UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission File No. 0-19731

GILEAD SCIENCES, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	94-3047598
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)

333 Lakeside Drive, Foster City, California 94404

(Address of principal executive offices) (Zip Code)

650-574-3000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value, $0.001 per share	GILD	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ 

Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No x

Number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of July 31, 2020: 1,253,724,370

GILEAD SCIENCES, INC.

INDEX

PART I.	FINANCIAL INFORMATION		2
	Item 1.	Condensed Consolidated Financial Statements	2
		Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019 (unaudited)	2
		Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	3
		Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	4
		Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	5
		Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2020 and 2019 (unaudited)	7
		Notes to Condensed Consolidated Financial Statements (unaudited)	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION		41
	Item 1.	Legal Proceedings	41
	Item 1A.	Risk Factors	41
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
	Item 3.	Defaults Upon Senior Securities	58
	Item 4.	Mine Safety Disclosures	58
	Item 5.	Other Information	58
	Item 6.	Exhibits	58
SIGNATURES			62

We own or have rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD^®, GILEAD SCIENCES^®, AMBISOME^®, ATRIPLA^®, BIKTARVY^®, CAYSTON^®, COMPLERA^®, DESCOVY^®, DESCOVY FOR PREP^®, EMTRIVA^®, EPCLUSA^®, EVIPLERA^®, GENVOYA^®, HARVONI^®, HEPSERA^®, JYSELECA^®, LETAIRIS^®, ODEFSEY^®, RANEXA^®, SOVALDI^®, STRIBILD^®, TECARTUS^TM, TRUVADA^®, TRUVADA FOR PREP^®, TYBOST^®, VEKLURY^® (remdesivir), VEMLIDY^®, VIREAD^®, VOSEVI^®, YESCARTA^® and ZYDELIG^®. This report also includes other trademarks, service marks and trade names of other companies.

PART I. FINANCIAL INFORMATION

Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in millions, except per share amounts)

	June 30, 2020		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	6,746	$	11,631
Short-term marketable securities	12,168		12,721
Accounts receivable, net of allowances of $698 and $758, respectively	3,194		3,582
Inventories	1,052		922
Prepaid and other current assets	1,483		1,440
Total current assets	24,643		30,296
Property, plant and equipment, net	4,653		4,502
Long-term marketable securities	2,276		1,488
Intangible assets, net	13,225		13,786
Goodwill	4,117		4,117
Other long-term assets	7,020		7,438
Total assets	$	55,934	$	61,627
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	532	$	713
Accrued government and other rebates	3,337		3,473
Other accrued liabilities	3,696		3,074
Current portion of long-term debt and other obligations, net	2,999		2,499
Total current liabilities	10,564		9,759
Long-term debt, net	21,103		22,094
Long-term income taxes payable	5,107		6,115
Other long-term obligations	1,018		1,009
Commitments and contingencies (Note 10)
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 shares authorized; 1,254 and 1,266 shares issued and outstanding, respectively	1		1
Additional paid-in capital	3,511		3,051
Accumulated other comprehensive income	70		85
Retained earnings	14,445		19,388
Total Gilead stockholders’ equity	18,027		22,525
Noncontrolling interest	115		125
Total stockholders’ equity	18,142		22,650
Total liabilities and stockholders’ equity	$	55,934	$	61,627

See accompanying notes.

2

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in millions, except per share amounts)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Revenues:
Product sales	$	5,067	$	5,607	$	10,534	$	10,807
Royalty, contract and other revenues	76		78		157		159
Total revenues	5,143		5,685		10,691		10,966
Costs and expenses:
Cost of goods sold	1,064		1,000		2,033		1,957
Research and development expenses	1,299		995		2,303		1,926
Acquired in-process research and development expenses	4,524		165		4,621		291
Selling, general and administrative expenses	1,239		1,095		2,315		2,125
Total costs and expenses	8,126		3,255		11,272		6,299
Income (loss) from operations	(2,983)		2,430		(581)		4,667
Interest expense	(240)		(248)		(481)		(502)
Other income (expense), net	250		228		92		595
Income (loss) before provision for income taxes	(2,973)		2,410		(970)		4,760
Provision for income taxes	373		535		838		917
Net income (loss)	(3,346)		1,875		(1,808)		3,843
Net loss attributable to noncontrolling interest	(7)		(5)		(20)		(12)
Net income (loss) attributable to Gilead	$	(3,339)	$	1,880	$	(1,788)	$	3,855
Net income (loss) per share attributable to Gilead common stockholders - basic	$	(2.66)	$	1.48	$	(1.42)	$	3.03
Shares used in per share calculation - basic	1,255		1,270		1,258		1,273
Net income (loss) per share attributable to Gilead common stockholders - diluted	$	(2.66)	$	1.47	$	(1.42)	$	3.01
Shares used in per share calculation - diluted	1,255		1,277		1,258		1,280

See accompanying notes.

3

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited)

(in millions)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net income (loss)	$	(3,346)	$	1,875	$	(1,808)	$	3,843
Other comprehensive income (loss):
Net foreign currency translation gain (loss), net of tax	4		(13)		(35)		8
Available-for-sale debt securities:
Net unrealized gain, net of tax	74		19		51		49
Reclassifications to net income (loss), net of tax	(2)		—		(13)		—
Net change	72		19		38		49
Cash flow hedges:
Net unrealized gain (loss), net of tax	(36)		1		21		29
Reclassifications to net income (loss), net of tax	(16)		(35)		(39)		(64)
Net change	(52)		(34)		(18)		(35)
Other comprehensive income (loss)	24		(28)		(15)		22
Comprehensive income (loss)	(3,322)		1,847		(1,823)		3,865
Less: Comprehensive loss attributable to noncontrolling interest	(7)		(5)		(20)		(12)
Comprehensive income (loss) attributable to Gilead	$	(3,315)	$	1,852	$	(1,803)	$	3,877

See accompanying notes.

4

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in millions, except per share amounts)

	Three Months Ended June 30, 2020
	Gilead Stockholders’ Equity									Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings
	Shares	Amount
Balance at March 31, 2020	1,254	$	1	$	3,311	$	46	$	18,709	$	112	$	22,179
Change in noncontrolling interest	—	—		—		—		—		10		10
Net loss	—	—		—		—		(3,339)		(7)		(3,346)
Other comprehensive income, net of tax	—	—		—		24		—		—		24
Issuances under equity incentive plans	1	—		35		—		—		—		35
Stock-based compensation	—	—		168		—		—		—		168
Repurchases of common stock	(1)	—		(3)		—		(59)		—		(62)
Dividends declared ($0.68 per share)	—	—		—		—		(866)		—		(866)
Balance at June 30, 2020	1,254	$	1	$	3,511	$	70	$	14,445	$	115	$	18,142

	Six Months Ended June 30, 2020
	Gilead Stockholders’ Equity									Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income		Retained Earnings
	Shares	Amount
Balance at December 31, 2019	1,266	$	1	$	3,051	$	85	$	19,388	$	125	$	22,650
Cumulative effect from the adoption of new accounting standard (Note 1)	—	—		—		—		(7)		—		(7)
Change in noncontrolling interest	—	—		—		—		—		10		10
Net loss	—	—		—		—		(1,788)		(20)		(1,808)
Other comprehensive loss, net of tax	—	—		—		(15)		—		—		(15)
Issuances under employee stock purchase plan	1	—		66		—		—		—		66
Issuances under equity incentive plans	8	—		146		—		—		—		146
Stock-based compensation	—	—		309		—		—		—		309
Repurchases of common stock	(21)	—		(61)		—		(1,415)		—		(1,476)
Dividends declared ($1.36 per share)	—	—		—		—		(1,733)		—		(1,733)
Balance at June 30, 2020	1,254	$	1	$	3,511	$	70	$	14,445	$	115	$	18,142

5

Three Months Ended June 30, 2019
Gilead Stockholders’ Equity			Noncontrolling Interest	Total Stockholders’ Equity
Common Stock	Additional Paid-In Capital	Accumulated Other