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Press Release: Gilead Sciences Announces Fourth -3-

· 02/04/2021 16:01
NM - Not Meaningful -- The unrealized losses primarily relating to Gilead's investments in Galapagos unfavorably impacted Other income (expense), net for the fourth quarter and full year 2020, compared to unrealized gains in the prior year periods. -- Interest expense for the fourth quarter 2020 increased primarily due to the senior unsecured notes issued in September 2020 and $1.0 billion borrowed under a three-year term loan facility related to the Immunomedics acquisition.Three Months Twelve Months Ended Ended December 31, December 31, --------------- ----------------- (In millions, except percentages) 2020 2019 Change 2020 2019 Change -------------- ------ ------- ------ -------- ------- ------ Other income (expense), net $(570) $1,051 NM $(1,418) $1,868 NM Non-GAAP other income (expense), net $ 46 $ 122 (62)% $ 249 $ 627 (60)% Interest expense $(267) $ (243) 10% $ (984) $ (995) (1)%Three Months Twelve Months Ended Ended December 31, December 31, -------------- -------------- (In millions, except percentages) 2020 2019 Change 2020 2019 Change -------------- ------ ------ ------ ------ ------ ------ SG&A expenses $1,730 $1,204 44% $5,151 $4,381 18% Non-GAAP SG&A expenses $1,499 $1,204 25% $4,834 $4,375 10% -- SG&A expenses and non-GAAP SG&A expenses for the fourth quarter 2020 increased, compared to the same period in 2019, primarily due to expenses related to additional funds allocated to corporate grants, including non-profit grantees to support racial equity and social justice efforts, the timing of marketing expenses related to Biktarvy, and commercialization efforts for Veklury and Trodelvy. -- SG&A expenses and non-GAAP SG&A expenses for the full year 2020 increased year-over-year, primarily due to a $97 million charge related to a previously disclosed legal settlement, increased corporate grants, higher costs associated with the commercialization efforts for Veklury, marketing expenses related to Biktarvy and donations of remdesivir. -- SG&A expenses for the fourth quarter and full year 2020 also increased due to accelerated stock-based compensation expenses of $168 million and $204 million, respectively, related to the fourth quarter 2020 Immunomedics acquisition and, for the full year 2020, the second quarter 2020 Forty Seven acquisition. -- The increases were partially offset by lower travel and other spend due to the COVID-19 pandemic.(1) Beginning in the second quarter 2020, Acquired IPR&D expenses were reported separately from R&D expenses in Gilead's Condensed Consolidated Statements of Income to provide additional information. The amounts for prior periods were reclassified to conform to the current period presentation. Acquired IPR&D expenses have been historically excluded from Gilead's non-GAAP financial information. -- Acquired IPR&D expenses of $5.9 billion for the full year 2020 were primarily related to Gilead's acquisition of Forty Seven as well as collaborations and other investments Gilead entered into during the year, separately with Arcus Biosciences, Inc., Pionyr, Tango Therapeutics, Inc., Tizona Therapeutics, Inc. and Jounce Therapeutics, Inc. -- Acquired IPR&D expenses for the fourth quarter 2019 were related to the $800 million impairment charge from assets obtained in Gilead's Kite acquisition. Full year 2019 included $3.9 billion in upfront charges related to Gilead's global research and development collaboration agreement with Galapagos.Three Months Twelve Months Ended Ended December 31, December 31, ------------ -------------- (In millions, except percentages) 2020 2019 Change 2020 2019 Change -------------- ------ ---- ------ ------ ------ ------ Acquired IPR&D expenses(1) $ 64 $800 (92)% $5,856 $5,051 16% Non-GAAP $ -- $ -- --% $ -- $ -- --% Acquired IPR&D expenses(1)(1) Beginning in the second quarter 2020, Acquired IPR&D expenses were reported separately from R&D expenses in Gilead's Condensed Consolidated Statements of Income to provide additional information. The amounts for prior periods were reclassified to conform to the current period presentation. Acquired IPR&D expenses have been historically excluded from Gilead's non-GAAP financial information. -- R&D expenses and non-GAAP R&D expenses for the fourth quarter 2020 increased, compared to the same period in 2019, primarily due to the charge recorded in the fourth quarter 2020, in connection with the agreement to amend the existing arrangement with Galapagos for the commercialization and development of Jyseleca of $190 million (EUR160 million), milestones of $70 million to Pionyr Immunotherapeutics, Inc. ("Pionyr"), and Trodelvy and other pipeline investments. -- In addition to the drivers described above, R&D expenses and non-GAAP R&D expenses for the full year 2020 increased year-over-year primarily due to: -- Higher clinical trial expenses related to the investigation of remdesivir as a treatment for COVID-19 and higher investments in oncology programs, including magrolimab, an investigational anti-CD47 monoclonal antibody. -- The increases were partially offset by lower clinical trial expenses from the completion of certain inflammation programs and lower costs as a result of Gilead's pause or postponement of certain clinical trials due to the COVID-19 pandemic. -- R&D expenses for the fourth quarter and full year 2020 also increased due to accelerated stock-based compensation expenses of $58 million and $166 million, respectively, related to the fourth quarter 2020 Immunomedics acquisition and, for the full year 2020, the second quarter 2020 Forty Seven acquisition.Three Months Twelve Months Ended Ended December 31, December 31, -------------- -------------- (In millions, except percentages) 2020 2019 Change 2020 2019 Change -------------- ------ ------ ------ ------ ------ ------ R&D expenses(1) $1,578 $1,099 44% $5,039 $4,055 24% Non-GAAP R&D expenses(1) $1,512 $1,103 37% $4,857 $4,059 20%Three Months Ended Twelve Months Ended December 31, December 31, -------------------- -------------------- 2020 2019 Change 2020 2019 Change --------- --------- --------- ------ --------- --------- ------ Product gross 990 230 margin 80.9% 71.0% bps 81.2% 78.9% bps Non-GAAP product gross 1190 270 margin 87.5% 75.6% bps 86.5% 83.8% bps -- Product gross margin and non-GAAP product gross margin for the fourth quarter and full year 2020 improved year-over-year due to the fourth quarter 2019 inventory write-down described above.

Product Gross Margin

Operating Expenses

R&D

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Acquired IPR&D

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SG&A

Other Income (Expense), Net and Interest Expense

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Effective Tax Rate

The effective tax rate ("ETR") and non-GAAP ETR for the fourth quarter 2020 were 14.9% and 15.8%, respectively, compared to (41.5)% and 31.5% for the same period in 2019. The year-over-year increase in ETR was primarily due to a $1.2 billion discrete tax benefit related to intra-entity intangible asset transfers to different tax jurisdictions recorded in the fourth quarter 2019. The year-over-year decrease in non-GAAP ETR was primarily due to a $114 million discrete tax expense related to the Altera Corp. v. Commissioner ruling recorded in the fourth quarter 2019. The ETR and non-GAAP ETR for the fourth quarter 2020 reflected $76 million of discrete tax benefits related to settlements with taxing authorities.

The ETR and non-GAAP ETR for the full year 2020 were 94.7% and 18.6%, respectively, compared to (4.0)% and 22.4% for the same period in 2019. The increase in ETR was primarily due to the above-mentioned unrealized losses on Gilead's equity investments in Galapagos and certain acquired IPR&D charges in 2020 that were non-deductible for income tax purposes. In addition, the ETR for the full year 2019 included the $1.2 billion discrete tax benefit described above. The ETR and non-GAAP ETR for the full year 2020 reflected $167 million of discrete tax benefits related to settlements with taxing authorities.

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February 04, 2021 16:01 ET (21:01 GMT)