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)	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	5,705	$	5,412
Short-term marketable debt securities	1,159		973
Accounts receivable, net	4,790		4,777
Inventories	1,663		1,507
Prepaid and other current assets	2,662		1,774
Total current assets	15,980		14,443
Property, plant and equipment, net	5,572		5,475
Long-term marketable debt securities	1,156		1,245
Intangible assets, net	27,152		28,894
Goodwill	8,314		8,314
Other long-term assets	4,200		4,800
Total assets	$	62,373	$	63,171
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	586	$	905
Accrued rebates	3,714		3,479
Other current liabilities	5,852		4,580
Current portion of long-term debt and other obligations, net	1,793		2,273
Total current liabilities	11,945		11,237
Long-term debt, net	23,189		22,957
Long-term income taxes payable	2,088		3,916
Deferred tax liability	1,984		2,673
Other long-term obligations	924		1,179
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; 1,247 shares issued and outstanding	1		1
Additional paid-in capital	6,279		5,550
Accumulated other comprehensive income	31		2
Retained earnings	16,002		15,687
Total Gilead stockholders’ equity	22,314		21,240
Noncontrolling interest	(72)		(31)
Total stockholders’ equity	22,242		21,209
Total liabilities and stockholders’ equity	$	62,373	$	63,171

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions, except per share amounts)	2023		2022		2023		2022
Revenues:
Product sales	$	6,994	$	6,978	$	19,864	$	19,650
Royalty, contract and other revenues	56		64		138		242
Total revenues	7,051		7,042		20,002		19,892
Costs and expenses:
Cost of goods sold	1,565		1,395		4,408		4,261
Research and development expenses	1,457		1,149		4,310		3,429
Acquired in-process research and development expenses	91		448		808		786
In-process research and development impairment	—		—		—		2,700
Selling, general and administrative expenses	1,315		1,213		4,482		3,653
Total costs and expenses	4,428		4,205		14,009		14,829
Operating income	2,623		2,837		5,993		5,063
Interest expense	(232)		(229)		(692)		(709)
Other income (expense), net	(72)		(176)		(95)		(571)
Income before income taxes	2,318		2,432		5,206		3,783
Income tax expense	(146)		(646)		(1,010)		(850)
Net income	2,172		1,786		4,196		2,933
Net loss attributable to noncontrolling interest	8		3		40		19
Net income attributable to Gilead	$	2,180	$	1,789	$	4,236	$	2,952
Basic earnings per share attributable to Gilead	$	1.75	$	1.43	$	3.39	$	2.35
Shares used in basic earnings per share attributable to Gilead calculation	1,248		1,255		1,249		1,255
Diluted earnings per share attributable to Gilead	$	1.73	$	1.42	$	3.37	$	2.34
Shares used in diluted earnings per share attributable to Gilead calculation	1,257		1,261		1,259		1,261

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2023		2022		2023		2022
Net income	$	2,172	$	1,786	$	4,196	$	2,933
Other comprehensive income, net:
Net foreign currency translation loss	(35)		(81)		(3)		(102)
Available-for-sale debt securities:
Net unrealized gain (loss), net of tax impact of $0, $0, $0 and $0, respectively	4		(7)		10		(38)
Reclassifications to net income, net of tax impact of $0, $0, $0 and $0, respectively	—		—		2		1
Net change	5		(7)		11		(37)
Cash flow hedges:
Net unrealized gain, net of tax impact of $9, $21, $9 and $37, respectively	66		140		65		254
Reclassifications to net income, net of tax impact of $2, $7, $6 and $15, respectively	(14)		(41)		(44)		(100)
Net change	51		99		21		154
Other comprehensive income, net	21		11		30		15
Comprehensive income, net	2,193		1,797		4,226		2,948
Comprehensive loss attributable to noncontrolling interest, net	8		3		40		19
Comprehensive income attributable to Gilead, net	$	2,201	$	1,800	$	4,265	$	2,967

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)


		Three Months Ended September 30, 2023
(in millions, except per share amounts)		Gilead Stockholders’ Equity													Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Income			Retained Earnings
	Shares		Amount
Balance as of June 30, 2023		1,247		$	1		$	6,008		$	10		$	15,138	$	(64)	$	21,094
Net income (loss)		—		—			—			—			2,180		(8)		2,172
Other comprehensive income, net		—		—			—			21			—		—		21
Issuances under employee stock purchase plan		1		—			62			—			—		—		62
Issuances under equity incentive plans		4		—			21			—			—		—		21
Stock-based compensation		—		—			202			—			—		—		202
Repurchases of common stock under repurchase programs ($77.08 average price per share)		(4)		—			(14)			—			(286)		—		(300)
Repurchases of common stock for employee tax withholding under equity incentive plans and other		(1)		—			—			—			(77)		—		(77)
Dividends declared ($0.75 per share)		—		—			—			—			(953)		—		(953)
Balance as of September 30, 2023		1,247		$	1		$	6,279		$	31		$	16,002	$	(72)	$	22,242


		Nine Months Ended September 30, 2023
(in millions, except per share amounts)		Gilead Stockholders’ Equity													Noncontrolling Interest		Total Stockholders’ Equity
	Common Stock					Additional Paid-In Capital			Accumulated Other Comprehensive Income			Retained Earnings
	Shares		Amount
Balance as of December 31, 2022		1,247		$	1		$	5,550		$	2		$	15,687	$	(31)	$	21,209
Net income (loss)		—		—			—			—			4,236		(40)		4,196
Other comprehensive income, net		—		—			—			30			—		—		30
Issuances under employee stock purchase plan		2		—			129			—			—		—		129
Issuances under equity incentive plans		11		—			71			—			—		—		71
Stock-based compensation		—		—			566			—			—		—		566
Repurchases of common stock under repurchase programs ($79.92 average price per share)		(11)		—			(38)			—			(812)		—		(850)
Repurchases of common stock for employee tax withholding under equity incentive plans and other		(3)		—			—			—			(245)		—		(245)
Dividends declared ($2.25 per share)		—		—			—			—			(2,864)		—		(2,864)
Balance as of September 30, 2023		1,247		$	1		$	6,279		$	31		$	16,002	$	(72)	$	22,242

See accompanying notes.


		Three Months Ended September 30, 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			Retained Earnings
	Shares		Amount
Balance as of June 30, 2022		1,254		$	1		$	5,031		$	87		$	15,117	$	(21)	$	20,215
Net income (loss)		—		—			—			—			1,789		(3)		1,786
Other comprehensive income, net		—		—			—			11			—		—		11
Issuances under employee stock purchase plan		2		—			30			—			—		—		30
Issuances under equity incentive plans		2		—			6			—			—		—		6
Stock-based compensation		—		—			170			—			—		—		170
Repurchases of common stock under repurchase programs ($63.10 average price per share)		(3)		—			(11)			—			(171)		—		(182)
Repurchases of common stock for employee tax withholding under equity incentive plans		(1)		—			—			—			(46)		—		(46)
Dividends declared ($0.73 per share)		—		—			—			—			(933)		—		(933)
Balance as of September 30, 2022		1,254		$	1		$	5,226		$	98		$	15,756	$	(24)	$	21,057


		Nine Months Ended September 30, 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			Retained Earnings
	Shares		Amount
Balance as of December 31, 2021		1,254		$	1		$	4,661		$	83		$	16,324	$	(5)	$	21,064
Net income (loss)		—		—			—			—			2,952		(19)		2,933
Other comprehensive income, net		—		—			—			15			—		—		15
Issuances under employee stock purchase plan		3		—			103			—			—		—		103
Issuances under equity incentive plans		9		—			30			—			—		—		30
Stock-based compensation		—		—			465			—			—		—		465
Repurchases of common stock under repurchase programs ($63.34 average price per share)		(10)		—			(33)			—			(572)		—		(605)
Repurchases of common stock for employee tax withholding under equity incentive plans		(2)		—			—			—			(151)		—		(151)
Dividends declared ($2.19 per share)		—		—			—			—			(2,797)		—		(2,797)
Balance as of September 30, 2022		1,254		$	1		$	5,226		$	98		$	15,756	$	(24)	$	21,057

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Nine Months Ended
	September 30,
(in millions)	2023		2022
Operating Activities:
Net income	$	4,196	$	2,933
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense	263		240
Amortization expense	1,742		1,335
Stock-based compensation expense	565		463
Acquired in-process research and development expenses	808		786
In-process research and development impairment	—		2,700
Deferred income taxes	(592)		(1,214)
Net loss from equity securities	356		596
Other	260		546
Changes in operating assets and liabilities:
Accounts receivable, net	(63)		(125)
Inventories	(535)		(34)
Prepaid expenses and other	71		(69)
Accounts payable	(304)		(38)
Income tax assets and liabilities, net	(1,070)		(483)
Accrued and other liabilities	141		(1,131)
Net cash provided by operating activities	5,837		6,505
Investing Activities:
Purchases of marketable debt securities	(1,474)		(1,398)
Proceeds from sales of marketable debt securities	412		370
Proceeds from maturities of marketable debt securities	985		1,232
Acquisitions, including in-process research and development, net of cash acquired	(873)		(1,579)
Purchases of equity securities	(218)		(166)
Capital expenditures	(370)		(547)
Other	—		(3)
Net cash used in investing activities	(1,538)		(2,091)
Financing Activities:
Proceeds from debt financing, net of issuance costs	1,979		—
Proceeds from issuances of common stock	206		133
Repurchases of common stock under repurchase programs	(850)		(604)
Repayments of debt and other obligations	(2,250)		(1,500)
Payments of dividends	(2,866)		(2,794)
Other	(245)		(150)
Net cash used in financing activities	(4,026)		(4,915)
Effect of exchange rate changes on cash and cash equivalents	20		(138)
Net change in cash and cash equivalents	293		(639)
Cash and cash equivalents at beginning of period	5,412		5,338
Cash and cash equivalents at end of period	$	5,705	$	4,699

See accompanying notes.

GILEAD SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements and related Notes to Condensed Consolidated Financial Statements of Gilead Sciences, Inc. (“Gilead,” “we,” “our” or “us”) should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed with U.S. Securities and Exchange Commission. There have been no material changes to our organization or summary of significant accounting policies as disclosed in that filing. Beginning in the first quarter of 2023, we reclassified changes in income taxes prepaid and receivable from Prepaid expenses and other to combine them with changes in income taxes payable as Income tax assets and liabilities, net within Operating Activities on our Condensed Consolidated Statements of Cash Flows. We believe this presentation assists users of the financial statements to better understand cash flow movements. Prior periods have been revised to reflect this change, resulting in a reclassification of $81 million from Prepaid expenses and other for the nine months ended September 30, 2022.

These interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and include all adjustments consisting of normal recurring adjustments that the management of Gilead believes are necessary for a fair presentation of the periods presented and are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. Certain amounts and percentages in these Condensed Consolidated Financial Statements and accompanying notes may not sum or recalculate due to rounding.

2. REVENUES

Disaggregation of Revenues

The following table summarizes our Total revenues:


	Three Months Ended September 30, 2023								Three Months Ended September 30, 2022
(in millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product sales:
HIV
Biktarvy	$	2,504	$	313	$	268	$	3,085	$	2,286	$	278	$	201	$	2,766
Complera/Eviplera	13		18		3		34		20		21		3		43
Descovy	460		25		26		511		444		28		28		500
Genvoya	433		47		23		503		502		71		27		600
Odefsey	257		74		11		343		276		86		12		374
Stribild	18		5		2		25		22		7		3		32
Truvada	15		3		4		22		24		3		2		30
Revenue share - Symtuza(1)	96		32		3		131		85		40		4		130
Other HIV(2)	10		3		—		13		1		6		5		12
Total HIV	3,807		519		341		4,667		3,661		541		285		4,487
Oncology
Cell Therapy
Tecartus	64		27		4		96		60		20		1		81
Yescarta	197		154		40		391		210		91		16		317
Total Cell Therapy	261		181		45		486		270		111		17		398

Trodelvy	201		62		21		283		139		38		3		180
Total Oncology	462		243		65		769		409		149		20		578
Liver Disease
Chronic hepatitis C virus (“HCV”)
Ledipasvir/Sofosbuvir(3)	17		2		4		23		8		5		12		25
Sofosbuvir/Velpatasvir(4)	215		76		85		377		241		131		84		455
Other HCV(5)	28		7		3		38		34		7		2		44
Total HCV	260		85		93		438		283		143		98		524

Chronic hepatitis B virus (“HBV”) / Chronic hepatitis delta virus (“HDV”)
Vemlidy	112		9		106		228		129		9		90		228
Viread	4		5		12		21		2		5		15		22
Other HBV/HDV(6)	—		19		—		20		—		13		—		14
Total HBV/HDV	116		34		119		269		131		28		106		264
Total Liver Disease	376		119		211		706		413		170		204		788

Veklury	258		65		313		636		336		130		458		925
Other
AmBisome	12		63		39		115		9		63		33		105
Letairis	36		—		—		36		43		—		—		43
Other(7)	34		9		23		65		28		11		13		52
Total Other	82		72		62		216		80		75		46		200
Total product sales	4,985		1,017		992		6,994		4,900		1,064		1,013		6,978
Royalty, contract and other revenues	32		23		1		56		28		37		—		64
Total revenues	$	5,017	$	1,040	$	993	$	7,051	$	4,928	$	1,101	$	1,013	$	7,042


	Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2022
(in millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product sales:
HIV
Biktarvy	$	7,104	$	920	$	717	$	8,741	$	6,088	$	807	$	577	$	7,472
Complera/Eviplera	40		55		9		104		56		76		10		142
Descovy	1,314		75		86		1,475		1,152		92		91		1,335
Genvoya	1,305		157		81		1,544		1,441		220		103		1,764
Odefsey	754		223		33		1,011		763		278		36		1,077
Stribild	57		16		6		79		68		23		7		98
Truvada	71		10		16		97		77		12		13		102
Revenue share - Symtuza(1)	278		101		10		390		251		126		10		388
Other HIV(2)	24		11		6		41		11		20		15		45
Total HIV	10,949		1,568		965		13,482		9,906		1,653		863		12,422
Oncology
Cell Therapy
Tecartus	179		83		11		272		160		56		2		217
Yescarta	624		408		99		1,130		528		253		42		823
Total Cell Therapy	802		491		109		1,402		688		308		44		1,040

Trodelvy	551		169		44		764		379		98		8		485
Total Oncology	1,354		660		153		2,167		1,067		407		52		1,525
Liver Disease
HCV
Ledipasvir/Sofosbuvir(3)	29		11		14		54		27		13		43		83
Sofosbuvir/Velpatasvir(4)	643		250		266		1,159		629		288		244		1,161
Other HCV(5)	80		33		10		123		88		31		7		127
Total HCV	751		294		289		1,335		745		332		294		1,371

HBV/HDV
Vemlidy	295		28		322		645		306		27		289		622
Viread	4		17		40		62		4		17		48		69
Other HBV/HDV(6)	—		50		—		51		1		41		—		42
Total HBV/HDV	299		96		363		758		311		85		337		733
Total Liver Disease	1,051		390		652		2,093		1,056		417		631		2,104

Veklury	607		227		630		1,465		1,179		560		1,166		2,905
Other
AmBisome	39		192		150		381		48		192		140		380
Letairis	106		—		—		106		135		—		—		135
Other(7)	91		31		49		171		91		52		35		178
Total Other	236		224		199		658		275		244		174		693
Total product sales	14,196		3,069		2,599		19,864		13,482		3,281		2,887		19,650
Royalty, contract and other revenues	57		77		4		138		140		98		4		242
Total revenues	$	14,253	$	3,146	$	2,603	$	20,002	$	13,622	$	3,378	$	2,891	$	19,892

(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, Sunlenca 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				Nine Months Ended
	September 30,				September 30,
(as a percentage of total revenues)	2023		2022		2023		2022
Cencora, Inc. (formerly known as AmerisourceBergen Corporation)	19	%	18	%	19	%	17	%
Cardinal Health, Inc.	25	%	25	%	26	%	25	%
McKesson Corporation	22	%	22	%	21	%	20	%

Revenues Recognized from Performance Obligations Satisfied in Prior Years

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2023		2022		2023		2022
Revenue share with Janssen and royalties for licenses of intellectual property	$	166	$	192	$	517	$	573
Changes in estimates	$	111	$	207	$	347	$	452

Contract Balances

The following table summarizes our contract balances:


(in millions)	September 30, 2023		December 31, 2022
Contract assets(1)	$	123	$	171
Contract liabilities(2)	$	68	$	102

(1) Consists of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation.

(2) Generally results from receipt of advance payment before our performance under the contract.

3. FAIR VALUE MEASUREMENTS

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:


	September 30, 2023								December 31, 2022
(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	$	428	$	—	$	—	$	428	$	410	$	—	$	—	$	410
U.S. government agencies securities	—		152		—		152		—		35		—		35
Non-U.S. government securities	—		10		—		10		—		34		—		34
Certificates of deposit	—		97		—		97		—		54		—		54
Corporate debt securities	—		1,334		—		1,334		—		1,427		—		1,427
Residential mortgage and asset-backed securities	—		361		—		361		—		333		—		333
Equity securities:
Money market funds	4,240		—		—		4,240		3,831		—		—		3,831
Equity investment in Galapagos NV (“Galapagos”)	571		—		—		571		736		—		—		736
Equity investment in Arcus Biosciences, Inc. (“Arcus”)	266		—		—		266		286		—		—		286
Other publicly traded equity securities	257		—		—		257		175		—		—		175
Deferred compensation plan	259		—		—		259		220		—		—		220
Foreign currency derivative contracts	—		67		—		67		—		60		—		60
Total	$	6,021	$	2,021	$	—	$	8,042	$	5,658	$	1,943	$	—	$	7,600
Liabilities:
Liability for MYR GmbH (“MYR”) contingent consideration	$	—	$	—	$	275	$	275	$	—	$	—	$	275	$	275
Deferred compensation plan	258		—		—		258		220		—		—		220
Foreign currency derivative contracts	—		8		—		8		—		42		—		42
Total	$	258	$	8	$	275	$	540	$	220	$	42	$	275	$	538

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 by 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 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

Our foreign currency derivative contracts have maturities of 18 months or less 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 utilizing 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 and swap rates. These inputs, where applicable, are observable at commonly quoted intervals.

Senior Unsecured Notes

The total estimated fair value of our senior unsecured notes, determined using Level 2 inputs based on their quoted market values, was approximately $20.9 billion and $21.9 billion as of September 30, 2023 and December 31, 2022, respectively, and the carrying value was $23.8 billion and $24.1 billion as of September 30, 2023 and December 31, 2022, respectively.

Level 3 Inputs

Contingent Consideration Liability

In connection with our first quarter 2021 acquisition of MYR, we are subject to a potential contingent consideration payment of up to €300 million, subject to customary adjustments, which is revalued each reporting period using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex until the related contingency is resolved.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2023		2022		2023		2022
Beginning balance	$	288	$	306	$	275	$	317
Changes in valuation assumptions(1)	(2)		(30)		3		(19)
Effect of foreign exchange remeasurement(2)	(11)		(27)		(4)		(49)
Ending balance	$	275	$	249	$	275	$	249

(1) Included in Research and development expenses on our Condensed Consolidated Statements of Income. The changes primarily related to increasing discount rates and updated probability rate estimates.

(2) Included in Other income (expense), net on our Condensed Consolidated Statements of Income.

Liability Related to Future Royalties

We recorded a liability related to 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 value of the liability related to future royalties was $1.1 billion as of September 30, 2023 and December 31, 2022. The carrying value of the liability related to future royalties was $1.2 billion as of September 30, 2023 and $1.1 billion as of December 31, 2022.

Nonrecurring Fair Value Measurements

During the nine months ended September 30, 2022, we recorded a partial impairment charge of $2.7 billion related to certain acquired in-process research and development (“IPR&D”) assets. See Note 7. Intangible Assets for additional information. There were no indicators of impairment to IPR&D assets noted during the nine months ended September 30, 2023.

Fair Value Level Transfers

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

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

Available-for-Sale Debt Securities

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


	September 30, 2023								December 31, 2022
(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	$	430	$	—	$	(3)	$	428	$	415	$	—	$	(5)	$	410
U.S. government agencies securities	153		—		(1)		152		36		—		—		35
Non-U.S. government securities	10		—		—		10		34		—		—		34
Certificates of deposit	97		—		—		97		54		—		—		54
Corporate debt securities	1,351		—		(17)		1,334		1,452		—		(26)		1,427
Residential mortgage and asset-backed securities	362		—		(1)		361		335		—		(3)		333
Total	$	2,403	$	—	$	(21)	$	2,382	$	2,325	$	1	$	(34)	$	2,293

The following table summarizes information related to available-for-sale debt securities that have been in a continuous unrealized loss position, classified by length of time:


	September 30, 2023
	Less Than 12 Months				12 Months or Longer				Total
(in millions)	Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
U.S. treasury securities	$	(1)	$	261	$	(1)	$	71	$	(3)	$	332
U.S. government agencies securities	(1)		150		—		2		(1)		152
Non-U.S. government securities	—		5		—		5		—		10
Corporate debt securities	(4)		549		(13)		642		(17)		1,191
Residential mortgage and asset-backed securities	(1)		273		—		42		(1)		315
Total	$	(7)	$	1,238	$	(14)	$	761	$	(21)	$	2,000


	December 31, 2022
	Less Than 12 Months				12 Months or Longer				Total
(in millions)	Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value
U.S. treasury securities	$	(2)	$	174	$	(3)	$	206	$	(5)	$	379
U.S. government agencies securities	—		21		—		—		—		21
Non-U.S. government securities	—		31		—		3		—		34
Corporate debt securities	(17)		774		(8)		439		(26)		1,213
Residential mortgage and asset-backed securities	(2)		205		(1)		56		(3)		261
Total	$	(22)	$	1,204	$	(12)	$	705	$	(34)	$	1,908

No allowance for credit losses was recognized for investments with unrealized losses as of September 30, 2023, as the unrealized losses were primarily driven by broader change in interest rates with no adverse conditions identified that would prevent the issuer from making scheduled principal and interest payments. We do not currently intend to sell, and it is not more likely than not that we will be required to sell, such investments before recovery of their amortized cost bases.

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


(in millions)	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	67	$	75
Short-term marketable debt securities	1,159		973
Long-term marketable debt securities	1,156		1,245
Total	$	2,382	$	2,293

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


	September 30, 2023
(in millions)	Amortized Cost		Fair Value
Within one year	$	1,233	$	1,226
After one year through five years	1,161		1,147
After five years through ten years	6		6
After ten years	3		3
Total	$	2,403	$	2,382

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, on our Condensed Consolidated Balance Sheets:


(in millions)	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	4,240	$	3,831
Prepaid and other current assets(1)	1,110		473
Other long-term assets(1)	244		943
Total	$	5,594	$	5,248

(1) Includes our equity method investments in Arcus and Galapagos, for which we elected and applied the fair value option as we believe it best reflects the underlying economics of these investments. Our investment in Arcus was classified in Prepaid and other current assets as of September 30, 2023 and December 31, 2022. Our investment in Galapagos is subject to certain lock-up provisions until August 2024 and was classified in Prepaid and other current assets and in Other long-term assets as of September 30, 2023 and December 31, 2022, respectively.

Other Equity Securities

Equity method investments and other equity investments without readily determinable fair values were $337 million and $423 million as of September 30, 2023 and December 31, 2022, respectively, and were excluded from the table above. These amounts were included in Other long-term assets on our Condensed Consolidated Balance Sheets.

Unrealized Gains and Losses

We recognized $168 million and $356 million net unrealized losses on equity securities for the three and nine months ended September 30, 2023, respectively, and $197 million and $596 million net unrealized losses on equity securities for the three and nine months ended September 30, 2022, respectively, which were included in Other income (expense), net on our Condensed Consolidated Statements of Income.

Related Party Transaction

During the nine months ended September 30, 2022, Gilead donated certain equity securities at fair value to the Gilead Foundation, a California nonprofit public benefit corporation (the “Foundation”). The Foundation is a related party as certain of our officers also serve as directors of the Foundation. The donation expense of $85 million was recorded within Selling, general and administrative expenses on our Condensed Consolidated Statements of Income during the nine months ended September 30, 2022.

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 that are denominated in a non-functional currency are not designated as hedges. 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.

We held foreign currency exchange contracts with outstanding notional amounts of $2.3 billion as of September 30, 2023 and $3.0 billion as of December 31, 2022.

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


	September 30, 2023
	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	$	57	Other current liabilities	$	7
Foreign currency exchange contracts	Other long-term assets	10		Other long-term obligations	—
Total derivatives designated as hedges		67			7
Derivatives not designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	—		Other current liabilities	1
Total derivatives not designated as hedges		—			1
Total derivatives presented gross on the Condensed Consolidated Balance Sheets		$	67		$	8

Gross amounts not offset on the Condensed Consolidated Balance Sheets:
Derivative financial instruments		(8)			(8)
Cash collateral received / pledged		—			—
Net amount (legal offset)		$	59		$	—


	December 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	$	59	Other current liabilities	$	26
Foreign currency exchange contracts	Other long-term assets	1		Other long-term obligations	9
Total derivatives designated as hedges		59			35
Derivatives not designated as hedges:
Foreign currency exchange contracts	Prepaid and other current assets	1		Other current liabilities	7
Total derivatives not designated as hedges		1			7
Total derivatives presented gross on the Condensed Consolidated Balance Sheets		$	60		$	42

Gross amounts not offset on the Condensed Consolidated Balance Sheets:
Derivative financial instruments		(36)			(36)
Cash collateral received / pledged		—			—
Net amount (legal offset)		$	25		$	7

The following table summarizes the effect of our derivative contracts on our Condensed Consolidated Financial Statements:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions)	2023		2022		2023		2022
Derivatives designated as hedges:
Net gain recognized in Accumulated other comprehensive income	$	75	$	162	$	74	$	292
Net gain reclassified from Accumulated other comprehensive income into Product sales	$	16	$	48	$	50	$	115
Derivatives not designated as hedges:
Net gain (loss) recognized in Other income (expense), net	$	(4)	$	6	$	46	$	70

The majority of gains and losses related to the hedged forecasted transactions reported in Accumulated other comprehensive income as of September 30, 2023 are expected to be reclassified to Product sales within 12 months. There were no discontinuances of cash flow hedges for the three and nine months ended September 30, 2023 and 2022.

The cash flow effects of our derivative contracts for the nine months ended September 30, 2023 and 2022 were included within Net cash provided by operating activities on our Condensed Consolidated Statements of Cash Flows.

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.

Acquisitions

XinThera

In May 2023, we closed an agreement to acquire XinThera, Inc. (“XinThera”), a privately held biotechnology company focused on small molecule drugs to treat cancer and immunologic diseases, for approximately $200 million in cash consideration, net of cash acquired. As a result, XinThera became our wholly-owned subsidiary.

We accounted for the transaction as an asset acquisition and recorded a $170 million charge to Acquired in-process research and development expenses on our Condensed Consolidated Statements of Income during the three months ended June 30, 2023. The remaining purchase price relates to various other assets acquired and liabilities assumed. Under the agreement, the former shareholders of XinThera are eligible to receive performance-based development and regulatory milestone payments of up to approximately $760 million.

Tmunity

In February 2023, we closed an agreement to acquire Tmunity Therapeutics, Inc. (“Tmunity”), a clinical-stage, private biotechnology company focused on next-generation CAR T-therapies and technologies. Under the terms of the agreement, we acquired all outstanding shares of Tmunity other than those already owned by Gilead for approximately $300 million in cash consideration. As a result, Tmunity became our wholly-owned subsidiary.

We accounted for the transaction as an asset acquisition and recorded a $244 million charge to Acquired in-process research and development expenses on our Condensed Consolidated Statements of Income during the three months ended March 31, 2023. The remaining purchase price relates to various other assets acquired and liabilities assumed, consisting primarily of deferred tax assets. Under the agreement, the former shareholders of Tmunity and the University of Pennsylvania are eligible to receive a mix of up to approximately $1.0 billion in potential future payments upon achievement of certain development, regulatory and sales-based milestones, as well as royalty payments on sales.

Collaborations and Other Arrangements

Arcellx

In January 2023, we closed an agreement to enter into a global strategic collaboration with Arcellx, Inc. (“Arcellx”) to co-develop and co-commercialize Arcellx’s lead late-stage product candidate, CART-ddBCMA, for the treatment of patients with relapsed or refractory multiple myeloma, and potential future next-generation autologous and non-autologous products. In conjunction with the collaboration agreement, we recorded a $212 million charge to Acquired in-process research and development expenses on our Condensed Consolidated Statements of Income during the three months ended March 31, 2023, primarily related to an upfront payment, as well as a $115 million equity investment, which is subject to lock-up provisions until July 2024 and is in Prepaid and other current assets on our Condensed Consolidated Balance Sheets as of September 30, 2023. The companies will share development, clinical trial and commercialization costs for CART-ddBCMA and will jointly commercialize the product and split U.S. profits 50/50. Outside the U.S., we will commercialize the product and Arcellx will receive royalties on sales. Arcellx is eligible to receive performance-based development and regulatory milestone payments of up to $835 million related to CART-ddBCMA, a potential future next-generation autologous product and a potential future non-autologous product, with further commercial milestone payments, profit split payments on co-promoted products and royalties on at least a portion of worldwide net sales, depending on whether Arcellx opts in to co-promote the future products. If additional future products are developed, Arcellx would be eligible to receive additional milestone payments, profit split payments on co-promoted products and royalties on at least a portion of worldwide net sales, depending on whether Arcellx opts in to co-promote these additional future products as well.

Pionyr

In June 2020, we entered into a transaction with Pionyr Immunotherapeutics (“Pionyr”), a privately held company pursuing novel biology in the field of immuno-oncology, which included entry into two separate agreements, one related to the initial acquisition of a 49.9% equity interest in Pionyr and the other providing us with the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Pionyr (“Pionyr Merger and Option Agreements”). The exclusive option had an estimated fair value of $70 million based on a probability-weighted option pricing model using unobservable inputs, which are considered Level 3 under the fair value measurement and disclosure guidance. In March 2023, we waived our exclusive option to acquire Pionyr and certain other rights under the Pionyr Merger and Option Agreements and recorded a $70 million charge to Other income (expense), net on our Condensed Consolidated Statements of Income during the three months ended March 31, 2023. In August 2023, Pionyr was acquired by Ikena Oncology, Inc. (“Ikena”) and our equity interest was converted to shares of Ikena stock.

Tizona

In July 2020, we entered into a transaction with Tizona Therapeutics, Inc. (“Tizona”), a privately held company developing cancer immunotherapies, which included entry into two separate agreements, one related to the initial acquisition of a 49.9% equity interest in Tizona and the other providing us the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Tizona (“Tizona Merger and Option Agreements”). The exclusive option had an estimated fair value of $41 million based on a probability-weighted option pricing model using unobservable inputs, which are considered Level 3 under the fair value measurement and disclosure guidance. In September 2023, we waived our exclusive option to acquire Tizona and certain other rights under the Tizona Merger and Option Agreements and recorded a $41 million charge to Other income (expense), net on our Condensed Consolidated Statements of Income during the three months ended September 30, 2023.

7. INTANGIBLE ASSETS

The following table summarizes our Intangible assets, net:


	September 30, 2023								December 31, 2022
(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	$	(6,875)	$	—	$	3,845	$	10,720	$	(6,350)	$	—	$	4,370
Intangible asset – axicabtagene ciloleucel	7,110		(2,213)		—		4,897		7,110		(1,908)		—		5,202
Intangible asset – Trodelvy(1)	11,730		(1,732)		—		9,998		5,630		(973)		—		4,657
Intangible asset – Hepcludex	845		(222)		—		623		845		(158)		—		687
Other	1,489		(822)		1		668		1,489		(733)		1		758
Total finite-lived assets	31,894		(11,863)		1		20,032		25,794		(10,121)		1		15,674
Indefinite-lived assets – IPR&D(1)	7,120		—		—		7,120		13,220		—		—		13,220
Total intangible assets	$	39,014	$	(11,863)	$	1	$	27,152	$	39,014	$	(10,121)	$	1	$	28,894

_______________________________

(1) In February 2023, FDA granted approval of Trodelvy for use in adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting. Accordingly, the related IPR&D intangible asset of $6.1 billion was reclassified to finite-lived assets in the first quarter of 2023.

Amortization Expense

Aggregate amortization expense related to finite-lived intangible assets was $598 million and $1.7 billion for the three and nine months ended September 30, 2023, respectively, and $445 million and $1.3 billion for the three and nine months ended September 30, 2022, 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 September 30, 2023:


(in millions)	Amount
2023 (remaining three months)	$	598
2024	2,392
2025	2,386
2026	2,378
2027	2,378
Thereafter	9,900
Total	$	20,032

Impairment Assessments

No indicators of impairment were noted for the three and nine months ended September 30, 2023 and 2022, except as described under “2022 IPR&D Impairment” below.

2022 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-”) 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 first 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. As of March 2022, 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)	September 30, 2023		December 31, 2022
Accounts receivable	$	5,585	$	5,464
Less: allowances for chargebacks	638		549
Less: allowances for cash discounts and other	104		83
Less: allowances for credit losses	54		55
Accounts receivable, net	$	4,790	$	4,777

The majority of our trade accounts receivable arises from product sales in the U.S. and Europe.

Inventories

The following table summarizes our Inventories:


(in millions)	September 30, 2023		December 31, 2022
Raw materials	$	1,266	$	1,177
Work in process	614		577
Finished goods	1,323		1,066
Total	$	3,202	$	2,820
Reported as:
Inventories	$	1,663	$	1,507
Other long-term assets(1)	1,539		1,313
Total	$	3,202	$	2,820

(1) Amounts primarily consist of raw materials.

Other current liabilities

The following table summarizes the components of Other current liabilities:


(in millions)	September 30, 2023		December 31, 2022
Compensation and employee benefits	$	961	$	1,018
Income taxes payable	2,086		959
Allowance for sales returns	403		422
Other	2,402		2,182
Other current liabilities	$	5,852	$	4,580

Accumulated other comprehensive income

The following tables summarizes the changes in Accumulated other comprehensive income by component, net of tax:


(in millions)	Foreign Currency Translation		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, 2022	$	2	$	(33)	$	33	$	2
Net unrealized gain (loss)	(3)		10		65		72
Reclassifications to net income	—		2		(44)		(42)
Net current period other comprehensive income (loss)	(3)		11		21		30
Balance as of September 30, 2023	$	(1)	$	(22)	$	54	$	31


(in millions)	Foreign Currency Translation		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)	(102)		(38)		254		114
Reclassifications to net income	—		1		(100)		(99)
Net current period other comprehensive income (loss)	(102)		(37)		154		15
Balance as of September 30, 2022	$	(89)	$	(41)	$	228	$	98

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	September 30, 2023		December 31, 2022
Senior Unsecured	September 2016	September 2023	2.50%	$	—	$	749
Senior Unsecured	September 2020	September 2023	0.75%	—		1,498
Senior Unsecured	March 2014	April 2024	3.70%	1,749		1,748
Senior Unsecured	November 2014	February 2025	3.50%	1,749		1,748
Senior Unsecured	September 2015	March 2026	3.65%	2,744		2,742
Senior Unsecured	September 2016	March 2027	2.95%	1,248		1,247
Senior Unsecured	September 2020	October 2027	1.20%	747		747
Senior Unsecured	September 2020	October 2030	1.65%	994		993
Senior Unsecured	September 2023	October 2033	5.25%	992		—
Senior Unsecured	September 2015	September 2035	4.60%	993		993
Senior Unsecured	September 2016	September 2036	4.00%	743		742
Senior Unsecured	September 2020	October 2040	2.60%	988		988
Senior Unsecured	December 2011	December 2041	5.65%	996		996
Senior Unsecured	March 2014	April 2044	4.80%	1,737		1,736
Senior Unsecured	November 2014	February 2045	4.50%	1,734		1,733
Senior Unsecured	September 2015	March 2046	4.75%	2,222		2,221
Senior Unsecured	September 2016	March 2047	4.15%	1,729		1,728
Senior Unsecured	September 2020	October 2050	2.80%	1,478		1,477
Senior Unsecured	September 2023	October 2053	5.55%	988		—
Total senior unsecured notes				23,830		24,088
Liability related to future royalties				1,152		1,141
Total debt, net				24,982		25,229
Less: Current portion of long-term debt and other obligations, net				1,793		2,273
Total Long-term debt, net				$	23,189	$	22,957

Senior Unsecured Notes

In September 2023, we issued $2.0 billion aggregate principal amount of senior unsecured notes in a registered offering consisting of $1.0 billion principal amount of 5.25% senior unsecured notes due October 2033 and $1.0 billion principal amount of 5.55% senior unsecured notes due October 2053. These notes may be redeemed at our option at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum, as determined by an independent investment banker, of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the Treasury Rate, plus a make-whole premium as defined in the indenture. The senior unsecured fixed rate notes also have a par call feature, exercisable at our option, to redeem the notes at par in whole, or in part, on dates ranging from three to six months prior to maturity. In each case, accrued and unpaid interest is also required to be redeemed to the date of redemption.

In September 2023, we repaid at maturity $2.25 billion of principal balance related to our senior unsecured notes due September 2023.

We are required to comply with certain covenants under our note indentures governing our senior unsecured notes. As of September 30, 2023, we were not in violation of any covenants.

Revolving Credit Facility

As of September 30, 2023 and December 31, 2022, 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. Certain significant matters 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 recorded an accrual of $525 million in the second quarter of 2023 in Other current liabilities on our Condensed Consolidated Balance Sheets for settlements with certain plaintiffs in the HIV antitrust litigation, which we paid in the second half of 2023. We did not have any other material accruals for the matters described below as of September 30, 2023.

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 FTC and tenofovir disoproxil fumarate (“TDF”) or 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 lawsuit against the U.S. federal government in the U.S. Court of Federal Claims (“CFC”), alleging breach of three material transfer agreements (“MTAs”) related to the research underlying the HHS Patents and two clinical trial agreements (“CTAs”) by the U.S. Centers for Disease Control and Prevention related to PrEP research. A trial for the bifurcated portion of the lawsuit in the CFC was held in June 2022, and in November 2022, the CFC determined that the government breached the MTAs. The CFC also made findings of fact relating to the CTAs but declined to issue a decision on breach of the CTAs at least until after trial in the District Court. In May 2023, the District Court held a trial regarding the government’s patent infringement claims, and the jury rendered a full defense verdict in favor of Gilead, finding that the asserted claims of the HHS Patents are invalid and not infringed. The government has filed post-trial motions, and we expect the District Court to issue a decision by January 2024. In October 2023, oral argument regarding the remaining CTA liability decision took place in the CFC. Although we cannot predict with certainty the ultimate outcome of each of these litigation matters, we believe that the U.S. federal government breached its contracts with Gilead, 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 separate trial at the CFC to determine the damages Gilead is owed based on the government’s breach has yet to be scheduled.

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 products 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.

In October 2021, we received a letter from Lupin Ltd. (“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 and Janssen Products, L.P., filed a patent infringement lawsuit against Lupin as co-plaintiffs in the U.S. District Court of Delaware. In September 2022, we received a letter from Apotex Inc. and Apotex Corp. (“Apotex”) stating that they have submitted an ANDA for a generic version of Symtuza. In October 2022, we, along with Janssen and Janssen Products, L.P., filed a patent infringement lawsuit against Apotex as co-plaintiffs in the U.S. District Court of Delaware. The cases against Lupin and Apotex have been consolidated into a single trial scheduled for May 2024. We separately filed an additional lawsuit against Apotex asserting infringement of two additional patents in the same court, which has been resolved.

Starting in March 2022, we received letters from Lupin, Laurus Labs (“Laurus”) and Cipla Ltd. (“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 filed a lawsuit against Lupin, Laurus and Cipla in May 2022 in the U.S. District Court of Delaware, and intend to enforce and defend our intellectual property. Trial has been scheduled for December 2024.

In June 2023, we received a letter from Apotex indicating that it has submitted an ANDA to FDA requesting permission to market and manufacture a generic version of Genvoya. In July 2023, we filed a patent infringement lawsuit against Apotex in the U.S. District Court of Delaware, and intend to enforce and defend our intellectual property. This case has been consolidated with the Symtuza matters discussed above, and a trial has been scheduled for May 2024.

Antitrust and Consumer Protection

We, along with Bristol-Myers Squibb Company (“BMS”), Johnson & Johnson, Inc. (“Johnson & Johnson”), and Teva Pharmaceutical Industries Ltd. (“Teva”) 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 direct purchasers consisting largely of wholesalers and indirect or end-payor purchasers, including health insurers and individual patients. Plaintiffs seek damages, permanent injunctive relief and other relief. In the second half of 2021 and first half of 2022, several plaintiffs consisting of retail pharmacies, individual health plans and United Healthcare, filed separate lawsuits effectively opting out of the class action cases, asserting claims that are substantively the same as the classes. These cases have been coordinated with the class actions. In March 2023, the District Court granted our motion to hold separate trials as to (i) the allegations against us and Teva seeking monetary damages relating to Truvada and Atripla (“Phase I”) and (ii) the allegations against us and, in part, Johnson & Johnson, seeking monetary damages and injunctive relief relating to Complera (“Phase II”). In May 2023, we settled claims with the direct purchaser class and the retailer opt-out plaintiffs for $525 million, which we paid in the second half of 2023. The settlement agreements are not an admission of liability or fault by us, and are subject to a number of other conditions including, with respect to the preliminary settlement agreement between us and the direct purchaser class, court approval. From May 2023 through June 2023, a jury trial was held on the remaining plaintiffs’ Phase I allegations. The jury returned a complete verdict in Gilead’s favor. Trial on the Phase II claims has not yet been scheduled. While we believe the Phase II claims are without merit, we cannot predict the ultimate outcome. If the plaintiffs are successful in their Phase II claims, we could be required to pay monetary damages or could be subject to permanent injunctive relief in favor of the plaintiffs.

In January 2022, we, along with BMS and Janssen Products, L.P., were named as defendants in a lawsuit filed in the Superior Court of the State of California, County of San Mateo, by Aetna, Inc. on behalf of itself and its affiliates and subsidiaries that effectively opts the Aetna plaintiffs out of the above class actions. The allegations are substantively the same as those in the class actions. The Aetna plaintiffs seek damages, permanent injunctive relief and other relief.

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, permanent injunctive relief 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 and Missouri, involve more than 25,000 active plaintiffs. Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss. The first bellwether trial in California state court was scheduled to begin in October 2022, but is currently stayed while the California First District Court of Appeal considers the merits of plaintiffs’ theories of liability. The first bellwether trial in California federal court is scheduled to begin in April 2024. 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 lawsuit seeks all available relief under these statutes.

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. This case was stayed in September 2021, which was lifted in April 2023.

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.

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 financial position, results of operations or cash flows.

11. EARNINGS PER SHARE

The following table shows the calculation of basic and diluted earnings per share attributable to Gilead:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in millions, except per share amounts)	2023		2022		2023		2022
Net income attributable to Gilead	$	2,180	$	1,789	$	4,236	$	2,952
Shares used in basic earnings per share attributable to Gilead calculation	1,248		1,255		1,249		1,255
Dilutive effect of stock options and equivalents	8		6		10		5
Shares used in diluted earnings per share attributable to Gilead calculation	1,257		1,261		1,259		1,261

Basic earnings per share attributable to Gilead	$	1.75	$	1.43	$	3.39	$	2.35
Diluted earnings per share attributable to Gilead	$	1.73	$	1.42	$	3.37	$	2.34

Potential shares of common stock excluded from the computation of diluted earnings per share attributable to Gilead because their effect would have been antidilutive were 6 million and 4 million for the three and nine months ended September 30, 2023, respectively, and 17 million for the three and nine months ended September 30, 2022.

12. INCOME TAXES

The following table summarizes our Income tax expense:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except percentages)	2023			2022			2023			2022
Income before income taxes	$	2,318		$	2,432		$	5,206		$	3,783
Income tax expense	$	(146)		$	(646)		$	(1,010)		$	(850)
Effective tax rate	6.3		%	26.6		%	19.4		%	22.5		%

Our effective income tax rate of 6.3% for the three months ended September 30, 2023 was lower than the U.S. federal statutory rate of 21% primarily due to a decrease in unrecognized tax benefits as a result of reaching agreement with a tax authority on certain tax positions.

Our effective income tax rate of 19.4% for the nine months ended September 30, 2023 was lower than the U.S. federal statutory rate of 21% primarily due to the above mentioned reason for the three months ended September 30, 2023, partially offset by remeasurement of certain deferred tax liabilities related to acquired intangible assets and non-deductible acquired IPR&D expenses recorded associated with our acquisitions of XinThera and Tmunity.

Our effective income tax rates of 26.6% and 22.5% for the three and nine months ended September 30, 2022, respectively, were higher than the U.S. federal statutory rate of 21% primarily due to a non-deductible acquired IPR&D charge recorded associated with our acquisition of MiroBio.

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 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.

We believe that it is reasonably possible that our unrecognized tax benefits may further decrease by approximately $400 million in the next 12 months due to potential resolutions with a tax authority.

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