Item 1. BUSINESS

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Item 1. BUSINESS

Gilead Sciences, Inc. (“Gilead,” “we,” “our” or “us”) is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people. We are committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis and cancer. We operate in more than 35 countries worldwide, with headquarters in Foster City, California.

Our Business

Products

Our innovative medicines represent advancements by offering first-in-class treatments, greater efficacy, enhanced modes of delivery, more convenient treatment regimens, improved resistance profiles and reduced side effects. Our focus on innovation has allowed us to deliver marketed products across multiple therapeutic areas.

In 2021, our primary revenue-generating products and the approved indications in the United States were as follows:

HIV/AIDS

Biktarvy****®** is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Biktarvy is a single-tablet regimen of a fixed-dose combination of our antiretroviral medications, bictegravir, emtricitabine and tenofovir alafenamide (“TAF”).
Genvoya****®** is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Genvoya is a single-tablet regimen of a fixed-dose combination of our antiretroviral medicines, elvitegravir, cobicistat, emtricitabine and TAF.
Descovy****®** is an oral formulation indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection in certain patients. Descovy is a fixed-dose combination of our antiretroviral medications, emtricitabine and TAF. Descovy is also approved by U.S. Food and Drug Administration (“FDA”) for a pre-exposure prophylaxis (“PrEP”) indication to reduce the risk of sexually acquired HIV-1 infection in certain at-risk patients.
Odefsey****®** is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Odefsey is a single-tablet regimen of a fixed-dose combination of our antiretroviral medications, emtricitabine and TAF, and rilpivirine marketed by Janssen Sciences Ireland Unlimited Company, one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”).
Truvada****®** is an oral formulation indicated in combination with other antiretroviral agents for the treatment of HIV-1 infection in certain patients. Truvada is a fixed-dose combination of our antiretroviral medications, tenofovir disoproxil fumarate (“TDF”) and emtricitabine. Truvada is also approved by FDA for a PrEP indication to reduce the risk of sexually acquired HIV-1 infection in certain at-risk patients.
Complera****®/Eviplera®** is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. The product, marketed in the United States as Complera and in Europe as Eviplera, is a single-tablet regimen of a fixed-dose combination of our antiretroviral medications, TDF and emtricitabine, and Janssen’s rilpivirine hydrochloride.
Stribild****®** is an oral formulation dosed once a day for the treatment of HIV-1 infection in certain patients. Stribild is a single-tablet regimen of a fixed-dose combination of our antiretroviral medications, elvitegravir, cobicistat, TDF and emtricitabine.
Atripla****®** is an oral formulation indicated as a complete regimen for the treatment of HIV-1 infection in certain patients. Atripla is a fixed-dose combination of our antiretroviral medications, TDF and emtricitabine, and Bristol-Myers Squibb Company (“BMS”)’s efavirenz.

COVID-19

Veklury****®** (remdesivir), an injection for intravenous use, is a nucleotide analog RNA polymerase inhibitor indicated for the treatment of coronavirus disease 2019 (“COVID-19”) in certain adults and children 12 years of age and older and weighing at least 88 pounds (40 kg) who are (i) hospitalized or (ii) not hospitalized and have mild-to-moderate COVID-19, and are at high risk for progression to severe COVID-19, including hospitalization or death*.

*This indication received expedited approval by FDA in January 2022.

Liver Diseases

Epclusa****®** is an oral formulation of a once-daily single-tablet regimen of sofosbuvir and velpatasvir for the treatment of chronic hepatitis C virus (“HCV”) infection in adults and certain pediatric patients with genotype 1, 2, 3, 4, 5 or 6: (i) without cirrhosis or with compensated cirrhosis or (ii) with decompensated cirrhosis for use in combination with ribavirin. In addition, we have an authorized generic version of Epclusa distributed by our separate subsidiary, Asegua Therapeutics LLC.
Harvoni****®** is an oral formulation of a once-daily, single-tablet regimen of ledipasvir and sofosbuvir for the treatment of chronic HCV infection in: (i) adults with genotype 1, 4, 5 or 6 without cirrhosis or with compensated cirrhosis, (ii) adults with genotype 1 with decompensated cirrhosis, in combination with ribavirin, (iii) adults with genotype 1 or 4 who are liver transplant recipients without cirrhosis or with compensated cirrhosis, in combination with ribavirin, or (iv) certain pediatric patients with genotype 1, 4, 5 or 6 without cirrhosis or with compensated cirrhosis. In addition, we have an authorized generic version of Harvoni distributed by our separate subsidiary, Asegua Therapeutics LLC.
Vosevi****®** is an oral formulation of a once-daily, single-tablet regimen of sofosbuvir, velpatasvir and voxilaprevir for the re-treatment of chronic HCV infection in adults: (i) with genotype 1, 2, 3, 4, 5 or 6 previously treated with an NS5A inhibitor-containing regimen or (ii) with genotype 1a or 3 previously treated with a sofosbuvir-containing regimen without an NS5A inhibitor.
Vemlidy****®** is an oral formulation of TAF dosed once a day for the treatment of chronic hepatitis B virus (“HBV”) infection in adults with compensated liver disease.
Viread****®** is an oral formulation of TDF dosed once a day for the treatment of chronic HBV infection in adults and certain pediatric patients.

Hematology/Oncology/Cell Therapy

Yescarta****®** (axicabtagene ciloleucel), a suspension for intravenous infusion, is a chimeric antigen receptor (“CAR”) T-cell therapy for the treatment of (i) adult patients with relapsed or refractory large B-cell lymphoma after two or more lines of systemic therapy, including diffuse large B-cell lymphoma (“DLBCL”) not otherwise specified, primary mediastinal large B-cell lymphoma, high-grade B-cell lymphoma and DLBCL arising from follicular lymphoma, and (ii) adult patients with relapsed or refractory follicular lymphoma (“FL”) after two or more lines of systemic therapy*.

*This indication is approved under accelerated approval by FDA, and continued approval for this indication may be contingent upon verification and description of clinical benefit in confirmatory trials.

Tecartus****®** (brexucabtagene autoleucel), a suspension for intravenous infusion, is a CAR T cell therapy for the treatment of (i) adult patients with relapsed or refractory mantle cell lymphoma (“MCL”) and (ii) adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia (“ALL”).
Trodelvy****®** (sacituzumab govitecan-hziy), an injection for intravenous use, is a Trop-2 directed antibody and topoisomerase inhibitor conjugate indicated for the treatment of (i) adult patients with unresectable locally advanced or metastatic triple-negative breast cancer (“TNBC”) who have received two or more prior systemic therapies, at least one of them for metastatic disease, and (ii) adult patients with locally advanced or metastatic urothelial cancer who have previously received a platinum-containing chemotherapy and either programmed death receptor-1 (“PD-1”) or programmed death-ligand 1 (“PD-L1”) inhibitor*.

Zydelig**® (idelalisib) is an oral formulation of a kinase inhibitor for the treatment of patients with relapsed chronic lymphocytic leukemia, in combination with rituximab, for whom rituximab alone would be considered appropriate therapy due to other co-morbidities.

Other

Letairis**® (ambrisentan) is an oral formulation of an endothelin receptor antagonist for the treatment of pulmonary arterial hypertension (“PAH”) (WHO Group I) (i) to improve exercise capacity and delay clinical worsening or (ii) in combination with tadalafil to reduce the risks of disease progression and hospitalization for worsening PAH, and to improve exercise ability.
Ranexa**® (ranolazine) is an oral formulation of an extended-release tablet of an antianginal for the treatment of chronic angina.
AmBisome**® (amphotericin B liposome for injection) is a proprietary liposomal formulation of amphotericin B, an antifungal agent, for the treatment of serious invasive fungal infections caused by various fungal species in adults.

For information about our revenue-generating products, including the amount of revenue contributed by the products listed above, see Note 2. Revenues of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Revenue Share and Other Revenues

We also generate revenues from other activities, including revenue share from combination products, royalties for outbound licenses of our intellectual property and other payments received from our collaborations with third-party partners. For example, pursuant to our collaboration with Janssen, we receive revenue share from cobicistat, emtricitabine and TAF that are components of Symtuza (darunavir/cobicistat/emtricitabine/TAF), a fixed-dose combination product commercialized by Janssen. We include our revenue share from Symtuza in our Product sales. For a description of our collaborations with Janssen and other partners, see Note 11. Collaborations and Other Arrangements of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Commercialization and Distribution

We have U.S. and international commercial sales operations, with marketing subsidiaries in more than 35 countries. Our products are marketed through our commercial teams and/or in conjunction with third-party distributors and corporate partners. Our commercial teams promote our products through direct field contact with physicians, hospitals, clinics and other healthcare providers. We generally grant our third-party distributors the exclusive right to promote our product in a territory for a specified period of time. Most of our agreements with these distributors provide for collaborative efforts between the distributor and Gilead in obtaining and maintaining regulatory approval for the product in the specified territory.

We sell and distribute most of our products in the United States exclusively through the wholesale channel. During the year ended December 31, 2021, approximately 91% of our product sales in the United States and approximately 65% of our total worldwide revenues were to three large wholesalers, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. We sell and distribute our products in Europe and countries outside the United States where the product is approved, either through our commercial teams, third-party distributors or corporate partners.

Competition

We operate in a highly competitive environment. We face significant competition from global pharmaceutical and biotechnology companies, specialized pharmaceutical firms and generic drug manufacturers. Our products compete with other commercially available products based primarily on efficacy, safety, tolerability, acceptance by doctors, ease of patient compliance, ease of use, price, insurance and other reimbursement coverage, distribution and marketing. As our products mature, pricing pressures from private insurers and government payers often result in a reduction of the net product prices. Further, as new branded or generic products are introduced into major markets, our ability to maintain pricing and market share may be affected.

Research and Development

Our research and development (“R&D”) mission is to discover and develop transformational therapies in areas of high unmet medical need. Our product development efforts are focused primarily in viral diseases, inflammatory diseases and oncology. Our team of research scientists is engaged in the discovery and development of new molecules and technologies that we hope will lead to the approval of innovative medicines and therapies that will advance the current standard of care and address unmet medical needs. We intend to continue committing significant resources to internal R&D opportunities and external business development activity to drive innovation and growth of our business.

The development of product candidates and investigational therapies in our pipeline is subject to various risks and uncertainties. These risks and uncertainties include our ability to enroll patients in clinical trials, the possibility of unfavorable results of our clinical trials, the need to modify or delay our clinical trials, including on account of clinical holds placed by regulatory authorities, or to perform additional trials and the risk of failing to obtain regulatory approvals. As a result, our product candidates and investigational therapies may never be successfully commercialized. Drug development is inherently risky, and many product candidates and investigational therapies fail during the development process.

In 2021, we continued to invest in and advance our R&D pipeline across our therapeutic areas. Below is a summary of our product candidates that were in Phase 3 or registrational Phase 2 clinical trials or pending marketing authorization review by FDA or European Medicines Agency (“EMA”) as of the end of 2021.

Product Candidates in Viral Diseases


Product Candidates						Description
Regulatory Filings
Lenacapavir						A New Drug Application and a Marketing Authorization Application have been filed with FDA and EMA, respectively, for lenacapavir, an HIV capsid inhibitor, as a component of a long-acting regimen for the treatment of HIV infection in heavily treatment-experienced people living with HIV. It has been granted Breakthrough Therapy designation by FDA for this indication.
Bulevirtide						A Biologics License Application has been filed with FDA for bulevirtide for the treatment of chronic hepatitis delta virus (“HDV”) infection. It has been granted both Orphan Drug and Breakthrough Therapy designations by FDA for this indication. In Europe, Hepcludex® (bulevirtide) has been granted Conditional Marketing Authorization by the European Commission and PRIority MEdicines (PRIME) scheme eligibility by the EMA as the first approved treatment in adults with chronic HDV infection with compensated liver disease.
Phase 3
Lenacapavir						Lenacapavir is being evaluated for an HIV PrEP indication. Program timeline is pending resolution of clinical hold placed by FDA on studies evaluating injectable lenacapavir.

Product Candidates in Inflammatory Diseases


Product Candidate						Description
Phase 3
Cilofexor						Cilofexor, an FXR agonist, is being evaluated for the treatment of primary sclerosing cholangitis.
Filgotinib						Filgotinib, a JAK1 inhibitor, is being evaluated for the treatment of Crohn’s disease.

Product Candidates in Oncology


Product Candidates						Description
Regulatory Filings
Yescarta (axicabtagene ciloleucel)						A supplemental Biologics License Application and a Type II Variation Marketing Authorization Application have been filed with FDA and EMA, respectively, for axicabtagene ciloleucel, a CAR T cell therapy for the treatment of second-line DLBCL. A Type II Variation Marketing Authorization Application has been filed with EMA for axicabtagene ciloleucel for the treatment of relapsed or refractory FL. Yescarta has received accelerated approval by FDA for the treatment of adult patients with relapsed or refractory FL after two or more lines of systemic therapy.
Tecartus (brexucabtagene autoleucel)						A Type II Variation Marketing Authorization Application has been filed with EMA for brexucabtagene autoleucel, a CAR T cell therapy, for the treatment of adult ALL. Tecartus has received FDA approval for the treatment of adult patients with relapsed or refractory B-cell precursor ALL.
Phase 3
Sacituzumab govitecan-hziy						Sacituzumab govitecan-hziy, a Trop-2 directed antibody and topoisomerase inhibitor conjugate, is being evaluated for (i) hormone receptor positive (“HR+”), human epidermal growth factor receptor 2 negative (“HER2-”), metastatic breast cancer and (ii) non-small cell lung cancer (“NSCLC”) as a second-line or third-line treatment.
Magrolimab						Magrolimab, an anti-CD47, is being evaluated for (i) higher risk myelodysplastic syndrome (“MDS”) as a first-line treatment and (ii) acute myeloid leukemia (“AML”) as a first-line treatment. Program timelines are pending resolution of partial clinical holds placed by FDA on studies evaluating magrolimab.
Zimberelimab*						Zimberelimab, an anti-PD-1 monoclonal antibody, is being evaluated for NSCLC as a first-line treatment.
Domvanalimab*						Domvanalimab, an Fc-silent anti-TIGIT antibody, is being evaluated for NSCLC as a first-line treatment.
Registrational Phase 2
Brexucabtagene autoleucel						Brexucabtagene autoleucel is being evaluated for the treatment of pediatric ALL.

*In collaboration with Arcus Biosciences, Inc. (“Arcus”). See Note 11. Collaborations and Other Arrangements of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information regarding this collaboration.

In 2021, we also received regulatory approvals or authorizations from FDA and the European Commission to expand the indications of our products, including:


Product						Regulatory Approval or Authorization
Biktarvy						FDA approved a new low-dose tablet dosage form of Biktarvy for pediatric patients weighing at least 14 kg to less than 25 kg who are virologically suppressed or new to antiretroviral therapy.
Epclusa						FDA approved an expansion of the pediatric indication of Epclusa for the treatment of chronic HCV infection to include pediatric patients 3 years of age and older, regardless of HCV genotype or liver disease severity.
Veklury						European Commission approved a variation to the Conditional Marketing Authorization for Veklury to include adults who do not require supplemental oxygen and are at an increased risk of progressing to severe COVID-19.
Yescarta						FDA granted accelerated approval of Yescarta for the treatment of adult patients with relapsed or refractory FL.
Tecartus						FDA approved Tecartus for the treatment of adult patients with relapsed or refractory B-cell precursor ALL.
Trodelvy						FDA granted full approval of Trodelvy for adult patients with unresectable locally advanced or metastatic TNBC. FDA granted accelerated approval of Trodelvy for use in adult patients with locally advanced or metastatic UC. European Commission granted marketing authorization for Trodelvy as a monotherapy indicated for the treatment of adult patients with unresectable or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for advanced disease.

In addition, we seek to enhance our commercial portfolio and clinical pipeline across multiple therapeutic areas through acquisitions, in-licensing and strategic collaborations. For example, in October 2021, we entered into a clinical trial collaboration with Merck Sharp & Dohme, Corp., a subsidiary of Merck & Co., Inc. (“Merck”), to evaluate Trodelvy in combination with Merck’s Keytruda in patients with first-line metastatic TNBC. In November 2021, we expanded our research collaboration with Arcus and exercised our options to three programs in Arcus’s clinical-stage portfolio, including domvanalimab, which is in Phase 2 and 3 studies in NSCLC. Our strategic business development activity reflects our commitment to focus on transformative science, build a sustainable and diverse portfolio and position ourselves for the near-, medium- and long-term growth of our business.

Patents and Proprietary Rights

U.S. and European Patent Expiration

We have a number of U.S. and foreign patents, patent applications and rights to patents related to our compounds, products and technology, but we cannot be certain that issued patents will be enforceable or provide adequate protection or that pending patent applications will result in issued patents.

The following table shows the estimated expiration dates (including patent term extensions, supplementary protection certificates and/or pediatric exclusivity where granted) in the United States and the European Union for the primary (typically compound) patents for our key product candidates as described above. For our product candidates that are fixed-dose combinations of single-tablet regimens, the estimated patent expiration date provided corresponds to the latest expiring compound patent for one of the active ingredients in the single-tablet regimen.


Key Product Candidates	Patent Expiration
	U.S.		E.U.
Viral Diseases:
Lenacapavir	2037		2037
Bulevirtide	2030		2029
Inflammatory Diseases:
Cilofexor	2032		2032
Filgotinib	2030		2030
Oncology:
Axicabtagene ciloleucel	2031		—	(1)
Brexucabtagene autoleucel	2027		—	(1)
Sacituzumab govitecan-hziy	2023	(2)	2029
Magrolimab	2031		2031
Zimberelimab(3)	2036		2036
Domvanalimab(3)	2037		2036

(1) The composition of matter patent has expired in the European Union. In the European Union and the United States, patent applications are pending relating to proprietary manufacturing processes of Kite, a Gilead company (“Kite”).

(2) An application for patent term extension was filed in the United States that, if granted, would extend the U.S. expiration date to at least 2028. Regulatory exclusivity in the United States expires in 2032.

(3) In collaboration with Arcus.

The following table shows the actual or estimated expiration dates (including patent term extensions, supplementary protection certificates and/or pediatric exclusivity where granted) in the United States and the European Union for the primary (typically compound) patents for our principal products. For our products that are fixed-dose combinations or single-tablet regimens, the estimated patent expiration dates provided correspond to the latest expiring compound patent for one of the active ingredients in the single-tablet regimen.


Products	Patent Expiration
	U.S.		E.U.
Ranexa	2019	(1)	2023
Descovy	2025		2026
Vemlidy	2025		2026
Complera/Eviplera	2025		2026
Zydelig	2025	(2)	2029
Odefsey	2025		2026
Yescarta	2031		—	(3)
Stribild	2029	(4)	2028
Genvoya	2029	(4)	2028
Harvoni	2030		2030
Epclusa	2033		2032
Biktarvy	2033		2033
Vosevi	2034		2033
Veklury	2035		2035
Tecartus	2027		—	(3)
Trodelvy	2023	(5)	2029
Jyseleca	2030		2030
Hepcludex	2030		2029
These estimated expiration dates do not include any potential additional exclusivity (e.g., patent term extensions, supplementary protection certificates or pediatric exclusivity) that has not yet been granted.

(1) In 2013, Gilead and Lupin Limited reached an agreement to settle a patent litigation matter related to Ranexa.

(2) Applications for patent term extensions are pending in the United States and/or SPCs are pending in one or more countries in the European Union for these products.

(3) The composition of matter patent has expired in the European Union. In the European Union and the United States, patent applications are pending relating to proprietary manufacturing processes of Kite.

(4) In 2018, Gilead and Mylan Pharmaceuticals reached an agreement to settle the patent litigation concerning patents that protect cobicistat in our Stribild and Genvoya products.

(5) An application for patent term extension was filed in the United States that, if granted, would extend the U.S. expiration date to at least 2028. Regulatory exclusivity in the United States expires in 2032.

Patent Protection and Certain Challenges

Patents and other proprietary rights are very important to our business. If we have a properly drafted and enforceable patent, it can be more difficult for our competitors to use our technology to create competitive products and more difficult for our competitors to obtain a patent that prevents us from using technology we create. As part of our business strategy, we actively seek patent protection both in the United States and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology.

Patents covering certain of the active pharmaceutical ingredients (“API”) of most of our HIV products as well as cell therapy products are held by third parties. We acquired exclusive rights to these patents in the agreements we have with these parties.

We may obtain patents for certain products many years before marketing approval is obtained. Because patents have a limited life that may begin to run prior to the commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply for patent term extensions or supplementary protection certificates in some countries. For example, extensions for the patents or supplementary protection certificates on many of our products have been granted in the United States and in a number of European countries, compensating in part for delays in obtaining marketing approval. Similar patent term extensions may be available for other products we are developing, but we cannot be certain we will obtain them in some countries.

It is also important that we do not infringe the valid patents of third parties. If we infringe the valid patents of third parties, our reputation may be harmed and we may be required to pay significant monetary damages, we may be prevented from commercializing products or we may be required to obtain licenses from these third parties. We may not be able to obtain alternative technologies or any required license on reasonable terms or at all. If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our products. For example, we are aware of patents and patent applications owned by other parties that such parties may claim to cover the use of sofosbuvir, axicabtagene ciloleucel, brexucabtagene autoleucel, tenofovir disoproxil, tenofovir alafenamide and bictegravir.

Because patent applications are confidential for a period of time until a patent is issued, we may not know if our competitors have filed patent applications for technology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our products. In addition, if competitors file patent applications covering our technology, we may have to participate in litigation, post-grant proceedings before the U.S. Patent and Trademark Office or other proceedings to determine the right to a patent or validity of any patent granted. Such litigation and proceedings are unpredictable and expensive, and could divert management attention from other operations, such that, even if we are ultimately successful, we may be adversely impacted.

Patents relating to pharmaceutical, biopharmaceutical and biotechnology products, compounds and processes such as those that cover our existing compounds, products and processes and those that we will likely file in the future, do not always provide complete or adequate protection. Future litigation or other proceedings regarding the enforcement or validity of our existing patents or any future patents could result in the invalidation of our patents or substantially reduce their protection. From time to time, certain individuals or entities may challenge our patents.

Our pending patent applications and the patent applications filed by our collaborative partners may not result in the issuance of any patents or may result in patents that do not provide adequate protection. As a result, we may not be able to prevent third parties from developing compounds or products that are closely related to those which we have developed or are developing. In addition, certain countries do not provide effective enforcement of our patents, and third-party manufacturers may be able to sell generic versions of our products in those countries.

For a description of our significant pending legal proceedings, see Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. See also Item 1A Risk Factors “Our success depends to a significant degree on our ability to obtain and defend our patents and other intellectual property rights both domestically and internationally, and to operate without infringing upon the patents or other proprietary rights of third parties.”

Trade Secrets

We also rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation. For example, a great deal of our liposomal manufacturing expertise, which is a key component of our liposomal technology, is not covered by patents but is instead protected as a trade secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and vendors. These agreements provide that all confidential information developed or made known to an individual during the course of their relationship with us will be kept confidential and will not be used or disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions made by an individual while employed by us will be our exclusive property. We cannot be certain that these parties will comply with these confidentiality agreements, that we have adequate remedies for any breach or that our trade secrets, internal know-how or technological innovation will not otherwise become known or be independently discovered by our competitors. Under some of our R&D agreements, inventions become jointly owned by us and our corporate partners and in other cases become the exclusive property of one party. In certain circumstances, it can be difficult to determine who owns a particular invention and disputes could arise regarding those inventions. If our trade secrets or confidential information become known or independently discovered by competitors, or if we enter into disputes over ownership of inventions, our business and results of operations could be adversely affected.

Manufacturing and Raw Materials

Our products are manufactured either at our own facilities or by third-party contract manufacturers. We depend on third parties to perform manufacturing activities for the majority of our API and drug products. For most of our products, including our HIV and HCV products, we use multiple third-party contract manufacturers so that we have primary and back-up suppliers and manufacturing sites. For our cell therapy products, we have established clinical and commercial manufacturing facilities for cell processing activities. For our future products, we continue to develop additional manufacturing capabilities and establish additional third-party suppliers to manufacture sufficient quantities of our product candidates to undertake clinical trials and to manufacture sufficient quantities of any product that is approved for commercial sale.

Our Manufacturing Facilities

We own or lease manufacturing facilities to manufacture and distribute certain products and API for clinical and/or commercial uses. These facilities include:

Foster City, California: We conduct process chemistry research and formulation development activities, manufacture API and drug product for our clinical trials and oversee our third-party contract manufacturers.
San Dimas and La Verne, California: We manufacture AmBisome and also package and label the majority of our commercial products for distribution to the Americas and Pacific Rim.
Oceanside, California: We utilize the facility for clinical manufacturing and process development of our biologics candidates.
El Segundo, California: We utilize the facility for clinical and commercial manufacturing and processing of our cell therapy products.
Frederick, Maryland: We utilize the facility for clinical manufacturing and processing of our cell therapy products.
Morris Plains, New Jersey: We utilize the facility for manufacturing for monoclonal antibody intermediate and process optimization of our antibody drug conjugate products.
Cork and Dublin, Ireland: We utilize the Cork facility for commercial manufacturing, packaging and labeling of our products. We also perform quality control testing, labeling, packaging and final release of many of our products at the Cork facility, which are distributed to the European Union and other international markets through our facility in Dublin. We utilize our other facility in central Dublin as a drug development hub for our pediatric programs where we perform clinical development, safety, quality, biostatistics and data sciences, regulatory and compliance functions.
Edmonton, Canada: We conduct process chemistry research and scale-up activities for our clinical development candidates, manufacture API for both investigational and commercial products and conduct chemical development activities to improve existing commercial manufacturing processes.
Hoofddorp, Netherlands: We utilize the facility for commercial manufacturing and processing of our cell therapy products.

Third-Party Manufacturers

We believe the technology we use to manufacture our products is proprietary. For products manufactured by our third-party contract manufacturers, we have disclosed all necessary aspects of this technology to enable them to manufacture the products for us. We have agreements with these third-party manufacturers that are intended to restrict them from using or revealing this technology, but we cannot be certain that these third-party manufacturers will comply with these restrictions.

For more information about our third-party manufacturers, see Item 1A Risk Factors “We may face manufacturing difficulties, delays or interruptions, including at our third-party manufacturers and corporate partners.”

Regulation of Manufacturing Process

The manufacturing process for pharmaceutical products is highly regulated and regulators may shut down manufacturing facilities that they observe do not comply with regulations. We, our third-party manufacturers and our corporate partners are subject to current Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and the EMA. Similar regulations are in effect in other jurisdictions. Our manufacturing operations are subject to routine inspections by regulatory agencies.

For our cell therapy products, we are required by FDA to comply with the Risk Evaluation and Mitigation Strategy program, which includes educating and certifying medical personnel regarding the therapy procedures and the potential side effect profile of our therapy, such as the potential adverse side effects related to cytokine release syndrome and neurologic toxicities. Additionally, we are required to maintain a complex chain of identity and custody with respect to patient material as such material moves to the manufacturing facilities, through the manufacturing process, and back to the patient.

Access to Raw Materials

We need access to certain raw materials to conduct our clinical trials and manufacture our products. These raw materials are generally available from multiple sources, purchased worldwide and normally available in quantities adequate to meet the needs of our business. We attempt to manage the risks associated with our supply chain by inventory management, relationship management and evaluation of alternative sources when feasible. For more information, see Item 1A Risk Factors “We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell our products, which could limit our ability to generate revenues.”

Human Capital

Gilead’s success depends on the work of its dedicated employees who embrace a shared sense of purpose and a culture of excellence. Our human capital objective is to make Gilead the employer of choice for the best talent in our industry. Gilead’s key priorities for human capital management include inclusion and diversity, health and safety, total rewards, employee development and engagement. The Compensation and Talent Committee of our Board of Directors oversees our overall human capital management.

Inclusion & Diversity

Inclusion is a Gilead core value, and we believe building an inclusive and diverse workforce is critical to enabling Gilead’s mission. Our Global Inclusion and Diversity Council is responsible for governance of these matters, tracking progress on our goals and promoting a culture of inclusion. The Global Inclusion and Diversity Council is chaired by our Chairman and Chief Executive Officer and includes members of our leadership team. In 2020, we introduced our Advancing Black Leadership Strategy, a multi-year initiative that outlines our commitments to create internal and external pipelines for diverse talent and to build awareness, capabilities and accountability among our people managers. As part of this strategy, we set clear targets for representation within our overall workforce and executive populations, including goals to increase the percentage of female, Black and Hispanic employees with well-defined annual targets through 2025. Gilead also implemented multiple programs to train managers on inclusion and diversity topics, and created strategies and initiatives focused on attracting, developing and retaining diverse talent and driving an inclusive culture in our workplace, which organizational leaders were required to regularly review starting in 2021. In addition, our employee resource groups (“ERGs”) support diverse employees and aim to raise awareness of different cultures within the workplace, cultivate diversity as a business strength and support Gilead’s talent acquisition strategy to source, attract and recruit diverse candidates. Executive sponsors and leaders of our ERGs contribute to the advancement of our inclusion and diversity commitments through service on our Global Inclusion and Diversity Council.

We believe Gilead’s inclusive and diverse workforce is the foundation for innovation and productivity. Gilead’s commitment to equal employment opportunity furthers its efforts to cultivate and celebrate an equitable culture of belonging. As of December 31, 2021, Gilead had approximately 14,400 employees, and Gilead’s global workforce was approximately 52% female and 48% male. Additionally, women represented 34% of Gilead’s leadership (defined as vice president level and above). In the United States, based on our employees’ voluntary self-identification, our workforce was 40% White, 38% Asian, 11% Hispanic, 7% Black and 4% Other.

Health and Safety

Gilead is committed to providing a workplace for its employees that promotes health, safety, wellness and productivity. We have a workplace safety, training and security program together with various compliance protocols to support this commitment. We routinely train and educate our employees on workplace safety and security. In response to the COVID-19 pandemic, most Gilead sites required flexible location employees to work from home, while employees who needed to be physically present for their positions (such as laboratory technicians) continued to work at Gilead sites. In the fourth quarter of 2021, Gilead transitioned to a return-to-site phase for our U.S. flexible location employees. During the pandemic, we implemented job site enhancements and risk protocols, including health screenings, COVID-19 testing and vaccine requirements, reconfiguration of work and common spaces to allow for physical distancing, in our effort to support the safe occupancy of our sites. Gilead also maintains a robust contact tracing and notification process for any employee who reports COVID-19 infection. We continue to monitor the state of the pandemic and we remain committed to maintaining a work environment that promotes the health, safety and productivity of our workforce.

Total Rewards

Gilead’s compensation and benefits programs are designed to help attract, develop and retain the industry’s most talented workforce. Our Total Rewards program (which varies by country) includes competitive base salary and incentive compensation, stock awards, an employee stock purchase plan, a 401(k) savings plan with a company match that vests immediately, health and welfare and other valuable benefits, such as flexible work arrangements, flexible spending accounts, paid time off, family leave, family care resources, fertility, adoption and surrogacy assistance, student loan repayment and tuition assistance, employee assistance programs, global wellbeing reimbursement and tuition assistance, among many others. Each year, we reassess our Total Rewards package to confirm whether it offers benefits and incentives that align with our total reward philosophy.

We are a pay-for-performance company and are committed to addressing pay equity. Our employee salaries are informed by market-based ranges and are assessed annually through performance and career development reviews. Our policy is that compensation decisions are made without regard to personal characteristics such as gender, race, color, national or ethnic origin, age, disability, sexual orientation, gender identity or expression, genetic information, religion, or veteran status. We also conduct an annual pay equity review of employee compensation in an effort to strive to make our pay practices gender and race neutral.

Employee Development and Engagement

Employee development and engagement maximizes the potential and performance of each member of our workforce and is critical to achieving our business goals. Gilead offers a number of internal and external professional, management and leadership development training programs to help our employees develop technical, cross-functional and leadership skills and tools to grow their careers. In addition, employees can receive reimbursement for tuition expenses incurred while pursuing undergraduate, graduate or certificate courses at an accredited college or university.

As we strive to be the employer of choice in our industry, our listening strategy gathers input from our employees to shape our engagement strategies and programs and measure our progress. In addition to ongoing internal and external data collection, we conducted a large-scale review of the employee experience in 2021 with an employee survey. The results of this survey played a key role in determining the direction of our culture as well as the company’s broader response to the continuing COVID-19 pandemic, including the meaningful benefits we provided to employees and our approach to flexible work arrangements. We believe our flexible work program positions us to be competitive for talent and support employee well-being while also creating the collaborative environment and connections that fuel innovation.

Environmental, Social and Governance (“ESG”)

Investing in corporate responsibility is core to our business strategy and reflects our values of accountability, inclusion, teamwork, excellence and integrity. This is in service to our mission to advance global health by providing innovative therapeutics in areas of unmet need in a way that is socially responsible and environmentally sustainable. Gilead’s ESG programs reflect this commitment to our stakeholders. ESG strategy and performance are overseen by the Nominating and Corporate Governance Committee of its Board of Directors, and managed by a Corporate Responsibility Committee comprised of leaders from key departments across our company. The Corporate Responsibility Committee is responsible for reviewing material ESG issues and integrating them into our overall business strategy and operations. Additional information about this program and ESG highlights are available in Gilead’s 2020 year in review under Gilead’s website at www.gilead.com/news-and-press/annual-report/year-in-review-2020.

Our ESG goals are aspirational and may change. Statements regarding these goals and related initiatives are not guarantees or promises that they will be met.

Seasonality of Operations

Our worldwide product sales do not reflect any significant degree of seasonality in end-user demand. However, in the United States, fluctuations in wholesaler inventory levels impact our product sales. We typically observe strong wholesaler and sub-wholesaler purchases of our products in the fourth quarter resulting in inventory draw-down by wholesalers and sub-wholesalers in the subsequent first quarter. Several other factors, including government budgets, annual grant cycles for federal and state funds, the COVID-19 pandemic, and other buying patterns, also could impact the product sales recorded in a particular quarter. For more information, see Item 1A Risk Factors “We face challenges in accurately forecasting sales because of the difficulties in predicting demand for our products and fluctuations in purchasing patterns or wholesaler inventories.”

Government Regulation

Our operations and activities are subject to extensive regulation by numerous government authorities in the United States, the European Union and other countries, including laws and regulations governing the testing, manufacture, safety, efficacy, labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these regulations, product development and product approval processes are very expensive and time consuming, which has a significant impact on our capital expenditures and results of operations. The regulatory requirements applicable to drug development and approval are subject to change. Any legal and regulatory changes may impact our operations in the future.

A country’s regulatory agency, such as FDA in the United States and the EMA and European Commission for the European Union, as well as the national authorities of the European Union Member States, must approve a drug before it can be sold in the respective country or countries. The general process for drug approval in the United States is summarized below. Many other countries, including countries in the European Union (and the European Union under a centralized procedure), have similar regulatory structures.

Preclinical Testing

Before we can test a drug candidate in humans, we must study the drug in laboratory experiments and in animals to generate data to support the drug candidate’s potential benefits and safety. We submit this data to FDA in an investigational new drug (“IND”) application seeking its approval to test the compound in humans.

Clinical Trials

If FDA accepts the IND, the drug candidate can then be studied in human clinical trials to determine if the drug candidate is safe and effective. These clinical trials involve three separate phases that often overlap, can take many years and are very expensive. These three phases, which are subject to considerable regulation, are as follows:

Phase 1. The drug candidate is given to a small number of healthy human control subjects or patients suffering or at risk from the indicated disease, to test for safety, dose tolerance, pharmacokinetics, metabolism, distribution and excretion.
Phase 2. The drug candidate is given to a limited patient population to determine the effect of the drug candidate in treating or preventing the disease, the best dose of the drug candidate, and the possible side effects and safety risks of the drug candidate. It is not uncommon for a drug candidate that appears promising in Phase 1 clinical trials to fail in the more rigorous and extensive Phase 2 clinical trials.
Phase 3. If a drug candidate appears to be effective and have an appropriate safety profile in Phase 2 clinical trials, Phase 3 clinical trials are commenced to confirm those results. Phase 3 clinical trials are conducted over a longer term, involve a significantly larger population, are conducted at numerous sites in different geographic regions and are carefully designed to provide reliable and conclusive data regarding the safety and benefits of a drug candidate. It is not uncommon for a drug candidate that appears promising in Phase 2 clinical trials to fail in the more rigorous and extensive Phase 3 clinical trials.

FDA Approval Process

When we believe that the data from our clinical trials show an acceptable benefit-risk profile, we submit the appropriate filing, usually in the form of a New Drug Application, Biologics License Application or supplemental application, with FDA, seeking approval to sell the drug candidate for a particular use. At FDA’s discretion, FDA may hold a public hearing where an independent advisory committee of expert advisors asks additional questions and makes recommendations regarding the drug candidate. This committee makes a recommendation to FDA that is not binding but is generally followed by FDA. If FDA agrees that the drug has met the required level of safety and efficacy for a particular use, it will approve the application and allow us to sell the drug in the United States for that use. It is not unusual, however, for FDA to decline to approve an application because it believes that the drug candidate is not safe enough or efficacious enough (i.e., does not have an appropriate benefit-risk profile) or because it does not believe that the data submitted is reliable or conclusive.

At any point in this process, the development of a drug candidate can be stopped for a number of reasons, including safety concerns, lack of treatment benefit or manufacturing issues. We cannot be certain that any clinical trials that we are currently conducting or any that we conduct in the future will be completed successfully or within any specified time period. We may choose, or FDA may require us, to delay or suspend our clinical trials at any time if it appears that patients are being exposed to an unacceptable health risk or if the drug candidate does not appear to have sufficient treatment benefit.

Even after approving a drug, FDA may also require Phase 4 non-registrational studies to explore scientific questions to further characterize safety and efficacy during commercial use of our drug. FDA may also require us to provide additional data or information, improve our manufacturing processes, procedures or facilities or may require extensive surveillance to monitor the safety or benefits of our product candidates if it determines that our filing does not contain adequate evidence of the safety and benefits of the drug. In addition, even if FDA approves a drug, it could limit the uses of the drug. FDA can withdraw approvals if it does not believe that we are complying with regulatory standards or if concerns about the safety or efficacy are uncovered or occur after approval.

In addition to obtaining FDA approval for each drug, we obtain FDA approval of the manufacturing facilities for any drug we sell, including those of companies who manufacture our drugs for us. All of these facilities are subject to periodic inspections by FDA. FDA must also approve foreign establishments that manufacture products to be sold in the United States and these facilities are subject to periodic regulatory inspection. Our manufacturing facilities located in California also must be licensed by the State of California in compliance with local regulatory requirements. Our manufacturing facilities in Canada, Ireland and Netherlands also must obtain local licenses and permits in compliance with local regulatory requirements.

FDA may employ one of several tools to facilitate and expedite the development and review of a drug, including fast track designation, Breakthrough Therapy designation, accelerated approval and Priority Review designation. Fast track designation is designed to facilitate the development and review of a drug that treats a serious condition and fills an unmet medical need. Breakthrough Therapy designation is designed to expedite the development and review of a drug that treats a serious condition and preliminary clinical evidence demonstrates substantial improvement over available therapies. Accelerated approval of a drug may be granted by FDA where the drug treats a serious condition, fills an unmet medical need and has been studied for safety and efficacy. Priority Review designation means FDA’s goal is to take action on an application within six months of filing. FDA may grant Priority Review designation to a drug that would provide significant improvement in the safety or effectiveness of a treatment, diagnosis or prevention of a serious condition.

European Union Regulatory System and Approval Process

In the European Union (“EU”), our products are subject to a variety of EU and EU Member State regulations governing clinical trials, commercial sales and distribution. We are required to obtain a marketing authorization in the EU before we can market our medicinal products on the relevant market. The conduct of clinical trials in the EU is governed by, among others, Directive 2001/20/EC and Directive 2005/28/EC and the EU (ICH) Good Clinical Practice rules. These impose legal and regulatory obligations that are similar to those provided in applicable U.S. laws. The conduct of clinical trials in the EU must be approved by the competent authorities of each EU Member States in which the clinical trials take place, and a positive opinion must be obtained from the relevant Ethics Committee in the relevant Member State. In 2014, the EU legislator adopted Regulation (EU) No 536/2014 to replace Directive 2001/20/EC and to introduce a coordinated procedure for authorization of clinical trials. This Regulation entered into application in January 2022.

Marketing authorization holders, manufacturers, importers, wholesalers and distributors of medicinal products placed on the market in the EU are required to comply with a number of regulatory requirements including pharmacovigilance, GMP compliance and the requirement to obtain manufacturing, import and/or distribution licenses issued by the competent authorities of the EU Member States. Failure to comply with these requirements may lead to the imposition of civil, criminal or administrative sanctions, including suspension of marketing or manufacturing authorizations.

Pricing and Reimbursement

Successful commercialization of our products depends, in part, on the availability of third-party payer reimbursement for the cost of such products and related treatments and medical services in the markets where we sell our products. Government health authorities, private health insurers and other organizations generally provide reimbursement. In the United States, the European Union and other significant or potentially significant markets for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services. A significant portion of our sales of the majority of our products are subject to substantial discounts from their list prices, including rebates we may be required to pay to Medicaid agencies or discounts we may be required to pay to 340B covered entities. As a result, the price increases we implement from time to time on certain products may have a limited effect on our net product sales in certain markets. In addition, standard reimbursement structures may not adequately reimburse for innovative therapies.

As our products mature, pricing pressures from private insurers and government payers often result in a reduction of the net product prices. Further, as new branded or generic products are introduced into major markets, our ability to maintain pricing and market share may be affected.

For more information, see Item 1A Risk Factors “Our existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and other discounts on our products and other pricing pressures.” and “We face challenges in accurately forecasting sales because of the difficulties in predicting demand for our products and fluctuations in purchasing patterns or wholesaler inventories.”

Health Care Fraud and Abuse Laws; Anti-Bribery Laws

We are subject to various U.S. federal and state laws pertaining to health care “fraud and abuse,” including anti-kickback laws and false claim laws. Anti-kickback laws make it illegal for a prescription drug manufacturer to knowingly and willingly solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of business reimbursed by a federal healthcare program, including the purchase or prescription of a particular drug. False claims laws generally prohibit anyone from knowingly presenting, or causing to be presented, a false or fraudulent claim for payment by federal and certain state payers (including Medicare and Medicaid), or knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim. In addition, the FDA regulates written and verbal communications about our products. In addition to federal law, states also have consumer protection and false claims laws. Due to the breadth of the statutory provisions and the attention being given to them by law enforcement authorities, our sales, marketing, patient support, medical, clinical and public affairs activities may be subject to scrutiny under these laws. For example, recently there has been enhanced scrutiny by government enforcement authorities of company-sponsored patient assistance programs, including co-pay assistance programs and manufacturer donations to third-party charities that provide such assistance, reimbursement support offerings, clinical education programs and promotional speaker programs. Similarly, in Europe, interactions between pharmaceutical companies and physicians are subject to strict laws, regulations, industry self‑regulation codes of conduct and physicians’ codes of professional conduct, as applicable, including the EU Member States anti-corruption laws and the UK Bribery Act 2010.

In addition, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments for the purpose of obtaining or retaining business. Our policies mandate compliance with these anti-bribery laws. We operate in parts of the world that have experienced governmental corruption to some degree. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than local custom.

Despite our training and compliance program, our internal control policies and procedures may not protect us from unlawful acts committed by our employees or agents. Violations of fraud and abuse laws or anti-bribery laws may be punishable by criminal and/or civil sanctions, including fines and civil monetary penalties, as well as the possibility of exclusion from federal health care programs (including Medicare and Medicaid). Violations can also lead to the imposition of a Corporate Integrity Agreement or similar government oversight program, even if we disagree with the government’s perspective that we have violated any rules or guidance. Any similar violations by our competitors could also negatively impact the reputation of our industry and increase governmental and public scrutiny over our business and our products.

U.S. Healthcare Reform

The U.S. federal and state governments continue to propose and pass legislation designed to regulate the healthcare industry, including legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing.

For more information, see Item 1A Risk Factors “We are impacted by evolving laws, regulations and legislative or regulatory actions applicable to the health care industry.”

Environment

We are subject to a number of laws and regulations that require compliance with federal, state, and local regulations for the protection of the environment. The regulatory landscape continues to evolve, and we anticipate additional regulations in the future. Laws and regulations are implemented and under consideration to mitigate the effects of climate change mainly caused by greenhouse gas emissions. Our business is not energy intensive. Therefore, we do not anticipate being subject to a cap and trade system or other mitigation measure that would materially impact our capital expenditures, operations or competitive position.

Other Information

We are subject to the information requirements of the Securities Exchange Act of 1934 (“Exchange Act”). Therefore, we file periodic reports, proxy and information statements and other information with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

Our website is www.gilead.com. Through a link on the “Investors” page of our website (under the “SEC Filings” section), we make available the following filings free of charge as soon as reasonably practicable after they are electronically filed with or furnished to the SEC: our Annual Reports on Form 10-K; Quarterly Reports on Form 10-Q; Current Reports on Form 8-K; and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.

Website references are provided throughout this document for convenience. The content on the referenced websites does not constitute a part of and is not incorporated by reference into this Annual Report on Form 10-K.

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