Analyst Conference Summary

conference date: January 23, 2008 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2007 (4th quarter)

Forward-looking statements

Overview: Still growing revenues, but at a reduced pace, with net income growing slower than revenues. Atripla sales in Europe will commence in Q1 2008.

Basic data:

Revenues were $1.09 billion, up 3% sequentially from $1.06 billion and up 22% from $899 million year-earlier.

Net income was $401.6 million, up 1% sequentially from $398 million and up from a loss of $1.6 billion year-earlier (see also non-GAAP data below)

EPS (earnings per share) were $0.41, down 2% sequentially from $0.42, but way up from a loss of $1.81 per share year-earlier.

Guidance:

Full year product sales revenue $4.7 to 4.8 billion. Non-GAAP product gross margin of 77% to 79%. R&D $610 to $630 million to support late stage clinical trials. $710 to $730 million for SG&A to support EU expansion. Tax rate 29 to 30%.

Conference Highlights:

Product sales were a record $1.03 billion, up 34% from year-earlier. Atripla and Truvada sales led the growth.

Non-GAAP net income given as $426.8 million ($0.44 per share), up 7% from $397.7 million year-earlier.

Revenues by product:

Truvada $448.8 million, up 33% y/y.
Atripla $259.7 million, up 89% y/y.
Viread $148.5 million, down 8% y/y.
Emtriva $7.1 million, down 16% y/y.
Hepsera $76.9 million, up 17% y/y.
AmBisome $67.8 million, up 18% y/y.

Overall HIV product sales were $864.2 million, up 35% from $642.4 million year-earlier.

Royalty and contract revenues were $68.8 million, down 48% from year-earlier and down 29% sequentially. This contraction was mainly due to reduced Tamiflu royalties from Hoffmann-La Roche, representing the payment for Q3. 2008 guidance from Roche for Tamiflu is expected next week.

Cost of goods sold was $215.5 million. R&D expense $184.6 million. Selling, general and administrative (SG&A) $180.0 million. Leaving income from operations of $514.5 million. Interest income net $26.7 million, $2 million from joint venture. Income tax provision $141.6 million.

Cash and equivalents ended at $2.72 billion. $512 million operating cash flow. Committed to returning cash to stockholders.

3 new products are undergoing review in the U.S. and Europe; Gilead is prepared to launch them in 2008. Viread for chronic hepatitis B could be approved quickly in Europe. GS9190 for Hepatitis C early (Phase I) results were good, but possible QTC effect issue. Studies for HIV, cardiovascular, and respiratory remedies are proceeding as well. Covered other events announced during quarter.

$26 million of product revenue was due to currency exchange rate changes compared to year-earlier.

Hepsera had a sequential decrease which may be an inventory issue.

Plans to expand operations in EU. Atripla sales in EU were minimal in Q4; already approved; will jointly market with Bristol-Myers. Truvada sales grew in EU; had about 40% of patients in big 5 EU markets.

Latairis for pulmonary arterial hypertension launch going well. [Because of the risks of liver injury and birth defects, Letairis is available only through a special restricted distribution program called the Letairis Education and Access Program (LEAP)]

Q&A:

No product breakouts for individual products for 2008.

NNRTI class competition for Atripla? We are early in getting new patients into Atripla care. See the new products being used in combination with other products, plus is twice a day. There are some issues with 278, so we'll watch that.

HIV trends in U.S? We did see wholesale inventory drawdown, but still within contractual band.

Latairis? Moved from 450 prescribers to 800.

Why are your projects for 2008 about $100 million higher than street concensus. We think Atripla for HIV growth potential in Europe is very good. This week we heard from the U.K. that the major consortium just listed Atripla. Expect about a 9 month rollout before meaninful sales in Italy, France, and Spain.

Most HIV patients coming off Atripla move to Truvada plus other drugs.

Tamiflu? We don't know what Roche numbers will be, but generally numbers are expected to be down. It has been a mild flue season in Europe and U.S. so far.

Why is gross margin better than predicted? Partly currency benefits, partly driving down costs.

Eastern European HIV sales? Access and reimbursements there are limited. We will be present there but sales growth may be slow.

OpenIcon Analyst Conference Summaries Main Page

Gilead Investor Relations page

Search

More Analyst Conference Pages: