Gilead Sciences : View Q4 & Full Year 2021 Earnings Release

GILEAD SCIENCES ANNOUNCES FOURTH QUARTER AND FULL YEAR 2021 FINANCIAL RESULTS

Biktarvy Sales Increased Year-Over-Year by 19% for Full Year 2021 & 22% for Fourth Quarter 2021

EPS Results Reflect $1.25 Billion Charge for a Legal Settlement & $625 Million Arcus Opt-In Charge

Foster City, CA, February 1, 2022 - Gilead Sciences, Inc. (Nasdaq: GILD) announced today its results of operations for the fourth quarter and full year 2021.

"Gilead is at an important point in its transformation journey, having built considerable momentum in the expansion of our commercial and clinical portfolios in both virology and oncology in 2021," said Daniel O'Day, Gilead's Chairman and Chief Executive Officer. "We are planning to further increase the number of clinical development studies across our novel oncology portfolio in 2022. We also look forward to advancing our long- acting programs for HIV. Today our cancer therapies, Trodelvy, Yescarta and Tecartus are reaching increasing numbers of cancer patients, Veklury is playing a critical role in the pandemic and Biktarvy remains the most prescribed HIV treatment in the US. We have all the elements in place for a strong year and a strong decade."

Fourth Quarter 2021 Financial Results

• Total fourth quarter 2021 revenue of $7.2 billion decreased 2% compared to the same period in 2020, due to decreased demand for Veklury® (remdesivir 100 mg for injection), partially offset by favorable pricing dynamics in HIV.
• Diluted Earnings Per Share ("EPS") decreased to $0.30 for the fourth quarter 2021 compared to $1.23 for the same period in 2020. The decrease was primarily driven by a $1.25 billion charge related to a legal settlement and a charge of $625 million related to the Arcus Biosciences, Inc. ("Arcus") collaboration opt-in, representing an unfavorable $0.80 and $0.38 impact to diluted EPS, respectively. This was partially offset by favorable changes in the fair value of Gilead's equity investments.
• Non-GAAPdiluted EPS decreased to $0.69 for the fourth quarter 2021 compared to $2.19 for the same period in 2020, primarily due to the impact of the aforementioned $1.25 billion charge related to a legal settlement and a charge of $625 million related to the Arcus collaboration opt-in, representing an unfavorable $0.80 and $0.38 impact to non-GAAP diluted EPS, respectively.
• As of December 31, 2021, Gilead had $7.8 billion of cash, cash equivalents and marketable debt securities compared to $7.9 billion as of December 31, 2020.
• During the fourth quarter 2021, Gilead generated $3.2 billion in operating cash flow.
• During the fourth quarter 2021, Gilead repaid $1.0 billion in debt, paid cash dividends of $894 million and utilized $49 million to repurchase common stock.

Product Sales Performance for the Fourth Quarter 2021

Total fourth quarter 2021 product sales decreased 2% to $7.2 billion compared to the same period in 2020. Total product sales excluding Veklury increased 8% to $5.8 billion for the fourth quarter 2021 compared to the same period in 2020, primarily reflecting higher demand for Biktarvy® (bictegravir 50 mg/emtricitabine ("FTC") 200 mg/tenofovir alafenamide ("TAF") 25mg) and favorable pricing dynamics in HIV as well as contributions from Trodelvy® (sacituzumab govitecan-hziy) and Cell Therapy.

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HIV product sales increased 7% to $4.5 billion for the fourth quarter 2021 compared to the same period in 2020, reflecting higher Biktarvy demand and favorable pricing dynamics in HIV, partially offset, as expected, by the loss of exclusivity of Truvada® (FTC 200mg/tenofovir disoproxil fumarate ("TDF") 300mg) and Atripla® (efavirenz 600mg/FTC 200mg/TDF 300mg) in the United States.

• Biktarvy sales increased 22% year-over-year in the fourth quarter 2021, primarily reflecting higher demand and favorable pricing dynamics.
• Truvada and Atripla sales decreased 58% and 29% year-over-year, respectively, in the fourth quarter 2021, as expected, due to the loss of exclusivity in the United States in late 2020.

Hepatitis C virus ("HCV") product sales decreased 7% to $393 million for the fourth quarter 2021 compared to the same period in 2020, primarily driven by unfavorable changes in payer mix and fewer patient starts.

Hepatitis B virus ("HBV") and hepatitis delta virus ("HDV") product sales increased 9% to $265 million for the fourth quarter 2021 compared to the same period in 2020. Vemlidy® (TAF 25 mg) sales increased 17% in the fourth quarter 2021 compared to the same period in 2020, driven primarily by uptake in all geographies.

Hepcludex® (bulevirtide) contributed $12 million in the fourth quarter 2021 as launch activities continued across Europe.

Cell Therapy product sales increased 47% to $239 million for the fourth quarter 2021 compared to the same period in 2020.

• Yescarta® (axicabtagene ciloleucel) sales increased to $182 million in the fourth quarter 2021, reflecting continued demand in relapsed or refractory large B-cell lymphoma ("LBCL") in the United States and Europe and follicular lymphoma ("FL") in the United States.
• Tecartus® (brexucabtagene autoleucel) sales increased to $57 million in the fourth quarter 2021, driven by continued adoption in mantle cell lymphoma ("MCL") and launch in adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia.

Trodelvy sales for the fourth quarter 2021 were $118 million, reflecting continued uptake in the second-line setting for treatment of metastatic triple-negative breast cancer ("TNBC") in the United States and Europe as well as second-line metastatic urothelial cancer ("UC") in the United States.

Veklury sales decreased 30% to $1.4 billion for the fourth quarter 2021 compared to the same period in 2020. Sales of Veklury are generally affected by COVID-19 related rates of infections, hospitalizations and vaccinations as well as the availability, uptake and effectiveness of alternative treatments for COVID-19.

Fourth Quarter 2021 Product Gross Margin, Operating Expenses and Tax

• Product gross margin was 63.3% for the fourth quarter 2021 compared to 80.9% in the same period in 2020. Non-GAAP product gross margin was 70.5% for the fourth quarter 2021 compared to 87.5% in the same period in 2020. The lower product gross margin reflects the impact of the $1.25 billion charge related to the aforementioned legal settlement.
• Research and Development ("R&D") expenses for the fourth quarter 2021 were $2.0 billion compared to $1.6 billion in the same period in 2020. Non-GAAP R&D expenses for the fourth quarter 2021 were $2.0 billion compared to $1.5 billion in the same period in 2020. Higher R&D expenses primarily reflect a charge related to the Arcus collaboration opt-in and increased Trodelvy and magrolimab clinical activities, partially offset by the impact of higher 2020 expenses in connection with an amended agreement with Galapagos NV in the prior year that did not repeat.
• Selling, General and Administrative ("SG&A") expenses for the fourth quarter 2021 were $1.7 billion compared to $1.7 billion in the same period in 2020. Non-GAAP SG&A expenses for the fourth quarter 2021 were $1.6 billion compared to $1.5 billion in the same period in 2020. Higher non-GAAP SG&A expenses reflect increased promotional and marketing activities, primarily due to Trodelvy.

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• The effective tax rate ("ETR") and non-GAAP ETR for the fourth quarter 2021 were 50.5% and 32.2%, respectively, compared to 14.9% and 15.8%, respectively, for the same period in 2020. The higher ETR reflects tax expense related to uncertain tax positions, an increase in valuation allowance as well as the impact of discrete tax benefits related to settlements with tax authorities in 2020 that did not recur in 2021.

Full Year 2021 Financial Results

• Total full year 2021 revenue of $27.3 billion increased 11% compared to 2020, due to increased demand for Veklury.
• Diluted EPS increased to $4.93 for the full year 2021 compared to $0.10 in 2020. Non-GAAP diluted EPS increased 3% to $7.28 for the full year 2021 compared to $7.09 in 2020. The increase in EPS and non-GAAP diluted EPS was primarily due to higher product sales partially offset by the impact from the aforementioned legal settlement, representing an unfavorable $0.80 impact, and higher operating expenses, including a charge related to the Arcus collaboration opt-in, representing an unfavorable $0.38 impact. EPS in 2020 reflects higher acquired in-process R&D ("IPR&D") charges and higher unrealized losses on our equity investments.

Product Sales Performance for the Full Year 2021

Total full year 2021 product sales increased 11% to $27.0 billion compared to the same period in 2020. Total product sales excluding Veklury decreased 0.5% to $21.4 billion for the full year 2021 compared to 2020 primarily driven by, as expected, the loss of exclusivity of Truvada, Atripla and Letairis® (ambrisentan 5 mg and 10 mg) in the United States, partially offset by Biktarvy demand and contributions from Cell Therapy and Trodelvy.

HIV product sales decreased 4% to $16.3 billion for the full year 2021 compared to 2020, reflecting, as expected, the loss of exclusivity of Truvada and Atripla in the United States, partially offset by improved treatment and PrEP medication demand.

• Truvada and Atripla sales decreased 74% and 58% year-over-year, respectively, in the full year 2021, as expected, due to the loss of exclusivity in the United States in late 2020.
• Biktarvy sales increased 19% year-over-year in the full year 2021, reflecting higher demand.
• Descovy sales decreased 9% year-over-year in the full year 2021, primarily driven by lower net price, partially offset by higher PrEP medication demand.

HCV product sales decreased 9% to $1.9 billion for the full year 2021 compared to 2020, primarily due to fewer patient starts.

HBV and HDV product sales increased 13% to $969 million for the full year 2021 compared to 2020, driven primarily by higher demand for Vemlidy in all geographies as well as ongoing launch activities with Hepcludex in Europe.

Cell Therapy product sales increased 43% to $871 million for the full year 2021 compared to 2020, primarily due to launches of Tecartus in MCL and Yescarta in FL.

Trodelvy sales for the full year 2021 were $380 million, reflecting continued uptake and launch activities in second-line metastatic TNBC in the United States and Europe as well as second-line metastatic UC in the United States.

Veklury sales increased 98% to $5.6 billion for the full year 2021 compared to 2020. Sales of Veklury are generally affected by COVID-19 related rates of infections, hospitalizations and vaccinations as well as the availability, uptake and effectiveness of alternative treatments for COVID-19.

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Full Year 2021 Product Gross Margin, Operating Expenses and Tax

• Product gross margin was 75.6% for the full year 2021 compared to 81.2% in 2020. Non-GAAP product gross margin was 83.2% for the full year 2021 compared to 86.5% in 2020. Lower product gross margin primarily reflects the aforementioned legal settlement, partially offset by product mix and lower royalty expense.
• R&D expenses for the full year 2021 were $5.4 billion compared to $5.0 billion in 2020. Non-GAAP R&D expenses for the full year 2021 were $5.2 billion compared to $4.9 billion in 2020. Higher R&D expenses primarily reflect a charge related to the Arcus collaboration opt-in in the fourth quarter 2021 and timing of clinical activities related to Trodelvy and magrolimab, partially offset by lower remdesivir and inflammation related expenses.
• SG&A expenses for the full year 2021 were $5.2 billion compared to $5.2 billion in 2020. Non-GAAP SG&A expenses for full year 2021 were $5.0 billion compared to $4.8 billion in 2020. Higher SG&A expenses primarily reflect increased commercial activities.
• The ETR and non-GAAP ETR for the full year 2021 were 25.1% and 20.4%, respectively, compared to 94.7% and 18.6%, respectively, in 2020. The lower ETR is primarily due to certain acquired IPR&D charges in 2020 that were non-deductible for income tax purposes. The higher non-GAAP ETR primarily reflects the impact of discrete tax benefits related to settlements with tax authorities in 2020 that did not recur in 2021.

Key Updates Since Our Last Quarterly Release

Viral Diseases

• Announced updates to the lenacapavir clinical development program for the treatment and prevention of HIV. Dosing in the Phase 2 trial evaluating an investigational once-weekly oral combination treatment regimen of lenacapavir plus islatravir for the treatment of HIV was paused following clinical hold by FDA due to recent safety findings associated with Merck & Co., Inc.'s ("Merck") islatravir.
• Announced a pause in clinical trials evaluating injectable lenacapavir following a clinical hold placed by FDA related to the compatibility of vials made with borosilicate glass with that of the lenacapavir solution. The dosing of oral formulations of lenacapavir continues.
• Announced that Gilead had conducted genetic analysis of more than 15,000 genetic sequences of the Omicron variant isolates and found no additional prevalent mutations in the viral RNA polymerase compared to prior SARS-CoV-2 variants, suggesting Veklury remains active against the Omicron variant.
• Received approval from the European Commission ("EC") to expand the indication for Veklury for use in the earlier stages of the disease in adult patients who do not require supplemental oxygen and are at increased risk of progressing to severe COVID-19.
• Received FDA approval in January 2022 to expand the Veklury indication to include the treatment of non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death. The pediatric Emergency Use Authorization was also expanded to include use of Veklury in non-hospitalized pediatric patients weighing at least 3.5 kg who are younger than 12 years of age or weigh less than 40 kg and who are at high risk of disease progression.
• Published results from the Phase 3 PINETREE study of Veklury in non-hospitalized patients in the New England Journal of Medicine. Participants receiving a three-day course of Veklury intravenously achieved an 87% reduction in risk for the composite primary endpoint of COVID-19 related hospitalization or all-cause death by Day 28; there were no deaths in either arm of the study through the primary endpoint.
• Announced the submission of a Biologics License Application ("BLA") to FDA for investigational bulevirtide (labeled as Hepcludex in the EU) for treatment of chronic HDV infection in adults with compensated liver disease.

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Oncology

• Announced a partial clinical hold for global studies evaluating magrolimab in combination with azacitidine due to an apparent imbalance in investigator-reported suspected unexpected serious adverse reactions between study arms. Patients already enrolled in these clinical studies may continue to receive magrolimab and azacitidine, or placebo.
• Granted Priority Review by FDA for a supplemental BLA seeking approval of Yescarta for second-line LBCL with a PDUFA date of April 1, 2022. Regulatory submissions were also announced for the European Medicines Agency ("EMA").
• Presented results from long-term and earlier-line studies of Yescarta at the American Society of Hematology 2021 meeting. Results from the landmark ZUMA-7 trial of Yescarta in second-line LBCL were highlighted in a plenary session, where data included 60% improvement in event-free survival as compared to standard of care after a median follow-up of 24.9 months. Additional presentations included five-yearfollow-up data from ZUMA-1 that demonstrated overall survival of 42.6% and updated two-year results from ZUMA-5 data in adult patients with relapsed or refractory indolent non-Hodgkin lymphoma after at least two prior lines of therapy. Results from ZUMA-12 were also reported in patients with high-risk LBCL receiving Yescarta in the front-line setting.
• Received approval from FDA for a label update for Yescarta to include the use of prophylactic corticosteroids across all approved indications. Yescarta is now the first and only chimeric antigen receptor T-cell therapy with information in the label to help physicians prophylactically manage, and potentially prevent, treatment side effects with corticosteroids.
• Announced the availability of Yescarta to patients with relapsed or refractory LBCL in Japan following authorization of the first CAR T-cell therapy treatment site by Daiichi Sankyo Co., Ltd. ("Daiichi Sankyo").
• Announced Gilead's decision to exercise options to opt-in to three clinical-stage Arcus programs, which includes both anti-TIGIT molecules (domvanalimab and AB308) as well as etrumadenant and quemliclustat. The transaction was closed in December for total option fee of $725 million paid in January 2022. As part of the agreement, the $100 million option continuation payment previously due to Arcus in the third quarter of 2022 was waived, resulting in a $625 million charge recorded in the fourth quarter of 2021.
• Received marketing authorization from the EC for Trodelvy for the treatment of adult patients with unresectable or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for advanced disease.
• Announced a clinical trial collaboration with Merck to evaluate Trodelvy in combination with Keytruda in the first-line setting in patients with metastatic TNBC and, in the first quarter 2022, in patients with non-small cell lung cancer.
• Announced with Everest Medicines that the Phase 2b EVER-132-001 study evaluating sacituzumab govitecan (labeled as Trodelvy in the U.S.) for patients with metastatic TNBC in China reached the primary overall response rate endpoint.
• Presented a new subgroup analysis of the ASCENT study at the 2021 San Antonio Breast Cancer Symposium which demonstrated that the clinical benefit of Trodelvy in Black patients was consistent with the full metastatic TNBC population in the study.

Corporate

• Announced that a Virology Deep-Dive event will be held on February 17, 2022 and Oncology Deep- Dive event will be held on April 14, 2022.