Q2 2017 Earnings Results July 26, 2017
Forward-Looking Statements The projected financial results presented in the following slides represent management's estimates of Gilead’s future financial results. Gilead cautions readers that forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties include: Gilead’s ability to achieve its anticipated full year 2017 financial results; Gilead’s ability to sust ain growth in revenues for its antiviral and other programs; the risk that estimates of patients with HCV or anticipated patient demand may not be accurate; the risk that private and public payers may be reluctant to provide, or continue to provide, coverage or reimbursement for new products, including Vosevi, Vemlidy, Epclusa, Descovy, Odefsey and Genvoya; the potential for increased pricing pressure globally and contracting pressure as well as decreased volume and market share from additional competitive HCV launches; a larger than anticipated shift in payer mix to more highly discounted payer segments and geographic regions and decreases in treatment duration; availability of funding for state AIDS Drug Assistance Programs (ADAPs) and Veterans Administration (VA); continued fluctuations in ADAP and VA purchases driven by federal and state grant cycles which may not mirror patient demand and may cause fluctuations in Gilead’s earnings; market share and price erosion caused by the introduction of generic versions of Viread and Truvada outsid e the United States; potential amendments to the Affordable Care Act or other government action that could have the effect of lowering prices or reducing the number of insured patients; the possibility of unfavorable results from clinical trials involving investigational compounds; the levels of inventory held by wholesalers and retailers which may cause fluctuations in Gilead’s earnings; Gilead’s ability to submit new drug applications and receive regulatory approval for new product candidates in the timelines currently anticipated or at all, including for Vosevi and BIC/FTC/TAF; Gilead’s ability t o successfully develop its oncology, inflammation, cardiovascular and respiratory programs; safety and efficacy data from clinical studies may not warrant further development of Gilead’s product candidates, including GS - 0976; Gilead’s ability to pay dividends or complete its share repurchase program due t o changes in its stock price, corporate or other market conditions; fluctuations in the foreign exchange rate of the U.S. dollar that may cause an unfavorable foreign currency exchange impact on Gilead’s future revenues and pre - tax earnings; and other risks identified from time to time in Gilead’s repor ts filed with the U.S. Securities and Exchange Commission (SEC). In addition, Gilead makes estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. Actual results may differ significantly from these estimates. You are urged to consider statements that include the words may, will, would, could, should, might, believes, estimates, projects, potential, expects, plans, anticipates, intends, continues, forecast, designed, goal, or the negative of those words or other comparable words to be uncertain and forward-looking. Gilead directs readers to its press releases, Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 and other subsequent disclosure documents filed with the SEC. Gilead claims the protection of the Safe Harbor contained in the Private Securities Litigation Reform Act of 1995 for forward-looking statements. All forward- looking statements are based on information currently available to Gilead, and Gilead assumes no obligation to update any such forward-looking statements. This presentation includes GAAP and non-GAAP financial measures, a complete reconciliation between these two measures is available on the Company’s website at www.gilead.com within the investor section. Management believes this non -GAAP information is useful for investors, when considered in conjunction with Gilead’s GAAP financial statements, because management uses such information internally for it s 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 U.S. GAAP. Non -GAAP measures may be defined and calculated differently by other companies in the same industry. 2
Q2 2017 Earnings Call Agenda Sung Lee, VP, Investor Relations Introduction Robin Washington, EVP and CFO Commentary Kevin Young, COO Norbert Bischofberger, EVP, R&D and CSO John Milligan, President and CEO 3
Table of Contents Discussion Slide # Robin Washington, EVP and CFO 6 – 12 Income Statement Performance 13 – 15 Cash Flow and Return of Capital to Shareholders 16 – 17 2017 Guidance Kevin Young, COO 19 – 26 HIV 27 – 33 HCV Norbert Bischofberger, EVP, R&D and CSO 35 – 43 Pipeline Progress John Milligan, President and CEO Vosevi 45 46 – 57 Appendix 4
Robin Washington EVP and CFO
Financial Highlights: Q2 2017 (in millions, except percentages and per share amounts) YoY QoQ Q2 2016 Q1 2017 Q2 2017 Change Change Net Product Sales $7,651 $6,377 $7,046 (8%) 10% Antiviral Products 7,126 5,841 6,439 (10%) 10% HCV 3,986 2,576 2,868 (28%) 11% HIV and HBV 3,140 3,265 3,571 14% 9% Other Products * 525 536 607 16% 13% Non-GAAP Costs and Expenses** $2,531 $2,439 $2,531 - 4% COGS 653 743 892 37% 20% Product Gross Margin 92% 88% 87% R&D 1,040 889 812 (22%) (9%) SG&A 838 807 827 (1%) 2% Operating Margin 68% 63% 65% Effective Tax Rate 18% 25% 25% Non-GAAP Net Income** $4,177 $2,949 $3,372 (19%) 14% Non-GAAP Diluted EPS** $3.08 $2.23 $2.56 (17%) 15% Diluted Shares 1,355 1,320 1,317 (3%) - * Other Products comprised primarily of Letairis, Ranexa, AmBisome, Zydelig, Cayston and Lexiscan. 6 **Non-GAAP costs and expenses, net income and diluted EPS exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.
Financial Highlights: Six Months Ended June 30 (in millions, except percentages and per share amounts) 2016 2017 Change Net Product Sales $15,332 $13,423 (12%) Antiviral Products 14,309 12,280 (14%) HCV 8,280 5,444 (34%) HIV and HBV 6,029 6,836 13% Other Products * 1,023 1,143 12% Non-GAAP Costs and Expenses** $4,921 $4,970 1% COGS 1,636 1,635 - Product Gross Margin 89% 88% R&D 1,809 1,701 (6%) SG&A 1,476 1,634 11% Operating Margin 68% 64% Effective Tax Rate 19% 25% Non-GAAP Net Income** $8,451 $6,321 (25%) Non-GAAP Diluted EPS** $6.11 $4.79 (22%) Diluted Shares 1,383 1,319 (5%) * Other Products comprised primarily of Letairis, Ranexa, AmBisome, Zydelig, Cayston and Lexiscan. 7 **Non-GAAP costs and expenses, net income and diluted EPS exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses.
Total Revenues Q2 2017 down 8% from Q2 2016 $ in millions $7,776 $7,500 $7,320 $7,141 $6,505 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Note: FX impact to revenues was unfavorable $7 million QoQ (-0.1%) and unfavorable $80 million YoY (-1.0%). 8
Non-GAAP Diluted EPS Q2 2017 down 17% from Q2 2016 $3.08 $2.75 $2.70 $2.56 $2.23 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Note: Non-GAAP diluted EPS excludes acquisition-related, up-front collaboration, stock-based compensation and other expenses. 9
Total Product Sales Q2 2017 down 8% from Q2 2016 $ in millions By Therapeutic Area By Geography $7,651 $7,651 $7,405 $7,405 $7,216 $7,216 $7,046 $7,046 $1,150 $931 $870 $665 $6,377 $6,377 $661 $1,412 $1,612 $1,399 $1,415 $3,325 $3,986 $2,868 $3,229 $1,266 $2,576 $5,062 $4,982 $4,931 $4,889 $4,450 $3,571 $3,516 $3,366 $3,265 $3,140 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 * HIV and HBV HCV Other U.S Europe Other Int'l 10 *Other comprised primarily of Letairis, Ranexa, AmBisome, Zydelig, Cayston and Lexiscan.
Non-GAAP R&D Expenses Q2 2017 down 22% from Q2 2016 Key Metrics $ in millions ● YoY and sequential $1,040 $981 decreases primarily due to $959 the purchases of FDA $889 priority review vouchers $812 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Note: Non-GAAP R&D expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. 11
Non-GAAP SG&A Expenses Q2 2017 down 1% from Q2 2016 Key Metrics $ in millions ● YoY decrease primarily due $938 to lower Branded Prescription $838 $827 Drug (BPD) fee $807 $780 ● Sequential increase primarily due to timing of marketing expenses ● P&L impact of BPD fee: BPD Fee $M 2015 Actual $414 2016 Actual $270 2017 Estimate $350-$450 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Note: Non-GAAP SG&A expenses exclude acquisition-related, up-front collaboration, stock-based compensation and other expenses. 12
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