Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to provide material information around events and uncertainties known to management that are relevant to an assessment of the financial condition and results of operations of Gilead and should therefore be read in conjunction with our audited Consolidated Financial Statements and the related notes thereto and other disclosures included as part of our Annual Report on Form 10-K for the year ended December 31, 2023 and our unaudited Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2024 and the related notes thereto and other disclosures (including the disclosures under Part II, Item 1A. Risk Factors) included in this Quarterly Report on Form 10-Q.

Management Overview

Gilead Sciences, Inc. (including its consolidated subsidiaries, referred to as “Gilead,” the “company,” “we,” “our” or “us”) is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people. We are committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis, coronavirus disease 2019 (“COVID-19”) and cancer. We operate in more than 35 countries worldwide, with headquarters in Foster City, California.

Key Business Updates

The following updates are based on select press releases issued since the filing of our Annual Report on Form 10-K for the year ended December 31, 2023. Readers are encouraged to review all press releases available on our website at www.gilead.com. The content on the referenced website does not constitute a part of and is not incorporated by reference into this Quarterly Report on Form 10-Q.

Virology

• Announced results of PURPOSE 2, the second Phase 3 study of twice-yearly lenacapavir for HIV prevention, with data presented at the HIV Research for Prevention Conference. In the lenacapavir group, 99.9% of participants did not acquire HIV infection, with two incident cases among 2,179 participants. Lenacapavir reduced HIV infections by 96% compared to background HIV incidence in cisgender men and gender-diverse people, and additionally demonstrated superiority to daily Truvada (89% relative risk reduction). Lenacapavir was generally well-tolerated and no significant or new safety concerns were identified. Gilead expects to file for U.S. Food and Drug Administration (“FDA”) approval before the end of the year, with global filings to follow. The use of lenacapavir for the prevention of HIV is investigational.

• Received approval from FDA to update Biktarvy’s label with additional data reinforcing the safety and efficacy profile to treat pregnant people with HIV-1 with suppressed viral loads.

• Received approval from FDA to expand Biktarvy’s label to include treatment of people with HIV who have suppressed viral loads with known or suspected M184V/I resistance.

• Received approval from FDA to expand the indication for Vemlidy to include treatment of chronic hepatitis B virus (“HBV”) in children six years and older who weigh at least 25 kg with compensated liver disease.

Oncology

• Announced plans to voluntarily withdraw the U.S. accelerated approval of Trodelvy for use in pre-treated adult patients with locally advanced or metastatic urothelial cancer, following the results of the Phase 3 TROPiCS-04 trial announced in May 2024.

• Announced a research collaboration, option and license agreement with Merus N.V. to discover novel antibody-based trispecific T-cell engagers in oncology.

• Entered into an exclusive license agreement with Xilio Therapeutics, Inc. (“Xilio”) to develop and commercialize Xilio’s tumor-activated IL-12 program, including investigational candidate XTX301 in advanced solid tumors.

Inflammation

• Received accelerated approval from FDA for Livdelzi (seladelpar) for the treatment of primary biliary cholangitis in combination with ursodeoxycholic acid (“UDCA”) in adults who have had an inadequate response to UDCA, or as monotherapy in patients unable to tolerate UDCA.

• Entered into an amended license agreement featuring the buy-out of global seladelpar royalties from Janssen Pharmaceutica NV (“Janssen”) for $320 million.

• Completed the acquisition of CymaBay Therapeutics, Inc. (“CymaBay”), for $4.3 billion in total equity value, or $3.9 billion net cash paid, adding investigational candidate seladelpar for the treatment of primary biliary cholangitis to Gilead’s Liver Disease portfolio.

Other

• Announced a strategic collaboration with Genesis Therapeutics, Inc. (“Genesis”) to discover and develop novel small molecule therapies across multiple targets using Genesis’ artificial intelligence platform.

Key Financial Results

						Three Months Ended																		Nine Months Ended
						September 30,																		September 30,
(in millions, except percentages and per share amounts)						2024						2023						Change						2024						2023						Change
Total revenues						$	7,545					$	7,051					7		%				$	21,185					$	20,002					6		%
Net income (loss) attributable to Gilead						$	1,253					$	2,180					(43)		%				$	(1,303)					$	4,236					NM
Diluted earnings (loss) per share attributable to Gilead						$	1.00					$	1.73					(42)		%				$	(1.04)					$	3.37					NM

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NM - Not Meaningful

Total revenues increased 7% to $7.5 billion for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher product sales in HIV.

Total revenues increased 6% to $21.2 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to higher product sales in HIV, Oncology and Liver Disease.

Net income attributable to Gilead was $1.3 billion and diluted earnings per share attributable to Gilead was $1.00 for the three months ended September 30, 2024, compared to net income attributable to Gilead of $2.2 billion and diluted earnings per share attributable to Gilead of $1.73 for the same period in 2023. The decrease was primarily due to:

• A pre-tax in-process research and development (“IPR&D”) partial impairment charge of $1.8 billion related to assets acquired by Gilead from Immunomedics, Inc. (“Immunomedics”) in 2020 (see further information in “Results of Operations; In-Process Research and Development Impairment” below); and

• Higher acquired IPR&D expenses; partially offset by

• Higher revenues;

• Lower income tax expense; and

• Higher net unrealized gains on equity securities.

Net loss attributable to Gilead was $1.3 billion and diluted loss per share attributable to Gilead was $1.04 for the nine months ended September 30, 2024, compared to net income attributable to Gilead of $4.2 billion and diluted earnings per share attributable to Gilead of $3.37 for the same period in 2023. The decrease was primarily due to:

• A pre-tax IPR&D partial impairment charge of $4.2 billion related to assets acquired by Gilead from Immunomedics in 2020 (see further information in “Results of Operations; In-Process Research and Development Impairment” below); and

• Higher acquired IPR&D expenses, primarily $3.9 billion related to the acquisition of CymaBay; partially offset by

• Lower income tax expense;

• Higher revenues; and

• Lower net unrealized losses on equity securities.

Results of Operations

Revenues

The following table summarizes the period-over-period changes in our Total revenues:

						Three Months Ended September 30, 2024																								Three Months Ended September 30, 2023
(in millions)						U.S.						Europe						Rest of World						Total						U.S.						Europe						Rest of World						Total						Change
Product sales:
HIV
Biktarvy						$	2,826					$	375					$	272					$	3,472					$	2,504					$	313					$	268					$	3,085					13		%
Descovy						534						24						28						586						460						25						26						511						15		%
Genvoya						384						44						21						449						433						47						23						503						(11)		%
Odefsey						248						69						9						326						257						74						11						343						(5)		%
Symtuza - Revenue share(1)						103						33						3						139						96						32						3						131						6		%
Other HIV(2)						65						26						9						100						56						28						9						94						7		%
Total HIV						4,161						570						342						5,073						3,807						519						341						4,667						9		%
Liver Disease
Sofosbuvir/Velpatasvir(3)						222						67						96						385						215						76						85						377						2		%
Vemlidy						126						11						95						232						112						9						106						228						2		%
Other Liver Disease(4)						45						54						17						116						49						33						20						102						14		%
Total Liver Disease						393						132						207						733						376						119						211						706						4		%
Veklury						393						81						219						692						258						65						313						636						9		%
Oncology
Cell Therapy
Tecartus						63						29						6						98						64						27						4						96						2		%
Yescarta						145						182						60						387						197						154						40						391						(1)		%
Total Cell Therapy						208						211						66						485						261						181						45						486						—		%
Trodelvy						226						80						26						332						201						62						21						283						17		%
Total Oncology						433						291						92						816						462						243						65						769						6		%
Other
AmBisome						6						71						52						130						12						63						39						115						13		%
Other(5)						47						8						16						71						69						9						23						101						(29)		%
Total Other						53						80						68						201						82						72						62						216						(7)		%
Total product sales						5,433						1,154						928						7,515						4,985						1,017						992						6,994						7		%
Royalty, contract and other revenues						17						13						1						30						32						23						1						56						(46)		%
Total revenues						$	5,450					$	1,167					$	929					$	7,545					$	5,017					$	1,040					$	993					$	7,051					7		%

						Nine Months Ended September 30, 2024																								Nine Months Ended September 30, 2023
(in millions)						U.S.						Europe						Rest of World						Total						U.S.						Europe						Rest of World						Total						Change
Product sales:
HIV
Biktarvy						$	7,726					$	1,110					$	814					$	9,649					$	7,104					$	920					$	717					$	8,741					10		%
Descovy						1,339						75						82						1,496						1,314						75						86						1,475						1		%
Genvoya						1,088						138						66						1,292						1,305						157						81						1,544						(16)		%
Odefsey						705						217						30						952						754						223						33						1,011						(6)		%
Symtuza - Revenue share(1)						338						101						9						448						278						101						10						390						15		%
Other HIV(2)						190						96						36						322						192						91						38						321						—		%
Total HIV						11,386						1,737						1,038						14,160						10,949						1,568						965						13,482						5		%
Liver Disease
Sofosbuvir/Velpatasvir(3)						737						230						299						1,266						643						250						266						1,159						9		%
Vemlidy						338						33						328						699						295						28						322						645						8		%
Other Liver Disease(4)						134						148						55						337						113						112						64						289						17		%
Total Liver Disease						1,210						411						682						2,302						1,051						390						652						2,093						10		%
Veklury						784						204						473						1,461						607						227						630						1,465						—		%
Oncology
Cell Therapy
Tecartus						181						102						22						305						179						83						11						272						12		%
Yescarta						502						509						170						1,181						624						408						99						1,130						4		%
Total Cell Therapy						683						611						192						1,485						802						491						109						1,402						6		%
Trodelvy						655						217						88						960						551						169						44						764						26		%
Total Oncology						1,338						828						280						2,446						1,354						660						153						2,167						13		%
Other
AmBisome						37						210						176						424						39						192						150						381						11		%
Other(5)						203						26						52						281						197						31						49						277						1		%
Total Other						241						236						228						705						236						224						199						658						7		%
Total product sales						14,958						3,416						2,700						21,074						14,196						3,069						2,599						19,864						6		%
Royalty, contract and other revenues						66						43						2						111						57						77						4						138						(19)		%
Total revenues						$	15,024					$	3,459					$	2,703					$	21,185					$	14,253					$	3,146					$	2,603					$	20,002					6		%

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(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, Complera/Eviplera, Emtriva, Sunlenca, Stribild, Truvada and Tybost.

(3) Includes Epclusa and the authorized generic version of Epclusa sold by Gilead’s separate subsidiary, Asegua Therapeutics LLC (“Asegua”).

(4) Includes ledipasvir/sofosbuvir (Harvoni and the authorized generic version of Harvoni sold by Asegua), Hepcludex, Hepsera, Livdelzi, Sovaldi, Viread and Vosevi.

(5) Includes Cayston, Jyseleca, Letairis, Ranexa and Zydelig.

HIV

HIV product sales increased 9% to $5.1 billion for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher average realized price, mainly due to shifts in channel mix, and higher demand, partially offset by inventory dynamics. In particular:

• Biktarvy sales increased primarily due to higher demand, including patients switching from Genvoya and other Gilead HIV products, and higher average realized price, partially offset by lower inventory build in the distribution channel.

• Descovy sales increased primarily due to higher demand and higher average realized price, partially offset by lower inventory build in the distribution channel.

HIV product sales increased 5% to $14.2 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to higher demand and higher average realized price, driven mainly by higher net pricing partially offset by unfavorable channel mix in the U.S. In particular:

• Biktarvy sales increased primarily due to higher demand, including patients switching from Genvoya and other Gilead HIV products, and higher average realized price.

• Descovy sales increased primarily due to higher demand, partially offset by lower average realized price.

Liver Disease

Liver Disease product sales increased 4% to $733 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher demand in products for chronic hepatitis C virus (“HCV”), HBV and, in Europe, chronic hepatitis D virus (“HDV”), partially offset by lower average realized price.

Liver Disease product sales increased 10% to $2.3 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to higher demand in products for HCV, HBV and, in Europe, HDV, as well as higher average realized price.

Veklury

Veklury product sales increased 9% to $692 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily driven by increased rates of COVID-19-related hospitalizations, particularly in the U.S.

Veklury product sales were $1.5 billion and remained relatively flat for the nine months ended September 30, 2024, compared to the same period in 2023.

Oncology

Cell Therapy

Cell Therapy product sales were $485 million and remained relatively flat for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• Decreased Yescarta sales primarily due to lower demand from higher in- and out-of-class competition in the U.S. partially offset by higher demand for the treatment of relapsed or refractory (“R/R”) large B-cell lymphoma (“LBCL”) outside the U.S.; and

• Increased Tecartus sales primarily due to higher demand for the treatment of R/R adult acute lymphoblastic leukemia (“ALL”).

Cell Therapy product sales increased 6% to $1.5 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• Increased Yescarta sales primarily due to higher demand for the treatment of R/R LBCL outside the U.S., partially offset by lower demand from higher in- and out-of-class competition in the U.S.; and

• Increased Tecartus sales primarily due to higher demand for the treatment of R/R ALL.

Trodelvy

Trodelvy product sales increased 17% to $332 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to higher demand across all regions.

Trodelvy product sales increased 26% to $960 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to higher demand across all regions.

Other

Other product sales decreased 7% to $201 million for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to lower demand for Letairis and other products, partially offset by higher demand for AmBisome.

Other product sales increased 7% to $705 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to higher average realized price and higher demand for AmBisome as well as higher average realized price and higher demand for Letairis related to a temporary shortage of generics in the market.

Foreign Currency Exchange Impact

We generally face exposure to movements in foreign currency exchange rates, primarily in the Euro. We use foreign currency exchange contracts to hedge a portion of our foreign currency exposures.

Approximately 26% and 27% of our product sales were denominated in foreign currencies during the three months ended September 30, 2024 and 2023, respectively. Foreign currency exchange, net of hedges, had an unfavorable impact on our total product sales of $56 million for the three months ended September 30, 2024, based on a comparison using foreign currency exchange rates from the three months ended September 30, 2023.

Approximately 27% of our product sales were denominated in foreign currencies during the nine months ended September 30, 2024 and 2023. Foreign currency exchange, net of hedges, had an unfavorable impact on our total product sales of $172 million for the nine months ended September 30, 2024, based on a comparison using foreign currency exchange rates from the nine months ended September 30, 2023.

Costs and Expenses

The following table summarizes the period-over-period changes in our costs and expenses:

						Three Months Ended																		Nine Months Ended
						September 30,																		September 30,
(in millions, except percentages)						2024						2023						Change						2024						2023						Change
Cost of goods sold						$	1,574					$	1,565					1		%				$	4,670					$	4,408					6		%
Product gross margin						79.1		%				77.6		%				144 bps						77.8		%				77.8		%				3 bps
Research and development expenses						$	1,395					$	1,457					(4)		%				$	4,266					$	4,310					(1)		%
Acquired in-process research and development expenses						$	505					$	91					NM						$	4,674					$	808					NM
In-process research and development impairment						$	1,750					$	—					NM						$	4,180					$	—					NM
Selling, general and administrative expenses						$	1,433					$	1,315					9		%				$	4,184					$	4,482					(7)		%

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NM - Not Meaningful

Product Gross Margin

Product gross margin increased to 79.1% for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to fixed intangible asset amortization expenses over a higher revenue base and changes in product mix.

Product gross margin was 77.8% and remained relatively flat for the nine months ended September 30, 2024, compared to the same period in 2023.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of personnel costs including salaries, benefits and stock-based compensation expense, infrastructure, materials and supplies and other support costs, research and clinical studies performed by contract research organizations and our collaboration partners and other outside services.

We manage our R&D expenses by identifying the R&D activities we expect to be performed during a given period and then prioritizing efforts based on scientific data, probability of successful technical development and regulatory approval, market potential, available human and capital resources and other considerations. We regularly review our R&D activities based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities that we believe will best support the long-term growth of our business. We do not track total R&D expenses by product candidate, therapeutic area or development phase.

The following table provides a breakout of expenses by major cost type:

						Three Months Ended												Nine Months Ended
						September 30,												September 30,
(in millions)						2024						2023						2024						2023
Personnel, infrastructure and other support costs						$	808					$	776					$	2,601					$	2,382
Clinical studies and other costs						587						681						1,665						1,928
Total						$	1,395					$	1,457					$	4,266					$	4,310

Research and development expenses decreased 4% to $1.4 billion for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• Clinical studies and other costs decreases mainly related to timing of clinical activities, including the wind-down of studies for magrolimab and obeldesivir for treatment of COVID-19; partially offset by

• Personnel, infrastructure and other support costs increases mainly related to higher compensation expenses.

Research and development expenses decreased 1% to $4.3 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• Clinical studies and other costs decreases related to timing of clinical activities, including the wind-down of studies for magrolimab and obeldesivir for treatment of COVID-19 and higher R&D reimbursements, which was higher than increases from the progression of other studies; partially offset by

• Personnel, infrastructure and other support costs increases mainly related to higher compensation expenses, restructuring costs of $68 million, and stock-based compensation expenses of $67 million and other integration costs related to the acquisition of CymaBay.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses are recorded when incurred and reflect costs of externally-developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use, including upfront and milestone payments related to various collaborations and the costs of rights to IPR&D projects.

Acquired in-process research and development expenses were $505 million and $4.7 billion for the three and nine months ended September 30, 2024, respectively, primarily related to the following transactions based on their respective period of occurrence:

• $68 million associated with the Arcellx, Inc. (“Arcellx”) collaboration for milestones met in August 2024;

• $47 million associated with the Tmunity Therapeutics, Inc. (“Tmunity”) acquisition for milestones met in August 2024;

• $320 million associated with the Janssen future royalty obligation extinguishment related to seladelpar in July 2024;

• $3.9 billion associated with the CymaBay acquisition in March 2024; and

• $100 million associated with the Arcus Biosciences, Inc. collaboration amendment in January 2024.

Acquired in-process research and development expenses were $91 million and $808 million for the three and nine months ended September 30, 2023, respectively, primarily related to the following transactions based on their respective period of occurrence:

• $56 million associated with the Tentarix Biotherapeutics Inc. collaboration entered into in August 2023;

• $170 million associated with the XinThera, Inc. acquisition in May 2023;

• $244 million associated with the Tmunity acquisition in February 2023; and

• $212 million associated with the Arcellx collaboration entered into in January 2023.

See Note 6. Acquisitions, Collaborations and Other Arrangements of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

In-Process Research and Development Impairment

As of December 31, 2023, approximately $5.9 billion was assigned to an indefinite-lived IPR&D intangible asset related to Trodelvy for metastatic non-small cell lung cancer (“NSCLC”). In addition to NSCLC, Trodelvy is being explored for potential investigational use in a range of tumor types where Trop-2 is highly expressed. Gilead’s clinical development program in metastatic NSCLC includes ongoing Phase 2 and registrational Phase 3 studies for Trodelvy as a first- or second-line indication.

In January 2024, we received data from our Phase 3 EVOKE-01 study of Trodelvy evaluating sacituzumab govitecan-hziy (“SG”) indicating that the study did not meet its primary endpoint of overall survival in previously treated metastatic NSCLC, thus triggering a review for potential impairment of the NSCLC IPR&D impairment asset. Based on our evaluation of the study results and all other data currently available, and in connection with the preparation of the financial statements for the first quarter, we performed an interim impairment test and determined that the revised estimated fair value of the NSCLC IPR&D intangible asset was below its carrying value. As a result, we recognized a partial impairment charge of $2.4 billion in In-process research and development impairment on our Condensed Consolidated Statements of Operations for the three months ended March 31, 2024.

In September 2024, based on discussions with regulators and external opinion leaders and the completed evaluation of the Phase 3 EVOKE-01 study data, we made a strategic decision to discontinue our clinical development program in metastatic NSCLC for Trodelvy in the second-line indication. This decision triggered a review for potential impairment of the NSCLC IPR&D intangible asset. Based on our evaluation, and in connection with the preparation of the financial statements for the third quarter, we performed an interim impairment test and determined that the revised estimated fair value of the NSCLC IPR&D intangible asset was below its carrying value. As a result, we recognized a partial impairment charge of $1.8 billion in In-process research and development impairment on our Condensed Consolidated Statements of Operations for the three months ended September 30, 2024, and including the first quarter impairment described above, the total In-process research and development impairment on our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2024 totaled $4.2 billion.

To arrive at the revised estimated fair value, we used a probability-weighted income approach that discounts expected future cash flows to present value, which requires the use of Level 3 fair value measurements and inputs, and requires the use of critical estimated inputs, including: revenues and operating profits related to the planned utilization of SG in NSCLC, which, include inputs such as addressable patient population, projected market share, treatment duration, and the life of the potential commercialized product; the probability of technical and regulatory success; the time and resources needed to complete the development and approval of SG in NSCLC; an appropriate discount rate based on the estimated weighted-average cost of capital for companies with profiles similar to our profile; and risks related to the viability of and potential alternative treatments in any future target markets. Our revised discounted cash flows for the March 31, 2024 fair value estimation primarily reflect the smaller addressable market that Trodelvy could serve among metastatic NSCLC patients and a delay in expected launch timing for second-line plus patients. Our revised discounted cash flows for the September 30, 2024 fair value estimation primarily reflect the removal of cash flows associated with second-line plus patients, and the remaining carrying value as of that date reflects Trodelvy’s opportunity as a combination therapy in first-line metastatic NSCLC patients supported by its ongoing Phase 3 clinical trial in this patient population. The revised estimated fair value of the NSCLC IPR&D intangible asset was $3.5 billion as of March 31, 2024 and $1.8 billion as of September 30, 2024.

If future events result in adverse changes in the key assumptions used in determining fair value, including the timing of product launches, information on the competitive landscape of treatments in this indication, changes to the probability of technical or regulatory success, failure to obtain anticipated regulatory approval or discount rate, among others, additional impairments may be recorded and could be material to our financial statements.

No IPR&D impairment charges were recorded during the three and nine months ended September 30, 2023.

Selling, General and Administrative Expenses

Selling, general and administrative expenses are recorded when incurred and consist primarily of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses, and other general and administrative costs related to sales and marketing, finance, human resources, legal and other administrative activities.

Selling, general and administrative expenses increased 9% to $1.4 billion for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• Higher commercial activities, including the launch of Livdelzi in the U.S.; and

• Higher corporate activities.

Selling, general and administrative expenses decreased 7% to $4.2 billion for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• A 2023 expense of $525 million for settlements with certain plaintiffs in HIV antitrust litigation which did not repeat in 2024; and

• A decrease in our allocation of the branded prescription drug fee; partially offset by

• Stock-based compensation expenses of $67 million and other integration costs related to the acquisition of CymaBay;

• Higher commercial activities, including the launch of Livdelzi in the U.S.; and

• Higher restructuring costs.

Interest Expense and Other (Income) Expense, Net

The following table summarizes the period-over-period changes in Interest expense and Other (income) expense, net:

						Three Months Ended																		Nine Months Ended
						September 30,																		September 30,
(in millions, except percentages)						2024						2023						Change						2024						2023						Change
Interest expense						$	238					$	232					2		%				$	728					$	692					5		%
Other (income) expense, net						$	(306)					$	72					NM						$	(41)					$	95					NM
(Gain) loss from equity securities, net						$	(258)					$	168					NM						$	148					$	356					(58)		%
Interest income						$	(52)					$	(106)					(50)		%				$	(196)					$	(274)					(28)		%
Other, net						$	4					$	10					(56)		%				$	7					$	13					(44)		%

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NM - Not Meaningful

Interest expense was $238 million and remained relatively flat for the three months ended September 30, 2024, compared to the same period in 2023.

Interest expense increased 5% to $728 million for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to a higher average interest rate on long-term debt, partially offset by lower debt balances.

See Note 9. Debt and Credit Facilities of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information on our long-term debt and related interest rates.

Favorable movements in Other (income) expense, net for the three months ended September 30, 2024, compared to the same period in 2023, primarily related to higher net gains from equity securities, partially offset by lower interest income due to lower average cash balances.

Favorable movements in Other (income) expense, net for the nine months ended September 30, 2024, compared to the same period in 2023, primarily related to lower net losses from equity securities, partially offset by lower interest income due to lower average cash balances.

Income Taxes

The following table summarizes the period-over-period changes in Income tax (benefit) expense:

						Three Months Ended																		Nine Months Ended
						September 30,																		September 30,
(in millions, except percentages)						2024						2023						Change						2024						2023						Change
Income (loss) before income taxes						$	956					$	2,318					$	(1,362)					$	(1,477)					$	5,206					$	(6,684)
Income tax (benefit) expense						$	(297)					$	146					$	(443)					$	(174)					$	1,010					$	(1,185)
Effective tax rate						(31.1)		%				6.3		%				(37.4)		%				11.8		%				19.4		%				(7.6)		%

Our effective tax rate decreased for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• A non-recurring tax benefit associated with a legal entity restructuring; and

• A decrease in state deferred tax liabilities associated with the $1.8 billion NSCLC IPR&D intangible asset impairment charge; partially offset by

• A decrease in unrecognized tax benefits as a result of negotiations with a tax authority in the three months ended September 30, 2023.

Our effective tax rate decreased for the nine months ended September 30, 2024, compared to the same period in 2023, primarily due to:

• The non-deductible acquired IPR&D expense recorded in connection with our first quarter 2024 acquisition of CymaBay; partially offset by

• A non-recurring tax benefit associated with a legal entity restructuring;

• A decrease in state deferred tax liabilities associated with the $4.2 billion NSCLC IPR&D intangible asset impairment charge; and

• Remeasurement of certain deferred tax liabilities related to acquired intangible assets in the nine months ended September 30, 2023.

Liquidity and Capital Resources

We regularly evaluate our liquidity and capital resources, including our access to external capital, so that we can adequately and efficiently finance our operations. We believe our existing capital resources, including cash and cash equivalents and our revolving credit facility, supplemented by cash flows generated from our operations, will be adequate to satisfy our capital needs for the foreseeable future.

Liquidity

Cash, cash equivalents and marketable debt securities were $5.0 billion and $8.4 billion as of September 30, 2024 and December 31, 2023, respectively. During the three months ended March 31, 2024, we sold all of our marketable debt securities and used the proceeds to partially fund our acquisition of CymaBay.

Cash and cash equivalents decreased by $1.0 billion from December 31, 2023 to September 30, 2024 due to the following cash flow activities:

						Nine Months Ended
(in millions)						September 30, 2024
Net cash provided by (used in):
Operating activities						$	7,853
Investing activities						$	(3,224)
Financing activities						$	(5,693)
Effect of exchange rate changes on cash and cash equivalents						$	15

Operating Activities

Net cash provided by operating activities for the nine months ended September 30, 2024 amounted to $7.9 billion, net of a $1.2 billion transition tax payment associated with the Tax Cuts and Jobs Acts of 2017. Refer to the Condensed Consolidated Statements of Cash Flows for additional information.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2024 primarily related to:

• $4.8 billion for acquisitions, including IPR&D, mainly related to $3.9 billion for the CymaBay acquisition; and

• Purchases of equity securities; partially offset by

• Proceeds from the liquidation of marketable debt securities.

Financing Activities

Net cash used in financing activities for the nine months ended September 30, 2024 primarily related to:

• $2.9 billion for dividend payments;

• $2.0 billion for repayment of debt and other obligations; and

• $800 million for common stock repurchases.

Capital Resources and Material Cash Requirements

A summary of our capital resources and material cash requirements is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. Other than as disclosed in the Liquidity section above and in Notes 4. Available-For-Sale Debt Securities and Equity Securities, 6. Acquisitions, Collaborations and Other Arrangements, 9. Debt and Credit Facilities, 10. Commitments and Contingencies and 12. Income Taxes of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no material changes to our capital resources and material cash requirements during the nine months ended September 30, 2024.

Subsequently, in November 2024, we announced that our Board of Directors declared a quarterly dividend of $0.77 per share of common stock for the fourth quarter of 2024. The dividend is payable on December 30, 2024, to stockholders of record at the close of business on December 13, 2024. Future dividends will be subject to Board approval.

Critical Accounting Estimates

A summary of our critical accounting estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023. Other than as disclosed in Notes 2. Revenues, 7. Intangible Assets, 10. Commitments and Contingencies and 12. Income Taxes of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting estimates during the nine months ended September 30, 2024.