Analyst Conference Summary

conference date: January 26, 2010 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2009 (fourth quarter)

Forward-looking statements

Overview: Record results for this growth and value stock.

Basic data (GAAP) :

Revenues were $2.03 billion, up 13% sequentially from $1.80 billion and up 42% from $1.43 billion in the year-earlier quarter.

Net income was $802.2 million, up 19% sequentially from $673.0 million and up 43% from $560.0 million year-earlier.

Earnings per share (EPS) were $0.87, up 21% sequentially from $0.72 and up 47% from $0.59 year-earlier.

Guidance:

2010 full year product revenue $7.6 to $7.7 billion (up 17% to 19%). 75 to 77% non-GAAP product gross margin. Tax rate 25% to 26%.

Conference Highlights:

Non-GAAP numbers were: net income $864.4 million (up 46% y/y) or $0.93 per share (up 49% y/y).

Product sales were $1.80 billion, up 30% y/y. Increase was largely due to antiviral drugs Atripla and Truvada. Antiviral revenues were $1.62 billion, up 27% y/y.

Royalty revenue $228 million, up mainly due to Tamiflu sales.

$955 million operating cash flow in quarter. Paid off $200 million credit facility. $242 million was spent on share repurchases. Balance of cash and securities of $3.9 billion.

75% product gross margin non-GAAP, down due to Atripla, which as a lower gross margin. Tamiflu royalties helped margins.

Pipeline portfolio was reviews for 2010. Believes will become a major player in specialty cardiovascular space.

HIV screening in the U.S. was increased in 2009. Routine HIV screening for all adults is now the recommendation. Federal funding for HIV treatment was increased.

Aztreonam (Cayston) for inhalation for Pseudomonas infections in cystic fibrosis was recommended for approval by an FDA committee. The actual FDA decision is due in February.

Cost of goods sold was $473.4 million. Research and development $239.6 million. Selling, general and administrative $253.9 million. Leaving income from operations of $1.07 billion. Interest and other income was $11.3 million, offset by interest expense of $17.3 million. Income tax provision was $260.1 million.

Restructuring expense for 2010 estimated around $20 million.

Atripla doing well in France, where it was introduced about 6 months ago. Launched in Belgium in Q4; in Australia in January 2010.

Viread for hepatitis B is more than offsetting declines in use for HIV. International launches continue; gaining market share for hepatitis B in Europe.

Renexa for angina saw strong prescription demand. Building awareness with targetted physicians.

Pipeline highlights for 2010: Renexa plus sodium channel inhibitors. GS 9667 Phase 1b to lower plasma glucose and triglycerides for type II diabetes. GS 9411 sodium channel blocker for cystic fibrosis. IPF study of Letairis is 25% enrolled. So many products and trials, better See Gilead Pipeline.

Evaluating future uses of cash, including augmenting the pipeline.

See also Gilead analyst conference slide show

Q&A:

Q4 HIV trends? Demand increased from Q3 due to: 4 day inventory draw-down in Q3; full effect of price increase from July on Truvada and Atripla; most important, strong demand Florida and Texas programs for patients.

R&D spending is very judicious. Programs have to be worth the investment in terms of prospective returns.

Dividends? Others have asked us about dividends. We are continuing to evaluate our long-term plans. We won't rule out going into new verticals.

Quad HIV therapy differentiation? Believes safety will differentiate, but needs to show that with data.

Does guidance reflect steady HIV patient growth? We expect a good proportion of patients found under the new guidelines will go onto our therapies. Robust, dependable growth in market is expected, but not acceleration.

The main revenue drivers in 2010 are Nenexa and Atripla, which continues to come online in Europe.

There are approximately 125,000 U.S. patients identified who are not receiving therapy because of their blood count levels. With new guidelines, 60 to 70,000 patients should be moved to therapy.

Quad vs. Atripla? 53% of new U.S. patients begin with Atripla. Less used in females due to pregnancy cautions. How quad fits depends on how data comes out.

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