Gilead Sciences, Inc. — 2022 Form 10-K Summary
Business context and reporting period. Gilead is a global biopharmaceutical company focused on HIV, viral hepatitis, oncology and other diseases. This annual report covers the fiscal year ended December 31, 2022; comparisons are primarily with fiscal 2021. The filing was signed February 22, 2023.
Financial performance
| Metric | 2022 | 2021 | Change / context |
|---|---|---|---|
| Total revenues | $27.281 billion | $27.305 billion | Essentially flat |
| Net income attributable to Gilead | $4.592 billion | $6.225 billion | Down 26% |
| Diluted EPS attributable to Gilead | $3.64 | $4.93 | Down 26% |
| Operating income | $7.330 billion | $9.918 billion | Down $2.588 billion |
| Product gross margin | 79.0% | 75.6% | Up 347 basis points |
| Operating cash flow | $9.072 billion | $11.384 billion | Down $2.312 billion |
- Product sales were $26.982 billion; royalty, contract and other revenues were $299 million. Gross-to-net deductions were $14.582 billion, or 35% of gross product sales.
- HIV sales rose 5% to $17.194 billion, led by Biktarvy demand. Cell therapy sales rose 68% to $1.459 billion and Trodelvy sales rose 79% to $680 million.
- Veklury sales fell 30% to $3.905 billion as COVID-19 hospitalizations and demand declined in the U.S. and Europe. HCV sales fell 4% to $1.810 billion.
- R&D expense increased 8% to $4.977 billion; SG&A increased 8% to $5.673 billion. Cost of goods sold declined 14% to $5.657 billion.
Liquidity, debt and capital allocation
- Cash and cash equivalents were $5.412 billion at year-end; cash, cash equivalents and marketable debt securities totaled approximately $7.6 billion.
- Total debt, net, was $25.229 billion, including $24.088 billion of senior unsecured notes and a $1.141 billion liability related to future Trodelvy royalties. The $2.5 billion revolving credit facility had no outstanding borrowings.
- Cash flow from investing activities was negative $2.466 billion; financing cash flow was negative $6.469 billion. Financing uses included $1.5 billion of debt repayments, $3.7 billion of dividends and $1.4 billion of share repurchases.
- Cash dividends declared were $2.92 per share for 2022. In February 2023, the Board announced a quarterly dividend increase to $0.75 per share, subject to future declarations.
- Management said existing resources, operating cash flows and the revolving credit facility should meet capital needs for the foreseeable future.
Material changes and unusual items
- Net income included a $2.7 billion impairment charge for Trodelvy in-process R&D related to HR+/HER2- breast cancer, following revised launch timing and market-share assumptions. The related asset had a $6.1 billion carrying value at year-end; FDA approval for this indication followed in February 2023.
- SG&A included a $406 million charge to terminate the Trodelvy collaboration with Everest and reacquire Asian territory rights. Gilead agreed to $280 million in termination payments, of which $84 million was paid in 2022, and potential further milestone payments of up to $175 million.
- Gilead paid the $1.25 billion Biktarvy-related legal settlement in February 2022. The global resolution also requires a 3% royalty on specified U.S. sales through October 5, 2027. The payment reduced 2022 operating cash flow; the settlement charge had been recorded in 2021.
- Other acquired R&D expense totaled $944 million, including charges related to MiroBio, Dragonfly, Jounce/GS-1811 and MacroGenics.
Outlook, management commentary and risks
- Management’s stated priorities include near-term revenue growth, expanding long-acting HIV treatments, advancing oncology programs and improving execution. The filing does not provide a clear quantitative revenue or earnings forecast.
- Sunlenca received U.S. approval in December 2022 as a twice-yearly HIV treatment for heavily treatment-experienced adults with multidrug-resistant HIV. Yescarta and Tecartus received expanded approvals; Trodelvy’s HR+/HER2- breast cancer indication was approved in February 2023.
- HIV products represented approximately 64% of 2022 product sales, creating material concentration risk. Three U.S. wholesalers accounted for approximately 89% of U.S. product sales; the three together represented approximately 63% of worldwide revenues.
- Key risks include competition and generic entry, pricing and reimbursement pressure (including the Inflation Reduction Act and 340B program), patent challenges, clinical and regulatory setbacks, manufacturing and supply interruptions, and unpredictable Veklury demand. Foreign exchange, inflation and cybersecurity risks are also disclosed.
- Significant litigation includes patent disputes, HIV antitrust claims, product-liability lawsuits involving older HIV medicines, and government-related matters. The filing states that no material accruals were recorded for the described legal proceedings at December 31, 2022; outcomes and possible losses are generally uncertain or not estimable.
- FDA issued a complete response letter for bulevirtide in October 2022, citing manufacturing and delivery concerns. Approval remained pending resolution of those issues.
- Ernst & Young issued unqualified opinions on the financial statements and internal control over financial reporting.
Most important facts for investors to verify
- Whether HIV growth and Biktarvy demand can offset mature-product declines, pricing pressure and future loss of exclusivity.
- How Trodelvy performs following the February 2023 indication approval, and whether further impairment or commercial assumptions change.
- Veklury demand and the extent to which lower COVID-19 hospitalization rates continue to affect sales.
- Developments in material patent, antitrust, product-liability and government proceedings, including potential financial exposure.
- Debt maturities, ongoing royalty obligations, cash generation and the sustainability of dividends and repurchases.
- Progress in clinical trials and manufacturing capacity for cell therapies and other pipeline candidates; the filing cautions that development and regulatory outcomes are uncertain.