Gilead Sciences, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed February 23, 2024. Gilead is a global biopharmaceutical company focused on HIV, viral hepatitis, COVID-19, oncology and other therapeutic areas.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Total revenue | $27.116 billion | $27.281 billion | Down 1% |
| Operating income | $7.605 billion | $7.330 billion | Up 4% |
| Net income attributable to Gilead | $5.665 billion | $4.592 billion | Up 23% |
| Diluted EPS | $4.50 | $3.64 | Up 24% |
| Product gross margin | 75.9% | 79.0% | Down 3.16 percentage points |
| Operating cash flow | $8.006 billion | $9.072 billion | Down $1.066 billion |
Revenue mix and trends: Product sales were $26.934 billion, essentially flat year over year. HIV sales rose 6% to $18.175 billion, led by Biktarvy, which grew 14% to $11.850 billion. Oncology sales increased 37% to $2.932 billion: cell therapy sales grew 28% to $1.869 billion and Trodelvy sales grew 56% to $1.063 billion. Liver-disease sales declined 1% to $2.784 billion. Veklury sales fell 44% to $2.184 billion as COVID-19 hospitalizations declined. Lower Veklury sales were largely offset by growth in HIV and oncology.
Profitability and unusual items: Net income increased despite slightly lower revenue, mainly because 2022 included a $2.7 billion in-process R&D impairment, while 2023 impairment expense was $50 million; 2023 also had lower unrealized equity-investment losses and higher interest income. These benefits were partly offset by higher cost of goods sold and operating expenses. Product gross margin fell amid Trodelvy amortization, product mix and $479 million of manufacturing-strategy restructuring costs recorded in cost of goods sold.
Gross-to-net deductions rose to $16.4 billion, or 38% of gross product sales, from $14.6 billion, or 35%, primarily reflecting product and payer mix. R&D expense increased 15% to $5.718 billion; acquired in-process R&D expense was $1.155 billion. SG&A increased 7% to $6.090 billion, including a $525 million HIV antitrust settlement expense.
Cash, debt and capital returns
Cash and cash equivalents were $6.085 billion at year-end; cash, cash equivalents and marketable debt securities totaled $8.4 billion. Operating cash flow was $8.006 billion; investing cash outflow was $2.265 billion and financing cash outflow was $5.125 billion. Operating cash flow was lower mainly due to higher taxes, inventory and operating spending, including litigation payments, partly offset by higher collections and the absence of a $1.25 billion bictegravir litigation settlement payment made in 2022.
Total debt, net, including the liability related to future Trodelvy royalties, was $24.987 billion; this included $23.834 billion of senior unsecured notes. Gilead issued $2.0 billion of notes due 2033 and 2053 and repaid $2.25 billion of notes in 2023. No amounts were drawn under its $2.5 billion revolving credit facility, which matures in June 2025. The company paid $3.809 billion in dividends and repurchased $1.0 billion of shares. The Board announced a quarterly dividend increase from $0.75 to $0.77 per share in February 2024.
Material developments, outlook and risks
- Pipeline and portfolio: Gilead reported approvals and label expansions for Trodelvy, Yescarta, Veklury and Hepcludex. It expanded collaborations and completed the Tmunity and XinThera acquisitions.
- Clinical setbacks and potential impairment: The Phase 3 EVOKE-01 Trodelvy study in previously treated metastatic non-small cell lung cancer did not meet its overall-survival primary endpoint. Gilead identified a potential impairment indicator for its $5.9 billion related IPR&D asset and planned an interim assessment in Q1 2024; any charge was not estimable in the filing. In February 2024, FDA placed all magrolimab studies in myelodysplastic syndromes and acute myeloid leukemia on clinical hold, and Gilead said it would discontinue development in those cancers. It also discontinued further enrollment in one Arcus lung-cancer study.
- Subsequent acquisition: In February 2024, Gilead agreed to acquire CymaBay for approximately $4.3 billion in cash, subject to customary closing conditions. Its lead candidate, seladelpar, was under FDA review for primary biliary cholangitis.
- Legal matters: Gilead paid $525 million to settle certain HIV antitrust claims; the settlement was not an admission of liability. Other antitrust claims, product-liability cases involving more than 25,000 active plaintiffs, government inquiries and patent disputes remain pending. Outcomes and potential losses are uncertain.
- Commercial and policy risks: HIV products represented approximately 67% of product sales. Three U.S. wholesalers accounted for approximately 91% of U.S. product sales, creating customer and channel-inventory concentration. Pricing, rebates, generic competition, patent challenges and Medicare drug-pricing provisions may pressure sales or margins. Veklury demand remains uncertain.
- Operations and financial risks: Gilead relies on third parties for much manufacturing and faces supply, regulatory, clinical-trial, foreign-exchange and cybersecurity risks. Flooding temporarily suspended on-site operations at its Cork facility in October 2023. The company is implementing a new ERP system in phases; it reported effective internal controls at year-end.
- Guidance: The supplied filing text does not provide clear numerical 2024 revenue or earnings guidance. Management said existing capital resources and operating cash flows should meet capital needs for the foreseeable future, while noting requirements depend on product performance, R&D, debt, litigation and other factors.
Key facts for investors to verify
- Q1 2024 impairment assessment and subsequent disclosures for Trodelvy’s NSCLC IPR&D asset.
- Progress and regulatory outcome for the CymaBay acquisition and seladelpar application.
- HIV and oncology growth, Veklury demand, gross-to-net deductions and wholesaler inventory effects.
- Updates on significant litigation, including product-liability and remaining antitrust claims.
- Debt maturities, transition-tax payments, future capital returns and the effects of Medicare pricing changes.