similar lawsuit was also recently filed in the U.S. District Court for the Southern District of Florida, which may also be consolidated. Plaintiffs seek damages, permanent injunctive relief, and other relief. We intend to vigorously defend ourselves in this action. While we believe this action is without merit, we cannot predict the ultimate outcome. If plaintiffs are successful in their claims, we could be required to pay significant monetary damages or could be subject to permanent injunctive relief. Other Matters We are a party to various legal actions that arose in the ordinary course of our business. We do not believe that these other legal actions will have a material adverse impact on our consolidated business, financial position or results of operations. Other Commitments In the normal course of business, we enter into various firm purchase commitments primarily related to active pharmaceutical ingredients (API) and certain inventory related items. As of December 31, 2019, these commitments for the next five years were approximately $271 million in 2020, $45 million in 2021, $22 million in 2022, $22 million in 2023 and $14 million in 2024. The amounts related to API represent minimum purchase commitments. Actual payments for the purchases of API and certain inventory related items were $529 million in 2019, $1.0 billion in 2018 and $1.7 billion in 2017. In January 2020, we amended an API contract, which increased our firm purchase commitments by approximately $220 million.
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Acquisitions |
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Business Combination Disclosure [Text Block] | ACQUISITIONS Kite Pharma, Inc. In October 2017 (the Acquisition Date), we completed a tender offer for all of the outstanding common stock of Kite for $180 per share in cash. As a result, Kite became our wholly-owned subsidiary. The acquisition of Kite helps establish our foundation for improving the treatment of hematological malignancies and solid tumors. The consideration transferred for the acquisition was $11,155 million, consisting of $10,420 million in cash to the outstanding Kite common stockholders, $645 million cash payment to vested equity award holders, $15 million to warrant holders and $75 million representing the portion of the replaced stock-based awards attributable to the pre-combination period. In addition, $733 million was excluded from the consideration transferred, representing the portion of the replaced stock-based awards attributable to the post combination period (Replacement Awards), which is expected to be recognized through 2021. As of December 31, 2019, unrecognized compensation cost related to the Replacement Awards was not material. The acquisition of Kite was accounted for as a business combination using the acquisition method of accounting. This method requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The determination of estimated fair value requires us to make significant estimates and assumptions. During 2018, we recorded a $42 million reduction to goodwill primarily due to revision of deferred income taxes as a result of finalization of Kite’s pre-acquisition federal income tax return. The fair value estimates for the assets acquired and liabilities assumed have been completed. The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed, and the consideration transferred (in millions):
Identifiable Intangible Assets We acquired intangible assets primarily related to IPR&D for axicabtagene ciloleucel, KITE-585 program, and KTE-X19 (formerly KTE-C19, being evaluated for the treatment of acute lymphoblastic leukemia (ALL)), which had an estimated aggregate fair value of $8,950 million as of the Acquisition Date. Intangible assets related to IPR&D projects are considered to be indefinite-lived assets until the completion or abandonment of the associated R&D efforts. In October 2017, axicabtagene ciloleucel, now known commercially as Yescarta, was approved by FDA for the treatment of adult patients with relapsed or refractory diffuse large B-cell lymphoma (DLBCL) after two or more lines of systemic therapy. Upon FDA approval of Yescarta, $6,200 million of the purchased IPR&D was reclassified as a finite-lived intangible asset and is being amortized over an estimated useful life of 18 years using the straight-line method. In 2019, we recognized an impairment charge of $800 million primarily related to axicabtagene ciloleucel for the treatment of iNHL. In 2018, we recognized an impairment charge of $820 million to write down to zero the carrying value of the KITE-585 program. See Note 9. Intangible Assets for additional information. Additionally, we acquired an outlicensing arrangement with Daiichi Sankyo Company Limited, which had an estimated fair value of $91 million as of the Acquisition Date. This definite-lived intangible asset is being amortized over an estimated useful life of 14 years on a straight-line basis. The fair value was determined by estimating the probability-weighted net cash flows attributable to the outlicense discounted to present value using a discount rate that represents the estimated rate that market participants would use to value this intangible asset. Goodwill The $2,945 million goodwill represents the excess of the consideration transferred over the fair values of assets acquired and liabilities assumed and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. None of the goodwill is deductible for income tax purposes. Cell Design Labs, Inc. In December 2017, we acquired all of the issued and outstanding stock of Cell Design Labs, Inc., a privately held company (Cell Design Labs), which was in addition to the approximately 12.2% of shares in Cell Design Labs we obtained in the acquisition of Kite. With this acquisition, we gained new technology platforms that will enhance R&D efforts in cellular therapy. The cash consideration totaled $150 million, net of acquired cash. Additionally, the shareholders of Cell Design Labs, other than us, are eligible to receive contingent development and regulatory milestone-based payments of up to $322 million. Our 12.2% equity interest in Cell Design Labs had a carrying value of $30 million. The transaction was accounted for as an asset acquisition. As a result, $172 million was expensed as acquired IPR&D within Research and development expenses on our Consolidated Statements of Income.
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Revenues |
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Revenue from Contract with Customer [Text Block] | REVENUES Disaggregation of Revenues The following table disaggregates our product sales by product and geographic region and disaggregates our royalty, contract and other revenues by geographic region (in millions):
Revenues Recognized from Performance Obligations Satisfied in Prior Periods Revenues recognized from performance obligations satisfied in prior years related to royalties for licenses of our intellectual property were $741 million and $541 million for the years ended December 31, 2019 and 2018, respectively. Changes in estimates for variable consideration related to sales made in prior years resulted in a $257 million increase and a $56 million decrease in revenues for the years ended December 31, 2019 and 2018, respectively. Contract Balances Our contract assets, which consist of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation, totaled $144 million and $125 million as of December 31, 2019 and 2018, respectively. Contract liabilities were not material as of December 31, 2019 and 2018.
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Other Financial Information |
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Other Financial Information | OTHER FINANCIAL INFORMATION Other Accrued Liabilities The following table summarizes the components of Other accrued liabilities (in millions):
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Fair value measurements (Tables) |
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Summary of assets and liabilities measured at fair value | The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in millions):
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Summary of classification of Galapagos equity investment | The following table summarizes the classification of our equity investment in Galapagos in our Consolidated Balance Sheets (in millions):
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Summary of classification of other equity securities | The following table summarizes the classification of our other equity securities in our Consolidated Balance Sheets (in millions):
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Inventories (Tables) |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories |
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Fair value measurements Summary of Classification on Balance Sheet (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Fair Value, Assets and Liabilities | ||
Total | $ 7,562 | $ 5,688 |
Cash and cash equivalents | ||
Fair Value, Assets and Liabilities | ||
Marketable equity securities | 7,069 | 5,305 |
Prepaid Expenses and Other Current Assets | ||
Fair Value, Assets and Liabilities | ||
Marketable equity securities | 319 | 241 |
Other long-term assets | ||
Fair Value, Assets and Liabilities | ||
Marketable equity securities | $ 174 | $ 142 |
Revenues Revenues Recognized from Performance Obligations Satisfied in Prior Periods (Details) - USD ($) $ in Millions |
12 Months Ended | |
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Dec. 31, 2019 |
Dec. 31, 2018 |
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Revenue recognized related to royalties for licenses of our intellectual property [Member] | ||
Revenues Recognized from Performance Obligations Satisfied in Prior Periods [Line Items] | ||
Contract with Customer, Performance Obligation Satisfied in Previous Period | $ 741 | $ 541 |
Change in estimate variable consideration [Member] | ||
Revenues Recognized from Performance Obligations Satisfied in Prior Periods [Line Items] | ||
Contract with Customer, Performance Obligation Satisfied in Previous Period | $ 257 | $ (56) |
Stockholders' Equity - Repurchases of Common Stock (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
12 Months Ended | ||||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Jan. 29, 2020 |
Jan. 28, 2016 |
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Class of Stock [Line Items] | |||||
Stock Repurchased and Retired During Period, Value | $ 1,749 | $ 2,900 | $ 954 | ||
Stock Repurchase, Average Cost Per Share | $ 66.36 | $ 72.95 | $ 71.79 | ||
2016 Stock Repurchase Program [Member] | |||||
Class of Stock [Line Items] | |||||
Stock Repurchase Program, Authorized Amount | $ 12,000 | ||||
Stock Repurchase Program, Remaining Authorized Repurchase Amount | $ 3,400 | ||||
Publicly Announced Program [Member] | |||||
Class of Stock [Line Items] | |||||
Stock Repurchased and Retired During Period, Shares | 26 | 40 | 13 | ||
Subsequent Event [Member] | 2020 Stock Repurchase Program [Member] | |||||
Class of Stock [Line Items] | |||||
Stock Repurchase Program, Authorized Amount | $ 5,000 |
Inventories - Narrative (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Schedule of Inventory [Line Items] | ||||
Inventory write-downs | $ 649 | $ 572 | ||
Inventory write-downs for excess raw materials | ||||
Schedule of Inventory [Line Items] | ||||
Inventory write-downs | $ 500 | $ 410 | $ 547 | $ 440 |
Debt and Credit Facilities - Term Loan Facilities (Details) - Term Loan Facilities - USD ($) $ in Billions |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Debt Instrument [Line Items] | ||
Proceeds from Lines of Credit | $ 6.0 | |
Repayments of Lines of Credit | $ 4.5 | $ 1.5 |
Leases Balance Sheet Location Detail (Details) $ in Millions |
Dec. 31, 2019
USD ($)
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Leases [Abstract] | |
Right-of-use assets, net | $ 668 |
Lease liabilities - current | 99 |
Lease liabilities - noncurrent | $ 626 |
Weighted average remaining lease term | 8 years 8 months 12 days |
Weighted average discount rate | 3.47% |
Intangible Assets - Schedule of Estimated Future Amortization Expense (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | ||
2020 | $ 1,125 | |
2021 | 1,124 | |
2022 | 1,124 | |
2023 | 1,124 | |
2024 | 1,125 | |
Thereafter | 6,922 | |
Total | $ 12,544 | $ 13,694 |
Collaborative and Other Arrangements |
12 Months Ended |
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Dec. 31, 2019 | |
Collaborative and Other Arrangements [Abstract] | |
Collaborative and Other Arrangements [Text Block] | COLLABORATIVE AND OTHER ARRANGEMENTS We enter into collaborative and other similar arrangements with third parties for the development and commercialization of certain products and product candidates. These arrangements involve two or more parties who are active participants in the operating activities of the collaboration and are exposed to significant risks and rewards depending on the commercial success of the activities. These arrangements may include non-refundable, up-front payments, payments by us for options to acquire certain rights, contingent obligations by us for potential development and regulatory milestone payments and/or sales-based milestone payments, royalty payments, revenue or profit-sharing arrangements, cost-sharing arrangements and equity investments. Galapagos Filgotinib Collaboration In 2016, we closed a license and collaboration agreement with Galapagos, a clinical-stage biotechnology company based in Belgium, for the development and commercialization of filgotinib, a JAK1-selective inhibitor being evaluated for inflammatory disease indications (the filgotinib agreement). Upon closing, we made an up-front license fee payment and an equity investment in Galapagos by subscribing for 6.8 million new ordinary shares of Galapagos at a price of €58 per share. The equity investment, net of issuance premium, was $357 million. Under the terms of the filgotinib agreement, as amended in 2019, we have an exclusive, worldwide, royalty-bearing, sublicensable license for filgotinib and products containing filgotinib. As of December 31, 2019, Galapagos is eligible to receive from us potential future development and regulatory milestone-based payments of up to $640 million, sales-based milestone payments of up to $600 million, plus tiered royalties on global net sales ranging from 20% to 30%, with the exception of certain co-commercialization territories where profits would be shared equally. The co-commercialization territories are the UK, Germany, France, Italy, Spain, Belgium, the Netherlands and Luxembourg. We share global development costs for filgotinib equally. For the periods presented, the payments between Galapagos and us for the development costs and milestones were not material. Termination of the agreement may be on a country-by-country basis and will depend on the circumstances, including expiration of royalty term or in the co-commercialization territories, sale of a generic product, or material breach by either party. We may also terminate the entire agreement without cause following a certain period. Global Collaboration In August 2019, we closed an Option, License and Collaboration Agreement (the Collaboration Agreement) and a Subscription Agreement (the Subscription Agreement), each with Galapagos, pursuant to which the parties entered into a global collaboration that covers Galapagos’ current and future product portfolio (other than filgotinib). Upon closing, we paid $5.05 billion for the license and option rights and for 6.8 million new ordinary shares of Galapagos at a subscription price of €140.59 per share with a fair value of $1.13 billion, which included an issuance discount of $63 million calculated based on Galapagos’ closing stock price on the date of closing of the Subscription Agreement. The remaining $3.92 billion of the payment was recorded within Research and development expenses on our Consolidated Statements of Income. Pursuant to the Subscription Agreement, we were issued warrants that confer the right to subscribe, from time to time, for a number of new shares to be issued by Galapagos sufficient to bring the number of shares owned by us to 29.9% of the issued and outstanding shares at the time of our exercises. In the fourth quarter of 2019, we exercised a warrant to subscribe for 2.6 million ordinary shares of Galapagos at €140.59 per share and purchased shares on the open market with an aggregate fair value of $586 million, which brought the number of shares owned by us to 16.7 million or approximately 25.8% of the shares then issued and outstanding. Our equity investment in Galapagos is classified as Other long-term assets on our Consolidated Balance Sheets as it is subject to contractual lock-up provisions. We are subject to a 10-year standstill restricting our ability to acquire voting securities of Galapagos exceeding more than 29.9% of the then issued and outstanding voting securities of Galapagos. We agreed not to, without the prior consent of Galapagos, dispose of any equity securities of Galapagos prior to the second anniversary of the closing of the Subscription Agreement or dispose of any equity securities of Galapagos thereafter until the fifth anniversary of the closing of the Subscription Agreement, if after such disposal we would own less than 20.1% of the then issued and outstanding voting securities of Galapagos, subject to certain exceptions and termination events. We have two designees appointed to Galapagos’ board of directors. We have elected the fair value option to account for our equity investment in Galapagos whereby the investment is marked to market through earnings in each reporting period based on the market price of Galapagos’ shares. We believe the fair value option best reflects the underlying economics of the investment. See Note 3. Fair Value Measurements for additional information. Under the Collaboration Agreement, we have an exclusive license for the development and commercialization of GLPG-1690, a Phase 3 candidate for idiopathic pulmonary fibrosis, in our territories and have an option to participate in the development and commercialization of GLPG-1972, a Phase 2b candidate for osteoarthritis, and Galapagos’ other current and future clinical programs that have entered clinical development during the first ten years of the collaboration, subject to extension in certain circumstances. We may exercise our option for a program after the receipt of a data package from a completed, qualifying Phase 2 study for such program (or, in certain circumstances, the first Phase 3 study). If GLPG-1690 receives marketing approval in the United States, we will pay Galapagos $325 million as well as tiered royalties described below. If we exercise our option to the GLPG-1972 program, we will pay a $250 million option exercise fee and Galapagos would be eligible to receive up to $750 million in development, regulatory and commercial milestones as well as tiered royalties described below. With respect to all other programs in Galapagos’ current and future pipeline, if we exercise our option to a program, we will pay a $150 million option exercise fee per program. In addition, Galapagos will receive tiered royalties ranging from 20% to 24% on net sales in our territories of each Galapagos product optioned by us (including GLPG-1690 and GLPG-1972). If we exercise our option for a program, the parties will share equally in development costs and mutually agreed commercialization costs incurred subsequent to our exercise of the option. Galapagos retains exclusive commercialization rights for the optioned programs in the European Union, the UK, Iceland, Norway, Lichtenstein and Switzerland, and we have exclusive commercialization rights for all other countries globally, except for GLPG-1972 where we will only acquire the U.S. rights. We may terminate the collaboration in its entirety or on a program-by-program and country-by-country basis with advance notice as well as following other customary termination events. Janssen Complera/Eviplera and Odefsey In 2009, we entered into a license and collaboration agreement with Janssen Sciences Ireland UC (Janssen), formerly Tibotec Pharmaceuticals, to develop and commercialize a fixed-dose combination of our Truvada and Janssen’s non-nucleoside reverse transcriptase inhibitor, rilpivirine. This combination was approved in the United States and European Union in 2011 and is sold under the brand name Complera in the United States and Eviplera in the European Union. The agreement was amended in 2014 to expand the collaboration to include another product containing Janssen’s rilpivirine and our emtricitabine and tenofovir alafenamide (Odefsey). Under the amended agreement, Janssen granted us an exclusive license to Complera/Eviplera and Odefsey worldwide, but retained rights to distribute both combination products in certain countries outside of the United States. Neither party is restricted from combining its drugs with any other drug products except those which are similar to the components of Complera/Eviplera and Odefsey. We are responsible for manufacturing Complera/Eviplera and Odefsey and have the lead role in registration, distribution and commercialization of both products except in the countries where Janssen distributes. Janssen has exercised a right to co-detail the combination product in some of the countries where we are the selling party. Under the financial provisions of the 2014 amendment, the selling party sets the price of the combined products and the parties share revenues based on the ratio of the net selling prices of the party’s component(s), subject to certain restrictions and adjustments. We retain a specified percentage of Janssen’s share of revenues, including up to 30% in major markets. Sales of these products are included in Product sales and Janssen’s shares of revenues are included in Cost of goods sold on our Consolidated Statements of Income. Cost of goods sold relating to Janssen’s shares were $574 million, $608 million and $561 million for the years ended December 31, 2019, 2018 and 2017, respectively. Termination of the agreement may be on a product or country basis and will depend on the circumstances, including withdrawal of a product from the market, material breach by either party or expiry of revenue share payment term. We may terminate the agreement without cause with respect to the countries where we sell the products in which case Janssen has the right to become the selling party for such country if the product has launched but has been on the market for fewer than 10 years. Symtuza In 2014, we amended a license and collaboration agreement with Janssen to develop and commercialize a fixed-dose combination of Janssen’s darunavir and our cobicistat, emtricitabine and tenofovir alafenamide. This combination was approved in the United States and European Union in July 2018 and September 2017, respectively, and is sold under the brand name Symtuza. Under the terms of the 2014 amendment, we granted Janssen an exclusive license to Symtuza worldwide. Janssen is responsible for manufacturing, registration, distribution and commercialization of Symtuza worldwide. We are responsible for the intellectual property related to cobicistat, emtricitabine and tenofovir alafenamide (Gilead Compounds) and are the exclusive supplier of the Gilead Compounds. Neither party is restricted from combining its drugs with any other drug products except those which are similar to the components of Symtuza. Janssen sets the price of Symtuza and the parties share revenue based on the ratio of the net selling prices of the party’s component(s), subject to certain restrictions and adjustments. The intellectual property license and supply obligations related to the Gilead Compounds are accounted for as a single performance obligation. As the license was deemed to be the predominant item to which the revenue share relates, we recognize our share of the Symtuza revenue in the period when the corresponding sales of Symtuza by Janssen occur. We record our share of the Symtuza revenue as Product sales on our Consolidated Statements of Income primarily because we supply the Gilead Compounds to Janssen for Symtuza. See Note 2. Revenues for revenue recognized for the periods presented. Termination of the agreement may be on a product or country basis and will depend on the circumstances, including withdrawal of a product from the market, material breach by either party or expiry of revenue share payment term. Janssen may terminate the agreement without cause on a country-by-country basis, in which case Gilead has the right to become the selling party for such country(ies) if the product has launched but has been on the market for fewer than 10 years. Janssen may also terminate the entire agreement without cause. Japan Tobacco In 2005, Japan Tobacco, Inc. (Japan Tobacco) granted us exclusive rights to develop and commercialize elvitegravir, a novel HIV integrase inhibitor, in all countries of the world, excluding Japan, where Japan Tobacco retained such rights and paid a royalty to us based on its product sales in Japan. Under the agreement, we are responsible for seeking regulatory approval in our territories and are required to use diligent efforts to commercialize elvitegravir for the treatment of HIV infection. We bear all costs and expenses associated with such commercialization efforts and pay a royalty to Japan Tobacco based on our product sales. Japan Tobacco also marketed and distributed certain other products in our HIV portfolio in Japan and paid a royalty to us based on these product sales. We received approval for Stribild and Genvoya (elvitegravir-containing products) in 2012 and 2015, respectively. Our sales of these products are included in Product sales. Royalties due to Japan Tobacco based on our product sales are included in Cost of goods sold. Royalties due from Japan Tobacco based on its product sales in Japan are included in Royalty, contract and other revenues on our Consolidated Statements of Income. Royalty expenses recognized were $358 million, $452 million and $400 million for the years ended December 31, 2019, 2018 and 2017, respectively. Royalty income recognized was not material for the periods presented. Effective in December 2018, we entered into an agreement with Japan Tobacco to acquire the rights to market and distribute certain products in our HIV portfolio in Japan and to expand our rights to develop and commercialize elvitegravir to include Japan. We are responsible for the marketing of the products as of January 1, 2019. Under the terms of the agreement, we paid Japan Tobacco $559 million in cash, of which $194 million was paid as an up-front payment in 2018, and the remaining $365 million was paid in 2019. We recognized an intangible asset of $550 million reflecting the estimated fair value of the marketing-related rights acquired from Japan Tobacco with the remaining $9 million recorded as Prepaid and other current assets on our Consolidated Balance Sheets. The intangible asset is being amortized over nine years, representing the period over which the majority of the benefits are expected to be derived from the applicable products in our HIV portfolio. The amortization expense is classified as selling expense and recorded as Selling, general and administrative expenses on our Consolidated Statements of Income. Termination of the agreement may be on a product or country basis and will depend on the circumstances, including material breach by either party or expiry of royalty payment term. We may also terminate the entire agreement without cause. Gadeta In July 2018, we entered into a collaboration arrangement with Gadeta, a privately-held company based in Utrecht, the Netherlands, to develop gamma delta T cell receptor therapies for various cancers. Under the financial terms, we provide R&D funding for the collaboration, and Gadeta is eligible to receive future payments upon achievement of certain regulatory milestones. In addition, we made an upfront purchase of equity in Gadeta from Gadeta’s shareholders and may acquire additional equity in Gadeta upon achievement of certain R&D milestones. We also have the exclusive option to acquire the remaining equity in Gadeta for €300 million, adjusted for closing cash, transaction expenses and closing indebtedness. The option is exercisable at our discretion. Gadeta is a VIE, and we are its primary beneficiary because we have the power to direct the activities of Gadeta that most significantly impact its economic performance and as a result of the financial terms described above. Upon the initial consolidation of Gadeta, we recorded assets of $117 million, primarily intangible assets related to IPR&D and $82 million to Noncontrolling interest on our Consolidated Balance Sheets. Gadeta does not meet the definition of a business as defined in ASC 805, “Business Combinations”, and as a result, no goodwill was recognized. Bristol-Myers Squibb Company North America We had a collaboration arrangement with Bristol-Myers Squibb Company (BMS) to develop and commercialize a single tablet regimen containing our Truvada and BMS’s Sustiva (efavirenz) in the United States and Canada. This combination is sold under the brand name Atripla. We and BMS structured this collaboration as a joint venture that operated as a limited liability company, which we consolidated. On December 31, 2017, we terminated BMS’s participation in the collaboration following the launch of a generic version of Sustiva in the U.S. and became the sole owner of the joint venture. BMS is not permitted to commercialize Atripla in the United States and Canada but is entitled to receive from us certain fees based on net sales of Atripla in 2018, 2019 and 2020 on a declining annual scale. BMS supplies Sustiva to us at cost plus a markup during this three-year period but may terminate the supply agreement after a notice period. BMS notified us of their voluntary termination of the supply agreement in 2019. For the years ended December 31, 2019 and 2018 we recorded $58 million and $198 million. respectively, of fee expenses within Cost of goods sold on our Consolidated Statements of Income. Europe Gilead Sciences Ireland UC, our wholly-owned subsidiary, and BMS have a collaboration agreement which sets forth the terms and conditions under which we and BMS commercialize and distribute Atripla in the European Union, Iceland, Liechtenstein, Norway and Switzerland (collectively, the European Territory). The parties formed a limited liability company which we consolidate, to manufacture Atripla for distribution in the European Territory using efavirenz that it purchases from BMS at BMS’s estimated net selling price of efavirenz in the European Territory. The parties also formed a limited liability company to hold the marketing authorization for Atripla in the European Territory. Starting in 2012, except for a limited number of activities that are jointly managed, the parties no longer coordinate detailing and promotional activities in the European Territory. We are responsible for manufacturing, product distribution, inventory management and warehousing and have primary responsibility for regulatory activities. Through our local subsidiaries, we have primary responsibility for order fulfillment, collection of receivables, customer relations and handling of sales returns in all the territories where we and BMS promote Atripla. In general, the parties share revenues and out-of-pocket expenses in proportion to the net selling prices of the components of Atripla, Truvada and efavirenz. As of December 31, 2019 and 2018, efavirenz purchased from BMS at BMS’s estimated net selling price of efavirenz in the European Territory was included in Inventories on our Consolidated Balance Sheets. In September 2019, BMS elected to voluntarily terminate the agreement effective March 31, 2020. Post termination, BMS is not permitted to commercialize Atripla in the European territory but is entitled to receive from us certain fees based on net sales of Atripla on a declining annual scale for a three-year period following the effective date of the termination. Other collaboration arrangements that are not individually significant During 2019 and 2018, we entered into several collaborative and other similar arrangements, including equity investments and licensing arrangements, that we do not consider to be individually material. Cash outflows related to these arrangements totaled $467 million and $474 million for the years ended December 31, 2019 and 2018, respectively. We recorded up-front collaboration and licensing expenses related to these arrangements of $331 million and $278 million for the years ended December 31, 2019 and 2018, respectively, within Research and development expenses on our Consolidated Statements of Income and the remaining amounts were recorded in current and other long-term assets on our Consolidated Balance Sheets. We made no material cash payments related to individually insignificant collaboration arrangements entered into in 2017. Under the financial terms of these arrangements, we may be required to make payments upon achievement of various developmental, regulatory and commercial milestones, which could be significant. Future milestone payments, if any, will be reflected in our Consolidated Statements of Income when the corresponding events become probable. In addition, we may be required to pay significant royalties on future sales if products related to these arrangements are commercialized. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.
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Inventories |
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Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | INVENTORIES The following table summarizes our inventories (in millions):
Amounts reported as other long-term assets primarily consisted of raw materials as of December 31, 2019 and 2018. During the year ended December 31, 2019, we recorded inventory write-downs of $649 million, of which $547 million was related to slow moving and excess raw material and work in progress inventory primarily due to lower long-term demand for our hepatitis C virus (HCV) products. During the year ended December 31, 2018, we recorded inventory write-downs of $572 million, of which $440 million was related to excess raw materials primarily due to a sustained decrease in demand for Harvoni. Inventory write-downs recorded for the year ended December 31, 2017 were not material.
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Fair value measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | FAIR VALUE MEASUREMENTS We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:
Our financial instruments consist primarily of cash and cash equivalents, marketable debt securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and short-term and long-term debt. Cash and cash equivalents, marketable debt securities and certain equity securities, and foreign currency exchange contracts are reported at their respective fair values in our Consolidated Balance Sheets. Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Short-term and long-term debt are reported at their amortized costs in our Consolidated Balance Sheets. The remaining financial instruments are reported in our Consolidated Balance Sheets at amounts that approximate current fair values. The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in millions):
Changes in the fair value of equity securities resulted in net unrealized gains of $1.2 billion and $115 million for the years ended December 31, 2019 and 2018, respectively, which were included in Other income (expense), net, on our Consolidated Statements of Income. The following table summarizes the classification of our equity investment in Galapagos in our Consolidated Balance Sheets (in millions):
See Note 11. Collaborative and Other Arrangements for additional information on our equity investment in Galapagos. The following table summarizes the classification of our other equity securities in our Consolidated Balance Sheets (in millions):
Our available-for-sale debt securities are classified as cash equivalents, short-term marketable securities and long-term marketable securities in our Consolidated Balance Sheets. See Note 4. Available-for-Sale Debt Securities for additional information. Level 2 Inputs We estimate the fair values of Level 2 instruments by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs. Substantially all of our foreign currency derivative contracts have maturities within an 18 month time horizon and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by taking into consideration the valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, London Interbank Offered Rates (LIBOR) and swap rates. These inputs, where applicable, are observable at commonly quoted intervals. The total estimated fair values of our short-term and long-term debt, determined using Level 2 inputs based on their quoted market values, were approximately $27.3 billion and $27.1 billion at December 31, 2019 and 2018, respectively, and the carrying values were $24.6 billion and $27.3 billion at December 31, 2019 and 2018, respectively. Level 3 Inputs As of December 31, 2019 and 2018, the only assets or liabilities that were measured using Level 3 inputs on a recurring basis were our contingent consideration liabilities, which were not material. The fair values of our acquired IPR&D assets are based on probability-adjusted discounted cash flow calculations using Level 3 fair value measurements and inputs including estimated revenues, costs, probability of technical and regulatory success and discount rates. Amounts capitalized as IPR&D are subject to impairment testing until the completion or abandonment of the associated R&D efforts. During the fourth quarter of 2019, we recognized an impairment charge of $800 million associated with the IPR&D intangible assets acquired in connection with the acquisition of Kite Pharma, Inc. (Kite) primarily for the treatment of indolent B-cell non-Hodgkin lymphoma (iNHL). During the fourth quarter of 2018, we recognized an impairment charge of $820 million to write down to zero the carrying value of the KITE-585 program (an anti-B cell maturation antigen being evaluated for the treatment of multiple myeloma). See Note 6. Acquisitions and Note 9. Intangible Assets for additional information. Our policy is to recognize transfers into or out of Level 3 classification as of the actual date of the event or change in circumstances that caused the transfer. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.
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Revenues Disaggregation of Revenues (Tables) |
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Disaggregation of Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Table Text Block] | The following table disaggregates our product sales by product and geographic region and disaggregates our royalty, contract and other revenues by geographic region (in millions):
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Acquisitions Fair Value of Assets Acquired and Liabilities Assumed (Tables) |
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Business Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The following table summarizes the acquisition date fair values of assets acquired and liabilities assumed, and the consideration transferred (in millions):
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Revenues Contract Assets (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Contract Assets [Abstract] | ||
Contract assets | $ 144 | $ 125 |
Inventories - Schedule of inventories (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Schedule of Inventory [Line Items] | ||
Raw materials | $ 1,348 | $ 1,888 |
Work in process | 170 | 235 |
Finished goods | 549 | 507 |
Inventories | 922 | 814 |
Inventory, Noncurrent | 1,145 | 1,816 |
Assets, Total | ||
Schedule of Inventory [Line Items] | ||
Inventories | $ 2,067 | $ 2,630 |
Leases Narrative (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Leases [Abstract] | |||
Lease term extension | 15 years | ||
Termination period | one year | ||
Operating lease expense under ASC 842 | $ 162 | ||
Operating lease expense under ASC 840 | $ 109 | $ 84 |
Leases (Tables) |
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Dec. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet and Other Information Related to Operating Leases | The following table summarizes balance sheet and other information related to our operating leases as of December 31, 2019 (in millions, except weighted average amounts):
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Supplemental Information Related to Operating Leases | The following table summarizes other supplemental information related to our operating leases (in millions):
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Operating Lease Aggregate Future Lease Payments | The following table summarizes a maturity analysis of our operating lease liabilities showing the aggregate lease payments as of December 31, 2019 (in millions):
The following table summarizes the aggregate undiscounted non-cancelable future minimum lease payments for operating leases under the prior lease standard as of December 31, 2018 (in millions):
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Segment Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Revenue by Major Customers | The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our total revenues (as a percentage of total revenues):
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Net Income Per Share Attributable to Gilead Common Shareholders - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | 12 Months Ended | |||||||||
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Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Earnings Per Share [Abstract] | |||||||||||
Net income attributable to Gilead | $ 2,696 | $ (1,165) | $ 1,880 | $ 1,975 | $ 3 | $ 2,097 | $ 1,817 | $ 1,538 | $ 5,386 | $ 5,455 | $ 4,628 |
Shares used in per share calculation - basic | 1,270 | 1,298 | 1,307 | ||||||||
Dilutive effect of stock options and equivalents | 7 | 10 | 12 | ||||||||
Shares used in per share calculation - diluted | 1,277 | 1,308 | 1,319 | ||||||||
Net income per share attributable to Gilead common stockholders - basic | $ 2.13 | $ (0.92) | $ 1.48 | $ 1.55 | $ 0 | $ 1.62 | $ 1.40 | $ 1.18 | $ 4.24 | $ 4.20 | $ 3.54 |
Net income per share attributable to Gilead common stockholders - diluted | $ 2.12 | $ (0.92) | $ 1.47 | $ 1.54 | $ 0 | $ 1.60 | $ 1.39 | $ 1.17 | $ 4.22 | $ 4.17 | $ 3.51 |
Acquisitions Impairment of Intangible Assets (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Business Acquisition [Line Items] | |||||
In-process research and development impairment | $ 800,000,000 | $ 820,000,000 | $ 800,000,000 | $ 820,000,000 | $ 0 |
Kite 585 Program [Member] | |||||
Business Acquisition [Line Items] | |||||
Indefinite-lived Intangible Assets (Excluding Goodwill) | $ 0 | $ 0 |
Derivative Financial Instruments - Summary of Potential Effect of Offsetting Derivatives (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Derivative Asset [Abstract] | ||
Gross Amounts of Recognized Assets/Liabilities | $ 37 | $ 78 |
Gross Amounts Offset on our Condensed Consolidated Balance Sheets | 0 | 0 |
Amounts of Assets/Liabilities Presented on our Condensed Consolidated Balance Sheets | 37 | 78 |
Derivative Financial Instruments | (6) | (1) |
Cash Collateral Received/ Pledged | 0 | 0 |
Net Amount (Legal Offset) | 31 | 77 |
Derivative Liability [Abstract] | ||
Gross Amounts of Recognized Assets/Liabilities | (8) | (1) |
Gross Amounts Offset on our Condensed Consolidated Balance Sheets | 0 | 0 |
Amounts of Assets/Liabilities Presented on our Condensed Consolidated Balance Sheets | (8) | (1) |
Derivative Financial Instruments | 7 | 1 |
Cash Collateral Received/ Pledged | 0 | 0 |
Net Amount (Legal Offset) | $ (1) | $ 0 |
Consolidated Statements of Stockholders' Equity (Parenthetical) - $ / shares |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Statement of Stockholders' Equity [Abstract] | |||||||||||
Common Stock, Dividends, Per Share, Declared | $ 0.63 | $ 0.63 | $ 0.63 | $ 0.63 | $ 0.57 | $ 0.57 | $ 0.57 | $ 0.57 | $ 2.52 | $ 2.28 | $ 2.08 |
Stockholders' Equity - Dividends (Details) - USD ($) $ / shares in Units, $ in Millions |
3 Months Ended | 12 Months Ended | ||||||||||
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Feb. 04, 2020 |
Dec. 31, 2019 |
Sep. 30, 2019 |
Jun. 30, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2018 |
Jun. 30, 2018 |
Mar. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Subsequent Event [Line Items] | ||||||||||||
Common Stock, Dividends, Per Share, Declared | $ 0.63 | $ 0.63 | $ 0.63 | $ 0.63 | $ 0.57 | $ 0.57 | $ 0.57 | $ 0.57 | $ 2.52 | $ 2.28 | $ 2.08 | |
Dividends, Common Stock, Cash | $ 808 | $ 807 | $ 810 | $ 814 | $ 741 | $ 746 | $ 747 | $ 752 | $ 3,239 | $ 2,986 | ||
Subsequent Event [Member] | ||||||||||||
Subsequent Event [Line Items] | ||||||||||||
Common Stock, Dividends, Per Share, Declared | $ 0.68 | |||||||||||
Dividends Payable, Date to be Paid | Mar. 30, 2020 | |||||||||||
Dividends Payable, Date of Record | Mar. 13, 2020 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable allowance | $ 758 | $ 583 |
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Common Stock, Par value | $ 0.001 | $ 0.001 |
Common Stock, Shares authorized | 5,600,000,000 | 5,600,000,000 |
Common Stock, Shares issued | 1,266,000,000 | 1,282,000,000 |
Common Stock, Shares outstanding | 1,266,000,000 | 1,282,000,000 |
Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure | INCOME TAXES Income before provision for income taxes consists of the following (in millions):
The provision for income taxes consists of the following (in millions):
The 2019 provision for income taxes included a $1.2 billion deferred tax benefit related to intangible asset transfers from a foreign subsidiary to Ireland and the United States. In the fourth quarter of 2019, we completed an intra-entity asset transfer of certain intangible assets from a foreign subsidiary to Ireland. The transaction resulted in a step-up of the Irish tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the book basis of such intangible assets. As a result, we recognized a deferred tax asset of $1.2 billion on our consolidated financial statements. The tax deductions for amortization of the assets will be recognized in the future and any amortization not deducted for tax purposes will be carried forward indefinitely under Irish tax laws. We expect to be able to realize the deferred tax asset resulting from this intra-entity asset transfer. The impact of the intangible asset transfer from a foreign subsidiary to the United States was not material. The 2018 provision for income taxes included a $588 million deferred tax charge related to a transfer of acquired intangible assets from a foreign subsidiary to the United States. This transaction did not result in a step-up of the U.S. tax-deductible basis; and as a result, we recognized a deferred tax liability of $588 million for the temporary difference where the book basis exceeded the tax basis of these acquired intangible assets. The 2017 provision for income taxes included a $5.5 billion provisional charge to income tax expense related to Tax Reform enacted in December 2017. Tax reform made significant changes to the Internal Revenue Code of 1986, as amended, which include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a repatriation tax on deemed repatriated earnings of foreign subsidiaries, implementation of a modified territorial tax system, which has the effect of subjecting earnings of our foreign subsidiaries to U.S. taxation on GILTI. We elected to account for the tax on GILTI under the period cost method. The reconciliation between the federal statutory tax rate applied to income before taxes and our effective tax rate is summarized as follows:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows (in millions):
The valuation allowance was $217 million and $331 million at December 31, 2019 and 2018, respectively. The decrease of our valuation allowance in 2019 was primarily related to a reduction in net operating loss carryforwards under the asset recognition framework and the corresponding valuation allowance with respect to certain foreign jurisdictions. At December 31, 2019, we had U.S. federal net operating loss carryforwards of approximately $231 million. The federal net operating loss carryforwards will start to expire in 2021, if not utilized. We also had federal tax credit carryforwards of approximately $88 million which will start to expire in 2020, if not utilized. In addition, we had state net operating loss and tax credit carryforwards of approximately $1.4 billion and $543 million, respectively. The state net operating loss will start to expire in 2021 if not utilized and state tax credit carryforwards is carried forward indefinitely. Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of the net operating losses and credits before utilization. We file federal, state and foreign income tax returns in the United States and in many foreign jurisdictions. For federal income tax purposes, the statute of limitations is open for 2013 and onwards and 2010 and onwards for California income tax purposes. For certain acquired entities, the statute of limitations is open for all years from inception due to our utilization of their net operating losses and credits carried over from prior years. Our income tax returns are subject to audit by federal, state and foreign tax authorities. We are currently under examination by the IRS for the tax years from 2013 to 2015 and by various state and foreign jurisdictions. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We periodically evaluate our exposures associated with our tax filing positions. Of the total unrecognized tax benefits, $1.6 billion and $1.3 billion at December 31, 2019 and 2018, if recognized, would reduce our effective tax rate in the period of recognition. Interest and penalties related to unrecognized tax benefits included as part of provision for income taxes on our Consolidated Statements of Income were $105 million for the year ended December 31, 2019. Interest and penalties related to unrecognized tax benefits for the years ended December 31, 2018 and 2017, respectively, were not material. Accrued interest and penalties related to unrecognized tax benefits were $259 million and $154 million at December 31, 2019 and 2018, respectively. As of December 31, 2019, we believe that it is reasonably possible that our unrecognized tax benefits may materially change in the next 12 months due to potential resolutions with a tax authority. An estimate of the range of the reasonably possible change cannot be determined at this time. In June 2019, the Ninth Circuit Court of Appeals (Ninth Circuit) issued an opinion in Altera Corp. v. Commissioner reversing the prior decision of the United States Tax Court and requiring related parties in an intercompany cost-sharing arrangement to share expenses related to stock-based compensation. In July 2019, the taxpayer requested a rehearing before the full Ninth Circuit and the request was denied in November 2019. As a result, we recorded a cumulative income tax expense of $114 million in the fourth quarter of 2019. On February 10, 2020, the taxpayer requested a hearing before the Supreme Court of the United States; and as such, although the final outcome of the case is still uncertain, we recorded income tax expense in the fourth quarter of 2019 based on the Ninth Circuit’s denial. The following is a rollforward of our total gross unrecognized tax benefits (in millions):
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Stockholders' Equity |
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Stockholders' Equity Attributable to Parent [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note Disclosure | STOCKHOLDERS’ EQUITY Stock Repurchase Programs In the first quarter of 2016, our Board of Directors authorized a $12.0 billion stock repurchase program (2016 Program) under which repurchases may be made in the open market or in privately negotiated transactions. As of December 31, 2019, the remaining authorized repurchase amount under the 2016 Program was $3.4 billion. The following table summarizes our stock repurchases under the 2016 Program (in millions, except per share amounts):
In addition to repurchases from the 2016 Program, we repurchased shares of common stock withheld by us from employee restricted stock awards to satisfy our applicable tax withholding obligations, which are immaterial and excluded from the table above. We use the par value method of accounting for our stock repurchases. Under the par value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital (APIC) based on an estimated average sales price per issued share with the excess amounts charged to retained earnings. The following table summarizes the reduction of common stock and APIC and the charge to retained earnings as a result of our stock repurchases (in millions):
In the first quarter of 2020, our Board of Directors authorized a new $5.0 billion stock repurchase program (2020 Program), which will commence upon the completion of the 2016 Program. Purchases under the 2020 Program may be made in the open market or in privately negotiated transactions. Dividends The following table summarizes cash dividends declared on our common stock (in millions, except per share amounts):
Our restricted stock and performance share awards or units have dividend equivalent rights entitling holders to dividend equivalents to be paid upon vesting for each share of the underlying unit On February 4, 2020, we announced that our Board of Directors declared a quarterly cash dividend of $0.68 per share of our common stock, with a payment date of March 30, 2020 to all stockholders of record as of the close of business on March 13, 2020. Future dividends are subject to declaration by the Board of Directors. Preferred Stock We have 5 million shares of authorized preferred stock issuable in series. Our Board is authorized to determine the designation, powers, preferences and rights of any such series. There was no preferred stock outstanding as of December 31, 2019 and 2018. Accumulated Other Comprehensive Income The following table summarizes the changes in AOCI by component, net of tax (in millions):
The amounts reclassified to net income for gains and losses on cash flow hedges are recorded as part of Product sales on our Consolidated Statements of Income. See Note 5. Derivative Financial Instruments for additional information. The amounts reclassified to net income for gains and losses on available-for-sale debt securities are recorded as part of Other income (expense), net, on our Consolidated Statements of Income. The income tax impact allocated to each component of other comprehensive income was not material for the period presented.
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Income Taxes - Schedule of Income Before Provision for Income Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
|
Income Tax Disclosure [Abstract] | |||
Domestic | $ 4,112 | $ 7,074 | $ 8,099 |
Foreign | 1,048 | 725 | 5,430 |
Income before provision for income taxes | $ 5,160 | $ 7,799 | $ 13,529 |
Income Taxes - Rollforward of Total Unrecognized Tax Liabilities (Details) - USD ($) $ in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward] | |||
Balance, beginning of period | $ 1,595 | $ 2,181 | $ 1,852 |
Tax Positions Related to Current Year: Additions | 138 | 64 | 299 |
Tax Positions Related to Current Year: Reductions | 0 | 0 | 0 |
Tax Positions Related to Prior Years: Additions | 405 | 125 | 67 |
Tax Positions Related to Prior Years: Reductions | 0 | 0 | (16) |
Settlements | (104) | (774) | (12) |
Lapse of statute of limitations | (3) | (1) | (9) |
Balance, end of period | $ 2,031 | $ 1,595 | $ 2,181 |
Property, plant and equipment (Tables) |
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Property, Plant and Equipment | Property, plant and equipment (in millions):
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Organization and Summary of Significant Accounting Policies Organization and Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||
Organization, Consolidation and Presentation of Financial Statements Disclosure | Overview Gilead Sciences, Inc. (Gilead, we, our or us), incorporated in Delaware on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. With each new discovery and investigational drug candidate, we strive to transform and simplify care for people with life-threatening illnesses around the world. We have operations in more than 35 countries worldwide, with headquarters in Foster City, California. Gilead’s primary areas of focus include viral diseases, inflammatory and fibrotic diseases and oncology. We seek to add to our existing portfolio of products through our internal discovery and clinical development programs, product acquisition, in-licensing and strategic collaborations. Our portfolio of marketed products includes AmBisome®, Atripla®, Biktarvy®, Cayston®, Complera®/Eviplera®, Descovy®, Descovy for PrEP®, Emtriva®, Epclusa®, Genvoya®, Harvoni®, Hepsera®, Letairis®, Odefsey®, Ranexa®, Sovaldi®, Stribild®, Truvada®, Truvada for PrEP®, Tybost®, Vemlidy®, Viread®, Vosevi®, Yescarta® and Zydelig®. 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. Basis of Presentation The accompanying Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany transactions have been eliminated. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interests in our Consolidated Statements of Income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. We assess whether we are the primary beneficiary of a variable interest entity (VIE) at the inception of the arrangement and at each reporting date. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.
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Significant Accounting Policies, Estimates and Judgments | Significant Accounting Policies, Estimates and Judgments The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, 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. Actual results may differ significantly from these estimates.
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Revenue Recognition, Policy | Revenue Recognition On January 1, 2018, we adopted Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers” (Topic 606) using the modified retrospective method. Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605). As a result, we have changed our accounting policies for revenue recognition as detailed below. Policy Elections and Practical Expedients Taken
Product Sales We recognize revenue from product sales when control of the product transfers, generally upon shipment or delivery, to the customer, or in certain cases, upon the corresponding sales by our customer to a third party. Upon recognition of revenue from product sales, provisions are made for various forms of variable consideration, which include government and other rebates such as Medicaid reimbursements, customer incentives such as cash discounts for prompt payment, distributor fees and expected returns of expired products, as appropriate. Variable consideration is included in the net sales price only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Our payment terms to customers generally range from 30 to 90 days. Variable Consideration Rebates and Chargebacks We estimate reductions to our revenues for amounts paid to payers and healthcare providers in the United States, including Medicaid rebates, AIDS Drug Assistance Program rebates and chargebacks, Veterans Administration and Public Health Service rebates and chargebacks, as well as foreign government rebates. Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payer and individual payer plans. Our estimates are based on products sold, historical payer mix, and as available, pertinent third-party industry information, estimated patient population, known market events or trends, and for our U.S. product sales, channel inventory data obtained from our major U.S. wholesalers in accordance with our inventory management agreements. We also take into consideration, as available, new information regarding changes in programs’ regulations and guidelines that would impact the amount of the actual rebates and/or our expectations regarding future payer mix for these programs. Government and other chargebacks that are payable to our direct customers are classified as reductions of Accounts receivable on our Consolidated Balance Sheets. Government and other rebates that are payable to third party payers and healthcare providers are recorded in Accrued government and other rebates on our Consolidated Balance Sheets. Cash Discounts We estimate cash discounts based on contractual terms, historical customer payment patterns and our expectations regarding future customer payment patterns. Distributor Fees Under our inventory management agreements with our significant U.S. wholesalers, we pay the wholesalers a fee primarily for compliance with certain contractually determined covenants such as the maintenance of agreed upon inventory levels. These distributor fees are based on a contractually determined fixed percentage of sales. Product Returns We do not provide our customers with a general right of product return, but typically permit returns if the product is damaged, defective, or otherwise cannot be used when received by the customer, or in the case of product sold in the United States and certain other countries, if the product has expired. We will accept returns for product that will expire within six months or that have expired up to one year after their expiration dates. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of our historical return patterns, historical industry information reporting the return rates for similar products and contractual agreements intended to limit the amount of inventory maintained by our wholesalers. Royalty, Contract and Other Revenues Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur.
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Research and Development Expenses | Research and Development Expenses Research and development (R&D) expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations (CROs), materials and supplies, payments under collaborative and other arrangements, including up-front and milestone payments, license and option fees, as well as expense reimbursements to the collaboration partners and overhead allocations consisting of various support and infrastructure costs. We charge R&D costs, including clinical study costs, to expense when incurred. Clinical study costs are a significant component of R&D expenses. Most of our clinical studies are performed by third-party CROs. We monitor levels of performance under each significant contract including the extent of patient enrollment and other activities through communications with our CROs. We accrue costs for clinical studies performed by CROs over the service periods specified in the contracts and adjust our estimates, if required, based upon our ongoing review of the level of effort and costs actually incurred by the CROs. All of our material CRO contracts are terminable by us upon written notice and we are generally only liable for actual services completed by the CRO and certain non-cancelable expenses incurred at any point of termination.
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Selling, General and Administrative Expenses | Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses relate to sales and marketing, finance, human resources, legal and other administrative activities. SG&A 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 (BPD) fee. In the United States, we, along with other pharmaceutical manufacturers of branded drug products, are required to pay a portion of the BPD fee, which is estimated based on select government sales during the prior year as a percentage of total industry government sales. We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $784 million, $587 million and $600 million for the years ended December 31, 2019, 2018 and 2017, respectively.
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Cash and Cash Equivalents | Cash and Cash Equivalents We consider highly liquid investments with insignificant interest rate risk and an original maturity of three months or less on the purchase date to be cash equivalents.
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Marketable and Nonmarketable Securities | Marketable and Nonmarketable Securities Marketable Debt Securities We determine the appropriate classification of our marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. All of our marketable debt securities are considered available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term marketable securities or long-term marketable securities. Unrealized gains and losses on available-for-sale debt securities are excluded from net income and reported in accumulated other comprehensive income (loss) (AOCI) as a separate component of stockholders’ equity. Other income (expense), net, includes interest, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. We regularly review all of our investments for other-than-temporary declines in fair value. Our review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis. When we determine that the decline in fair value of an investment is below our accounting basis and the decline is other-than-temporary, we reduce the carrying value of the security we hold and record a loss for the amount of such decline. Marketable and Non-Marketable Equity Securities Investments in equity securities, other than equity method investments, are recorded at fair market value, if fair value is readily determinable and, beginning January 1, 2018, unrealized gains and losses are included in Other income (expense), net on our Consolidated Statements of Income. For periods presented prior to January 1, 2018, unrealized gains and losses were included in AOCI as a separate component of stockholders’ equity. For investments in entities over which we have significant influence but do not meet the requirements for consolidation and have not elected the fair value option, we use the equity method of accounting with our share of the underlying income or loss of such entities reported in Other income (expense), net on our Consolidated Statements of Income. We have elected the fair value option to account for our equity investment in Galapagos NV (Galapagos) over which we have significant influence. We believe the fair value option best reflects the underlying economics of the investment. See Note 11. Collaborative and Other Arrangements for additional information. Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Certain investments in equity securities of non-public companies are accounted for using the equity method based on our ownership percentage and other factors that indicate we have significant influence over the investee. Investments in equity securities without readily determinable fair values and investments in non-public companies that are accounted for using the equity method of accounting are not material for the periods presented. Our investments in equity securities are recorded in Prepaid and other current assets or Other long-term assets on our Consolidated Balance Sheet. We regularly review our securities for indicators of impairment.
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Concentrations of Risk | Concentrations of Risk We are subject to credit risk from our portfolio of cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. We are also subject to credit risk from our accounts receivable related to our product sales. Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and doubtful accounts. Estimates of our allowance for doubtful accounts are determined based on existing contractual payment terms, historical payment patterns of our customers and individual customer circumstances, an analysis of days sales outstanding by geographic region and a review of the local economic environment and its potential impact on government funding and reimbursement practices. The majority of our trade accounts receivable arises from product sales in the United States, Europe and Japan. To date, we have not experienced significant losses with respect to the collection of our accounts receivable. We believe that our allowance for doubtful accounts was adequate at December 31, 2019. Certain of the raw materials and components that we utilize in our operations are obtained through single suppliers. Certain of the raw materials that we utilize in our operations are made at only one facility. Since the suppliers of key components and raw materials must be named in a new drug application filed with U.S. Food and Drug Administration (FDA) for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from our suppliers is interrupted for any reason, we may be unable to ship our commercial products or to supply our product candidates for clinical trials.
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Inventories | Inventories Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We periodically review our inventories to identify obsolete, slow moving, excess or otherwise unsaleable items. If obsolete, slow moving, excess or unsaleable items are observed and there are no alternate uses for the inventory, we record a write-down to net realizable value through a charge to Cost of goods sold on our Consolidated Statements of Income. The determination of net realizable value requires judgment including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions and potential product obsolescence, among others. When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, we capitalize pre-launch inventory costs prior to regulatory approval. A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, anticipated R&D initiatives that could impact the indication in which the compound will be used, viability of commercialization and marketplace trends.
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Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method. Repairs and maintenance costs are expensed as incurred. Estimated useful lives in years are generally as follows:
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Acquisitions | Acquisitions We account for business combinations using the acquisition method of accounting, which requires that assets acquired, including in-process research and development (IPR&D) projects, and liabilities assumed be recorded at their fair values as of the acquisition date on our Consolidated Balance Sheets. Any excess of purchase price over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires us to make significant estimates and assumptions. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred. When we determine net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets and, therefore, no goodwill is recorded and contingent consideration such as payments upon achievement of various developmental, regulatory and commercial milestones generally is not recognized at the acquisition date. In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in our Consolidated Statements of Income unless there is an alternative future use
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Goodwill and Other Intangible Assets | Goodwill and Intangible Assets Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to revision within the measurement period, which may be up to one year from the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. We do not amortize goodwill and intangible assets with indefinite useful lives. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if we become aware of any events or circumstances that would indicate the fair values of the assets are below their carrying amounts. When development is successfully completed, which generally occurs when regulatory approval is obtained, the associated assets are deemed finite-lived and amortized over their respective estimated useful lives beginning at that point in time. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and are reviewed for impairment when facts or circumstances indicate that the carrying value of these assets may not be recoverable.
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Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.
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Foreign Currency Translation, Transaction Gains and Losses, and Hedging Contracts | Foreign Currency Translation, Transaction Gains and Losses, and Hedging Contracts Non-U.S. entity operations are recorded in the functional currency of each entity. Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of AOCI within stockholders’ equity. Foreign currency transaction gains and losses are recorded in Other income (expense), net, on our Consolidated Statements of Income. Net foreign currency transaction gains and losses were not material for the years ended December 31, 2019, 2018 and 2017. We hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The credit risk associated with these contracts is driven by changes in interest and currency exchange rates and, as a result, varies over time. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We also seek to limit our risk of loss by entering into contracts that permit net settlement at maturity. Therefore, our overall risk of loss in the event of a counterparty default is limited to the amount of any unrealized gains on outstanding contracts (i.e., those contracts that have a positive fair value) at the date of default. We do not enter into derivative contracts for trading purposes.
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Fair Value of Financial Instruments | Fair Value of Financial Instruments We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks.
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Derivative Financial Instruments | Derivative Financial Instruments We recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets. Changes in the fair value of derivatives designated as part of a hedge transaction are recorded each period in current earnings or AOCI. Changes in the fair value of derivatives that are not part of a hedge transaction are recorded each period in current earnings. We assess, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting the changes in cash flows or fair values of the hedged items. If we determine that a forecasted transaction is probable of not occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any related unrealized gain or loss on the contract is recognized in Other income (expense), net on our Consolidated Statements of Income.
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Income Taxes | Income Taxes Our income tax provision is computed under the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on interpretations of applicable tax laws or regulations. We record liabilities related to unrecognized tax benefits in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. An adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period. We have elected to account for the tax on Global Intangible Low-Taxed Income (GILTI), enacted as part of the Tax Cuts and Jobs Act (Tax Reform), as a component of tax expense in the period in which the tax is incurred (period cost method).
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Presentation of Cash Flows | Presentation of Cash Flows Starting in 2019, up-front and milestone payments related to collaborative and other arrangements are classified as cash flows from investing activities in our Consolidated Statements of Cash Flows. Comparative prior year amounts were not material and were not reclassified to investing activities from operating activities.
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Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 “Leases” (ASU 2016-02) and subsequently issued supplemental adoption guidance and clarification (collectively, Topic 842). Topic 842 amends a number of aspects of lease accounting, including requiring lessees to recognize right-of-use assets and lease liabilities for operating leases with a lease term greater than one year. Topic 842 supersedes Topic 840 “Leases.” On January 1, 2019, we adopted Topic 842 using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 840. We elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard and not reassess whether any contracts entered into prior to the adoption are leases. We also elected to account for lease and nonlease components in our lease agreements as a single lease component in determining lease assets and liabilities. In addition, we elected not to recognize the right-of-use assets and liabilities for leases with lease terms of one year or less. Upon adoption of Topic 842, we recorded $441 million of right-of-use assets within Other long-term assets and $490 million of operating lease liabilities, classified primarily within Other long-term obligations on our Consolidated Balance Sheet, as of January 1, 2019. The adoption did not have a material impact on our Consolidated Statements of Operations or Consolidated Statements of Cash Flows. See Note 13. Leases for additional information.
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Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” (ASU 2016-13). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The guidance will become effective for us beginning in the first quarter of 2020 and must be adopted using a modified retrospective approach, with certain exceptions. We do not expect the adoption of these standards to have a material impact on our Consolidated Financial Statements. In November 2018, the FASB issued Accounting Standards Update No. 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606” (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. This guidance will become effective for us beginning in the first quarter of 2020 and will be applied retrospectively to January 1, 2018 when we initially adopted Topic 606. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.
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Available-for-Sale Debt Securities (Tables) |
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Summary of Available-for-Sale Debt Securities at Estimated Fair Value | The following table summarizes our available-for-sale debt securities (in millions):
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Summary of the Classification of Available-for-Sale Debt Securities | The following table summarizes the classification of our available-for-sale debt securities in our Consolidated Balance Sheets (in millions):
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Summary of Available-for-Sale Debt Securities by Contractual Maturity | The following table summarizes our available-for-sale debt securities by contractual maturity (in millions):
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Summary of Available-for-Sale Debt Securities in a Continuous Loss Position Deemed not to be Other-than-Temporarily Impaired | The following table summarizes our available-for-sale debt securities that were in a continuous unrealized loss position, but were not deemed to be other-than-temporarily impaired (in millions):
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Intangible Assets |
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Intangible Assets, Net (Excluding Goodwill) [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | INTANGIBLE ASSETS The following table summarizes our intangible assets, net (in millions):
Aggregate amortization expense related to finite-lived intangible assets was $1.1 billion, $1.2 billion and $912 million for the years ended December 31, 2019, 2018 and 2017, respectively, and is primarily included in Cost of goods sold on our Consolidated Statements of Income. Amounts capitalized as IPR&D are subject to impairment testing until the completion or abandonment of the associated R&D efforts. During the fourth quarter of 2019, we performed quantitative impairment testing of our IPR&D intangible assets using a probability-weighted income approach that discounts expected future cash flows to present value. The estimated net cash flows were discounted using a discount rate of 9.5%, which is based on the estimated weighted-average cost of capital for companies with profiles similar to our profile and represents the rate that market participants would use to value the intangible assets. The discounted cash flow models used in valuing these intangible assets also require the use of Level 3 fair value measurements and inputs including estimated revenues, costs, and probability of technical and regulatory success. In comparison to the 2018 assessment, we used lower estimated revenues in 2019 due to changes in the estimated market opportunities as new therapies or combinations of existing therapies were approved. The lower estimated revenues reduced the fair value of the IPR&D intangible assets, primarily related to axicabtagene ciloleucel for the treatment of iNHL, below carrying value resulting in the recognition of an impairment charge of $800 million, which was recorded within Research and development expenses on our Consolidated Statements of Income. In 2018, we concluded that the KITE-585 program did not justify further efforts based on the totality of the clinical data gathered and discontinued the program. As a result, the carrying value of the IPR&D relating to the KITE-585 program was written down to zero and we recorded an impairment charge of $820 million within Research and development expenses on our Consolidated Statements of Income. No IPR&D impairment charges were recorded in 2017. The following table summarizes the estimated future amortization expense associated with our finite-lived intangible assets as of December 31, 2019 (in millions):
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Derivative Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | DERIVATIVE FINANCIAL INSTRUMENTS Our operations in foreign countries expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, primarily the Euro. To manage this risk, we may hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward or option contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The credit risk associated with these contracts is driven by changes in interest and currency exchange rates and, as a result, varies over time. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We also seek to limit our risk of loss by entering into contracts that permit net settlement at maturity. Therefore, our overall risk of loss in the event of a counterparty default is limited to the amount of any unrealized gains on outstanding contracts (i.e., those contracts that have a positive fair value) at the date of default. We do not enter into derivative contracts for trading purposes. We hedge our exposure to foreign currency exchange rate fluctuations for certain monetary assets and liabilities of our entities that are denominated in a non-functional currency. The derivative instruments we use to hedge this exposure are not designated as hedges, and as a result, changes in their fair value are recorded in Other income (expense), net, on our Consolidated Statements of Income. We hedge our exposure to foreign currency exchange rate fluctuations for forecasted product sales that are denominated in a non-functional currency. The derivative instruments we use to hedge this exposure are designated as cash flow hedges and have maturities of 18 months or less. Upon executing a hedging contract and quarterly thereafter, we assess hedge effectiveness using regression analysis. The unrealized gains or losses in AOCI are reclassified into product sales when the respective hedged transactions affect earnings. The majority of gains and losses related to the hedged forecasted transactions reported in AOCI at December 31, 2019 are expected to be reclassified to product sales within 12 months. The cash flow effects of our derivative contracts for the years ended December 31, 2019, 2018 and 2017 are included within Net cash provided by operating activities on our Consolidated Statements of Cash Flows. We had notional amounts on foreign currency exchange contracts outstanding totaling $2.9 billion and $2.2 billion at December 31, 2019 and 2018, respectively. While all our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts on a gross basis. The following table summarizes the classification and fair values of derivative instruments in our Consolidated Balance Sheets (in millions):
The following table summarizes the effect of our foreign currency exchange contracts on our Consolidated Financial Statements (in millions):
From time to time, we may discontinue cash flow hedges, and as a result, record related amounts in Other income (expense), net, on our Consolidated Statements of Income. There was no discontinuance of cash flow hedges for the years presented. As of December 31, 2019 and 2018, we only held foreign currency exchange contracts. The following table summarizes the potential effect of offsetting derivatives by type of financial instrument on our Consolidated Balance Sheets (in millions):
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Property, plant and equipment - Schedule of property, plant and equipment (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
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Property, Plant and Equipment [Abstract] | ||
Land | $ 404 | $ 404 |
Buildings and Improvements, Gross | 3,358 | 2,344 |
Machinery and Equipment, Gross | 805 | 697 |
Office And Computer Equipment Gross | 634 | 558 |
Construction in Progress, Gross | 723 | 1,194 |
Property, Plant and Equipment, Gross | 5,924 | 5,197 |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | (1,422) | (1,191) |
Property, Plant and Equipment, Net | $ 4,502 | $ 4,006 |
Debt and Credit Facilities - Contractual Maturities of Financing Obligations (Details) $ in Millions |
Dec. 31, 2019
USD ($)
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Contractual Maturities of Financing Obligations | |
2020 | $ 2,500 |
2021 | 2,250 |
2022 | 1,500 |
2023 | 750 |
2024 | $ 1,750 |
Leases Supplemental Information Related to Leases (Details) $ in Millions |
12 Months Ended |
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Dec. 31, 2019
USD ($)
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Leases [Abstract] | |
Cash paid for amounts included in the measurement of lease liabilities | $ 66 |
Right-of-use assets obtained in exchange for lease liabilities | $ 313 |
Intangible Assets - Additional Information (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Intangible Assets [Line Items] | |||||
Discount Rate | 9.50% | ||||
In-process research and development impairment | $ 800,000,000 | $ 820,000,000 | $ 800,000,000 | $ 820,000,000 | $ 0 |
Cost of Goods Sold | |||||
Intangible Assets [Line Items] | |||||
Amortization of Intangible Assets | $ 1,100,000,000 | 1,200,000,000 | $ 912,000,000 | ||
Kite 585 Program [Member] | |||||
Intangible Assets [Line Items] | |||||
Indefinite-lived Intangible Assets (Excluding Goodwill) | $ 0 | $ 0 |
Available-for-Sale Debt Securities - Summary of the Balance Sheet Classification of Available-for-Sale Debt Securities (Details) - USD ($) $ in Millions |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale debt securities | $ 16,500 | $ 24,164 |
Cash and cash equivalents | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale debt securities | 2,291 | 10,592 |
Short-term marketable securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale debt securities | 12,721 | 12,149 |
Long-term marketable securities | ||
Debt Securities, Available-for-sale [Line Items] | ||
Available-for-sale debt securities | $ 1,488 | $ 1,423 |
Organization and Summary of Significant Accounting Policies |
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Dec. 31, 2019 | |||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Overview Gilead Sciences, Inc. (Gilead, we, our or us), incorporated in Delaware on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need. With each new discovery and investigational drug candidate, we strive to transform and simplify care for people with life-threatening illnesses around the world. We have operations in more than 35 countries worldwide, with headquarters in Foster City, California. Gilead’s primary areas of focus include viral diseases, inflammatory and fibrotic diseases and oncology. We seek to add to our existing portfolio of products through our internal discovery and clinical development programs, product acquisition, in-licensing and strategic collaborations. Our portfolio of marketed products includes AmBisome®, Atripla®, Biktarvy®, Cayston®, Complera®/Eviplera®, Descovy®, Descovy for PrEP®, Emtriva®, Epclusa®, Genvoya®, Harvoni®, Hepsera®, Letairis®, Odefsey®, Ranexa®, Sovaldi®, Stribild®, Truvada®, Truvada for PrEP®, Tybost®, Vemlidy®, Viread®, Vosevi®, Yescarta® and Zydelig®. 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. Basis of Presentation The accompanying Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany transactions have been eliminated. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income (loss) attributable to noncontrolling interests in our Consolidated Statements of Income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. We assess whether we are the primary beneficiary of a variable interest entity (VIE) at the inception of the arrangement and at each reporting date. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. Significant Accounting Policies, Estimates and Judgments The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, 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. Actual results may differ significantly from these estimates. Revenue Recognition On January 1, 2018, we adopted Accounting Standards Update No. 2014-09 “Revenue from Contracts with Customers” (Topic 606) using the modified retrospective method. Topic 606 supersedes the revenue recognition requirements in Topic 605 “Revenue Recognition” (Topic 605). As a result, we have changed our accounting policies for revenue recognition as detailed below. Policy Elections and Practical Expedients Taken
Product Sales We recognize revenue from product sales when control of the product transfers, generally upon shipment or delivery, to the customer, or in certain cases, upon the corresponding sales by our customer to a third party. Upon recognition of revenue from product sales, provisions are made for various forms of variable consideration, which include government and other rebates such as Medicaid reimbursements, customer incentives such as cash discounts for prompt payment, distributor fees and expected returns of expired products, as appropriate. Variable consideration is included in the net sales price only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Our payment terms to customers generally range from 30 to 90 days. Variable Consideration Rebates and Chargebacks We estimate reductions to our revenues for amounts paid to payers and healthcare providers in the United States, including Medicaid rebates, AIDS Drug Assistance Program rebates and chargebacks, Veterans Administration and Public Health Service rebates and chargebacks, as well as foreign government rebates. Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payer and individual payer plans. Our estimates are based on products sold, historical payer mix, and as available, pertinent third-party industry information, estimated patient population, known market events or trends, and for our U.S. product sales, channel inventory data obtained from our major U.S. wholesalers in accordance with our inventory management agreements. We also take into consideration, as available, new information regarding changes in programs’ regulations and guidelines that would impact the amount of the actual rebates and/or our expectations regarding future payer mix for these programs. Government and other chargebacks that are payable to our direct customers are classified as reductions of Accounts receivable on our Consolidated Balance Sheets. Government and other rebates that are payable to third party payers and healthcare providers are recorded in Accrued government and other rebates on our Consolidated Balance Sheets. Cash Discounts We estimate cash discounts based on contractual terms, historical customer payment patterns and our expectations regarding future customer payment patterns. Distributor Fees Under our inventory management agreements with our significant U.S. wholesalers, we pay the wholesalers a fee primarily for compliance with certain contractually determined covenants such as the maintenance of agreed upon inventory levels. These distributor fees are based on a contractually determined fixed percentage of sales. Product Returns We do not provide our customers with a general right of product return, but typically permit returns if the product is damaged, defective, or otherwise cannot be used when received by the customer, or in the case of product sold in the United States and certain other countries, if the product has expired. We will accept returns for product that will expire within six months or that have expired up to one year after their expiration dates. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of our historical return patterns, historical industry information reporting the return rates for similar products and contractual agreements intended to limit the amount of inventory maintained by our wholesalers. Royalty, Contract and Other Revenues Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur. Research and Development Expenses Research and development (R&D) expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations (CROs), materials and supplies, payments under collaborative and other arrangements, including up-front and milestone payments, license and option fees, as well as expense reimbursements to the collaboration partners and overhead allocations consisting of various support and infrastructure costs. We charge R&D costs, including clinical study costs, to expense when incurred. Clinical study costs are a significant component of R&D expenses. Most of our clinical studies are performed by third-party CROs. We monitor levels of performance under each significant contract including the extent of patient enrollment and other activities through communications with our CROs. We accrue costs for clinical studies performed by CROs over the service periods specified in the contracts and adjust our estimates, if required, based upon our ongoing review of the level of effort and costs actually incurred by the CROs. All of our material CRO contracts are terminable by us upon written notice and we are generally only liable for actual services completed by the CRO and certain non-cancelable expenses incurred at any point of termination. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses relate to sales and marketing, finance, human resources, legal and other administrative activities. SG&A 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 (BPD) fee. In the United States, we, along with other pharmaceutical manufacturers of branded drug products, are required to pay a portion of the BPD fee, which is estimated based on select government sales during the prior year as a percentage of total industry government sales. We expense the costs of advertising, including promotional expenses, as incurred. Advertising expenses were $784 million, $587 million and $600 million for the years ended December 31, 2019, 2018 and 2017, respectively. Cash and Cash Equivalents We consider highly liquid investments with insignificant interest rate risk and an original maturity of three months or less on the purchase date to be cash equivalents. Marketable and Nonmarketable Securities Marketable Debt Securities We determine the appropriate classification of our marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. All of our marketable debt securities are considered available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term marketable securities or long-term marketable securities. Unrealized gains and losses on available-for-sale debt securities are excluded from net income and reported in accumulated other comprehensive income (loss) (AOCI) as a separate component of stockholders’ equity. Other income (expense), net, includes interest, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. We regularly review all of our investments for other-than-temporary declines in fair value. Our review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis. When we determine that the decline in fair value of an investment is below our accounting basis and the decline is other-than-temporary, we reduce the carrying value of the security we hold and record a loss for the amount of such decline. Marketable and Non-Marketable Equity Securities Investments in equity securities, other than equity method investments, are recorded at fair market value, if fair value is readily determinable and, beginning January 1, 2018, unrealized gains and losses are included in Other income (expense), net on our Consolidated Statements of Income. For periods presented prior to January 1, 2018, unrealized gains and losses were included in AOCI as a separate component of stockholders’ equity. For investments in entities over which we have significant influence but do not meet the requirements for consolidation and have not elected the fair value option, we use the equity method of accounting with our share of the underlying income or loss of such entities reported in Other income (expense), net on our Consolidated Statements of Income. We have elected the fair value option to account for our equity investment in Galapagos NV (Galapagos) over which we have significant influence. We believe the fair value option best reflects the underlying economics of the investment. See Note 11. Collaborative and Other Arrangements for additional information. Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Certain investments in equity securities of non-public companies are accounted for using the equity method based on our ownership percentage and other factors that indicate we have significant influence over the investee. Investments in equity securities without readily determinable fair values and investments in non-public companies that are accounted for using the equity method of accounting are not material for the periods presented. Our investments in equity securities are recorded in Prepaid and other current assets or Other long-term assets on our Consolidated Balance Sheet. We regularly review our securities for indicators of impairment. Concentrations of Risk We are subject to credit risk from our portfolio of cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. We are also subject to credit risk from our accounts receivable related to our product sales. Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and doubtful accounts. Estimates of our allowance for doubtful accounts are determined based on existing contractual payment terms, historical payment patterns of our customers and individual customer circumstances, an analysis of days sales outstanding by geographic region and a review of the local economic environment and its potential impact on government funding and reimbursement practices. The majority of our trade accounts receivable arises from product sales in the United States, Europe and Japan. To date, we have not experienced significant losses with respect to the collection of our accounts receivable. We believe that our allowance for doubtful accounts was adequate at December 31, 2019. Certain of the raw materials and components that we utilize in our operations are obtained through single suppliers. Certain of the raw materials that we utilize in our operations are made at only one facility. Since the suppliers of key components and raw materials must be named in a new drug application filed with U.S. Food and Drug Administration (FDA) for a product, significant delays can occur if the qualification of a new supplier is required. If delivery of material from our suppliers is interrupted for any reason, we may be unable to ship our commercial products or to supply our product candidates for clinical trials. Inventories Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We periodically review our inventories to identify obsolete, slow moving, excess or otherwise unsaleable items. If obsolete, slow moving, excess or unsaleable items are observed and there are no alternate uses for the inventory, we record a write-down to net realizable value through a charge to Cost of goods sold on our Consolidated Statements of Income. The determination of net realizable value requires judgment including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions and potential product obsolescence, among others. When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, we capitalize pre-launch inventory costs prior to regulatory approval. A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, anticipated R&D initiatives that could impact the indication in which the compound will be used, viability of commercialization and marketplace trends. Property, Plant and Equipment Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method. Repairs and maintenance costs are expensed as incurred. Estimated useful lives in years are generally as follows:
Acquisitions We account for business combinations using the acquisition method of accounting, which requires that assets acquired, including in-process research and development (IPR&D) projects, and liabilities assumed be recorded at their fair values as of the acquisition date on our Consolidated Balance Sheets. Any excess of purchase price over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires us to make significant estimates and assumptions. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred. When we determine net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets and, therefore, no goodwill is recorded and contingent consideration such as payments upon achievement of various developmental, regulatory and commercial milestones generally is not recognized at the acquisition date. In an asset acquisition, up-front payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in our Consolidated Statements of Income unless there is an alternative future use. Goodwill and Intangible Assets Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to revision within the measurement period, which may be up to one year from the acquisition date. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. We do not amortize goodwill and intangible assets with indefinite useful lives. We test goodwill and indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if we become aware of any events or circumstances that would indicate the fair values of the assets are below their carrying amounts. When development is successfully completed, which generally occurs when regulatory approval is obtained, the associated assets are deemed finite-lived and amortized over their respective estimated useful lives beginning at that point in time. Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and are reviewed for impairment when facts or circumstances indicate that the carrying value of these assets may not be recoverable. Impairment of Long-Lived Assets Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss. Foreign Currency Translation, Transaction Gains and Losses, and Hedging Contracts Non-U.S. entity operations are recorded in the functional currency of each entity. Results of operations for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency rates. Assets and liabilities are translated using currency rates at period end. Foreign currency translation adjustments are recorded as a component of AOCI within stockholders’ equity. Foreign currency transaction gains and losses are recorded in Other income (expense), net, on our Consolidated Statements of Income. Net foreign currency transaction gains and losses were not material for the years ended December 31, 2019, 2018 and 2017. We hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The credit risk associated with these contracts is driven by changes in interest and currency exchange rates and, as a result, varies over time. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We also seek to limit our risk of loss by entering into contracts that permit net settlement at maturity. Therefore, our overall risk of loss in the event of a counterparty default is limited to the amount of any unrealized gains on outstanding contracts (i.e., those contracts that have a positive fair value) at the date of default. We do not enter into derivative contracts for trading purposes. Fair Value of Financial Instruments We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks. Derivative Financial Instruments We recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets. Changes in the fair value of derivatives designated as part of a hedge transaction are recorded each period in current earnings or AOCI. Changes in the fair value of derivatives that are not part of a hedge transaction are recorded each period in current earnings. We assess, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting the changes in cash flows or fair values of the hedged items. If we determine that a forecasted transaction is probable of not occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any related unrealized gain or loss on the contract is recognized in Other income (expense), net on our Consolidated Statements of Income. Income Taxes Our income tax provision is computed under the liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on interpretations of applicable tax laws or regulations. We record liabilities related to unrecognized tax benefits in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. An adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period. We have elected to account for the tax on Global Intangible Low-Taxed Income (GILTI), enacted as part of the Tax Cuts and Jobs Act (Tax Reform), as a component of tax expense in the period in which the tax is incurred (period cost method). Presentation of Cash Flows Starting in 2019, up-front and milestone payments related to collaborative and other arrangements are classified as cash flows from investing activities in our Consolidated Statements of Cash Flows. Comparative prior year amounts were not material and were not reclassified to investing activities from operating activities. Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-02 “Leases” (ASU 2016-02) and subsequently issued supplemental adoption guidance and clarification (collectively, Topic 842). Topic 842 amends a number of aspects of lease accounting, including requiring lessees to recognize right-of-use assets and lease liabilities for operating leases with a lease term greater than one year. Topic 842 supersedes Topic 840 “Leases.” On January 1, 2019, we adopted Topic 842 using the modified retrospective method. Results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 840. We elected the package of practical expedients permitted under the transition guidance within Topic 842, which allowed us to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard and not reassess whether any contracts entered into prior to the adoption are leases. We also elected to account for lease and nonlease components in our lease agreements as a single lease component in determining lease assets and liabilities. In addition, we elected not to recognize the right-of-use assets and liabilities for leases with lease terms of one year or less. Upon adoption of Topic 842, we recorded $441 million of right-of-use assets within Other long-term assets and $490 million of operating lease liabilities, classified primarily within Other long-term obligations on our Consolidated Balance Sheet, as of January 1, 2019. The adoption did not have a material impact on our Consolidated Statements of Operations or Consolidated Statements of Cash Flows. See Note 13. Leases for additional information. Recently Issued Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued Accounting Standards Update No. 2016-13 “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments” (ASU 2016-13). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU 2019-04 “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The guidance will become effective for us beginning in the first quarter of 2020 and must be adopted using a modified retrospective approach, with certain exceptions. We do not expect the adoption of these standards to have a material impact on our Consolidated Financial Statements. In November 2018, the FASB issued Accounting Standards Update No. 2018-18 “Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606” (ASU 2018-18). ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as revenue if the counterparty is not a customer for that transaction. This guidance will become effective for us beginning in the first quarter of 2020 and will be applied retrospectively to January 1, 2018 when we initially adopted Topic 606. We do not expect the adoption of this standard to have a material impact on our Consolidated Financial Statements.
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Consolidated Statements of Comprehensive Income - USD ($) $ in Millions |
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Statement of Comprehensive Income [Abstract] | |||
Net income | $ 5,364 | $ 5,460 | $ 4,644 |
Other Comprehensive Income (Loss) | |||
Net foreign currency translation gain (loss), net of tax | 6 | (38) | (47) |
Available-for-sale Securities | |||
Net unrealized gain, net of tax | 54 | 43 | 218 |
Reclassifications to net income, net of tax | (1) | 4 | (8) |
Net change | 53 | 47 | 210 |
Cash Flow Hedges | |||
Net unrealized gain (loss), net of tax | 72 | 112 | (304) |
Reclassification to net income, net of tax | (126) | 87 | 28 |
Net change | (54) | 199 | (276) |
Other comprehensive income (loss) | 5 | 208 | (113) |
Comprehensive income | 5,369 | 5,668 | 4,531 |
Comprehensive (loss) income attributable to noncontrolling interest | (22) | 5 | 16 |
Comprehensive income attributable to Gilead | $ 5,391 | $ 5,663 | $ 4,515 |
Selected Quarterly Financial Information (unaudited) Selected Quarterly Financial Information (Tables) |
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Quarterly Financial Information [Table Text Block] | (in millions, except per share amounts)
(5) Amounts for the fourth quarter of 2018 included an unfavorable impact of $1.31 per basic share and $1.30 per diluted share from the factors noted above in footnote (4).
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Other Financial Information (Tables) |
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Schedule of Other Accrued Liabilities |
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Employee Benefits (Tables) |
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Schedule of Share-based Compensation, Stock Options, Activity | The following table summarizes activity and related information under our stock option plans. All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:
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Share-based Compensation, Restricted Stock and Performance Shares Award Outstanding Activity | The following table summarizes our RSU and PSU activity and related information (in millions, except per share amounts):
(1) Weighted-average grant-date fair value per share excludes shares related to grants that currently have no grant date as the performance objectives have not yet been defined.
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Schedule of Stock-Based Compensation Expenses Included in Consolidated Statement of Income | The following table summarizes total stock-based compensation expenses included on our Consolidated Statements of Income (in millions):
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Schedule Of Assumptions To Calculate The Estimated Fair Value Of Awards | We used the following assumptions to calculate the estimated fair value of the awards:
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Net Income Per Share Attributable to Gilead Common Shareholders |
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Earnings Per Share | NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period. The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents were determined under the treasury stock method. Potential shares of common stock excluded from the computation of diluted net income per share attributable to Gilead common shareholders because their effect would have been antidilutive were 14 million, 13 million and 11 million during 2019, 2018 and 2017, respectively. The following table shows the calculation of basic and diluted net income per share attributable to Gilead common stockholders (in millions, except per share amounts):
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Leases |
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Leases | LEASES Our operating leases consist primarily of properties and equipment for our administrative, manufacturing and R&D activities. We determine if an arrangement contains a lease at inception. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate when it is reasonably certain that we will exercise that option. Some of our leases include options to extend the terms for up to 15 years and some include options to terminate the lease within one year after the lease commencement date. Right-of-use assets are adjusted for prepaid lease payments, lease incentives and initial direct costs incurred. As of December 31, 2019, we do not have material finance leases. As most of our operating leases do not provide an implicit interest rate, we generally utilize a collateralized incremental borrowing rate, applied in a portfolio approach when relevant, based on the information available at the commencement date to determine the lease liability. Operating lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term. Operating lease expenses, including variable costs and short-term leases, were $162 million for the year ended December 31, 2019. Operating lease expense under the prior lease standard was $109 million and $84 million for the years ended December 31, 2018 and 2017, respectively. The following table summarizes balance sheet and other information related to our operating leases as of December 31, 2019 (in millions, except weighted average amounts):
The following table summarizes other supplemental information related to our operating leases (in millions):
The following table summarizes a maturity analysis of our operating lease liabilities showing the aggregate lease payments as of December 31, 2019 (in millions):
The following table summarizes the aggregate undiscounted non-cancelable future minimum lease payments for operating leases under the prior lease standard as of December 31, 2018 (in millions):
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Selected Quarterly Financial Information (unaudited) Selected Quarterly Financial Information Table (Details) - USD ($) $ / shares in Units, $ in Millions |
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Selected Quarterly Financial Information [Abstract] | |||||||||||
Revenues | $ 5,879 | $ 5,604 | $ 5,685 | $ 5,281 | $ 5,795 | $ 5,596 | $ 5,648 | $ 5,088 | $ 22,449 | $ 22,127 | $ 26,107 |
Gross Profit | 4,113 | 4,481 | 4,607 | 4,243 | 4,111 | 4,369 | 4,344 | 4,000 | |||
Net income | 2,689 | (1,168) | 1,875 | 1,968 | 3 | 2,099 | 1,819 | 1,539 | 5,364 | 5,460 | 4,644 |
Net Income (Loss) Attributable to Parent | $ 2,696 | $ (1,165) | $ 1,880 | $ 1,975 | $ 3 | $ 2,097 | $ 1,817 | $ 1,538 | $ 5,386 | $ 5,455 | $ 4,628 |
Net income per share attributable to Gilead common stockholders - basic | $ 2.13 | $ (0.92) | $ 1.48 | $ 1.55 | $ 0 | $ 1.62 | $ 1.40 | $ 1.18 | $ 4.24 | $ 4.20 | $ 3.54 |
Net income per share attributable to Gilead common stockholders - diluted | $ 2.12 | $ (0.92) | $ 1.47 | $ 1.54 | $ 0 | $ 1.60 | $ 1.39 | $ 1.17 | $ 4.22 | $ 4.17 | $ 3.51 |
Schedule II: Valuation and Qualifying Accounts |
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Valuation and Qualifying Accounts | GILEAD SCIENCES, INC. Schedule II: Valuation and Qualifying Accounts (in millions)
(1) Allowances are for doubtful accounts, cash discounts and chargebacks.
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Segment Information Schedule of revenue by major customers (Details) |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Minimum [Member] | |||
Revenue, Major Customer [Line Items] | |||
Percentage of revenues | 10.00% | ||
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | AmerisourceBergen Corp [Member] | |||
Revenue, Major Customer [Line Items] | |||
Percentage of revenues | 21.00% | 20.00% | 20.00% |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | Cardinal Health Inc [Member] | |||
Revenue, Major Customer [Line Items] | |||
Percentage of revenues | 21.00% | 21.00% | 19.00% |
Revenue Benchmark [Member] | Customer Concentration Risk [Member] | McKesson Corp [Member] | |||
Revenue, Major Customer [Line Items] | |||
Percentage of revenues | 22.00% | 21.00% | 23.00% |
Income Taxes - Schedule of Difference Between Provision For Income Taxes and Federal Statutory Income Tax Rate to Income Before Provision for Income Taxes (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Components of Income Tax Expense (Benefit), Continuing Operations [Abstract] | |||
Federal statutory rate | 21.00% | 21.00% | 35.00% |
State taxes, net of federal benefit | 0.40% | 0.60% | 0.10% |
Foreign earnings at different rates | (2.50%) | (0.90%) | (11.20%) |
Research and other credits | (1.90%) | (1.10%) | (0.60%) |
US Tax on Foreign Earnings | 4.30% | 2.10% | 1.20% |
Effective income tax rate impacts related to deferred tax charge on acquired intangibles | (24.00%) | 7.50% | 0.00% |
Effective Income Tax Rate Reconciliation,Other Reconciling Items, Percent | 0 | (0.007) | 0.429 |
Deferred tax revaluation | 0.00% | 0.80% | (2.30%) |
Effective Income Tax Rate Reconciliation, Tax Settlement, Percent | (2.40%) | (1.90%) | 0.00% |
Other | 1.10% | 2.60% | 0.60% |
Effective tax rate | (4.00%) | 30.00% | 65.70% |
Derivative Financial Instruments - Additional Information (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Derivative [Line Items] | |||
Derivative, Notional Amount | $ 2,900 | $ 2,200 | |
Gain (Loss) on Discontinuance of Cash Flow Hedges | $ 0 | $ 0 | $ 0 |
Maximum | |||
Derivative [Line Items] | |||
Maturity on derivative instruments | 18 months | ||
Estimate of time to transfer | 12 months |
Stockholders' Equity - Preferred Stock (Details) - shares |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Stockholders' Equity Attributable to Parent [Abstract] | ||
Preferred Stock, Shares Authorized | 5,000,000 | 5,000,000 |
Preferred Stock, Shares Outstanding | 0 | 0 |
Available-for-Sale Debt Securities - Additional Information (Details) |
12 Months Ended | |
---|---|---|
Dec. 31, 2019
USD ($)
security
|
Dec. 31, 2018
USD ($)
security
|
|
Debt Securities, Available-for-sale [Abstract] | ||
Securities in unrealized loss positions, number of positions (securities) | security | 305 | 1,348 |
Other-than-temporary Impairment Loss, Debt Securities, Available-for-sale | $ | $ 0 | $ 0 |
Debt and Credit Facilities (Tables) |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Financing Arrangements | The following table summarizes the carrying amount of our borrowings under various financing arrangements (in millions):
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Schedule of Contractual Maturities of Financing Obligations | As of December 31, 2019, the aggregate future principal maturities of financing obligations for each of the next five years, based on contractual due dates, are as follows (in millions):
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Net Income Per Share Attributable to Gilead Common Shareholders (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table shows the calculation of basic and diluted net income per share attributable to Gilead common stockholders (in millions, except per share amounts):
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Selected Quarterly Financial Information (unaudited) Selected Quarterly Financial Information (Notes) |
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Quarterly Financial Information [Text Block] | SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (in millions, except per share amounts)
(5) Amounts for the fourth quarter of 2018 included an unfavorable impact of $1.31 per basic share and $1.30 per diluted share from the factors noted above in footnote (4).
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Net Income Per Share Attributable to Gilead Common Shareholders - Narrative (Details) - shares shares in Millions |
12 Months Ended | ||
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Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Earnings Per Share [Abstract] | |||
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 14 | 13 | 11 |
Income Taxes - Schedule of Provision for Income Taxes (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Components of Income Tax Expense (Benefit), Continuing Operations [Abstract] | |||
Federal - Current | $ 1,646 | $ 1,716 | $ 8,817 |
Federal - Deferred | (843) | 324 | (123) |
Federal Income Tax Expense (Benefit), Continuing Operations | 803 | 2,040 | 8,694 |
State - Current | 135 | 162 | 97 |
State - Deferred | (42) | (17) | (20) |
State and Local Income Tax Expense (Benefit), Continuing Operations | 93 | 145 | 77 |
Foreign - Current | 124 | 175 | 54 |
Foreign - Deferred | (1,224) | (21) | 60 |
Foreign Income Tax Expense (Benefit), Continuing Operations | (1,100) | 154 | 114 |
Provision for Income Taxes | $ (204) | $ 2,339 | $ 8,885 |
Employee Benefits |
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Employee Benefits | EMPLOYEE BENEFITS We provide share-based compensation in the form of various types of equity-based awards, including restricted stock units (RSUs), performance share awards or units (PSUs) and stock options. Compensation expense is recognized on the Consolidated Statements of Income based on the estimated fair value of the award on the grant date. The estimated fair value of RSUs is based on the closing price of our common stock. For PSUs, estimated fair value is based on either the Monte Carlo valuation methodology or the stock price on the date of grant. For stock option awards, estimated fair value is based on the Black-Scholes option valuation model. 2004 Equity Incentive Plan In May 2004, our stockholders approved and we adopted the Gilead Sciences, Inc. 2004 Equity Incentive Plan (as amended, the 2004 Plan). The 2004 Plan is a broad based incentive plan that provides for the grant of equity-based awards, including stock options, restricted stock units, restricted stock awards and performance share awards, to employees, directors and consultants. The 2004 Plan authorized the issuance of a total of 309 million shares of common stock. As of December 31, 2019, a total of 79 million shares remain available for future grant under the 2004 Plan. Stock Options The 2004 Plan provides for option grants designated as either non-qualified or incentive stock options. All stock options granted after January 1, 2006 have been non-qualified stock options. Employee stock options generally vest over three or four years. All options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options are issued and are granted at prices not less than the fair market value of our common stock on the grant date. Stock option exercises are settled with common stock from the 2004 Plan’s previously authorized and available pool of shares. The following table summarizes activity and related information under our stock option plans. All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:
Aggregate intrinsic value represents the value of our closing stock price on the last trading day of the year in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. Total intrinsic value of options exercised was $209 million for 2019, $412 million for 2018 and $337 million for 2017. The weighted-average grant date fair value of the stock options granted was $12.15 per share for 2019, $17.03 per share for 2018 and $38.78 per share for 2017. The weighted-average grant date fair value of stock options granted in 2017 was higher due to replacement awards granted in connection with our acquisitions of Kite and Cell Design Labs. As of December 31, 2019, there was $85 million of unrecognized compensation cost related to stock options, which is expected to be recognized over an estimated weighted-average period of 2.1 years. Restricted Stock and Performance Share Awards We grant time-based RSUs to certain employees as part of our annual employee equity compensation review program as well as to new hire employees and to non-employee members of our Board. RSUs are share-based awards that entitle the holder to receive freely tradable shares of our common stock upon vesting. RSUs generally vest over three or four years from the date of grant. The fair value of an RSU is equal to the closing price of our common stock on the grant date. We grant PSUs which vest upon the achievement of specified market or performance goals, which could include achieving a total shareholder return compared to a pre-determined peer group or achieving revenue targets. The actual number of common shares ultimately issued is calculated by multiplying the number of PSUs by a payout percentage ranging from 0% to 200%, and these awards generally vest only when a committee (or subcommittee) of our Board has determined that the specified market and performance goals have been achieved. The fair value of each PSU is estimated at the date of grant or when performance objectives are defined for the grants. Depending on the terms of the award, fair value on the date of grant is determined based on either the Monte Carlo valuation methodology or the closing stock price on the date of grant. In addition, we have also granted other PSUs to certain of our employees under the 2004 Plan. The vesting of these awards is subject to the achievement of specified individual performance goals, typically within a one to two year period. The fair value of such an award is equal to the closing price of our common stock on the grant date. The following table summarizes our RSU and PSU activity and related information (in millions, except per share amounts):
The weighted-average grant date fair value of RSUs granted was $64.31 per share for 2019, $77.98 per share for 2018, and $73.56 per share for 2017. The weighted-average grant date fair value of PSUs granted was $68.30 per share for 2019, $88.76 per share for 2018, and $74.42 per share for 2017. The total grant date fair value of our vested RSUs and PSUs was $450 million for , $481 million for 2018 and $329 million for 2017, and total fair value as of the respective vesting dates was $372 million for 2019, $446 million for 2018 and $288 million for 2017. As of December 31, 2019, there was $802 million of unrecognized compensation cost related to unvested RSUs and PSUs, which is expected to be recognized over a weighted-average period of 2.2 years. Employee Stock Purchase Plan Under our Employee Stock Purchase Plan and the International Employee Stock Purchase Plan (together, as amended, the ESPP), employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of our common stock on the offering date or the purchase date. The ESPP offers a six-month look-back feature as well as an automatic reset feature that provides for an offering period to be reset to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period. ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares. During 2019, 2 million shares were issued under the ESPP for $90 million. A total of 79 million shares of common stock have been authorized for issuance under the ESPP, and there were 9 million shares available for issuance under the ESPP as of December 31, 2019. Stock-Based Compensation The following table summarizes total stock-based compensation expenses included on our Consolidated Statements of Income (in millions):
Stock-based compensation is recognized as expense over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach, reduced for estimated forfeitures. We estimate forfeitures based on our historical experience. The requisite service period could be shorter than the vesting period if an employee is retirement eligible. Valuation Assumptions Fair value of options granted under our 2004 Plan and purchases under our ESPP were estimated at grant or purchase dates using a Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility and expected award life. We used the following assumptions to calculate the estimated fair value of the awards:
The fair value of stock options granted was calculated using the single option approach. We use a blend of historical volatility along with implied volatility for traded options on our common stock to determine our expected volatility. The expected term of stock-based awards represents the weighted-average period the awards are expected to remain outstanding. We estimate the weighted-average expected term based on historical cancellation and historical exercise data related to our stock options as well as the contractual term and vesting terms of the awards. The risk-free interest rate is based upon observed interest rates appropriate for the term of the stock-based awards. The dividend yield is based on our history and expectation of dividend payouts. Deferred Compensation We maintain a retirement saving plan under which eligible U.S. employees may defer compensation for income tax purposes under Section 401(k) of the Internal Revenue Code (the Gilead Sciences 401k Plan). In certain foreign subsidiaries, we maintain defined benefit plans as required by local regulatory requirements. Our total matching contribution expense under the Gilead Sciences 401k Plan and other defined benefit plans was $110 million during 2019, $91 million during 2018 and $74 million during 2017. We maintain a deferred compensation plan under which our directors and key employees may defer compensation. Amounts deferred by participants are deposited into a rabbi trust. The total assets and liabilities associated with the deferred compensation plan were $171 million as of December 31, 2019 and $124 million as of December 31, 2018.
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Debt and Credit Facilities |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt and Credit Facility | DEBT AND CREDIT FACILITIES The following table summarizes the carrying amount of our borrowings under various financing arrangements (in millions):
Senior Unsecured Notes We did not enter into any borrowings in 2019 or 2018. In 2017, in connection with our acquisition of Kite, we issued $3.0 billion aggregate principal amount of senior unsecured notes, of which $750 million of principal balance was repaid at maturity in 2018 and the remaining $2.25 billion was repaid at maturity in 2019. We collectively refer to our senior unsecured notes issued in September 2016 (the 2016 Notes), in September 2015 (the 2015 Notes), in March and November 2014 (the 2014 Notes) and in March and December 2011 (the 2011 Notes) as our Senior Notes. In 2019 and 2018, we repaid at maturity $500 million and $1.0 billion of principal balance related to the 2014 Notes and 2015 Notes, respectively. In February 2020, we repaid at maturity $500 million of principal balance related to the 2014 Notes. Our Senior Notes may be redeemed at our option at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum, as determined by an independent investment banker, of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the Treasury Rate, plus a make-whole premium as defined in the indenture. Our Senior Notes maturing after 2020 also have a call feature, exercisable at our option, to redeem the notes at par in whole or in part one to six months immediately preceding maturity. In each case, accrued and unpaid interest is also required to be redeemed to the date of redemption. In the event of the occurrence of a change in control and a downgrade in the rating of our Senior Notes below investment grade by Moody’s Investors Service, Inc. and S&P Global Ratings, the holders may require us to purchase all or a portion of their notes at a price equal to 101% of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest to the date of repurchase. We are required to comply with certain covenants under our Senior Notes and as of December 31, 2019 and 2018, we were not in violation of any covenants. Interest expense on our Senior Notes related to the contractual coupon rates and amortization of the debt discount and issuance costs was $1.0 billion, $1.1 billion and $1.0 billion in 2019, 2018 and 2017, respectively. Credit Facilities In 2017, in connection with our acquisition of Kite, we borrowed $6.0 billion against our term loan credit facility, of which $1.5 billion was repaid in 2017 and the remaining $4.5 billion was repaid in 2018. The term loan credit facility agreement was terminated in 2018. In 2016, we entered into a $2.5 billion five-year revolving credit facility agreement maturing in May 2021 (the Five-Year Revolving Credit Agreement). The revolving credit facility can be used for working capital requirements and for general corporate purposes, including, without limitation, acquisitions. As of December 31, 2019 and 2018, there were no amounts outstanding under the Five-Year Revolving Credit Agreement. The Five-Year Revolving Credit Agreement contains customary representations, warranties, affirmative and negative covenants and events of default. At December 31, 2019, we were not in violation of any covenants. Loans under the Five-Year Revolving Credit Agreement bear interest at either (i) the Eurodollar Rate plus the Applicable Percentage, or (ii) the Base Rate plus the Applicable Percentage, each as defined in the Five-Year Revolving Credit Agreement. We may terminate or reduce the commitments and may prepay any loans under the Five-Year Revolving Credit Agreement in whole or in part at any time without premium or penalty. Contractual Maturities of Financing Obligations As of December 31, 2019, the aggregate future principal maturities of financing obligations for each of the next five years, based on contractual due dates, are as follows (in millions):
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Organization and Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||
Property, Plant and Equipment, Estimated Useful Life | Estimated useful lives in years are generally as follows:
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