Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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Item 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)


(in millions, except per share amounts)	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	4,296	$	5,338
Short-term marketable debt securities	1,029		1,182
Accounts receivable, net	3,787		4,493
Inventories	1,482		1,618
Prepaid and other current assets	2,035		2,141
Total current assets	12,629		14,772
Property, plant and equipment, net	5,253		5,121
Long-term marketable debt securities	1,427		1,309
Intangible assets, net	30,331		33,455
Goodwill	8,314		8,332
Other long-term assets	5,126		4,963
Total assets	$	63,080	$	67,952
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	583	$	705
Accrued government and other rebates	3,450		3,244
Accrued and other current liabilities	3,500		6,145
Current portion of long-term debt and other obligations, net	1,025		1,516
Total current liabilities	8,558		11,610
Long-term debt, net	25,183		25,179
Long-term income taxes payable	4,793		4,767
Deferred tax liability	3,687		4,356
Other long-term obligations	944		976
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 5 shares authorized; none outstanding	—		—
Common stock, par value $0.001 per share; 5,600 shares authorized; 1,255 and 1,254 shares issued and outstanding, respectively	1		1
Additional paid-in capital	4,867		4,661
Accumulated other comprehensive income	73		83
Retained earnings	14,986		16,324
Total Gilead stockholders’ equity	19,927		21,069
Noncontrolling interest	(12)		(5)
Total stockholders’ equity	19,915		21,064
Total liabilities and stockholders’ equity	$	63,080	$	67,952

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended
	March 31,
(in millions, except per share amounts)	2022		2021
Revenues:
Product sales	$	6,534	$	6,340
Royalty, contract and other revenues	56		83
Total revenues	6,590		6,423
Costs and expenses:
Cost of goods sold	1,424		1,361
Research and development expenses	1,186		1,055
In-process research and development impairment	2,700		—
Acquired in-process research and development expenses	—		62
Selling, general and administrative expenses	1,083		1,055
Total costs and expenses	6,393		3,533
Income from operations	197		2,890
Interest expense	(238)		(257)
Other income (expense), net	(111)		(369)
Income (loss) before income taxes	(152)		2,264
Income tax benefit (expense)	164		(542)
Net income	12		1,722
Net loss attributable to noncontrolling interest	7		7
Net income attributable to Gilead	$	19	$	1,729
Net income per share attributable to Gilead common stockholders - basic	$	0.02	$	1.38
Shares used in per share calculation - basic	1,255		1,256
Net income per share attributable to Gilead common stockholders - diluted	$	0.02	$	1.37
Shares used in per share calculation - diluted	1,262		1,262

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended
	March 31,
(in millions)	2022		2021
Net income	$	12	$	1,722
Other comprehensive income (loss):
Net foreign currency translation gain, net of tax	5		10
Available-for-sale debt securities:
Net unrealized loss, net of tax	(19)		(2)
Reclassifications to net income, net of tax	—		—
Net change	(19)		(2)
Cash flow hedges:
Net unrealized gain, net of tax	24		68
Reclassifications to net income, net of tax	(20)		22
Net change	4		90
Other comprehensive income (loss)	(10)		98
Comprehensive income	2		1,820
Comprehensive loss attributable to noncontrolling interest	7		7
Comprehensive income attributable to Gilead	$	9	$	1,827

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


		Three Months Ended March 31, 2022
(in millions, except per share amounts)		Gilead Stockholders’ Equity													Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Shares		Amount
Balance as of December 31, 2021		1,254		$	1		$	4,661		$	83		$	16,324	$	(5)	$	21,064
Net income (loss)		—		—			—			—			19		(7)		12
Other comprehensive loss, net of tax		—		—			—			(10)			—		—		(10)
Issuances under employee stock purchase plan		1		—			73			—			—		—		73
Issuances under equity incentive plans		7		—			21			—			—		—		21
Stock-based compensation		—		—			131			—			—		—		131
Repurchases of common stock		(7)		—			(19)			—			(425)		—		(444)
Dividends declared ($0.73 per share)		—		—			—			—			(932)		—		(932)
Balance as of March 31, 2022		1,255		$	1		$	4,867		$	73		$	14,986	$	(12)	$	19,915


		Three Months Ended March 31, 2021
(in millions, except per share amounts)		Gilead Stockholders’ Equity													Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings
	Shares		Amount
Balance as of December 31, 2020		1,254		$	1		$	3,880		$	(60)		$	14,381	$	19	$	18,221
Net income (loss)		—		—			—			—			1,729		(7)		1,722
Other comprehensive income, net of tax		—		—			—			98			—		—		98
Issuances under employee stock purchase plan		1		—			76			—			—		—		76
Issuances under equity incentive plans		5		—			12			—			—		—		12
Stock-based compensation		—		—			140			—			—		—		140
Repurchases of common stock		(6)		—			(16)			—			(383)		—		(399)
Dividends declared ($0.71 per share)		—		—			—			—			(906)		—		(906)
Balance as of March 31, 2021		1,254		$	1		$	4,092		$	38		$	14,821	$	12	$	18,964

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Three Months Ended
	March 31,
(in millions)	2022		2021
Operating Activities:
Net income	$	12	$	1,722
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	80		78
Amortization expense	445		395
Stock-based compensation expense	130		139
Acquired in-process research and development expenses	—		62
In-process research and development impairment	2,700		—
Deferred income taxes	(651)		71
Net loss from equity securities	96		351
Other	190		201
Changes in operating assets and liabilities:
Accounts receivable, net	699		975
Inventories	53		(69)
Prepaid expenses and other	(20)		(8)
Accounts payable	(91)		(253)
Income taxes payable	(146)		(316)
Accrued and other liabilities	(1,657)		(738)
Net cash provided by operating activities	1,840		2,610
Investing Activities:
Purchases of marketable debt securities	(613)		(931)
Proceeds from sales of marketable debt securities	119		60
Proceeds from maturities of marketable debt securities	506		619
Acquisitions, including in-process research and development, net of cash acquired	(30)		(1,255)
Purchases of equity securities	(28)		(279)
Capital expenditures	(247)		(165)
Other	(777)		(91)
Net cash used in investing activities	(1,070)		(2,042)
Financing Activities:
Proceeds from issuances of common stock	94		88
Repurchases of common stock	(352)		(309)
Repayments of debt and other obligations	(500)		(1,250)
Payments of dividends	(945)		(917)
Other	(91)		(89)
Net cash used in financing activities	(1,794)		(2,477)
Effect of exchange rate changes on cash and cash equivalents	(18)		(23)
Net change in cash and cash equivalents	(1,042)		(1,932)
Cash and cash equivalents at beginning of period	5,338		5,997
Cash and cash equivalents at end of period	$	4,296	$	4,065

See accompanying notes.

GILEAD SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. The financial statements include all adjustments consisting of normal recurring adjustments that the management of Gilead Sciences, Inc. (“Gilead,” “we,” “our” or “us”) believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

The accompanying Condensed Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany transactions have been eliminated. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income or loss attributable to noncontrolling interests in our Condensed Consolidated Statements of Income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties.

We assess at the inception of an arrangement with another entity whether the relationship results in it being a variable interest entity (“VIE”) and, if so, whether we are the primary beneficiary of the VIE. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We did not have any material VIEs as of March 31, 2022.

The accompanying Condensed Consolidated Financial Statements and related Notes to Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2021, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission. Certain amounts and percentages in these Condensed Consolidated Financial Statements and accompanying notes may not sum or recalculate due to rounding.

Segment Information

We have one operating segment, which primarily focuses on the discovery, development and commercialization of innovative medicines in areas of unmet medical need. Our Chief Executive Officer, as the chief operating decision-maker (“CODM”), manages and allocates resources to the operations of our company on an entity-wide basis. Managing and allocating resources on an entity-wide basis enables our CODM to assess the overall level of resources available and how to best deploy these resources across functions and research and development (“R&D”) projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities to best support the long-term growth of our business. See Note 2. Revenues for a summary of disaggregated revenues by product and geographic region.

Significant Accounting Policies, Estimates and Judgments

The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates.

Concentrations of Risk

We are subject to credit risk from our portfolio of cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return.

We are also subject to credit risk from our accounts receivable related to our product sales. Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and credit losses. Estimates of our allowance for credit losses consider a number of factors, including existing contractual payment terms, individual customer circumstances, historical payment patterns of our customers, a review of the local economic environment and its potential impact on expected future customer payment patterns and government funding and reimbursement practices. The majority of our trade accounts receivable arises from product sales in the United States and Europe.

2. REVENUES

Disaggregation of Revenues

The following table summarizes our Total revenues:


	Three Months Ended March 31, 2022								Three Months Ended March 31, 2021
(in millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product sales:
HIV
Biktarvy	$	1,706	$	261	$	184	$	2,151	$	1,465	$	216	$	143	$	1,824
Complera/Eviplera	17		24		4		44		25		34		4		63
Descovy	311		32		31		374		282		42		35		359
Genvoya	457		77		48		582		506		106		61		673
Odefsey	232		96		11		339		240		113		14		367
Stribild	22		8		3		32		31		11		4		46
Truvada	28		4		6		38		119		7		9		135
Revenue share - Symtuza(1)	86		44		3		132		89		44		2		135
Other HIV(2)	5		4		5		14		29		5		14		48
Total HIV	2,862		550		295		3,707		2,786		578		286		3,650

Veklury	801		304		430		1,535		820		388		248		1,456
Hepatitis C virus (“HCV”)
Ledipasvir/Sofosbuvir(3)	13		4		18		35		19		16		21		56
Sofosbuvir/Velpatasvir(4)	162		83		85		330		214		75		92		381
Other HCV(5)	24		8		2		34		25		44		4		73
Total HCV	199		95		105		399		258		135		117		510
Hepatitis B virus (“HBV”) / Hepatitis delta virus (“HDV”)
Vemlidy	80		9		111		200		77		8		96		181
Viread	—		6		17		23		4		7		20		31
Other HBV/HDV(6)	—		13		—		13		—		8		—		8
Total HBV/HDV	80		28		128		235		81		23		116		220

Cell therapy
Tecartus	47		15		1		63		27		4		—		31
Yescarta	125		77		9		211		92		61		7		160
Total cell therapy	172		92		10		274		119		65		7		191

Trodelvy	119		25		2		146		72		—		—		72
Other
AmBisome	25		66		53		144		12		66		43		121
Letairis	43		—		—		43		54		—		—		54
Other(7)	26		15		9		50		38		20		8		66
Total other	94		81		62		236		104		86		51		241
Total product sales	4,329		1,174		1,031		6,534		4,240		1,275		825		6,340
Royalty, contract and other revenues	27		27		3		56		20		61		2		83
Total revenues	$	4,355	$	1,202	$	1,033	$	6,590	$	4,260	$	1,336	$	827	$	6,423

(1) Represents our revenue from cobicistat (“C”), emtricitabine (“FTC”) and tenofovir alafenamide (“TAF”) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland Unlimited Company (“Janssen”).

(2) Includes Atripla, Emtriva and Tybost.

(3) Amounts consist of sales of Harvoni and the authorized generic version of Harvoni sold by our separate subsidiary, Asegua Therapeutics LLC.

(4) Amounts consist of sales of Epclusa and the authorized generic version of Epclusa sold by our separate subsidiary, Asegua Therapeutics LLC.

(5) Includes Vosevi and Sovaldi.

(6) Includes Hepcludex and Hepsera.

(7) Includes Cayston, Jyseleca, Ranexa and Zydelig.

Revenues from Major Customers

The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our total revenues:


	Three Months Ended
	March 31,
(as a percentage of total revenues)	2022		2021
AmerisourceBergen Corporation	19	%	27	%
Cardinal Health, Inc.	23	%	18	%
McKesson Corporation	20	%	17	%

Revenues Recognized from Performance Obligations Satisfied in Prior Periods

The following table summarizes revenues recognized from performance obligations satisfied in prior periods:


	Three Months Ended
	March 31,
(in millions)	2022		2021
Revenue share with Janssen and royalties for licenses of intellectual property	$	184	$	226
Changes in estimates	$	230	$	332

Contract Balances

Our contract assets, which consist of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation, totaled $160 million and $174 million as of March 31, 2022 and December 31, 2021, respectively. Contract liabilities, which generally result from receipt of advance payment before our performance under the contract, were $117 million and $79 million as of March 31, 2022 and December 31, 2021, respectively.

3. FAIR VALUE MEASUREMENTS

We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

Level 1 inputs include quoted prices in active markets for identical assets or liabilities;
Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability; and
Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

Our financial instruments consist primarily of cash and cash equivalents, marketable debt securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and short-term and long-term debt. Cash and cash equivalents, marketable debt securities, certain equity securities and foreign currency exchange contracts are reported at their respective fair values on our Condensed Consolidated Balance Sheets. Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Short-term and long-term debt are reported at their amortized costs on our Condensed Consolidated Balance Sheets. The remaining financial instruments are reported on our Condensed Consolidated Balance Sheets at amounts that approximate current fair values.

The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:


	March 31, 2022								December 31, 2021
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale debt securities:
U.S. treasury securities	$	476	$	—	$	—	$	476	$	407	$	—	$	—	$	407
U.S. government agencies securities	—		5		—		5		—		4		—		4
Non-U.S. government securities	—		30		—		30		—		50		—		50
Certificates of deposit	—		153		—		153		—		249		—		249
Corporate debt securities	—		1,442		—		1,442		—		1,363		—		1,363
Residential mortgage and asset-backed securities	—		407		—		407		—		424		—		424
Equity securities:
Money market funds	2,360		—		—		2,360		3,661		—		—		3,661
Equity investment in Galapagos NV (“Galapagos”)	1,046		—		—		1,046		931		—		—		931
Equity investment in Arcus Biosciences, Inc. (“Arcus”)	436		—		—		436		559		—		—		559
Other publicly traded equity securities	243		—		—		243		331		—		—		331
Deferred compensation plan	253		—		—		253		261		—		—		261
Foreign currency derivative contracts	—		84		—		84		—		80		—		80
Total	$	4,813	$	2,122	$	—	$	6,935	$	6,150	$	2,170	$	—	$	8,320
Liabilities:
Liability for MYR GmbH (“MYR”) contingent consideration	$	—	$	—	$	322	$	322	$	—	$	—	$	317	$	317
Deferred compensation plan	253		—		—		253		261		—		—		261
Foreign currency derivative contracts	—		11		—		11		—		5		—		5
Total	$	253	$	11	$	322	$	586	$	261	$	5	$	317	$	583

Level 2 Inputs

Available-for-Sale Debt Securities

For our available-for-sale debt securities, we estimate the fair values by reviewing trading activity and pricing as of the measurement date, and taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

Foreign Currency Derivative Contracts

Substantially all of our foreign currency derivative contracts have maturities within an 18-month time horizon and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by taking into consideration the valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, Secured Overnight Financing Rate (“SOFR”) and swap rates. These inputs, where applicable, are observable at commonly quoted intervals.

Senior Unsecured Notes

The total estimated fair values of our senior unsecured notes, determined using Level 2 inputs based on their quoted market values, were approximately $25.6 billion and $28.6 billion as of March 31, 2022 and December 31, 2021, respectively, and the carrying values were $25.1 billion and $25.6 billion as of March 31, 2022 and December 31, 2021, respectively.

Level 3 Inputs

Contingent Consideration

In connection with our first quarter 2021 acquisition of MYR, we recorded a liability for contingent consideration, which is revalued each reporting period until the related contingency is resolved. The contingent consideration was estimated using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex.

The following table summarizes the change in fair value of our contingent consideration:


	Three Months Ended
	March 31,
(in millions)	2022		2021

Beginning balance	$	317	$	—
Additions	—		341
Changes in valuation assumptions	10		—
Effect of foreign exchange remeasurement	(6)		—
Ending balance	$	322	$	341

Changes in valuation assumptions were primarily related to updated probability rate estimates. The changes in the fair value of this contingent consideration were included in Research and development expenses on our Condensed Consolidated Statements of Income.

Liability Related to the Sale of Future Royalties

We recorded a liability related to the sale of future royalties as part of our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”), which is subsequently amortized using the effective interest method over the remaining estimated life. The fair values of the liability related to the sale of future royalties were $1.1 billion and $1.3 billion as of March 31, 2022 and December 31, 2021, respectively, and the carrying value was $1.1 billion as of March 31, 2022 and December 31, 2021. See Note 9. Debt and Credit Facilities for additional information.

Fair Value Level Transfers

There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

Nonrecurring Fair Value Measurements

During the three months ended March 31, 2022, we recorded a partial impairment charge of $2.7 billion related to certain in-process research and development (“IPR&D”) assets. See Note 7. Goodwill and Intangible Assets for additional information.

4. AVAILABLE-FOR-SALE DEBT SECURITIES AND EQUITY SECURITIES

Available-for-Sale Debt Securities

The following table summarizes our available-for-sale debt securities:


	March 31, 2022								December 31, 2021
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
U.S. treasury securities	$	481	$	—	$	(5)	$	476	$	408	$	—	$	(1)	$	407
U.S. government agencies securities	5		—		—		5		4		—		—		4
Non-U.S. government securities	30		—		—		30		50		—		—		50
Certificates of deposit	153		—		—		153		249		—		—		249
Corporate debt securities	1,457		—		(15)		1,442		1,365		—		(2)		1,363
Residential mortgage and asset-backed securities	410		—		(3)		407		425		—		(1)		424
Total	$	2,536	$	—	$	(23)	$	2,514	$	2,501	$	—	$	(4)	$	2,497

The following table summarizes the classification of our available-for-sale debt securities in our Condensed Consolidated Balance Sheets:


(in millions)	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	57	$	6
Short-term marketable debt securities	1,029		1,182
Long-term marketable debt securities	1,427		1,309
Total	$	2,514	$	2,497

The following table summarizes our available-for-sale debt securities by contractual maturity:


	March 31, 2022
(in millions)	Amortized Cost		Fair Value
Within one year	$	1,091	$	1,086
After one year through five years	1,414		1,397
After five years	31		31
Total	$	2,536	$	2,514

We held a total of 618 and 203 positions which were in unrealized loss positions as of March 31, 2022 and 2021, respectively. No impairment was recognized for the three months ended March 31, 2022 and 2021.

Equity Securities

Equity Securities Measured at Fair Value

The following table summarizes the classification of our equity securities measured at fair value on a recurring basis, including our equity method investments in Galapagos and Arcus for which we elected and applied the fair value option as we believe it best reflects the underlying economics of these investments, on our Condensed Consolidated Balance Sheets:


(in millions)	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	2,360	$	3,661
Prepaid and other current assets	692		885
Other long-term assets	1,286		1,197
Total	$	4,337	$	5,743

Other Equity Securities

Equity method investments and other equity investments without readily determinable fair values were $375 million and $338 million as of March 31, 2022 and December 31, 2021, respectively, and were included in Other long-term assets on our Condensed Consolidated Balance Sheets.

Unrealized Gains and Losses

Net unrealized losses recognized on equity securities were $96 million and $351 million for the three months ended March 31, 2022 and 2021, respectively, and were included in Other income (expense), net on our Condensed Consolidated Statements of Income.

5. DERIVATIVE FINANCIAL INSTRUMENTS

Our operations in foreign countries expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, primarily the Euro. To manage this risk, we hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The credit risk associated with these contracts is driven by changes in interest and currency exchange rates and, as a result, varies over time. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We also seek to limit our risk of loss by entering into contracts that permit net settlement at maturity. Therefore, our overall risk of loss in the event of a counterparty default is limited to the amount of any unrealized gains on outstanding contracts (i.e., those contracts that have a positive fair value) at the date of default. We do not enter into derivative contracts for trading purposes.

The derivative instruments we use to hedge our exposures for certain monetary assets and liabilities are not designated as hedges and, as a result, changes in their fair value are recorded in Other income (expense), net on our Condensed Consolidated Statements of Income.

The derivative instruments we use to hedge our exposures for forecasted product sales are designated as cash flow hedges and have maturities of 18 months or less. Upon executing a hedging contract and each reporting period thereafter, we assess hedge effectiveness using regression analysis. The unrealized gains or losses on these hedges are recorded in Accumulated other comprehensive income (“AOCI”) and are reclassified into Product sales on our Condensed Consolidated Statements of Income when the respective hedged transactions affect earnings. The majority of gains and losses related to the hedged forecasted transactions reported in AOCI as of March 31, 2022 are expected to be reclassified to Product sales within 12 months.

The cash flow effects of our derivative contracts for the three months ended March 31, 2022 and 2021 were included within Net cash provided by operating activities on our Condensed Consolidated Statements of Cash Flows.

We had notional amounts of foreign currency exchange contracts outstanding of $3.2 billion and $2.9 billion as of March 31, 2022 and December 31, 2021, respectively.

While all our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts on a gross basis. The following table summarizes the classification and fair values of derivative instruments in our Condensed Consolidated Balance Sheets:


	March 31, 2022
	Derivative Assets			Derivative Liabilities
(in millions)	Classification	Fair Value		Classification	Fair Value
Derivatives designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	$	77	Accrued and other current liabilities	$	6
Foreign currency exchange contracts	Other long-term assets	3		Other long-term obligations	1
Total derivatives designated as hedges		81			7
Derivatives not designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	3		Accrued and other current liabilities	5
Total derivatives not designated as hedges		3			5
Total derivatives		$	84		$	11


	December 31, 2021
	Derivative Assets			Derivative Liabilities
(in millions)	Classification	Fair Value		Classification	Fair Value
Derivatives designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	$	75	Accrued and other current liabilities	$	4
Foreign currency exchange contracts	Other long-term assets	5		Other long-term obligations	1
Total derivatives designated as hedges		80			5
Derivatives not designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	—		Accrued and other current liabilities	—
Total derivatives not designated as hedges		—			—
Total derivatives		$	80		$	5

The following table summarizes the effect of our foreign currency exchange contracts on our Condensed Consolidated Financial Statements:


	Three Months Ended
	March 31,
(in millions)	2022		2021
Derivatives designated as hedges:
Gain recognized in AOCI	$	28	$	78
Gain (loss) reclassified from AOCI into Product sales	$	22	$	(25)
Derivatives not designated as hedges:
Gain recognized in Other income (expense), net	$	19	$	34

From time to time, we may discontinue cash flow hedges and, as a result, record related amounts in Other income (expense), net on our Condensed Consolidated Statements of Income. There were no discontinuances of cash flow hedges for the three months ended March 31, 2022 and 2021.

The following table summarizes the potential effect of offsetting our foreign currency exchange contracts on our Condensed Consolidated Balance Sheets:


			Gross Amounts Not Offset on the Condensed Consolidated Balance Sheets
(in millions)	Gross Amounts of Assets/Liabilities Presented on the Condensed Consolidated Balance Sheets		Derivative Financial Instruments		Cash Collateral Received/Pledged		Net Amount (Legal Offset)
As of March 31, 2022
Derivative assets	$	84	$	(9)	$	—	$	75
Derivative liabilities	$	11	$	(9)	$	—	$	2
As of December 31, 2021
Derivative assets	$	80	$	(4)	$	—	$	76
Derivative liabilities	$	5	$	(4)	$	—	$	1

6. ACQUISITIONS, COLLABORATIONS AND OTHER ARRANGEMENTS

We enter into acquisitions, licensing and strategic collaborations and other similar arrangements with third parties for the development and commercialization of certain products and product candidates. The collaborations and other arrangements may involve two or more parties who are active participants in the operating activities of the collaboration and are exposed to significant risks and rewards depending on the commercial success of the activities. These arrangements may include non-refundable upfront payments, expense reimbursements or payments by us for options to acquire certain rights, contingent obligations by us for potential development and regulatory milestone payments and/or sales-based milestone payments, royalty payments, revenue or profit-sharing arrangements, cost-sharing arrangements and equity investments. We also have equity investments in third parties focused on the development and commercialization of products and product candidates.

Acquisitions

In the first quarter of 2021, we completed the acquisition of MYR, a German biotechnology company. MYR focuses on the development and commercialization of therapeutics for the treatment of HDV. The acquisition provided Gilead with Hepcludex, which was conditionally approved by the European Medicines Agency (“EMA”) in July 2020 for the treatment of chronic HDV infection in adults with compensated liver disease. MYR is a wholly-owned subsidiary of Gilead.

The aggregate consideration for this acquisition of €1.3 billion (or $1.6 billion) primarily consisted of €1.0 billion (or $1.2 billion) paid upon closing and contingent consideration of up to €300 million, subject to customary adjustments, representing a potential future milestone payment upon FDA approval of Hepcludex. The fair value of this contingent liability, estimated using probability-weighted scenarios for FDA approval, was $341 million as of the acquisition date. The estimated fair value of the contingent liability was $322 million as of March 31, 2022. See Note 3. Fair Value Measurements for additional information.

The acquisition of MYR was accounted for as a business combination using the acquisition method of accounting. Measurement period adjustments recorded to the fair values of assets acquired and liabilities assumed during the three months ended March 31, 2022 amounted to $18 million. See Note 7. Goodwill and Intangible Assets for additional information. The fair value estimates for the assets acquired and liabilities assumed have been completed.

Collaborations and Other Arrangements

Arcus

In 2020, we entered into an option, license and collaboration agreement with Arcus (the “Arcus Collaboration Agreement”), which granted us the right to opt in to all current and future clinical-stage product candidates for up to ten years following the closing of the transaction. In November 2021, we exercised our options to three of the clinical-stage programs and amended the Arcus Collaboration Agreement. The option exercise and amendment transaction closed in December 2021, triggering collaboration opt-in payments of $725 million and waiving a $100 million option continuation payment which would have been due to Arcus in the third quarter of 2022. The collaboration opt-in payments of $725 million were recorded in Accrued and other current liabilities on our Consolidated Balance Sheets as of December 31, 2021 and paid to Arcus in January 2022. Our payments to Arcus were included in Other in investing activities on our Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022.

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table summarizes the changes in the carrying amount of Goodwill:


(in millions)	Amount
Balance as of December 31, 2021	$	8,332
Measurement period adjustments	(18)
Balance as of March 31, 2022	$	8,314

During the three months ended March 31, 2022, goodwill decreased by $18 million as a result of finalizing the amount of acquired net operating losses of MYR, which resulted in a decrease to the net deferred tax liability acquired.

Intangible Assets

The following table summarizes our Intangible assets, net:


	March 31, 2022								December 31, 2021
(in millions)	Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Foreign Currency Translation Adjustment		Net Carrying Amount
Finite-lived assets:
Intangible asset - sofosbuvir	$	10,720	$	(5,826)	$	—	$	4,894	$	10,720	$	(5,651)	$	—	$	5,069
Intangible asset - axicabtagene ciloleucel	7,110		(1,603)		—		5,507		7,110		(1,501)		—		5,609
Intangible asset - Trodelvy	5,630		(623)		—		5,007		5,630		(507)		—		5,123
Intangible asset - Hepcludex	845		(93)		—		752		845		(72)		—		773
Other	1,632		(682)		1		951		1,610		(650)		1		961
Total finite-lived assets	25,937		(8,827)		1		17,111		25,915		(8,381)		1		17,535
Indefinite-lived assets - IPR&D	13,220		—		—		13,220		15,920		—		—		15,920
Total intangible assets	$	39,157	$	(8,827)	$	1	$	30,331	$	41,835	$	(8,381)	$	1	$	33,455

Aggregate amortization expense related to finite-lived intangible assets was $445 million and $395 million for the three months ended March 31, 2022 and 2021, respectively, and is primarily included in Cost of goods sold on our Condensed Consolidated Statements of Income.

The following table summarizes the estimated future amortization expense associated with our finite-lived intangible assets as of March 31, 2022:


(in millions)	Amount
2022 (remaining nine months)	$	1,336
2023	1,781
2024	1,781
2025	1,776
2026	1,768
Thereafter	8,669
Total	$	17,111

IPR&D Impairment

In connection with our acquisition of Immunomedics in 2020, we allocated a portion of the purchase price to acquired IPR&D intangible assets. Approximately $8.8 billion was assigned to IPR&D intangible assets related to Trodelvy for treatment of patients with hormone receptor-positive, human epidermal growth factor receptor 2-negative (“HR+/HER2-”) metastatic breast cancer. In March 2022, we received data from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with HR+/HER2- metastatic breast cancer who have received prior endocrine therapy, cyclin-dependent kinase 4/6 inhibitors and two to four lines of chemotherapy (“third-line plus patients”). Based on our evaluation of the study results, and in connection with the preparation of the financial statements for the quarter, we updated our estimate of the fair value of our HR+/HER2- IPR&D intangible asset to $6.1 billion as of March 31, 2022. Our estimate of fair value used a probability-weighted income approach that discounts expected future cash flows to the present value, which requires the use of Level 3 fair value measurements and inputs, including estimated revenues, costs, and probability of technical and regulatory success. The expected cash flows included cash flows from HR+/HER2- metastatic breast cancer for third-line plus patients and patients in earlier lines of therapy which are the subject of separate clinical studies. Our revised discounted cash flows were lower primarily due to a delay in launch timing for third-line plus patients which caused a decrease in our market share assumptions based on the expected competitive environment. There were no changes in our plans or assumptions related to our estimated cash flows for patients in the earlier lines of therapy. We used a discount rate of 6.75% which is based on the estimated weighted-average cost of capital for companies with profiles similar to ours and represents the rate that market participants would use to value the intangible assets. We determined the revised estimated fair value was below the carrying value of the asset and, as a result, we recognized a partial impairment charge of $2.7 billion in In-process research and development impairment on our Condensed Consolidated Statements of Income during the three months ended March 31, 2022.

8. OTHER FINANCIAL INFORMATION

Accounts receivable, net

The following table summarizes our Accounts receivable, net:


(in millions)	March 31, 2022		December 31, 2021
Accounts receivable	$	4,559	$	5,278
Less: chargebacks	642		671
Less: cash discounts and other	76		67
Less: allowances for credit losses	54		47
Accounts receivable, net	$	3,787	$	4,493

Inventories

The following table summarizes our Inventories:


(in millions)	March 31, 2022		December 31, 2021
Raw materials	$	1,091	$	1,112
Work in process	540		590
Finished goods	1,044		1,032
Total	$	2,675	$	2,734
Reported as:
Inventories	$	1,482	$	1,618
Other long-term assets(1)	1,194		1,116
Total	$	2,675	$	2,734

(1) Amounts primarily consist of raw materials.

Accrued and other current liabilities

The following table summarizes the components of Accrued and other current liabilities:


(in millions)	March 31, 2022		December 31, 2021
Compensation and employee benefits	$	559	$	927
Income taxes payable	467		539
Allowance for sales returns	403		499
Accrual for settlement related to bictegravir litigation(1)	—		1,250
Other accrued liabilities	2,071		2,930
Total	$	3,500	$	6,145

(1) See Note 10. Commitments and Contingencies for additional information.

9. DEBT AND CREDIT FACILITIES

The following table summarizes the carrying amount of our borrowings under various financing arrangements:


(in millions)				Carrying Amount
Type of Borrowing	Issue Date	Maturity Date	Interest Rate	March 31, 2022		December 31, 2021
Senior Unsecured	September 2016	March 2022	1.95%	$	—	$	500
Senior Unsecured	September 2015	September 2022	3.25%	1,000		999
Senior Unsecured	September 2016	September 2023	2.50%	749		748
Senior Unsecured	September 2020	September 2023	0.75%	1,497		1,496
Senior Unsecured	March 2014	April 2024	3.70%	1,748		1,747
Senior Unsecured	November 2014	February 2025	3.50%	1,748		1,747
Senior Unsecured	September 2015	March 2026	3.65%	2,740		2,739
Senior Unsecured	September 2016	March 2027	2.95%	1,247		1,247
Senior Unsecured	September 2020	October 2027	1.20%	746		746
Senior Unsecured	September 2020	October 2030	1.65%	993		993
Senior Unsecured	September 2015	September 2035	4.60%	992		992
Senior Unsecured	September 2016	September 2036	4.00%	742		742
Senior Unsecured	September 2020	October 2040	2.60%	987		987
Senior Unsecured	December 2011	December 2041	5.65%	996		996
Senior Unsecured	March 2014	April 2044	4.80%	1,736		1,736
Senior Unsecured	November 2014	February 2045	4.50%	1,733		1,733
Senior Unsecured	September 2015	March 2046	4.75%	2,220		2,220
Senior Unsecured	September 2016	March 2047	4.15%	1,727		1,727
Senior Unsecured	September 2020	October 2050	2.80%	1,477		1,476
Total senior unsecured notes				25,076		25,571
Liability related to the sale of future royalties				1,132		1,124
Total debt, net				26,208		26,695
Less: Current portion of long-term debt and other obligations, net				1,025		1,516
Total Long-term debt, net				$	25,183	$	25,179

Senior Unsecured Notes

In February 2022, we repaid $500 million of senior unsecured notes prior to the March 2022 maturity by exercising a par call option. No new debt was issued during the three months ended March 31, 2022. We are required to comply with certain covenants under our note indentures governing our senior unsecured notes. As of March 31, 2022, we were not in violation of any covenants.

Revolving Credit Facility

As of March 31, 2022 and December 31, 2021, there were no amounts outstanding under our $2.5 billion revolving credit facility maturing in June 2025, and we were in compliance with all covenants.

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are a party to various legal actions. The most significant of these are described below. We recognize accruals for such actions to the extent that we conclude that a loss is both probable and reasonably estimable. We accrue for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, then we accrue the minimum amount in the range. If we determine that a material loss is reasonably possible and the loss or range of loss can be estimated, we disclose the possible loss. Unless otherwise noted, the outcome of these matters either is not expected to be material or is not possible to determine such that we cannot reasonably estimate the maximum potential exposure or the range of possible loss.

We did not have any material accruals for the matters described below as of March 31, 2022. As of December 31, 2021, we recorded an accrual of $1.25 billion in Accrued and other current liabilities on our Consolidated Balance Sheets for the settlement related to bictegravir litigation described below, which we paid during the three months ended March 31, 2022.

Litigation Related to Sofosbuvir

In 2012, we acquired Pharmasset, Inc. Through the acquisition, we acquired sofosbuvir, a nucleotide analog that acts to inhibit the replication of HCV. In 2013, we received approval from FDA for sofosbuvir, now known commercially as Sovaldi. Sofosbuvir is also included in all of our marketed HCV products. We have received a number of litigation claims regarding sofosbuvir. While we have carefully considered these claims both prior to and following the acquisition and believe they are without merit, we cannot predict the ultimate outcome of such claims or range of loss.

We are aware of patents and patent applications owned by third parties that have been or may in the future be alleged by such parties to cover the use of our HCV products. If third parties obtain valid and enforceable patents, and successfully prove infringement of those patents by our HCV products, we could be required to pay significant monetary damages. We cannot predict the ultimate outcome of intellectual property claims related to our HCV products. We have spent, and will continue to spend, significant resources defending against these claims.

Litigation with the University of Minnesota

The University of Minnesota (the “University”) has obtained U.S. Patent No. 8,815,830 (the “’830 patent”), which purports to broadly cover nucleosides with antiviral and anticancer activity. In 2016, the University filed a lawsuit against us in the U.S. District Court for the District of Minnesota, alleging that the commercialization of sofosbuvir-containing products infringes the ’830 patent. We believe the ’830 patent is invalid and will not be infringed by the continued commercialization of sofosbuvir. In 2017, the court granted our motion to transfer the case to California. We have also filed petitions for inter partes review with the U.S. Patent and Trademark Office Patent Trial and Appeal Board (“PTAB”) alleging that all asserted claims are invalid for anticipation and obviousness. The PTAB instituted one of these petitions and a merits hearing was held in February 2021. In 2018, the U.S. District Court for the Northern District of California stayed the litigation until after the PTAB concluded the inter partes review that it had initiated. In May 2021, the PTAB issued a written decision finding the asserted claims of the University’s patent invalid. In July 2021, the University appealed this decision. The litigation in the U.S. District Court will remain stayed through the appeal proceedings.

Litigation with NuCana plc. (“NuCana”)

NuCana has obtained European Patent No. 2,955,190 (the “EP ’190 patent”) that allegedly covers sofosbuvir. In opposition proceedings before the European Patent Office (“EPO”) held in February 2021, the EPO Opposition Division upheld the validity of the EP ’190 patent in amended form. We believe that the amended EP ’190 patent claims are invalid. Subsequently, we initiated proceedings to invalidate the UK counterpart of the EP ’190 patent in the High Court of England & Wales. In March 2021, NuCana filed a counterclaim against us in the High Court of England & Wales alleging patent infringement of the UK counterpart and seeking damages and other relief. In April 2021, NuCana also filed a lawsuit against us in Germany at the Landgericht Düsseldorf alleging patent infringement of the German counterpart of the EP ’190 patent and seeking damages and injunctive relief. In April 2022, we filed a motion for grant of a compulsory license before the Federal Patent Court in Germany. The hearing date for the German NuCana infringement case has been scheduled for May 2022. The hearing date for the UK NuCana case has been scheduled for January 2023.

Litigation Related to Axicabtagene Ciloleucel

In October 2017, Juno Therapeutics, Inc. and Sloan Kettering Cancer Center (collectively, “Juno”) filed a lawsuit against us in the U.S. District Court for the Central District of California, alleging that the commercialization of axicabtagene ciloleucel, sold commercially as Yescarta, infringes on U.S. Patent No. 7,446,190 (the “’190 patent”). A jury trial was held on the ’190 patent, and in December 2019, the jury found that the asserted claims of the ’190 patent were valid, and that we willfully infringed the asserted claims of the ’190 patent. The jury also awarded Juno damages in amounts of $585 million in an upfront payment and a 27.6% running royalty from October 2017 through the date of the jury’s verdict. The parties filed post-trial motions in the first quarter of 2020, and the trial judge entered a judgment in April 2020. The trial judge affirmed the jury’s verdict, enhanced the past damages by 50% and maintained the royalties on future Yescarta sales at 27.6%. In April 2020, we filed an appeal seeking to reverse the judgment or obtain a new trial due to errors made by the trial judge, and in July 2021, the appeals court heard oral arguments. In August 2021, the Court of Appeals for the Federal Circuit (the “CAFC”) reversed the jury verdict, finding the asserted claims of Juno’s patent invalid. In October 2021, Juno filed a petition for rehearing with the CAFC. In January 2022, the CAFC denied Juno’s petition for rehearing. We believe that the likelihood of a material adverse outcome in this matter is remote.

Litigation Related to Bictegravir

In 2018, ViiV Healthcare Company (“VHC”) filed a lawsuit against us in the U.S. District Court of Delaware, alleging that the commercialization of bictegravir, sold commercially in combination with tenofovir alafenamide and emtricitabine as Biktarvy, infringes VHC’s U.S. Patent No. 8,129,385 (the “’385 patent”) covering VHC’s dolutegravir. Bictegravir is structurally different from dolutegravir, and we believe that bictegravir does not infringe the claims of the ’385 patent. In its lawsuit, VHC was seeking billions of dollars for alleged damages comprised of VHC’s lost profits and a royalty on U.S. sales of bictegravir from launch through the trial. In addition, should a court find that we are liable for infringement, we also expected VHC to seek a royalty on U.S. sales after the trial.

In 2018, VHC also filed a lawsuit against us in the Federal Court of Canada, alleging that our activities relating to our bictegravir compound infringes VHC’s Canadian Patent No. 2,606,282 (the “’282 patent”), which was issued to Shionogi & Co. Ltd. and VHC. The ’282 patent is the compound patent covering VHC’s dolutegravir. We believe that bictegravir does not infringe the claims of the ’282 patent. In November and December 2019, VHC filed lawsuits in France, Germany, Ireland and the UK asserting the relevant national designations of European Patent No. 3 045 206; in Australia asserting Australian Patent No. 2006239177; in Japan asserting Japanese Patent No. 4295353; and in Korea asserting Korean Patent Nos. 1848819 and 1363875. These patents all relate to molecules that VHC claims would act as integrase inhibitors. We believe that bictegravir does not infringe any valid claims of VHC’s patents and have prevailed in court proceedings to date in Canada and Germany.

On February 1, 2022, Gilead reached an agreement (the “Settlement”) with VHC, ViiV Healthcare UK (No.3) Limited, ViiV Healthcare UK Limited, Shionogi & Co., Ltd. and GlaxoSmithKline Mercury Limited (collectively, “ViiV”) for a global resolution of all pending or potential claims related to Gilead’s sales of Biktarvy, including the litigation pending in the U.S. District Court of Delaware and other jurisdictions outside the United States as described above. In February 2022, the lawsuit pending in the United States was dismissed as well as the lawsuits in Canada, France, Germany, Ireland, the UK, Australia, Japan and Korea.

Pursuant to the terms of the Settlement, ViiV grants Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir. In connection with the Settlement, Gilead (1) made a one-time payment to ViiV of $1.25 billion in the first quarter of 2022, and (2) will provide ViiV an ongoing royalty at a rate of 3% on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the United States until October 5, 2027. In connection with the Settlement, Gilead recorded a pre-tax charge of $1.25 billion to Cost of goods sold on our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021.

Litigation Relating to Pre-Exposure Prophylaxis

In August 2019, we filed petitions requesting inter partes review of U.S. Patent Nos. 9,044,509, 9,579,333, 9,937,191 and 10,335,423 (collectively, “HHS Patents”) by PTAB. The HHS Patents are assigned to the U.S. Department of Health and Human Services (“HHS”) and purport to claim a process of protecting a primate host from infection by an immunodeficiency retrovirus by administering a combination of emtricitabine and tenofovir disoproxil fumarate (“TDF”) or tenofovir alafenamide (“TAF”) prior to exposure of the host to the immunodeficiency retrovirus, a process commonly known as pre-exposure prophylaxis (“PrEP”). In November 2019, the U.S. Department of Justice filed a lawsuit against us in the U.S. District Court of Delaware, alleging that the sale of Truvada and Descovy for use as PrEP infringes the HHS Patents. In February 2020, PTAB declined to institute our petitions for inter partes review of the HHS Patents. In April 2020, we filed a breach of contract lawsuit against the U.S. federal government in the U.S. Court of Federal Claims, alleging violations of four material transfer agreements (“MTAs”) related to the research underlying the HHS Patents and a clinical trial agreement (“CTA”) by the U.S. Centers for Disease Control and Prevention related to PrEP research. Although we cannot predict with certainty the ultimate outcome of these litigation matters, we believe that the U.S. federal government breached the MTAs and CTA, that Truvada and Descovy do not infringe the HHS Patents and that the HHS Patents are invalid over prior art descriptions of Truvada’s use for PrEP and post-exposure prophylaxis as well because physicians and patients were using the claimed methods years before HHS filed the applications for the patents. A trial date for the lawsuit in the Court of Federal Claims has been set for June 2022, and a trial date for the lawsuit in the District Court of Delaware has been set for May 2023.

Litigation with Generic Manufacturers

As part of the approval process for some of our products, FDA granted us a New Chemical Entity (“NCE”) exclusivity period during which other manufacturers’ applications for approval of generic versions of our product will not be approved. Generic manufacturers may challenge the patents protecting products that have been granted NCE exclusivity one year prior to the end of the NCE exclusivity period. Generic manufacturers have sought and may continue to seek FDA approval for a similar or identical drug through an abbreviated new drug application (“ANDA”), the application form typically used by manufacturers seeking approval of a generic drug. The sale of generic versions of our products prior to their patent expiration would have a significant negative effect on our revenues and results of operations. To seek approval for a generic version of a product having NCE status, a generic company may submit its ANDA to FDA four years after the branded product’s approval.

Starting in December 2019, we received letters from Lupin Ltd. (“Lupin”), Apotex Inc., Shilpa Medicare Ltd. (“Shilpa”), Sunshine Lake Pharma Co. Ltd. (“Sunshine Lake”), Laurus Labs (“Laurus”), Natco Pharma Ltd., Macleods Pharma Ltd., Hetero Labs Ltd. and Cipla Ltd. (“Cipla”) (collectively, “Generic Manufacturers”) indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of certain of our TAF-containing products. Between them, these Generic Manufacturers seek to market generic versions of Odefsey, Descovy and Vemlidy. The Generic Manufacturers have challenged the validity of two to four patents listed on the Orange Book and associated with TAF. We filed lawsuits against the Generic Manufacturers, and we intend to enforce and defend our intellectual property. In November 2021, we reached an agreement with Shilpa to resolve the lawsuit against Shilpa. In addition, in January 2022, we reached an agreement with Sunshine Lake to resolve the lawsuit against Sunshine Lake. The settlement agreements have been filed with the U.S. Federal Trade Commission and the U.S. Department of Justice as required by law. In April 2022, the case against Laurus was dismissed after Laurus agreed not to challenge any of the Orange Book-listed patents associated with TAF.

In October 2021, we received a letter from Lupin indicating that it has submitted an ANDA to FDA requesting permission to market and manufacture a generic version of Symtuza, a product commercialized by Janssen and for which Gilead shares in revenues. In November 2021, we, along with Janssen Products, L.P. and Janssen, filed a patent infringement lawsuit against Lupin as co-plaintiffs in the U.S. District Court of Delaware. We separately filed an additional lawsuit against Lupin asserting infringement of two additional patents in the same court. This second case has been stayed pending resolution of the generic litigation regarding our TAF-containing products.

Starting in March 2022, we received letters from Lupin, Laurus and Cipla indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of Biktarvy. Lupin, Laurus, and Cipla have challenged the validity of three of the five patents listed in the Orange Book as associated with Biktarvy. We intend to enforce and defend our intellectual property.

European Patent Claims

In 2015, several parties filed oppositions in the EPO requesting revocation of one of our granted European patents covering sofosbuvir that expires in 2028. In 2016, the EPO upheld the validity of certain claims of our sofosbuvir patent. We have appealed this decision, seeking to restore all of the original claims, and several of the original opposing parties have also appealed, requesting full revocation. An appeal hearing originally scheduled for July 2021 has been canceled and a new date has not yet been set by the EPO.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024. The EPO conducted an oral hearing for this opposition in 2018 and upheld the claims. Two of the original opposing parties have appealed, requesting full revocation.

In 2016, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering TAF that expires in 2026. In 2017, the EPO upheld the validity of the claims of our TAF patent. Three parties have appealed this decision. The appeal hearing was held in March 2021, and the validity of all claims were upheld.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032. In 2019, the EPO upheld the validity of the claims of our TAF hemifumarate patent. Three parties have appealed this decision.

In 2016, three parties filed oppositions in the EPO requesting revocation of our granted European patent covering cobicistat that expires in 2028. In 2017, the EPO upheld the validity of the claims of our cobicistat patent. Two parties have appealed this decision.

The appeal process may take several years for all EPO opposition proceedings. While we are confident in the strength of our patents, we cannot predict the ultimate outcome of these oppositions. If we are unsuccessful in defending these oppositions, some or all of our patent claims may be narrowed or revoked and the patent protection for sofosbuvir, TAF, TAF hemifumarate and cobicistat in the EU could be substantially shortened or eliminated entirely. If our patents are revoked, and no other European patents are granted covering these compounds, our exclusivity may be based entirely on regulatory exclusivity granted by EMA. If we lose patent protection for any of these compounds, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost.

Antitrust and Consumer Protection

We (along with Bristol-Myers Squibb Company (“BMS”) and Johnson & Johnson, Inc.) have been named as defendants in class action lawsuits filed in 2019 and 2020 related to various drugs used to treat HIV, including drugs used in combination antiretroviral therapy. Plaintiffs allege that we (and the other defendants) engaged in various conduct to restrain competition in violation of federal and state antitrust laws and state consumer protection laws. The lawsuits, which have been consolidated, are pending in the U.S. District Court for the Northern District of California. The lawsuits seek to bring claims on behalf of two nationwide classes—one of direct purchasers consisting largely of wholesalers, and another of indirect or end-payor purchasers, including health insurers and individual patients. Plaintiffs seek damages, permanent injunctive relief and other relief. In the fall of 2021, several plaintiffs filed separate lawsuits effectively opting out of the class action cases, asserting claims that are substantively the same as the putative classes. These cases have been coordinated with the class actions. Trial is set for March 2023.

In September 2020, we, along with generic manufacturers Cipla and Cipla USA Inc. (together, “Cipla Defendants”), were named as defendants in a class action lawsuit filed in the U.S. District Court for the Northern District of California by Jacksonville Police Officers and Fire Fighters Health Insurance Trust (“Jacksonville Trust”) on behalf of end-payor purchasers. Jacksonville Trust claims that the 2014 settlement agreement between us and the Cipla Defendants, which settled a patent dispute relating to patents covering our Emtriva, Truvada and Atripla products and permitted generic entry prior to patent expiry, violates certain federal and state antitrust and consumer protection laws. The Plaintiff seeks damages, permanent injunctive relief and other relief.

In February 2021, we along with BMS and Teva Pharmaceutical Industries Ltd. were named as defendants in a lawsuit filed in the First Judicial District Court for the State of New Mexico, County of Santa Fe by the New Mexico Attorney General. The New Mexico Attorney General alleges that we (and the other defendants) restrained competition in violation of New Mexico antitrust and consumer protection laws. The New Mexico Attorney General seeks damages and other relief.

While we believe these cases are without merit, we cannot predict the ultimate outcome. If plaintiffs are successful in their claims, we could be required to pay significant monetary damages or could be subject to permanent injunctive relief awarded in favor of plaintiffs.

Product Liability

We have been named as a defendant in one class action lawsuit and various product liability lawsuits related to Viread, Truvada, Atripla, Complera and Stribild. Plaintiffs allege that Viread, Truvada, Atripla, Complera and/or Stribild caused them to experience kidney, bone and/or tooth injuries. The lawsuits, which are pending in state or federal court in California, Delaware, Missouri and New Jersey, involve more than 27,000 plaintiffs. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. We intend to vigorously defend ourselves in these actions. While we believe these cases are without merit, we cannot predict the ultimate outcome. If plaintiffs are successful in their claims, we could be required to pay significant monetary damages.

Government Investigation

In 2017, we received a subpoena from the U.S. Attorney’s Office for the Southern District of New York requesting documents related to our promotional speaker programs for HIV. We are cooperating with this inquiry.

Qui Tam Litigation

A former sales employee filed a qui tam lawsuit against Gilead in March 2017 in U.S. District Court for the Eastern District of Pennsylvania. Following the government’s decision not to intervene in the suit, the case was unsealed in December 2020. The lawsuit alleges that certain of Gilead’s HCV sales and marketing activities violated the federal False Claims Act and various state false claims acts. The relator seeks all available relief under these statutes.

Two former employees filed a qui tam lawsuit against Gilead in April 2020 in California state court. Following the California Attorney General’s Office’s decision not to intervene, relators served Gilead with their complaint in August 2020. The complaint alleges violations of the California False Claims Act (“CFCA”) and employment law claims. Relators seek all available relief under the CFCA. In December 2021, Gilead and relators executed a settlement agreement to resolve the lawsuit, and in February 2022, the court issued an order dismissing the lawsuit with prejudice. The settlement does not have a material impact to our Consolidated Financial Statements.

Health Choice Advocates, LLC (“Health Choice”) filed a qui tam lawsuit against Gilead in April 2020 in New Jersey state court. Following the New Jersey Attorney General’s Office’s decision not to intervene in the suit, Health Choice served us with their original complaint in August 2020. The lawsuit alleges that Gilead violated the New Jersey False Claims Act through our clinical educator programs for Sovaldi and Harvoni and our HCV and HIV patient access programs. The lawsuit seeks all available relief under the New Jersey False Claims Act. In April 2021, the trial court granted our motion to dismiss with prejudice. Health Choice has appealed the trial court’s dismissal.

Health Choice filed another qui tam lawsuit against Gilead in May 2020 making similar allegations in Texas state court. Following the Texas Attorney General’s Office’s decision not to intervene in the suit, Health Choice served us with their original complaint in October 2020. The lawsuit alleges that Gilead violated the Texas Medicare Fraud Prevention Act (“TMFPA”) through our clinical educator programs for Sovaldi and Harvoni and our HCV and HIV patient access programs. The lawsuit seeks all available relief under the TMFPA. In September 2021, the Texas Court of Appeals for the Sixth Court Appeals District granted our request to stay the Texas litigation. The case is stayed pending final judgment in the Eastern District of Pennsylvania lawsuit filed in March 2017, as discussed above.

We intend to vigorously defend ourselves in these actions. While we believe these cases are without merit, we cannot predict the ultimate outcomes. If any of these plaintiffs are successful in their claims, we could be required to pay significant monetary damages.

Securities Litigation

Immunomedics and several of its former officers and directors have been named as defendants in putative class actions filed in 2018 and 2019, which were consolidated in September 2019. Plaintiffs filed a consolidated complaint in November 2019 and an amended complaint in July 2021. Plaintiffs allege that Immunomedics and the individual defendants violated the federal securities laws in connection with Immunomedics’ Biologics License Application for Trodelvy, and seek certification of a class of shareholders, damages and other relief. The consolidated lawsuit is pending in the U.S. District Court for the District of New Jersey. While we believe this case is without merit, we cannot predict the ultimate outcome. If plaintiffs are successful in their claims, we could be required to pay significant monetary damages.

Other Matters

We are a party to various legal actions that arose in the ordinary course of our business. We do not believe that these other legal actions will have a material adverse impact on our consolidated business, financial position or results of operations.

11. STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

In the first quarter of 2016, our Board of Directors authorized a $12.0 billion stock repurchase program (“2016 Program”) under which repurchases may be made in the open market or in privately negotiated transactions. We started repurchases under the 2016 Program in April 2016.

In the first quarter of 2020, our Board of Directors authorized a $5.0 billion stock repurchase program (“2020 Program”), which will commence upon the completion of the 2016 Program. Purchases under the 2020 Program may be made in the open market or in privately negotiated transactions.

As of March 31, 2022, the remaining authorized repurchase amount under both programs was $5.9 billion.

The following table summarizes our stock repurchases through open market transactions under the 2016 Program:


	Three Months Ended
	March 31,
(in millions)	2022		2021
Shares repurchased and retired	5.5		4.8
Amount	$	352	$	309

Accumulated Other Comprehensive Income

The following table summarizes the changes in AOCI by component, net of tax:


(in millions)	Foreign Currency Translation, Net of Tax		Unrealized Gains and Losses on Available-for-Sale Debt Securities, Net of Tax		Unrealized Gains and Losses on Cash Flow Hedges, Net of Tax		Total
Balance as of December 31, 2021	$	13	$	(4)	$	74	$	83
Net unrealized gain (loss)	5		(19)		24		10
Reclassifications to net income	—		—		(20)		(20)
Net current period other comprehensive income (loss)	5		(19)		4		(10)
Balance as of March 31, 2022	$	18	$	(23)	$	78	$	73


(in millions)	Foreign Currency Translation, Net of Tax		Unrealized Gains and Losses on Available-for-Sale Debt Securities, Net of Tax		Unrealized Gains and Losses on Cash Flow Hedges, Net of Tax		Total
Balance as of December 31, 2020	$	51	$	2	$	(113)	$	(60)
Net unrealized gain (loss)	10		(2)		68		76
Reclassifications to net income	—		—		22		22
Net current period other comprehensive income (loss)	10		(2)		90		98
Balance as of March 31, 2021	$	61	$	—	$	(23)	$	38

The amounts reclassified to Net income for gains and losses on cash flow hedges are recorded as part of Product sales on our Condensed Consolidated Statements of Income. See Note 5. Derivative Financial Instruments for additional information. The amounts reclassified to Net income for gains and losses on available-for-sale debt securities are recorded as part of Other income (expense), net on our Condensed Consolidated Statements of Income.

12. NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS

Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period. The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents were determined under the treasury stock method.

Potential shares of common stock excluded from the computation of diluted net income per share attributable to Gilead common stockholders because their effect would have been antidilutive were 16 million and 15 million, for the three months ended March 31, 2022 and 2021 respectively.

The following table shows the calculation of basic and diluted net income per share attributable to Gilead common stockholders:


	Three Months Ended
	March 31,
(in millions, except per share amounts)	2022		2021
Net income attributable to Gilead	$	19	$	1,729
Shares used in per share calculation - basic	1,255		1,256
Dilutive effect of stock options and equivalents	6		6
Shares used in per share calculation - diluted	1,262		1,262

Net income per share attributable to Gilead common stockholders - basic	$	0.02	$	1.38
Net income per share attributable to Gilead common stockholders - diluted	$	0.02	$	1.37

13. INCOME TAXES

The following table summarizes our Income tax benefit (expense):


	Three Months Ended
	March 31,
(in millions, except percentages)	2022			2021
Income (loss) before income taxes	$	(152)		$	2,264
Income tax benefit (expense)	$	164		$	(542)
Effective tax rate	107.9		%	23.9		%

Our effective income tax rate of 107.9% for the three months ended March 31, 2022 differed from the U.S. federal statutory rate of 21% primarily due to a decrease in state deferred tax liabilities associated with a partial IPR&D impairment charge of $2.7 billion.

Our effective income tax rate of 23.9% for the three months ended March 31, 2021 differed from the U.S. federal statutory rate of 21% primarily due to unfavorable changes in the fair value of our equity investment in Galapagos that are non-deductible for income tax purposes, partially offset by net discrete tax benefits related to settlements with taxing authorities.

Our income tax returns are subject to audit by federal, state and foreign tax authorities. We are currently under examination by the Internal Revenue Service and Irish tax authorities for our 2016 to 2018 tax years. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We periodically evaluate our exposures associated with our tax filing positions.

14. SUBSEQUENT EVENT

In April 2022, we entered into a strategic research collaboration agreement with Dragonfly Therapeutics, Inc. (“Dragonfly”) (the “Dragonfly Collaboration Agreement”) to develop natural killer (“NK”) cell engager-based immunotherapies for oncology and inflammation indications. Under the terms of the Dragonfly Collaboration Agreement, we will receive an exclusive, worldwide license from Dragonfly for the 5T4-targeting investigational immunotherapy program, DF7001, as well as options, after the completion of certain preclinical activities, to license exclusive, worldwide rights to develop and commercialize additional NK cell engager programs using the Dragonfly Tri-specific NK Engager platform. Upon the closing of the Dragonfly Collaboration Agreement, we will make a $300 million upfront payment to Dragonfly. In addition, Dragonfly is eligible to receive potential opt-in payments and performance-based development, regulatory and commercial milestone payments. Dragonfly will also be eligible to receive royalties of up to 20% on worldwide net sales. The closing of the Dragonfly Collaboration Agreement is subject to antitrust clearances required by the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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