Gilead(US:GILD)2025-08-07 21:14PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Presents Gilead Sciences, Inc.'s unaudited interim financial statements as of June 30, 2025, detailing financial position, operations, and cash flows Condensed Consolidated Balance Sheets Total assets decreased to $55.7 billion by June 30, 2025, driven by reduced cash, while liabilities and debt also declined Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $5,144 | $9,991 | | Total current assets | $14,718 | $19,173 | | Intangible assets, net | $18,566 | $19,948 | | Goodwill | $8,314 | $8,314 | | Total assets | $55,721 | $58,995 | | Liabilities & Equity | | | | Total current liabilities | $11,189 | $12,004 | | Long-term debt, net | $22,140 | $24,896 | | Total liabilities | $36,131 | $39,749 | | Total stockholders' equity | $19,590 | $19,246 | Condensed Consolidated Statements of Operations Gilead reported $7.08 billion in Q2 2025 revenues and a significant turnaround to $3.28 billion net income for the first six months of 2025 Q2 2025 vs Q2 2024 Statement of Operations (in millions, except EPS) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenues | $7,082 | $6,954 | | Operating income | $2,474 | $2,644 | | Net income attributable to Gilead | $1,960 | $1,614 | | Diluted EPS | $1.56 | $1.29 | Six Months 2025 vs 2024 Statement of Operations (in millions, except EPS) | Metric | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | | Total revenues | $13,749 | $13,640 | | Operating income (loss) | $4,711 | $(1,678) | | Net income (loss) attributable to Gilead | $3,275 | $(2,556) | | Diluted EPS (loss) | $2.61 | $(2.05) | - A significant driver of the improved six-month performance was the reduction in Acquired IPR&D expenses to $315 million in 2025 from $4.17 billion in 2024, and lower IPR&D impairments of $190 million compared to $2.43 billion in the prior year15 Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities decreased to $2.6 billion for the first six months of 2025, with significant cash used in financing activities Six Months Ended June 30 Cash Flow Summary (in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,584 | $3,544 | | Net cash used in investing activities | $(2,531) | $(2,514) | | Net cash used in financing activities | $(4,993) | $(4,314) | | Net change in cash and cash equivalents | $(4,848) | $(3,313) | - Significant financing activities in the first six months of 2025 included $1.3 billion in stock repurchases, $1.8 billion in debt repayments, and $2.0 billion in dividend payments26 Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosures on accounting policies, revenue breakdown, acquisitions, impairment charges, legal proceedings, and tax rates Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses Q2 and first-half 2025 financial results, highlighting revenue drivers, expense changes, and capital allocation priorities - Total revenues increased 2% to $7.1 billion in Q2 2025, driven by higher HIV, Livdelzi, and Trodelvy sales, partially offset by lower HCV and Veklury sales108 - Net income for the first six months of 2025 was $3.3 billion, a significant improvement from a $2.6 billion net loss in the same period of 2024, primarily due to the absence of large IPR&D expenses and impairment charges from 2024109110 - Key business updates include FDA approval for Yeztugo (lenacapavir) for HIV PrEP, conditional EU marketing authorization for seladelpar for PBC, and positive topline results from the Phase 3 ASCENT-03 trial for Trodelvy105106 Results of Operations - Revenues Total product sales for Q2 2025 were $7.05 billion, up 2% year-over-year, driven by strong HIV franchise growth, offsetting declines in Veklury and Liver Disease sales Product Sales by Therapeutic Area (Q2 2025 vs Q2 2024, in millions) | Therapeutic Area | Q2 2025 Sales | Q2 2024 Sales | YoY Change | | :--- | :--- | :--- | :--- | | Total HIV | $5,088 | $4,745 | +7% | | Biktarvy | $3,530 | $3,232 | +9% | | Descovy | $653 | $485 | +35% | | Total Liver Disease | $795 | $832 | -4% | | Veklury | $121 | $214 | -44% | | Total Oncology | $849 | $841 | +1% | | Cell Therapy | $485 | $521 | -7% | | Trodelvy | $364 | $320 | +14% | - HIV product sales growth was driven by higher demand and higher average realized price, which includes the impact of the U.S. Medicare Part D program redesign113 - Veklury sales continued to decline significantly, down 44% in Q2 and 45% in the first half of 2025, due to lower rates of COVID-19-related hospitalizations117 Results of Operations - Costs and Expenses R&D expenses increased 10% in Q2 2025, with a $190 million IPR&D impairment for bulevirtide, while Acquired IPR&D and impairments significantly decreased year-over-year for the first six months Costs and Expenses (Q2 2025 vs Q2 2024, in millions) | Expense Category | Q2 2025 | Q2 2024 | YoY Change | | :--- | :--- | :--- | :--- | | Cost of goods sold | $1,501 | $1,544 | -3% | | Research and development (R&D) | $1,491 | $1,351 | +10% | | Acquired IPR&D | $61 | $38 | +61% | | IPR&D impairments | $190 | $0 | NM | | Selling, general & administrative (SG&A) | $1,365 | $1,377 | -1% | - A partial impairment charge of $190 million was recorded in Q2 2025 for the bulevirtide IPR&D asset, reflecting a more competitive market outlook136 - For the first six months of 2024, the company recorded a $2.4 billion partial impairment charge for the Trodelvy NSCLC IPR&D asset after the Phase 3 EVOKE-01 study did not meet its primary endpoint138 Liquidity and Capital Resources Gilead held $5.1 billion in cash as of June 30, 2025, with $2.6 billion in operating cash flow and $5.0 billion used in financing activities for dividends, debt, and repurchases Cash Flow Summary (Six Months Ended June 30, in millions) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,584 | $3,544 | | Net cash used in investing activities | $(2,531) | $(2,514) | | Net cash used in financing activities | $(4,993) | $(4,314) | - The company's capital priorities are: (i) investing in the business and R&D, (ii) partnerships and business development, (iii) growing the dividend, and (iv) repurchasing shares152 - In August 2025, the Board of Directors declared a quarterly dividend of $0.79 per share158 Item 3. Quantitative and Qualitative Disclosures About Market Risk No material changes to market risk disclosures were reported since the 2024 Annual Report, except for updates in specific financial notes - There were no material changes to the company's market risk disclosures from the 2024 Annual Report, except for updates provided in Notes 3, 4, 5, and 9 of this 10-Q163 Item 4. Controls and Procedures Management concluded that disclosure controls were effective as of June 30, 2025, while noting ongoing changes due to a new ERP system implementation - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025164 - The company is implementing a new enterprise resource planning (ERP) system in phases, which has required changes to its internal control over financial reporting165 PART II. OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 10 for detailed descriptions of significant pending legal proceedings, including generic challenges, antitrust lawsuits, and government investigations - For a detailed description of significant legal proceedings, the report refers to Note 10 in Part I, Item 1167 - As of December 31, 2024, the company had accrued approximately $242 million for legal matters, including $200 million for a settlement with the U.S. Attorney's Office that was paid in Q2 202579 Item 1A. Risk Factors This section details material risks that could adversely affect Gilead's business, including product, development, regulatory, operational, and financial risks Product and Commercialization Risks Gilead faces risks from heavy reliance on HIV product revenues, complexities of cell therapy commercialization, intense competition, and significant pricing pressures - A substantial portion of revenue comes from HIV products, and the inability to sustain sales or introduce new competitive products could force a scale-back of operations169 - The Inflation Reduction Act (IRA) is anticipated to increase payment obligations, limit prices, and increase rebates, thereby reducing profitability184185 - The company faces significant competition, and successful commercialization depends on reimbursement from third-party payers who are increasingly attempting to limit or regulate drug prices181182 - The company has identified and seized counterfeit versions of its medicines sold by unauthorized distributors, posing a risk to patient health and the company's reputation196197 Product Development and Supply Chain Risks The company faces significant risks in clinical trials, including unfavorable results and delays, and relies heavily on third-party CROs and limited suppliers for manufacturing - There are numerous risks in clinical trials, including unfavorable results; in June 2025, the FDA placed a clinical hold on HIV treatment trials of GS-1720 and GS-4182200 - Gilead depends on third-party contract manufacturing organizations (CMOs) for the majority of its active pharmaceutical ingredients and drug products, and some materials are sourced from a single supplier204 Regulatory and Other Legal Risks Gilead's operations are subject to complex and evolving regulations, with risks from non-compliance, healthcare laws, intellectual property challenges, and ongoing litigation - The company is subject to complex FDA and international regulations, and failure to comply can result in significant penalties, product recalls, or suspension of approvals207211 - Generic manufacturers are actively seeking to market generic versions of Gilead's products, leading to patent litigation that could result in an earlier-than-expected loss of exclusivity220 - The company is involved in numerous litigation and government investigation matters, which require substantial resources and could result in significant monetary damages or penalties223225 Operational Risks Gilead's global operations are exposed to risks from public health emergencies, foreign currency fluctuations, climate change, ERP system implementation, and cybersecurity threats - Global operations are subject to risks including foreign currency exchange fluctuations, political instability, and changes in trade policies227 - Climate change poses physical risks to facilities located in vulnerable regions (e.g., California) and transition risks from evolving environmental regulations228229 - The company is currently implementing a new ERP system, which entails risks of business disruption, cost overruns, and potential negative impacts on internal controls241 - Cybersecurity attacks are increasing in frequency and sophistication, posing a threat to sensitive data, intellectual property, and business operations242243 Strategic and Financial Risks Gilead faces risks from unsuccessful acquisitions and collaborations, potential impairment charges, increased debt from financing transactions, and changes in effective tax rates - Acquisitions and collaborations may not be successful and can lead to significant impairment charges, such as those recorded for IPR&D assets in Q2 2025 and Q1 2024246 - The company has incurred additional debt to finance strategic transactions, which could result in credit rating downgrades and reduced financial flexibility247 - The company's effective tax rate is subject to change based on the mix of earnings across jurisdictions and evolving tax laws, which could adversely affect earnings248 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Gilead repurchased approximately 5.0 million shares for $528 million, and a new $6.0 billion stock repurchase program was authorized in July 2025 Stock Repurchase Activity (Q2 2025) | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Shares Purchased as Part of Program (thousands) | | :--- | :--- | :--- | :--- | | April 2025 | 1,711 | $105.88 | 1,662 | | May 2025 | 1,936 | $103.00 | 1,888 | | June 2025 | 1,887 | $109.49 | 1,425 | | Total | 5,534 | $106.10 | 4,975 | - In July 2025, the Board authorized a new $6.0 billion stock repurchase program with no fixed expiration, to begin after the current $5.0 billion program is completed250 Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the quarter ended June 30, 2025253 Item 6. Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including various agreements, indentures, compensatory plans, and certifications - The Exhibit Index lists all documents filed with the report, such as merger agreements, indentures for senior notes, equity incentive plans, and officer certifications256257258