On September 24, 2019 Gilead Sciences, Inc. (Nasdaq: GILD) reported its results of operations for the third quarter ended September 30, 2019 (Press release, Gilead Sciences, OCT 24, 2019, View Source [SID1234542508]). The financial results that follow represent a year-over-year comparison of the third quarter of 2019 to the third quarter of 2018. Total revenues were $5.6 billion for the third quarter of 2019 compared to $5.6 billion for the same period in 2018. Net loss for the third quarter of 2019 was $1.2 billion, or $0.92 per diluted share, compared to net income of $2.1 billion or $1.60 per diluted share for the same period in 2018. The net loss for the third quarter of 2019 includes up-front collaboration and licensing expenses of $3.92 billion, or $2.40 per share, related to Gilead’s global research and development collaboration agreement with Galapagos NV (Galapagos). Non-GAAP net income was $2.2 billion or $1.75 per diluted share for the third quarter of 2019 compared to $2.4 billion or $1.84 per diluted share for the same period in 2018.

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Note: Non-GAAP financial information excludes acquisition-related, up-front collaboration and licensing, stock-based compensation and other expenses, fair value adjustments of equity securities and discrete tax charges or benefits associated with changes in tax related laws and guidelines. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 through 9.

Product Sales

Total product sales for the third quarter of 2019 were $5.5 billion compared to $5.5 billion for the same period in 2018. For the third quarter of 2019, product sales in the United States, Europe and other locations were $4.2 billion, $804 million and $513 million, respectively. For the third quarter of 2018, product sales in the United States, Europe and other locations were $4.1 billion, $873 million and $451 million, respectively.

HIV product sales were $4.2 billion for the third quarter of 2019 compared to $3.7 billion for the same period in 2018. The increase was primarily driven by higher sales volume as a result of the continued uptake of Biktarvy (bictegravir 50 mg/emtricitabine 200 mg/tenofovir alafenamide 25 mg).
Chronic hepatitis C virus (HCV) product sales were $674 million for the third quarter of 2019 compared to $902 million for the same period in 2018. The decline was primarily due to competitive dynamics.
Yescarta(axicabtagene ciloleucel) generated $118 million in sales during the third quarter of 2019 compared to $75 million for the same period in 2018. The increase was driven by a higher number of therapies provided to patients and the continued expansion in Europe.
Other product sales, which include products from chronic hepatitis B virus (HBV), cardiovascular, oncology and other categories inclusive of Vemlidy (tenofovir alafenamide 25 mg), Viread (tenofovir disoproxil fumarate 300 mg), Letairis (ambrisentan 5 mg and 10 mg), Ranexa (ranolazine 500 mg and 1000 mg), Zydelig (idelalisib 150 mg), AmBisome (amphotericin B liposome for injection 50 mg/vial) and Cayston (aztreonam for inhalation solution 75 mg/vial), were $522 million for the third quarter of 2019 compared to $751 million for the same period in 2018. The decrease was primarily due to the expected declines in Ranexa and Letairis sales after generic entries in 2019.
Operating Expenses

During the third quarter of 2019, compared to the same period in 2018:

R&D expenses increased primarily due to up-front collaboration and licensing expenses of $3.92 billion related to Gilead’s global research and development collaboration agreement with Galapagos. Furthermore, R&D expenses and non-GAAP R&D expenses increased primarily due to increased investment in Gilead’s oncology programs, HIV programs and research projects.
SG&A expenses and non-GAAP SG&A expenses increased primarily due to higher promotional expenses in the United States and expenses associated with the expansion of Gilead’s business in Japan and China.
Cash, Cash Equivalents and Marketable Debt Securities

As of September 30, 2019, Gilead had $25.1 billion of cash, cash equivalents and marketable debt securities, compared to $31.5 billion as of December 31, 2018. During the third quarter of 2019, Gilead generated $2.6 billion in operating cash flow, paid $5.05 billion in connection with the global research and development collaboration agreement and stock purchase agreement with Galapagos, repaid $1.5 billion of debt, paid cash dividends of $804 million and utilized $223 million on stock repurchases. The $5.05 billion paid to Galapagos was classified as cash flows from investing activities and included a $1.1 billion equity investment.

Revised Full Year 2019 Guidance

Gilead revised its full year 2019 guidance, initially provided on February 4, 2019 and revised on July 30, 2019.

Corporate Highlights, Including the Announcement of:

Appointment of Andrew Dickinson as Chief Financial Officer, effective November 1, 2019.
Appointment of Merdad Parsey as Chief Medical Officer, effective November 1, 2019.
Launch of RADIAN Initiative to meaningfully address new HIV infections and deaths from AIDS-related illnesses in Eastern Europe and Central Asia, in collaboration with the Elton John AIDS Foundation.
Closing of the global research and development collaboration agreement with Galapagos announced in July 2019.
Collaboration with Renown Institute for Health Innovation (Renown) to collect and analyze genetic and electronic health data to enhance the understanding of nonalcoholic steatohepatitis (NASH) and potentially inform development of treatment options for the disease.
Product and Pipeline Updates, Including the Announcement of:

Presentation of Week 52 data from the Phase 3 FINCH 1 and FINCH 3 trials of filgotinib, an investigational, oral, selective JAK1 inhibitor, for the treatment of moderately-to-severely active rheumatoid arthritis (RA), which are consistent with and support the efficacy, safety and tolerability profiles demonstrated in the week 12 and 24 analyses presented earlier this year.
Submission of the new drug application for filgotinib for the treatment of adults with RA to the Japanese Ministry of Health, Labor and Welfare (MHLW).
Presentation of data at the IDWeek 2019 conference, which included:
Results from the DISCOVER trial evaluating Descovy (emtricitabine 200 mg/tenofovir alafenamide 25 mg) for HIV pre-exposure prophylaxis (PrEP), which showed significant improvements in key measures of bone and renal safety parameters in a subset of study participants who switched from Truvada for PrEP (emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg) to Descovy for PrEP.
A release of the latest data demonstrating that major metropolitan areas in the United States with the highest use of PrEP experienced the greatest decreases in new HIV diagnoses.
Approval of a PrEP indication for Descovy by the U.S. Food and Drug Administration (FDA). Descovy for PrEP is indicated to reduce the risk of sexually acquired HIV-1 infection in adults and adolescents weighing at least 35 kg who are HIV-negative and at-risk for sexually acquired HIV, excluding individuals at-risk from receptive vaginal sex.
European Medicines Agency’s (EMA) validation of the marketing authorization application for filgotinib for the treatment of adults with RA; the application is now under evaluation by the agency.
Approval of Biktarvy by the China National Medical Products Administration for the treatment of HIV-1 infection in adults without present or past evidence of viral resistance to the integrase inhibitor class, emtricitabine or tenofovir.
Plans to bolster cell therapy manufacturing capabilities with a new 67,000-square-foot viral vector facility in Oceanside, California. The new site builds on existing state-of-the-art manufacturing capabilities to deliver innovative cell therapies for people with cancer, including Yescarta, and investigational T-cell receptor and tumor neoantigen targeting cell therapies.
Non-GAAP Financial Information

The information presented in this document has been prepared in accordance with U.S. generally accepted accounting principles (GAAP), unless otherwise noted as non-GAAP. Management believes non-GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial information, because management uses such information internally for its operating, budgeting and financial planning purposes. Non-GAAP information is not prepared under a comprehensive set of accounting rules and should only be used to supplement an understanding of Gilead’s operating results as reported under GAAP. Non-GAAP measures may be defined and calculated differently by other companies in the same industry. A reconciliation between GAAP and non-GAAP financial information is provided in the tables on pages 7 through 9.

Conference Call

The live webcast of the call can be accessed at Gilead’s Investors page at View Source Please connect to the website at least 15 minutes prior to the start of the call to allow adequate time for any software download that may be required to listen to the webcast. Alternatively, please call 877-359-9508 (U.S.) or 224-357-2393 (international) and dial the conference ID 6094972 to access the call. Telephone replay will be available approximately two hours after the call through 8:00 p.m. Eastern Time, October 26, 2019. To access the replay, please call 855-859-2056 (U.S.) or 404-537-3406 (international) and dial the conference ID 6094972. The webcast will be archived on www.gilead.com for one year.