Gilead Sciences, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report; the filing does not provide a clear standalone Q4 income statement summary in the supplied text. Amounts are in U.S. dollars.
Business context and financial performance
Gilead is a global biopharmaceutical company focused on HIV, viral hepatitis, COVID-19, oncology and other conditions. FY 2021 growth was led by Veklury, continued Biktarvy demand and expanding oncology sales, while HIV generics and pandemic-related disruption weighed on some established franchises.
| Metric | FY 2021 | FY 2020 | Change / context |
|---|---|---|---|
| Total revenue | $27.305B | $24.689B | Up 11% |
| Product sales | $27.008B | $24.355B | Up 11% |
| Operating income | $9.918B | $4.071B | Operating margin approximately 36.3%, versus 16.5% |
| Product gross margin | 75.6% | 81.2% | Down 5.6 percentage points |
| Net income attributable to Gilead | $6.225B | $123M | Increase reflects, among other factors, much lower acquired IPR&D charges in 2021 |
| Diluted EPS | $4.93 | $0.10 | Not directly comparable given unusually high 2020 charges |
| Operating cash flow | $11.384B | $8.168B | Up $3.216B, primarily from Veklury revenue and higher receivables collections |
| Cash, cash equivalents and marketable debt securities | $7.8B | $7.9B | Year-end liquidity; current ratio approximately 1.27 |
| Total debt, net | $26.695B | $31.402B | Includes $1.124B liability related to future royalties |
Reported product sales were net of $14.4B in gross-to-net deductions, equal to 35% of gross product sales, compared with $15.3B, or 39%, in 2020. Lower deductions as a share of gross sales mainly reflected product mix, including higher Veklury sales.
Revenue mix and changes versus prior year
- Veklury: $5.565B, up 98% from $2.811B. The product had only a partial year of sales in 2020; 2021 growth also reflected higher hospital demand.
- HIV: $16.315B, down 4%. Biktarvy grew 19% to $8.624B, partly offset by lower sales of Truvada- and Atripla-based products after U.S. loss of exclusivity and generic competition. Truvada and Atripla sales together were $1.3B lower year over year.
- HCV: $1.881B, down 9%, mainly due to fewer patient starts during the pandemic.
- HBV/HDV: $969M, up 13%, primarily reflecting Vemlidy demand and the Hepcludex launch.
- Cell therapy: $871M, up 43%, supported by Tecartus launches and Yescarta demand and expanded use.
- Trodelvy: $380M versus $49M in 2020; the prior year included only a partial period following the Immunomedics acquisition.
Costs, debt and capital allocation
- Cost of goods sold rose 44% to $6.601B. Management cited the $1.25B bictegravir litigation settlement charge, acquisition-related amortization and inventory step-up, inventory write-downs and product mix as factors in the lower product gross margin. A previously recorded $175M Yescarta-related litigation accrual was reversed after a favorable court decision.
- R&D expense was $5.363B, up 6%, including a $625M net Arcus collaboration opt-in charge. Acquired IPR&D expense fell to $177M from $5.856B in 2020.
- Other expense, net improved to $639M from $1.418B, largely due to lower unrealized losses on equity investments. Equity securities generated net unrealized losses of $610M in 2021 versus $1.7B in 2020.
- Gilead repaid $4.75B of debt in 2021 and issued no new debt. Financing cash outflows were $8.877B, including $3.605B in dividends and $546M in share repurchases. The company reported no covenant violations and no borrowings on its $2.5B revolving credit facility at year end.
- Management said existing capital resources and operating cash flow should meet capital needs for the foreseeable future, while noting that future funding needs depend on business, R&D, litigation and strategic transaction requirements.
Outlook, risks and unusual items
- 2022 outlook: Management expected product sales excluding Veklury to grow 2%–4% versus 2021. It anticipated Veklury sales to decline year over year but remain a meaningful revenue contributor, with sales more heavily weighted toward the beginning of 2022. No specific numerical Veklury forecast is provided here.
- Management expected HIV sales to recover from pandemic disruption and grow year over year, with most of the Truvada and Atripla loss-of-exclusivity impact behind the business starting in Q2 2022. Oncology, including Trodelvy and cell therapy, was expected to contribute to growth. The company also planned to expand clinical development, particularly in oncology, while maintaining disciplined expense management.
- Bictegravir settlement: In February 2022, after year end, Gilead agreed to pay ViiV $1.25B and a 3% royalty on future U.S. Biktarvy and other bictegravir-containing product sales through October 5, 2027. The $1.25B charge was accrued in Q4 2021 and paid in Q1 2022.
- Clinical and regulatory uncertainty: FDA clinical holds affected studies involving injectable lenacapavir and magrolimab; the filing also describes holds affecting lenacapavir/islatravir work. Trial outcomes, timelines, regulatory approvals and commercial success remain uncertain. Some Yescarta and Trodelvy indications have accelerated approval and may depend on confirmatory evidence.
- Commercial and operational risks: Veklury demand is difficult to forecast and depends on the pandemic, variants, hospitalizations, vaccination and alternative treatments. COVID-19 also disrupted HIV and HCV testing, treatment starts and clinical trials. Pricing and reimbursement pressure, generic competition, supply risks and foreign exchange may affect results.
- Concentration and litigation: Three U.S. wholesalers accounted for approximately 91% of U.S. product sales. Other significant legal matters include PrEP patent litigation, HCV patent disputes, antitrust claims and product-liability actions involving more than 27,000 plaintiffs; outcomes are uncertain.
- Net income comparisons are substantially affected by 2020 acquired IPR&D charges and investment valuation losses. The filing also identifies material estimation judgments for rebates and acquired IPR&D valuation; the auditor reported an unqualified opinion and effective internal control over financial reporting.
Important facts for investors to verify
- Whether 2022 product sales excluding Veklury achieved the guided 2%–4% growth, and how Veklury demand and revenue evolved.
- Whether Biktarvy growth and broader HIV recovery offset generic-related declines and persistent pandemic effects.
- Progress, timing and outcomes for lenacapavir, magrolimab and oncology pipeline programs, including resolution of clinical holds and confirmatory trials for accelerated approvals.
- The realized cost and ongoing financial effect of the bictegravir settlement royalty, and developments in other material litigation.
- Changes in gross-to-net rebates and discounts, wholesaler inventory concentration, product gross margin and the valuation of acquired IPR&D assets.
- Debt reduction, cash generation and the sustainability of dividends and repurchases alongside planned capital spending and collaboration commitments.