UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
For the quarterly period ended March 31, 2023
or
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
For the transition period from ________ to ________

Commission File No. 0-19731
 
GILEAD SCIENCES, INC.


(Exact Name of Registrant as Specified in Its Charter)

Delaware94-3047598
(State or Other Jurisdiction of
Incorporation or Organization)
(IRS Employer
Identification No.)
333 Lakeside Drive, Foster City, California94404
(Address of principal executive offices)(Zip Code)
333 Lakeside Drive, Foster City, California 94404
(Address of principal executive offices) (Zip Code)
650-574-3000
(Registrant’s Telephone Number, Including Area CodeCode)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value, $0.001 per shareGILDThe Nasdaq Global Select Market
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ýxNo ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ýxNo ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ý xAccelerated filer ¨Non-accelerated filer ¨    (Do not check if a smaller reporting company)
Smaller reporting company ¨ ☐Emerging growth company ¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨☐No ýx
Number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of October 31, 2017: 1,306,268,996
April 28, 2023: 1,247,352,689




GILEAD SCIENCES, INC.
INDEX

3
PART I.
Item 1.
Condensed Consolidated Financial Statements
23
23
34
45
6
57
68
2627
3432
3432
3633
3633
3633
5346
5446
5446
5446
5446
5950


We own or have rights to various trademarks copyrights and trade names used in our business, including the following: GILEAD®, GILEAD SCIENCES®, KITE™, AMBISOME®, ATRIPLA®, BIKTARVY®, CAYSTON®, COMPLERA®, DESCOVY®, DESCOVY FOR PREP®, EMTRIVA®, EPCLUSA®, EVIPLERA®, GENVOYA®, HARVONI®, HEPCLUDEX®, HEPSERA®, JYSELECA®, LETAIRIS®, ODEFSEY®, RANEXA®, SOVALDI®, STRIBILD®, SUNLENCA®, TECARTUS®, TRODELVY®, TRUVADA®, TRUVADA FOR PREP®, TYBOST®, VEKLURY®, VEMLIDY®, VIREAD®, VITEKTA®, VOLIBRIS®, VOSEVI®, YESCARTATM® and ZYDELIG®. ATRIPLA® is a registered trademark of Bristol-Myers Squibb & Gilead Sciences, LLC. LEXISCAN® is a registered trademark of Astellas U.S. LLC. MACUGEN® is a registered trademark of Eyetech, Inc. SUSTIVA® is a registered trademark of Bristol-Myers Squibb Pharma Company. TAMIFLU® is a registered trademark of Hoffmann-La Roche Inc. This report also includes otherrefers to trademarks, service marks and trade names of other companies.companies, which are the property of their respective owners.

Certain amounts and percentages in this Quarterly Report on Form 10-Q may not sum or recalculate due to rounding.




PART I.FINANCIAL INFORMATION
This Quarterly Report on Form 10-Q, including Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 1A. Risk Factors, contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Words such as “expect,” “anticipate,” “target,” “goal,” “project,” “hope,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “could,” “should,” “might,” “forecast” and variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements other than statements of historical fact are forward-looking statements, including statements regarding overall trends; operating cost and revenue trends; liquidity and capital needs; plans and expectations with respect to products, product candidates, corporate strategy, business and operations, financial projections and the use of capital; collaboration and licensing arrangements; patent protection and estimated loss of exclusivity for our products and product candidates; ongoing litigation and investigation matters; statements regarding the anticipated future impact on our business of the coronavirus disease 2019 (“COVID-19”); and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions.
We have based these forward-looking statements on our current expectations about future events. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those identified in Part II, Item 1A. Risk Factors. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof unless otherwise specified. Except as required under federal securities laws and the rules and regulations of U.S. Securities and Exchange Commission, we do not undertake, and specifically decline, any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise. In evaluating our business, you should carefully consider the risks described in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q. Any of the risks contained herein could materially and adversely affect our business, results of operations and financial condition.
2

PART I.    FINANCIAL INFORMATION
Item 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 1.    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in millions, except per share amounts)
(in millions, except per share amounts)March 31, 2023December 31, 2022
Assets  
Current assets:  
Cash and cash equivalents$4,936 $5,412 
Short-term marketable debt securities936 973 
Accounts receivable, net4,162 4,777 
Inventories1,576 1,507 
Prepaid and other current assets1,846 1,774 
Total current assets13,456 14,443 
Property, plant and equipment, net5,479 5,475 
Long-term marketable debt securities1,327 1,245 
Intangible assets, net28,348 28,894 
Goodwill8,314 8,314 
Other long-term assets4,952 4,800 
Total assets$61,876 $63,171 
Liabilities and Stockholders’ Equity  
Current liabilities:  
Accounts payable$627 $905 
Accrued rebates3,477 3,479 
Other current liabilities4,140 4,580 
Current portion of long-term debt and other obligations, net2,283 2,273 
Total current liabilities10,528 11,237 
Long-term debt, net22,956 22,957 
Long-term income taxes payable3,775 3,916 
Deferred tax liability2,401 2,673 
Other long-term obligations1,277 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; 1,248 and 1,247 shares issued and outstanding, respectively1 1 
Additional paid-in capital5,793 5,550 
Accumulated other comprehensive income (loss)(20)2 
Retained earnings15,223 15,687 
Total Gilead stockholders’ equity20,997 21,240 
Noncontrolling interest(58)(31)
Total stockholders’ equity20,939 21,209 
Total liabilities and stockholders’ equity$61,876 $63,171 

 September 30, 2017 December 31, 2016
Assets   
Current assets:   
Cash and cash equivalents$11,508
 $8,229
Short-term marketable securities16,879
 3,666
Accounts receivable, net of allowances of $595 at September 30, 2017 and $763 at December 31, 20164,122
 4,514
Inventories1,144
 1,587
Prepaid and other current assets1,664
 1,592
Total current assets35,317
 19,588
Property, plant and equipment, net3,100
 2,865
Long-term deferred tax assets1,147
 1,259
Long-term marketable securities12,973
 20,485
Intangible assets, net8,342
 8,971
Goodwill1,172
 1,172
Other long-term assets2,611
 2,637
Total assets$64,662
 $56,977
Liabilities and Stockholders’ Equity 
  
Current liabilities: 
  
Accounts payable$696
 $1,206
Accrued government and other rebates4,672
 5,021
Other accrued liabilities2,482
 2,991
Current portion of long-term debt and other obligations, net

1,747
 —
Total current liabilities9,597
 9,218
Long-term debt, net27,515
 26,346
Long-term income taxes payable2,037
 1,753
Other long-term obligations259
 297
Commitments and contingencies (Note 9)

 

Stockholders’ equity: 
  
Preferred stock, par value $0.001 per share; 5 shares authorized; none outstanding—
 —
Common stock, par value $0.001 per share; shares authorized of 5,600 at September 30, 2017 and December 31, 2016; shares issued and outstanding of 1,307 at September 30, 2017 and 1,310 at December 31, 20161
 1
Additional paid-in capital906
 454
Accumulated other comprehensive income249
 278
Retained earnings23,689
 18,154
Total Gilead stockholders’ equity24,845
 18,887
Noncontrolling interest409
 476
Total stockholders’ equity25,254
 19,363
Total liabilities and stockholders’ equity$64,662
 $56,977


See accompanying notes.

3


GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in millions, except per share amounts)
 Three Months Ended
March 31,
(in millions, except per share amounts)20232022
Revenues:
Product sales$6,306 $6,534 
Royalty, contract and other revenues46 56 
Total revenues6,352 6,590 
Costs and expenses:
Cost of goods sold1,401 1,424 
Research and development expenses1,447 1,178 
Acquired in-process research and development expenses481 8 
In-process research and development impairment— 2,700 
Selling, general and administrative expenses1,319 1,083 
Total costs and expenses4,647 6,393 
Operating income1,705 197 
Interest expense(230)(238)
Other income (expense), net(174)(111)
Income (loss) before income taxes1,300 (152)
Income tax benefit (expense)(316)164 
Net income985 12 
Net loss attributable to noncontrolling interest26 7 
Net income attributable to Gilead$1,010 $19 
Basic earnings per share attributable to Gilead$0.81 $0.02 
Shares used in basic earnings per share attributable to Gilead calculation1,248 1,255 
Diluted earnings per share attributable to Gilead$0.80 $0.02 
Shares used in diluted earnings per share attributable to Gilead calculation1,261 1,262 

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Revenues:        
Product sales $6,402
 $7,405
 $19,825
 $22,737
Royalty, contract and other revenues 110
 95
 333
 333
Total revenues 6,512
 7,500
 20,158
 23,070
Costs and expenses:        
Cost of goods sold 1,032
 1,129
 3,115
 3,186
Research and development expenses 789
 1,141
 2,584
 3,890
Selling, general and administrative expenses 879
 831
 2,626
 2,406
Total costs and expenses 2,700
 3,101
 8,325
 9,482
Income from operations 3,812
 4,399
 11,833
 13,588
Interest expense (291) (242) (821) (699)
Other income (expense), net 150
 119
 391
 288
Income before provision for income taxes 3,671
 4,276
 11,403
 13,177
Provision for income taxes 959
 951
 2,923
 2,788
Net income 2,712
 3,325
 8,480
 10,389
Net loss attributable to noncontrolling interest (6) (5) (13) (4)
Net income attributable to Gilead $2,718
 $3,330
 $8,493
 $10,393
Net income per share attributable to Gilead common stockholders - basic $2.08
 $2.52
 $6.50
 $7.72
Shares used in per share calculation - basic 1,306
 1,322
 1,307
 1,347
Net income per share attributable to Gilead common stockholders - diluted $2.06
 $2.49
 $6.44
 $7.59
Shares used in per share calculation - diluted 1,319
 1,339
 1,319
 1,369
Cash dividends declared per share $0.52
 $0.47
 $1.56
 $1.37










































See accompanying notes.

4


GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(in millions)
Three Months Ended
March 31,
(in millions)20232022
Net income$985 $12 
Other comprehensive loss, net:
Net foreign currency translation gain (loss)(5)5 
Available-for-sale debt securities:
Net unrealized gain (loss), net of tax impact of $0 and $0, respectively8 (19)
Reclassifications to net income, net of tax impact of $0 and $0, respectively1 — 
Net change9 (19)
Cash flow hedges:
Net unrealized gain (loss), net of tax impact of $(1) and $3, respectively(6)24 
Reclassification to net income, net of tax impact of $3 and $3, respectively(21)(20)
Net change(26)4 
Other comprehensive loss, net(22)(10)
Comprehensive income, net962 2 
Comprehensive loss attributable to noncontrolling interest, net26 7 
Comprehensive income attributable to Gilead, net$988 $9 

  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Net income $2,712
 $3,325
 $8,480
 $10,389
Other comprehensive income (loss):        
Net foreign currency translation losses, net of tax (4) (50) (51) (39)
Available-for-sale securities:        
Net unrealized gains, net of tax impact of $1, $1, $4 and $19, respectively 185
 29
 311
 159
Reclassifications to net income, net of tax impact of $0, $0, $(8) and $0, respectively (1) (6) (7) (8)
Net change 184
 23
 304
 151
Cash flow hedges:        
Net unrealized losses, net of tax impact of $(2), $2, $(11) and $(9), respectively (76) (45) (278) (249)
Reclassifications to net income, net of tax impact of $1, $(1), $0 and $(8), respectively 25
 10
 (4) (59)
Net change (51) (35) (282) (308)
Other comprehensive income (loss) 129
 (62) (29) (196)
Comprehensive income 2,841
 3,263
 8,451
 10,193
Comprehensive loss attributable to noncontrolling interest (6) (5) (13) (4)
Comprehensive income attributable to Gilead $2,847
 $3,268
 $8,464
 $10,197

























































See accompanying notes.

5


GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
Three Months Ended March 31, 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 (Loss)		Retained
Earnings
SharesAmount
Balance as of December 31, 20221,247 $1 $5,550 $2 $15,687 $(31)$21,209 
Net income (loss)— — — — 1,010 (26)985 
Other comprehensive loss, net— — — (22)— — (22)
Issuances under employee stock purchase plan1 — 67 — — — 67 
Issuances under equity incentive plans6 — 27 — — — 27 
Stock-based compensation— — 165 — — — 165 
Repurchases of common stock under repurchase programs ($82.29 average price per share)(5)— (17)— (383)— (400)
Repurchases of common stock for employee tax withholding under equity incentive plans(2)— — — (135)— (135)
Dividends declared ($0.75 per share)— — — — (957)— (957)
Balance as of March 31, 20231,248 $1 $5,793 $(20)$15,223 $(58)$20,939 
Three Months Ended March 31, 2022
(in millions, except per share amounts)Gilead Stockholders’ Equity Noncontrolling
Interest		Total
Stockholders’
Equity
Common Stock Additional
Paid-In
Capital		Accumulated
Other
Comprehensive
Income (Loss)		Retained
Earnings
SharesAmount
Balance as of December 31, 20211,254 $1 $4,661 $83 $16,324 $(5)$21,064 
Net income (loss)— — — — 19 (7)12 
Other comprehensive loss, net— — — (10)— — (10)
Issuances under employee stock purchase plan1 — 73 — — — 73 
Issuances under equity incentive plans7 — 21 — — — 21 
Stock-based compensation— — 131 — — — 131 
Repurchases of common stock under repurchase programs ($63.78 average price per share)(6)— (19)— (334)— (353)
Repurchases of common stock for employee tax withholding under equity incentive plans(2)— — — (91)— (91)
Dividends declared ($0.73 per share)— — — — (932)— (932)
Balance as of March 31, 20221,255 $1 $4,867 $73 $14,986 $(12)$19,915 









See accompanying notes.
6

GILEAD SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in millions)
Three Months Ended
March 31,
(in millions)20232022
Operating Activities:
Net income$985 $12 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense94 80 
Amortization expense546 445 
Stock-based compensation expense165 130 
Acquired in-process research and development expenses481 8 
In-process research and development impairment— 2,700 
Deferred income taxes(303)(651)
Net loss from equity securities256 96 
Other63 182 
Changes in operating assets and liabilities:
Accounts receivable, net635 699 
Inventories(227)53 
Prepaid expenses and other26 (54)
Accounts payable(272)(91)
Income tax assets and liabilities, net(161)(112)
Accrued and other liabilities(543)(1,657)
Net cash provided by operating activities1,744 1,840 
Investing Activities:
Purchases of marketable debt securities(527)(613)
Proceeds from sales of marketable debt securities167 119 
Proceeds from maturities of marketable debt securities324 506 
Acquisitions, including in-process research and development, net of cash acquired(551)(807)
Purchases of equity securities(125)(28)
Capital expenditures(109)(247)
Other(5)— 
Net cash used in investing activities(826)(1,070)
Financing Activities:
Proceeds from issuances of common stock97 94 
Repurchases of common stock under repurchase programs(400)(352)
Repayments of debt and other obligations— (500)
Payments of dividends(969)(945)
Other(135)(91)
Net cash used in financing activities(1,406)(1,794)
Effect of exchange rate changes on cash and cash equivalents13 (18)
Net change in cash and cash equivalents(476)(1,042)
Cash and cash equivalents at beginning of period5,412 5,338 
Cash and cash equivalents at end of period$4,936 $4,296 

  Nine Months Ended
  September 30,
  2017 2016
Operating Activities:    
Net income $8,480
 $10,389
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation expense 155
 129
Amortization expense 734
 737
Stock-based compensation expense 304
 278
Deferred income taxes 127
 (95)
In-process research and development impairment —
 231
Other 227
 142
Changes in operating assets and liabilities:    
Accounts receivable, net 473
 770
Inventories (79) (274)
Prepaid expenses and other 311
 (785)
Accounts payable (515) (115)
Income taxes payable (48) 1,029
Accrued liabilities (1,024) 1,072
Net cash provided by operating activities 9,145
 13,508
     
Investing Activities:    
Purchases of marketable securities (18,813) (19,881)
Proceeds from sales of marketable securities 8,966
 10,376
Proceeds from maturities of marketable securities 4,164
 1,131
Other investments —
 (357)
Capital expenditures (370) (579)
Net cash used in investing activities (6,053) (9,310)
     
Financing Activities:    
Proceeds from debt financing, net of issuance costs 2,991
 5,293
Proceeds from convertible note hedges —
 956
Proceeds from issuances of common stock 183
 180
Repurchases of common stock (848) (10,001)
Repayments of debt and other obligations (90) (1,251)
Payments to settle warrants —
 (469)
Payments of dividends (2,049) (1,836)
Other (141) (249)
Net cash provided by (used in) financing activities 46
 (7,377)
Effect of exchange rate changes on cash and cash equivalents 141
 137
Net change in cash and cash equivalents 3,279
 (3,042)
Cash and cash equivalents at beginning of period 8,229
 12,851
Cash and cash equivalents at end of period $11,508
 $9,809




See accompanying notes.

7


GILEAD SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.
1.    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. The financial statements include all adjustments, consisting of normal recurring adjustments that the management of Gilead Sciences, Inc. (Gilead, we, our or us) believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.
The accompanying Condensed Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary. All intercompany transactions have been eliminated. For consolidated entities where we own or are exposed to less than 100% of the economics, we record net income or loss attributable to noncontrolling interest in our Condensed Consolidated Statements of Income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties.
We assess whether we are the primary beneficiary of a variable interest entity (VIE) at the inception of the arrangement and at each reporting date. This assessment is based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or our right to receive benefits from the VIE that could potentially be significant to the VIE. As of September 30, 2017, the only material VIE was our joint venture with Bristol-Myers Squibb Company (BMS), which is described in Note 7, Collaborative Arrangements.
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, 2016,2022, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission.
Significant Accounting Policies, Estimates and Judgments
The preparation There have been no material changes to our organization or summary of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptionsas disclosed in that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates.
Concentrations of Risk
We are subject to credit risk from our portfolio of cash, cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements and a competitive after-tax rate of return.
We are also subject to credit risk from our accounts receivable related to our product sales. The majority of our trade accounts receivable arises from product sales in the United States and Europe. To date, we have not experienced significant losses with respect to the collection of our accounts receivable. We believe that our allowance for doubtful accounts was adequate at September 30, 2017.
Recently Adopted Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2015-17 (ASU 2015-17) “Balance Sheet Classification of Deferred Taxes.” We adopted this standard on a retrospective basisfiling. Beginning in the first quarter of 2017. ASU 2015-17 requires that deferred2023, we reclassified changes in income taxes prepaid and receivable from Prepaid expenses and other to combine with changes in income taxes payable as Income tax assets and liabilities, be classified as noncurrent on the balance sheet. As a result, our Condensed Consolidated Balance Sheet as of December 31, 2016 was retrospectively adjusted, resulting in a reduction in Total current assets of $857 million and an increase in Long-term deferred tax assets of $857 million. The resulting reclassification of our deferred tax liabilities was not material.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09 (ASU 2016-09) “Improvements to Employee Share-Based Payment Accounting.” We adopted this standard in the first quarter of 2017. One aspect of the standard requires that


excess tax benefits and deficiencies that arise upon vesting or exercise of share-based awards be recognized in the income statement on a prospective basis. Under previous guidance, the tax effects were recorded in additional paid-in capital. As a result, we recognized $27 million and $60 million of excess tax benefits in Provision for income taxesnet within Operating Activities on our Condensed Consolidated Statements of IncomeCash 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 $34 million from Prepaid expenses and other for the three and nine months ended September 30, 2017, respectively. The resulting impact toMarch 31, 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 shares used inmanagement of Gilead believes are necessary for a fair presentation of the calculationperiods presented and are not necessarily indicative of diluted earnings per shareresults expected for the threefull fiscal year or for any subsequent interim period. Certain amounts and nine months ended September 30, 2017 was not material. Additionally, as allowed by the standard, we elected to continue to estimate potential forfeitures.
Another aspect of ASU 2016-09 amends the presentation of certain share-based payment items on the statement of cash flows, which we adopted on a retrospective basis. As a result, our Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2016 was adjusted to (a) reclassify $162 million of excess tax benefits from stock-based compensation from Net cash usedpercentages in financing activities to Net cash provided by operating activities and (b) reclassify $163 million of employee taxes paid to tax authorities when we withheld shares to meet the minimum statutory withholding requirement from changes in Accrued liabilities within Net cash provided by operating activities to Other within Net cash used in financing activities.
Recently Issued Accounting Pronouncements Not Yet Adopted
In May 2014, the FASB issued Accounting Standards Update No. 2014-09 (ASU 2014-09) “Revenue from Contracts with Customers.” The standard’s core principle is that a reporting entity will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will become effective for us beginning in the first quarter of 2018. Early adoption is permitted in 2017. Entities have the option of using either a full retrospective or a modified retrospective approach to adopt this new guidance. The FASB issued supplemental adoption guidance and clarification to ASU 2014-09 in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-08 “Revenue from Contracts with Customers: Principal versus Agent Considerations,” ASU 2016-10 “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing,” ASU 2016-12 “Revenue from Contracts with Customers: Narrow-Scope Improvements and Practical Expedients” and ASU 2016-20 “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers,” respectively. We expect to adopt these standards using the modified retrospective approach. The cumulative effect of adopting these standards will be recorded to retained earnings on January 1, 2018. We have completed our initial assessment of the effect of adoption. Based on this assessment, we expect changes in our revenue recognition policy relating to royalty revenues and certain other revenues that are currently recognized on a cash basis or sell through method. Upon adoption of these standards, these revenues will be recognized in the periods in which the sales occur, subject to the constraint on variable consideration. We currently do not expect that adopting these standards will have a material impact on our Condensed Consolidated Financial Statements.
In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (ASU 2016-01) “Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 changes accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements for financial instruments. In addition, it clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The guidance will become effective for us beginning in the first quarter of 2018 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted for certain provisions. We plan to adopt this guidance in the first quarter of 2018. We expect an impact primarily related to the recognition and measurement of our available-for-sale equity securities; however, the impact of the adoption of this standard on our Condensed Consolidated Financial Statements will depend onand accompanying notes may not sum or recalculate due to rounding.
8

2.    REVENUES
Disaggregation of Revenues
The following table summarizes our Total revenues:
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(in millions)U.S.EuropeOther InternationalTotalU.S.EuropeOther InternationalTotal
Product sales:
HIV
Biktarvy$2,161 $304 $212 $2,677 $1,706 $261 $184 $2,151 
Complera/Eviplera14 22 3 39 17 24 4 44 
Descovy395 25 29 449 311 32 31 374 
Genvoya417 55 29 501 457 77 48 582 
Odefsey230 76 11 317 232 96 11 339 
Stribild20 6 2 28 22 8 3 32 
Truvada23 3 5 32 28 4 6 38 
Revenue share - Symtuza(1)
98 36 4 138 86 44 3 132 
Other HIV(2)
4 1 3 9 5 4 5 14 
Total HIV3,364 528 298 4,190 2,862 550 295 3,707 
Oncology
Cell Therapy
Tecartus59 27 3 89 47 15 1 63 
Yescarta210 121 28 359 125 77 9 211 
Total Cell Therapy269 148 31 448 172 92 10 274 
Trodelvy162 54 6 222 119 25 2 146 
Total Oncology431 202 37 670 292 117 11 420 
Liver Disease
Chronic hepatitis C virus (“HCV”)
Ledipasvir/Sofosbuvir(3)
3 7 5 15 13 4 18 35 
Sofosbuvir/Velpatasvir(4)
204 90 90 385 162 83 85 330 
Other HCV(5)
24 18 4 45 24 8 2 34 
Total HCV232 114 99 445 199 95 105 399 
Chronic hepatitis B virus (“HBV”) / hepatitis delta virus (“HDV”)
Vemlidy87 9 103 199 80 9 111 200 
Viread(1)6 14 19 — 6 17 23 
Other HBV/HDV(6)
— 11 — 11 — 13 — 13 
Total HBV/HDV86 26 117 230 80 28 128 235 
Total Liver Disease318 140 217 675 279 123 233 635 
Veklury252 111 209 573 801 304 430 1,535 
Other
AmBisome6 60 49 116 25 66 53 144 
Letairis32 — — 32 43 — — 43 
Other(7)
30 12 9 51 26 15 9 50 
Total Other69 72 58 199 94 81 62 236 
Total product sales4,434 1,053 819 6,306 4,329 1,174 1,031 6,534 
Royalty, contract and other revenues18 26 2 46 27 27 3 56 
Total revenues$4,452 $1,079 $821 $6,352 $4,355 $1,202 $1,033 $6,590 

(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 fair valueauthorized 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.
9

Revenues from Major Customers
The following table summarizes revenues from each of our equity securities as of the date of the adoption.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) “Leases.” ASU 2016-02 amends a number of aspects of lease accounting, including requiring lessees to recognize almost all leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. The guidance will become effective for us beginning in the first quarter of 2019 and is required to be adopted using a modified retrospective approach. Early adoption is permitted. We are evaluating the impact of the adoption of this standard, and we anticipate recognition of additional assets and corresponding liabilities related to leases on our Condensed Consolidated Balance Sheets.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13 (ASU 2016-13) “Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. This guidance will become effective for us beginning in the first quarter of 2020 and must be adopted using a modified retrospective approach, with certain exceptions. Early adoption is permitted beginning in the first quarter of 2019. We are evaluating the impact of the adoption of this standard on our Condensed Consolidated Financial Statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-01 (ASU 2017-01) “Clarifying the Definition of a Business.” ASU 2017-01 clarifies the definition of a business when evaluating whether transactions should becustomers who individually accounted for as acquisitions10% or disposalsmore of assetsour Total revenues:
 Three Months Ended
March 31,
(as a percentage of total revenues)20232022
AmerisourceBergen Corporation18 %19 %
Cardinal Health, Inc.26 %23 %
McKesson Corporation20 %20 %
Revenues Recognized from Performance Obligations Satisfied in Prior Periods
The following table summarizes revenues recognized from performance obligations satisfied in prior periods:
Three Months Ended
March 31,
(in millions)20232022
Revenue share with Janssen and royalties for licenses of intellectual property$192 $184 
Changes in estimates$160 $230 
Contract Balances
The following table summarizes our contract balances:
(in millions)March 31, 2023December 31, 2022
Contract assets(1)
$164 $171 
Contract liabilities(2)
$93 $102 

(1)     Consists of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or businesses. This guidance will become effective for us beginning inpredominant performance obligation.
(2)     Generally results from receipt of advance payment before our performance under the first quarter of 2018 and is required to be adopted on a prospective basis. Early adoption is permitted. We anticipate that the adoption of this guidance will result in more transactions being accounted for as asset acquisitions rather than business acquisitions.contract.

10


In January 2017, the FASB issued Accounting Standards Update No. 2017-04 (ASU 2017-04) “Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the goodwill impairment test. Under the new guidance, goodwill impairment will be measured by the amount by which the carrying value of a reporting unit exceeds its fair value, without exceeding the carrying amount of goodwill allocated to that reporting unit. This guidance will become effective for us beginning in the first quarter of 2020 and is required to be adopted on a prospective basis. Early adoption is permitted. We currently do not expect that adopting this standard will have a material impact on our Condensed Consolidated Financial Statements.
In February 2017, the FASB issued Accounting Standards Update No. 2017-05 (ASU 2017-05) “Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets: Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” ASU 2017-05 clarifies the scope of the derecognition of nonfinancial assets, defines in substance financial assets, adds guidance for partial sales of nonfinancial assets and clarifies the recognition of gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. This guidance will become effective for us beginning in the first quarter of 2018 and may be adopted using either a full retrospective or a modified retrospective approach. Early adoption is permitted. We are required to adopt the amendments in this standard at the same time that we adopt the amendments in ASU 2014-09. We plan to adopt this guidance in the first quarter of 2018 using a modified retrospective approach. We are evaluating the impact of the adoption of this standard on our Condensed Consolidated Financial Statements.
2.FAIR VALUE MEASUREMENTS
We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:
Level 1 inputs include quoted prices in active markets for identical assets or liabilities;
Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. For our marketable securities, we review trading activity and pricing as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data; and
Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.
Our financial instruments consist primarily of cash and cash equivalents, marketable securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and long-term debt. Cash and cash equivalents, marketable securities, foreign currency exchange contracts and equity securities are reported at their respective fair values on our Condensed Consolidated Balance Sheets. Long-term debt is reported at its amortized costs on our Condensed Consolidated Balance Sheets. The remaining financial instruments are reported on our Condensed Consolidated Balance Sheets at amounts that approximate current fair values. There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.


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 (in millions):hierarchy:
March 31, 2023December 31, 2022
September 30, 2017 December 31, 2016
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
(in millions)(in millions)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:               Assets:
Available-for-sale debt securities:Available-for-sale debt securities:
U.S. treasury securitiesU.S. treasury securities$344 $— $— $344 $410 $— $— $410 
U.S. government agencies securitiesU.S. government agencies securities— 155 — 155 — 35 — 35 
Non-U.S. government securitiesNon-U.S. government securities— 23 — 23 — 34 — 34 
Certificates of depositCertificates of deposit— 90 — 90 — 54 — 54 
Corporate debt securities$—
 $14,845
 $—
 $14,845
 $—
 $12,603
 $—
 $12,603
Corporate debt securities— 1,379 — 1,379 — 1,427 — 1,427 
U.S. treasury securities4,125
 —
 —
 4,125
 5,529
 —
 —
 5,529
Residential mortgage and asset-backed securitiesResidential mortgage and asset-backed securities— 335 — 335 — 333 — 333 
Equity securities:Equity securities:
Money market funds9,025
 —
 —
 9,025
 5,464
 —
 —
 5,464
Money market funds3,175 — — 3,175 3,831 — — 3,831 
Residential mortgage and asset-backed securities—
 4,213
 —
 4,213
 —
 3,602
 —
 3,602
U.S. government agencies securities—
 958
 —
 958
 —
 975
 —
 975
Certificates of deposit—
 5,511
 —
 5,511
 —
 943
 —
 943
Non-U.S. government securities—
 684
 —
 684
 —
 720
 —
 720
Municipal debt securities—
 10
 —
 10
 —
 27
 —
 27
Equity securities683
 —
 —
 683
 428
 —
 —
 428
Foreign currency derivative contracts—
 30
 —
 30
 —
 336
 —
 336
Deferred compensation plan110
 —
 —
 110
 84
 —
 —
 84
Total$13,943
 $26,251
 $—
 $40,194
 $11,505
 $19,206
 $—
 $30,711
               
Liabilities: 
  
  
  
  
  
  
  
Equity investment in Galapagos NV (“Galapagos”)Equity investment in Galapagos NV (“Galapagos”)639 — — 639 736 — — 736 
Equity investment in Arcus Biosciences, Inc. (“Arcus”)Equity investment in Arcus Biosciences, Inc. (“Arcus”)252 — — 252 286 — — 286 
Other publicly traded equity securitiesOther publicly traded equity securities235 — — 235 175 — — 175 
Deferred compensation plan$110
 $—
 $—
 $110
 $84
 $—
 $—
 $84
Deferred compensation plan249 — — 249 220 — — 220 
Foreign currency derivative contracts—
 101
 —
 101
 —
 37
 —
 37
Foreign currency derivative contracts— 32 — 32 — 60 — 60 
Contingent consideration—
 —
 16
 16
 —
 —
 25
 25
Total$110
 $101
 $16
 $227
 $84
 $37
 $25
 $146
Total$4,895 $2,014 $— $6,909 $5,658 $1,943 $— $7,600 
               
Liabilities:Liabilities:
Liability for MYR GmbH (“MYR”) contingent considerationLiability for MYR GmbH (“MYR”) contingent consideration$— $— $277 $277 $— $— $275 $275 
Deferred compensation planDeferred compensation plan249 — — 249 220 — — 220 
Foreign currency derivative contractsForeign currency derivative contracts— 49 — 49 — 42 — 42 
TotalTotal$249 $49 $277 $575 $220 $42 $275 $538 
Level 2 Inputs
WeAvailable-for-Sale Debt Securities
For our available-for-sale debt securities, we estimate the fair values by reviewing trading activity and pricing as of Level 2 instrumentsthe 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-income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.
Foreign Currency Derivative Contracts
Substantially all of our foreign currency derivative contracts have maturities within an 18-month time horizon and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by taking into consideration the valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, London Interbank Offered Rates (LIBOR)Secured Overnight Financing Rate and swap rates. These inputs, where applicable, are observable at commonly quoted intervals.
11

Senior Unsecured Notes
The total estimated fair values of our long-term debt,senior unsecured notes, determined using Level 2 inputs based on their quoted market values, were approximately $31.1$22.6 billion and $27.0$21.9 billion at September 30, 2017as of March 31, 2023 and December 31, 2016,2022, respectively, and the carrying values were $29.3value was $24.1 billion and $26.3 billion at September 30, 2017as of March 31, 2023 and December 31, 2016, respectively.2022.
Level 3 Inputs
AsContingent Consideration Liability
In connection with our first quarter 2021 acquisition of September 30, 2017MYR, 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
March 31,
(in millions)20232022
Beginning balance$275 $317 
Changes in valuation assumptions(1)
(3)10 
Effect of foreign exchange remeasurement(2)
5 (6)
Ending balance$277 $322 

(1)     Included in Research and development expenses on our Condensed Consolidated Statements of Income. The change in 2023 primarily related to updated expected payment dates and the change in 2022 primarily related to 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 March 31, 2023 and December 31, 2016,2022, and the onlycarrying value was $1.1 billion as of March 31, 2023 and December 31, 2022.
Nonrecurring Fair Value Measurements
During the three months ended March 31, 2022, we recorded a partial impairment charge of $2.7 billion related to certain 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 or liabilities thatnoted during the three months ended March 31, 2023.
Fair Value Level Transfers
There were measured usingno transfers between Level 1, Level 2 and Level 3 inputs on a recurring basis were our contingent consideration liabilities, which were immaterial.in the periods presented.
Our policy is to recognize transfers into or out of Level 3 classification as of the actual date of the event or change in circumstances that caused the transfer.
12


3.AVAILABLE-FOR-SALE SECURITIES
Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services.

4.AVAILABLE-FOR-SALE DEBT SECURITIES AND EQUITY SECURITIES
Available-for-Sale Debt Securities
The following table summarizes our available-for-sale debt securities:
March 31, 2023December 31, 2022
(in millions)Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value Amortized CostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value 
U.S. treasury securities$346 $— $(2)$344 $415 $— $(5)$410 
U.S. government agencies securities156 — — 155 36 — — 35 
Non-U.S. government securities23 — — 23 34 — — 34 
Certificates of deposit90 — — 90 54 — — 54 
Corporate debt securities1,400 1 (21)1,379 1,452 — (26)1,427 
Residential mortgage and asset-backed securities336 — (2)335 335 — (3)333 
Total$2,350 $2 $(26)$2,326 $2,325 $1 $(34)$2,293 
The following table summarizes information related to available-for-sale debt securities (in millions):that have been in a continuous unrealized loss position, classified by length of time:
March 31, 2023
Less Than 12 Months12 Months or LongerTotal
(in millions)Gross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair Value
U.S. treasury securities$(1)$89 $(2)$177 $(2)$266 
U.S. government agencies securities— 108 — — — 108 
Non-U.S. government securities— 23 — — — 23 
Corporate debt securities(6)451 (16)651 (21)1,102 
Residential mortgage and asset-backed securities(1)192 (1)53 (2)245 
Total$(8)$862 $(18)$880 $(26)$1,743 
December 31, 2022
 September 30, 2017 December 31, 2016Less Than 12 Months12 Months or LongerTotal
 Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair Value 		 Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair Value 
(in millions)(in millions)Gross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair ValueGross Unrealized LossesEstimated Fair Value
U.S. treasury securitiesU.S. treasury securities$(2)$174 $(3)$206 $(5)$379 
U.S. government agencies securitiesU.S. government agencies securities— 21 — — — 21 
Non-U.S. government securitiesNon-U.S. government securities— 31 — 3 — 34 
Corporate debt securities $14,858
 $10
 $(23) $14,845
 $12,657
 $7
 $(61) $12,603
Corporate debt securities(17)774 (8)439 (26)1,213 
U.S. treasury securities 4,147
 —
 (22) 4,125
 5,558
 1
 (30) 5,529
Money market funds 9,025
 —
 —
 9,025
 5,464
 —
 —
 5,464
Residential mortgage and asset-backed securities 4,221
 1
 (9) 4,213
 3,613
 2
 (13) 3,602
Residential mortgage and asset-backed securities(2)205 (1)56 (3)261 
U.S. government agencies securities 963
 —
 (5) 958
 981
 —
 (6) 975
Certificates of deposit 5,511
 —
 —
 5,511
 943
 —
 —
 943
Non-U.S. government securities 687
 —
 (3) 684
 725
 —
 (5) 720
Municipal debt securities 10
 —
 —
 10
 27
 —
 —
 27
Equity securities 357
 326
 —
 683
 357
 71
 —
 428
Total $39,779
 $337
 $(62) $40,054
 $30,325
 $81
 $(115) $30,291
Total$(22)$1,204 $(12)$705 $(34)$1,908 
No allowance for credit losses was recognized for investments with unrealized losses as of March 31, 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 onin our Condensed Consolidated Balance Sheets (in millions):Sheets:
(in millions)March 31, 2023December 31, 2022
Cash and cash equivalents$63 $75 
Short-term marketable debt securities936 973 
Long-term marketable debt securities1,327 1,245 
Total$2,326 $2,293 
13
  September 30, 2017 December 31, 2016
Cash and cash equivalents $9,519
 $5,712
Short-term marketable securities 16,879
 3,666
Prepaid and other current assets 683
 —
Long-term marketable securities 12,973
 20,485
Other long-term assets —
 428
Total $40,054
 $30,291

Cash and cash equivalents in the table above excludes cash of $2.0 billion and $2.5 billion as of September 30, 2017 and December 31, 2016, respectively.
The following table summarizes our available-for-sale securities by contractual maturity (in millions):
  September 30, 2017
  Amortized Cost Fair Value
Within one year $26,408
 $26,398
After one year through five years 12,867
 12,827
After five years through ten years 106
 105
After ten years 41
 41
Total $39,422
 $39,371


The following table summarizes our available-for-sale debt securities thatby contractual maturity:
March 31, 2023
(in millions)Amortized CostFair Value
Within one year$1,006 $999 
After one year through five years1,325 1,308 
After five years through ten years14 14 
After ten years5 5 
Total$2,350 $2,326 
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)March 31, 2023December 31, 2022
Cash and cash equivalents$3,175 $3,831 
Prepaid and other current assets(1)
394 473 
Other long-term assets(1)
982 943 
Total$4,551 $5,248 
________________________________
(1)     Prepaid and other current assets and Other long-term assets include our equity method investments in Arcus and Galapagos, respectively, 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 Galapagos is classified in Other long-term assets due to certain lock-up provisions in our amended subscription agreement with them, which extend to August 2024.
Other Equity Securities
Equity method investments and other equity investments without readily determinable fair values were in a continuous unrealized loss position but were not deemed to be other-than-temporarily impaired (in millions):
  Less Than 12 Months 12 Months or Greater Total
  Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value		 Gross
Unrealized
Losses		 Estimated
Fair Value
September 30, 2017            
Corporate debt securities $(13) $5,990
 $(10) $1,654
 $(23) $7,644
U.S. treasury securities (13) 2,771
 (9) 1,293
 (22) 4,064
Residential mortgage and asset-backed securities (7) 2,802
 (2) 151
 (9) 2,953
U.S. government agencies securities (3) 664
 (2) 247
 (5) 911
Non-U.S. government securities (2) 462
 (1) 222
 (3) 684
Certificates of deposit —
 12
 —
 —
 —
 12
Total $(38) $12,701
 $(24) $3,567
 $(62) $16,268
   
  
  
  
  
  
December 31, 2016            
Corporate debt securities $(60) $8,685
 $(1) $155
 $(61) $8,840
U.S. treasury securities (30) 5,081
 —
 —
 (30) 5,081
Residential mortgage and asset-backed securities (13) 2,180
 —
 42
 (13) 2,222
U.S. government agencies securities (6) 897
 —
 —
 (6) 897
Non-U.S. government securities (5) 714
 —
 5
 (5) 719
Certificates of deposit —
 15
 —
 —
 —
 15
Municipal debt securities —
 11
 —
 —
 —
 11
Total $(114) $17,583
 $(1) $202
 $(115) $17,785
We held a total of 2,181 $333 millionand 2,709 positions$423 million as of September 30, 2017March 31, 2023 and December 31, 2016,2022, respectively, related to our debt securities thatand were excluded from the table above. These amounts were included in an unrealized loss position.
BasedOther long-term assets on our review of our available-for-saleCondensed Consolidated Balance Sheets.
Unrealized Gains and Losses
Net unrealized losses recognized on equity securities we believe we had no other-than-temporary impairments on these securities as of September 30, 2017were $256 million and December 31, 2016, because we do not intend to sell these securities nor do we believe that we will be required to sell these securities before the recovery of their amortized cost basis. Gross realized gains and gross realized losses were immaterial$96 million for the three and nine months ended September 30, 2017March 31, 2023, and 2016.2022, respectively, and were included in Other income (expense), net on our Condensed Consolidated Statements of Income.
14
4.DERIVATIVE FINANCIAL INSTRUMENTS

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 and Yen. In order toEuro. To manage this risk, we may 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 or option 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 unrecognizedunrealized 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.
We hedge our exposure to foreign currency exchange rate fluctuations for certain monetary assets and liabilities of our entities that are denominated in a non-functional currency. The derivative instruments we use to hedge this exposure are not designated as hedgesour exposures for certain monetary assets and as a result, changes in their fair value are recorded in Other income (expense), net, on our Condensed Consolidated Statements of Income.
We hedge our exposure to foreign currency exchange rate fluctuations for forecasted product salesliabilities that are denominated in a non-functional currency.currency are not designated as hedges. The derivative instruments we use to hedge this exposureour exposures for forecasted product sales are designated as cash flow hedges and have maturities of 18 months or less. Upon executing a hedging contract
We held foreign currency exchange contracts with outstanding notional amounts of $2.9 billion as of March 31, 2023 and quarterly thereafter,$3.0 billion as of December 31, 2022.
While all our derivative contracts allow us the right to offset assets and liabilities, we assess prospective hedge effectiveness using regression analysis which calculates the changehave presented amounts in cash flow as a result of the hedge instrument. On a quarterly basis, we assess retrospective hedge effectiveness using a dollar offset approach. We exclude time value from our effectiveness testing and recognize changes in the time value of the hedge in Other income (expense), net, on our Condensed Consolidated Statements of Income. The effective component of our hedge is recorded as an unrealized gain or loss on the hedging instrument


in Accumulated other comprehensive income (AOCI) within Stockholders’ equity on our Condensed Consolidated Balance Sheets on a gross basis. The following table summarizes the classification and fair values of derivative instruments, including the gains or losses are reclassified into product sales whenpotential effect of offsetting:
March 31, 2023
Derivative AssetsDerivative Liabilities
(in millions)ClassificationFair ValueClassificationFair Value
Derivatives designated as hedges:
Foreign currency exchange contractsPrepaid and other current assets$30 Other current liabilities$35 
Foreign currency exchange contractsOther long-term assets1 Other long-term obligations3 
Total derivatives designated as hedges31 38 
Derivatives not designated as hedges:
Foreign currency exchange contractsPrepaid and other current assets1 Other current liabilities11 
Total derivatives not designated as hedges1 11 
Total derivatives presented gross on the Condensed Consolidated Balance Sheets$32 $49 
Gross amounts not offset on the Condensed Consolidated Balance Sheets:
Derivative financial instruments(24)(24)
Cash collateral received / pledged— — 
Net amount (legal offset)$7 $25 
15

 December 31, 2022
 Derivative AssetsDerivative Liabilities
(in millions)ClassificationFair ValueClassificationFair Value
Derivatives designated as hedges:
Foreign currency exchange contractsPrepaid and other current assets$59 Other current liabilities$26 
Foreign currency exchange contractsOther long-term assets1 Other long-term obligations9 
Total derivatives designated as hedges59 35 
Derivatives not designated as hedges:
Foreign currency exchange contractsPrepaid and other current assets1 Other current liabilities7 
Total derivatives not designated as hedges1 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 $7 
The following table summarizes the hedged transactions affect earnings. effect of our derivative contracts on our Condensed Consolidated Financial Statements:
Three Months Ended
 March 31,
(in millions)20232022
Derivatives designated as hedges:
Net gain (loss) recognized in Accumulated other comprehensive income$(6)$28 
Net gain reclassified from Accumulated other comprehensive income into Product sales$24 $22 
Derivatives not designated as hedges:
Net gain (loss) recognized in Other income (expense), net$(3)$19 
The majority of gains and losses related to the hedged forecasted transactions reported in AOCI at September 30, 2017Accumulated other comprehensive income (loss) as of March 31, 2023 are expected to be reclassified to productProduct sales within 12 months. There were no discontinuances of cash flow hedges for the three months ended March 31, 2023 and 2022.
The cash flow effects of our derivative contracts for the ninethree months ended September 30, 2017March 31, 2023 and 2016 are2022 were included within Net cash provided by operating activities on our Condensed Consolidated Statements of Cash Flows.
We had notional amounts on foreign currency exchange contracts outstanding of $3.4 billion and $6.2 billion at September 30, 2017 and December 31, 2016, respectively.
While all of our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts on a gross basis. Under the International Swap Dealers Association, Inc. master agreements with the respective counterparties of the foreign currency exchange contracts, subject to applicable requirements, we are allowed to net settle transactions of the same currency with a single net amount payable by one party to the other. The following table summarizes the classification and fair values of derivative instruments on our Condensed Consolidated Balance Sheets (in millions):6.    ACQUISITIONS, COLLABORATIONS AND OTHER ARRANGEMENTS
  September 30, 2017
  Asset Derivatives Liability Derivatives
  Classification 
Fair Value 
 Classification Fair Value
Derivatives designated as hedges:        
Foreign currency exchange contracts Other current assets $4
 Other accrued liabilities $(94)
Foreign currency exchange contracts Other long-term assets 3
 Other long-term obligations (5)
Total derivatives designated as hedges   7
   (99)
Derivatives not designated as hedges:    
    
Foreign currency exchange contracts Other current assets 23
 Other accrued liabilities (2)
Total derivatives not designated as hedges   23
   (2)
Total derivatives   $30
   $(101)
  December 31, 2016
  Asset Derivatives Liability Derivatives
  Classification Fair Value Classification Fair Value
Derivatives designated as hedges:        
Foreign currency exchange contracts Other current assets $225
 Other accrued liabilities $(1)
Foreign currency exchange contracts Other long-term assets 20
 Other long-term obligations —
Total derivatives designated as hedges   245
   (1)
Derivatives not designated as hedges:    
    
Foreign currency exchange contracts Other current assets 81
 Other accrued liabilities (34)
Foreign currency exchange contracts Other long-term assets 10
 Other long-term obligations (2)
Total derivatives not designated as hedges   91
   (36)
Total derivatives   $336
   $(37)


The following table summarizes the effect of our foreign currency exchange contracts on our Condensed Consolidated Financial Statements (in millions):
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Derivatives designated as hedges:        
Losses recognized in AOCI (effective portion) $(78) $(43) $(289) $(258)
Gains (losses) reclassified from AOCI into product sales (effective portion) $(26) $(9) $4
 $67
Gains recognized in Other income (expense), net (ineffective portion and amounts excluded from effectiveness testing) $10
 $11
 $32
 $38
Derivatives not designated as hedges:        
Losses recognized in Other income (expense), net $(2) $(62) $(112) $(328)
From time to time, we may discontinue cash flow hedges and, as a result, record related amounts in Other income (expense), net, on our Condensed Consolidated Statements of Income. There were no material amounts recorded in Other income (expense), net, for the three and nine months ended September 30, 2017 and 2016 as a result of the discontinuance of cash flow hedges.
As of September 30, 2017 and December 31, 2016, we held one type of financial instrument, derivative contracts related to foreign currency exchange contracts. The following table summarizes the potential effect of offsetting derivatives by type of financial instrument on our Condensed Consolidated Balance Sheets (in millions):
        
Gross Amounts Not Offset
on our Condensed
Consolidated Balance Sheets
  
Description 
Gross Amounts
 of Recognized
Assets/Liabilities
 
Gross Amounts
 Offset on our
Condensed
Consolidated
Balance Sheets
 
Amounts of Assets/Liabilities Presented
 on our Condensed Consolidated
Balance Sheets
 
Derivative
Financial
Instruments
 
Cash Collateral
Received/
Pledged
 
Net Amount
 (Legal Offset)
As of September 30, 2017            
Derivative assets $30
 $—
 $30
 $(24) $—
 $6
Derivative liabilities (101) —
 (101) 24
 —
 (77)
As of December 31, 2016            
Derivative assets $336
 $—
 $336
 $(37) $—
 $299
Derivative liabilities (37) —
 (37) 37
 —
 —
5.OTHER FINANCIAL INFORMATION
Inventories
Inventories are summarized as follows (in millions):
  September 30, 2017 December 31, 2016
Raw materials $1,701
 $1,610
Work in process 673
 626
Finished goods 797
 928
Total $3,171
 $3,164
     
Reported as:    
Inventories $1,144
 $1,587
Other long-term assets 2,027
 1,577
Total $3,171
 $3,164
Amounts reported as other long-term assets primarily consisted of raw materials as of September 30, 2017 and December 31, 2016.
The joint ventures formed by Gilead Sciences, LLC and BMS, which are included on our Condensed Consolidated Financial Statements and described in Note 7, Collaborative Arrangements, held efavirenz active pharmaceutical ingredient in inventory.


This efavirenz inventory was purchased from BMS at BMS’s estimated net selling price of efavirenz and totaled $734 million and $1.1 billion as of September 30, 2017 and December 31, 2016, respectively.
Other Accrued Liabilities
The components of other accrued liabilities are summarized as follows (in millions):
  September 30, 2017 December 31, 2016
Compensation and employee benefits $339
 $398
Accrued interest 210
 290
Branded prescription drug fee 189
 481
Other accrued expenses 1,744
 1,822
Total $2,482
 $2,991
     
6.INTANGIBLE ASSETS
The following table summarizes our finite-lived intangible assets (in millions):
  September 30, 2017 December 31, 2016
  
Gross Carrying
Amount
 
Accumulated
Amortization
 Net Carrying Amount 
Gross Carrying
Amount
 
Accumulated
Amortization
 Net Carrying Amount
Intangible asset - sofosbuvir $10,720
 $2,680
 $8,040
 $10,720
 $2,156
 $8,564
Intangible asset - Ranexa 688
 541
 147
 688
 467
 221
Other 455
 300
 155
 455
 269
 186
Total $11,863
 $3,521
 $8,342
 $11,863
 $2,892
 $8,971
Amortization expense related to finite-lived intangible assets, included primarily in Cost of goods sold on our Condensed Consolidated Statements of Income, totaled $209 million and $629 million for the three and nine months ended September 30, 2017 and $210 million and $630 million for the three and nine months ended September 30, 2016. As of September 30, 2017, the estimated future amortization expense associated with our finite-lived intangible assets is as follows (in millions):
Fiscal Year Amount
2017 (remaining three months) $210
2018 850
2019 739
2020 713
2021 713
Thereafter 5,117
Total $8,342
7.
COLLABORATIVE ARRANGEMENTS
We enter into collaborativeacquisitions, licensing and strategic collaborations and other similar arrangements with third parties for the development and commercialization of certain products. Bothproducts 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. The following is selected information relatedThese arrangements may include non-refundable upfront payments, expense reimbursements or payments by us for options to our collaborative arrangements.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.
Bristol-Myers Squibb Company
16

North AmericaAcquisitions
Tmunity
In 2004,February 2023, we entered intoclosed an agreement to acquire Tmunity Therapeutics, Inc. (“Tmunity”), a collaboration arrangement with BMS to developclinical-stage, private biotechnology company focused on next-generation CAR T-therapies and commercializetechnologies. 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 single-tablet regimen containingresult, Tmunity became our Truvada and BMS’s Sustiva (efavirenz) in the United States. This combination was approved for use in the United States in 2006 and is sold under the brand name Atripla. wholly-owned subsidiary.
We and BMS structured this collaboration as a joint venture that operates as a limited liability company named Bristol-Myers Squibb & Gilead Sciences, LLC, which we consolidate. We and BMS granted royalty-free sublicenses to the joint ventureaccounted for the use of our respective company owned technologiestransaction as an asset acquisition and in return, were grantedrecorded a license by the joint venture$244 million charge to use any intellectual property that results from the collaboration. In 2006, weAcquired in-process research and BMS amended the joint venture’s collaboration agreement to allow the joint venture to sell Atripla in Canada. The economic interests of the joint


venture held by us and BMS (including a share of revenues and out-of-pocket expenses) are based on the portion of the net selling price of Atripla attributable to Truvada and efavirenz. Since the net selling price for Truvada may change over time relative to the net selling price of efavirenz, both our and BMS’s respective economic interests in the joint venture may vary annually.
We and BMS shared marketing and sales efforts. Starting in the second quarter of 2011, except for a limited number of activities that are jointly managed, the parties no longer coordinate detailing and promotional activities in the United States, and the parties reduced their joint promotional efforts since we launched Complera in August 2011 and Stribild in August 2012. The parties continue to collaborate on activities such as manufacturing, regulatory, compliance and pharmacovigilance. The daily operations of the joint venture are governed by several joint committees formed by both BMS and Gilead. We are responsible for accounting, financial reporting, tax reporting, manufacturing and product distribution for the joint venture. Both parties provide their respective bulk active pharmaceutical ingredients to the joint venture at their approximate market values. The agreement will continue until terminated by the mutual agreement of the parties. In addition, either party may terminate the other party’s participation in the collaboration within 30 days after the launch of at least one generic version of such other party’s single agent products (or the double agent products). The terminating party then has the right to continue to sell Atripla and become the continuing party but will be obligated to pay the terminated party certain royalties for a three-year period following the effective date of the termination. The loss of exclusivity in the United States for Sustiva is expected in December 2017.
As of September 30, 2017 and December 31, 2016, the joint venture held efavirenz active pharmaceutical ingredient which it purchased from BMS at BMS’s estimated net selling price of efavirenz in the U.S. market. These amounts were primarily included in Other long term assets and Inventoriesdevelopment expenses on our Condensed Consolidated Balance Sheets at September 30, 2017Statements of Income during the three months ended March 31, 2023. The remaining purchase price relates to various other assets acquired and December 31, 2016, respectively.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.
Selected financial informationCollaborations 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 joint venture wastreatment 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 follows (in millions):
  September 30, 2017 December 31, 2016
Total assets $1,499
 $1,918
Cash and cash equivalents 100
 92
Accounts receivable, net 197
 229
Inventories 1,191
 1,579
Total liabilities 512
 772
Accounts payable 222
 434
Other accrued liabilities 290
 338
These asset and liability amounts do not reflect the impact of intercompany eliminations that are includedwell as a $115 million equity investment, which is subject to lock-up provisions until July 2024, in Other long-term assets on our Condensed Consolidated Balance Sheets. AlthoughThe 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 consolidatewill commercialize the joint venture,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-promote products and royalties on at least a portion of worldwide net sales, depending on whether Arcellx opts-in to co-promote on the legal structurefuture products. If additional future products are developed, Arcellx would be eligible to receive additional milestone payments, profit split payments on co-promote products and royalties on at least a portion of the joint venture limits the recourse that its creditors will have over our general credit or assets. Similarly, the assets held in the joint venture can be used onlyworldwide net sales, depending on whether Arcellx opts-in to settle obligations of the joint venture.co-promote these additional future products as well.
EuropePionyr
In 2007, Gilead Sciences Ireland UC, our wholly-owned subsidiary, and BMSJune 2020, we entered into a collaboration agreementtransaction with Pionyr Immunotherapeutics (“Pionyr”), a privately held company pursuing novel biology in the field of immuno-oncology, which sets forthincluded 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, under which weto acquire the remaining outstanding capital stock of Pionyr (“Pionyr Merger and BMS commercialize and distribute Atripla in the European Union, Iceland, Liechtenstein, Norway and Switzerland (collectively, the European Territory)Option Agreements”). The parties formedexclusive option had an estimated fair value of $70 million based on a limited liability company,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 consolidate,waived our exclusive option to manufacture Atripla for distribution inacquire Pionyr and certain other rights under the European Territory using efavirenz that it purchases from BMS at BMS’s estimatedPionyr Merger and Option Agreements and recorded a $70 million charge to Other income (expense), net selling price of efavirenz in the European Territory. We are responsible for manufacturing, product distribution, inventory management and warehousing. Through our local subsidiaries, we have primary responsibility for order fulfillment, collection of receivables, customer relations and handling of sales returns in all the territories where we and BMS promote Atripla. In general, the parties share revenues and out-of-pocket expenses in proportion to the net selling prices of the components of Atripla, Truvada and efavirenz.
Starting in 2012, except for a limited number of activities that are jointly managed, the parties no longer coordinate detailing and promotional activities in the European Territory. We are responsible for accounting, financial reporting and tax reporting for the collaboration. As of September 30, 2017 and December 31, 2016, efavirenz purchased from BMS at BMS’s estimated net selling price of efavirenz in the European Territory is included in Inventories on our Condensed Consolidated Balance Sheets.
The parties also formed a limited liability company to hold the marketing authorization for AtriplaStatements of Income. We will retain our equity interest in the European Territory. We have primary responsibility for regulatory activities. In the major market countries, both parties have agreed to independently continue to use commercially reasonable efforts to promote Atripla.
The agreement will terminate upon the expiration of the last-to-expire patent which affords market exclusivity to Atripla or one of its components in the European Territory. In addition, since December 31, 2013, either party may terminate the agreement for any reason and such termination will be effective two calendar quarters after notice of termination. The non-terminating party


hasPionyr as well as the right, under certain conditions, to continue to sell Atripla and become the continuing party but will be obligated to pay the terminating party certain royalties for a three-year period following the effective date of the termination. In the event the continuing party decides not to sell Atripla, the effective date of the termination will be the date Atripla is withdrawn in each country or the date on which a third party assumes distribution of Atripla, whichever is earlier.review new data as it emerges.
17
8.

7.INTANGIBLE ASSETS
DEBT AND CREDIT FACILITIES
The following table summarizes our borrowingsIntangible assets, net:
 March 31, 2023December 31, 2022
(in millions)Gross 
Carrying
Amount		Accumulated
Amortization		Foreign Currency Translation AdjustmentNet
Carrying Amount		Gross 
Carrying
Amount		Accumulated
Amortization		Foreign Currency Translation AdjustmentNet
Carrying Amount
Finite-lived assets:
Intangible asset – sofosbuvir$10,720 $(6,525)$— $4,195 $10,720 $(6,350)$— $4,370 
Intangible asset – axicabtagene ciloleucel7,110 (2,009)— 5,101 7,110 (1,908)— 5,202 
Intangible asset – Trodelvy(1)
11,730 (1,192)— 10,538 5,630 (973)— 4,657 
Intangible asset – Hepcludex845 (179)— 666 845 (158)— 687 
Other1,489 (762)1 728 1,489 (733)1 758 
Total finite-lived assets31,894 (10,667)1 21,228 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 $(10,667)$1 $28,348 $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 $546 million and $445 million for the three months ended March 31, 2023 and 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 March 31, 2023:
(in millions)Amount
2023 (remaining nine months)$1,794 
20242,392 
20252,386 
20262,378 
20272,378 
Thereafter9,900 
Total$21,228 
Impairment Assessments
No indicators of impairment were noted for the three months ended March 31, 2023 and 2022, except as described under various financing arrangements (in millions):“2022 IPR&D Impairment” below.
18

        Carrying Amount
Type of Borrowing Issue Date Due Date Interest Rate September 30, 2017 December 31, 2016
Senior Unsecured September 2015 September 2018 1.85% $999
 $998
Senior Unsecured September 2017 September 2018 3-month LIBOR + 0.17% 748
 —
Senior Unsecured September 2017 March 2019 3-month LIBOR + 0.22% 748
 —
Senior Unsecured March 2014 April 2019 2.05% 499
 499
Senior Unsecured September 2017 September 2019 1.85% 996
 —
Senior Unsecured September 2017 September 2019 3-month LIBOR + 0.25% 498
 —
Senior Unsecured November 2014 February 2020 2.35% 498
 498
Senior Unsecured September 2015 September 2020 2.55% 1,993
 1,991
Senior Unsecured March 2011 April 2021 4.50% 995
 994
Senior Unsecured December 2011 December 2021 4.40% 1,246
 1,245
Senior Unsecured September 2016 March 2022 1.95% 497
 497
Senior Unsecured September 2015 September 2022 3.25% 996
 995
Senior Unsecured September 2016 September 2023 2.50% 745
 744
Senior Unsecured March 2014 April 2024 3.70% 1,742
 1,741
Senior Unsecured November 2014 February 2025 3.50% 1,744
 1,743
Senior Unsecured September 2015 March 2026 3.65% 2,728
 2,726
Senior Unsecured September 2016 March 2027 2.95% 1,244
 1,243
Senior Unsecured September 2015 September 2035 4.60% 989
 989
Senior Unsecured September 2016 September 2036 4.00% 740
 739
Senior Unsecured December 2011 December 2041 5.65% 995
 995
Senior Unsecured March 2014 April 2044 4.80% 1,733
 1,732
Senior Unsecured November 2014 February 2045 4.50% 1,730
 1,729
Senior Unsecured September 2015 March 2046 4.75% 2,215
 2,214
Senior Unsecured September 2016 March 2047 4.15% 1,723
 1,723
Floating-rate Borrowings May 2016 May 2019 Variable 221
 311
Total debt, net 29,262
 26,346
Less current portion 1,747
 —
Total long-term debt, net $27,515
 $26,346
2022 IPR&D Impairment
In connection with our acquisition of Kite Pharma, Inc. (Kite),Immunomedics in 2020, we entered into the following financing arrangements. See Note 14, Subsequent Event for additional information relating to the acquisition.
September 2017 Issuance of Senior Unsecured Notes
In September 2017, we issued $3.0 billion aggregate principal amount of senior unsecured notes consisting of $750 million principal amount of floating rate notes due September 2018, $750 million principal amount of floating rate notes due March 2019, and $500 million principal amount of floating rate notes due September 2019 (collectively, the Floating Rate Notes) and $1.0 billion principal amount of 1.85% senior notes due September 2019 (the Fixed Rate Notes and, collectively with the Floating Rate Notes, the 2017 Senior Notes), the terms of which are summarized in the table above.


The Fixed Rate Notes may be redeemed at our option at a redemption price equal to the greater of (i) 100% of the principal amount of the Fixed Rate 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 Fixed Rate 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 10 basis points, plus accrued and unpaid interest on the Fixed Rate Notes to be redeemed to the date of redemption. We do not have the option to redeem any series of the Floating Rate Notes, in whole or in part, prior to the maturity date.
In the event of the occurrence of a change in control and a downgrade in the rating of the 2017 Senior Notes below investment grade by Moody’s Investors Service, Inc. and S&P Global Ratings, the holders may require us to purchase all orallocated a portion of their notes at athe purchase price equal to 101%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 aggregate principal amountstudy results, and in connection with the preparation of the notes repurchased, plus accrued and unpaid interestfinancial 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 datepresent value, which requires the use of repurchase.
Term Loan Facilities
In September 2017, we entered intoLevel 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 $6.0 billion principal amount term loan facility credit agreement consisting ofdelay in launch timing for third-line plus patients which caused a $1.0 billion principal amount 364-day senior unsecured term loan facility, a $2.5 billion principal amount three-year senior unsecured term loan facility and a $2.5 billion principal amount five-year senior unsecured term loan facility (collectively, the Term Loan Facilities). In October 2017, we drew $6.0 billion principal amountdecrease in our market share assumptions based on the Term Loan Facilities andexpected 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 the proceeds to finance our acquisitiona discount rate of Kite.
The Term Loan Facilities bear interest at floating rates6.75% which is based on LIBOR plus an applicable margin which will vary based on our debt rating from Fitch Ratings, Inc, Moody’s Investors Service, Inc.the estimated weighted-average cost of capital for companies with profiles similar to ours and S&P Global Ratings.represents the rate that market participants would use to value the intangible assets. We may prepay loans underdetermined the Term Loan Facilities in whole or in part at any time without premium or penalty. The Term Loan Facilities contain customary representations, warranties, affirmative, negativerevised estimated fair value was below the carrying value of the asset and, financial maintenance covenants and events of default.
Cash Bridge Facility
In August 2017, we entered into a $9 billion principal amount 90-day senior unsecured term loan facility (the Cash Bridge Facility). No amounts were drawn under the Cash Bridge Facility, which was terminated as a result, we recognized a partial impairment charge of $2.7 billion in In-process research and development impairment on our Condensed Consolidated Statements of Income during the three months ended March 31, 2022.
8.OTHER FINANCIAL INFORMATION
Accounts receivable, net
The following table summarizes our Accounts receivable, net:
(in millions)March 31, 2023December 31, 2022
Accounts receivable$4,933 $5,464 
Less: allowances for chargebacks634 549 
Less: allowances for cash discounts and other81 83 
Less: allowances for credit losses56 55 
Accounts receivable, net$4,162 $4,777 
The majority of our issuancetrade accounts receivable arises from product sales in the U.S. and Europe.
Inventories
The following table summarizes our Inventories:
(in millions)March 31, 2023December 31, 2022
Raw materials$1,157 $1,177 
Work in process570 577 
Finished goods1,283 1,066 
Total$3,010 $2,820 
Reported as:
Inventories$1,576 $1,507 
Other long-term assets(1)
1,434 1,313 
Total$3,010 $2,820 

(1)     Amounts primarily consist of raw materials.
19

Other current liabilities
The following table summarizes the 2017 components of Other current liabilities:
(in millions)March 31, 2023December 31, 2022
Compensation and employee benefits$707 $1,018 
Income taxes payable1,138 959 
Allowance for sales returns444 422 
Other1,851 2,182 
Other current liabilities$4,140 $4,580 


Accumulated other comprehensive income (loss)
The following table summarizes the changes in Accumulated other comprehensive income (loss) by component, net of tax:
(in millions)Foreign Currency TranslationUnrealized Gains and Losses on Available-for-Sale Debt Securities, Net of TaxUnrealized Gains and Losses on Cash Flow Hedges, Net of TaxTotal
Balance as of December 31, 2022$2 $(33)$33 $2 
Net unrealized gain (loss)(5)8 (6)(2)
Reclassifications to net income— 1 (21)(20)
Net current period other comprehensive income (loss)(5)9 (26)(22)
Balance as of March 31, 2023$(3)$(24)$7 $(20)
(in millions)Foreign Currency TranslationUnrealized Gains and Losses on Available-for-Sale Debt Securities, Net of TaxUnrealized Gains and Losses on Cash Flow Hedges, Net of TaxTotal
Balance as of December 31, 2021$13 $(4)$74 $83 
Net unrealized gain (loss)5 (19)24 10 
Reclassifications to net income— — (20)(20)
Net current period other comprehensive income (loss)5 (19)4 (10)
Balance as of March 31, 2022$18 $(23)$78 $73 
20

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 BorrowingIssue DateMaturity DateInterest RateMarch 31, 2023December 31, 2022
Senior UnsecuredSeptember 2016September 20232.50%$750 $749 
Senior UnsecuredSeptember 2020September 20230.75%1,499 1,498 
Senior UnsecuredMarch 2014April 20243.70%1,749 1,748 
Senior UnsecuredNovember 2014February 20253.50%1,748 1,748 
Senior UnsecuredSeptember 2015March 20263.65%2,742 2,742 
Senior UnsecuredSeptember 2016March 20272.95%1,247 1,247 
Senior UnsecuredSeptember 2020October 20271.20%747 747 
Senior UnsecuredSeptember 2020October 20301.65%994 993 
Senior UnsecuredSeptember 2015September 20354.60%993 993 
Senior UnsecuredSeptember 2016September 20364.00%743 742 
Senior UnsecuredSeptember 2020October 20402.60%988 988 
Senior UnsecuredDecember 2011December 20415.65%996 996 
Senior UnsecuredMarch 2014April 20444.80%1,736 1,736 
Senior UnsecuredNovember 2014February 20454.50%1,734 1,733 
Senior UnsecuredSeptember 2015March 20464.75%2,221 2,221 
Senior UnsecuredSeptember 2016March 20474.15%1,728 1,728 
Senior UnsecuredSeptember 2020October 20502.80%1,477 1,477 
Total senior unsecured notes24,092 24,088 
Liability related to future royalties1,146 1,141 
Total debt, net25,238 25,229 
Less: Current portion of long-term debt and other obligations, net2,283 2,273 
Total Long-term debt, net$22,956 $22,957 
Senior Unsecured Notes and entering into the Term Loan Facilities in September 2017.
We are required to comply with certain covenants under our credit agreements and note indentures governing our senior unsecured notes. As of September 30, 2017,March 31, 2023, we were not in violation of any covenants. Additionally, as
Revolving Credit Facility
As of September 30, 2017,March 31, 2023 and December 31, 2022, there were no amounts outstanding under our $2.5 billion revolving credit facility.facility maturing in June 2025, and we were in compliance with all covenants.
9.COMMITMENTS AND CONTINGENCIES
10.    COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are a party to various legal actions. The mostCertain significant of thesematters 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, itthe outcome of these matters either is not expected to be material or is not possible to determine the outcome of these matters, andsuch that we cannot reasonably estimate the maximum potential exposure or the range of possible loss.
We did not recognizehave any material accruals for litigationthe matters described below on our Condensed Consolidated Balance Sheets as of September 30, 2017March 31, 2023 and December 31, 2016, as we did not believe losses were probable.2022.
21

Litigation Related to Sofosbuvir
In January 2012, we acquired Pharmasset, Inc. (Pharmasset). Through the acquisition, we acquired sofosbuvir, a nucleotide analog that acts to inhibit the replication of the hepatitis C virus (HCV).HCV. In December 2013, we received approval from the U.S. Food and Drug Administration (FDA)FDA for sofosbuvir, now known commercially assold under the brand name Sovaldi. In October 2014, weSofosbuvir is also received approvalincluded in all of the fixed-dose combination of ledipasvir and sofosbuvir, now known commercially as Harvoni. In June 2016, we received approval of the fixed-dose combination of sofosbuvir and velpatasvir, now known commercially as Epclusa. In July 2017, we received approval of the fixed-dose combination of sofosbuvir, velpatasvir and voxilaprevir, now known commercially as Vosevi.our marketed HCV products. We have received a number of contractual and intellectual propertylitigation claims regarding sofosbuvir. While we have carefully considered these claims both prior to and following the acquisition and believe they are without merit, we cannot predict the ultimate outcome of such claims or range of loss, except where stated otherwise herein.loss.
We own patents and patent applications that claim sofosbuvir (Sovaldi) as a chemical entity and its metabolites and the fixed-dose combinations of ledipasvir and sofosbuvir (Harvoni), sofosbuvir and velpatasvir (Epclusa) and sofosbuvir, velpatasvir and voxilaprevir (Vosevi). Third parties may have, or may obtain rights to, patents that allegedly could be used to prevent or attempt to prevent us from commercializing our HCV products. For example, we are aware of patents and patent applications owned by otherthird parties that have been or may in the future be alleged by such parties to cover the use of our HCV products. If third parties obtain valid and enforceable patents, and successfully prove infringement of those patents by our HCV products, we could be required to pay significant monetary damages. We cannot predict


the ultimate outcome of intellectual property claims related to our HCV products. We have spent, and will continue to spend, significant resources defending against these claims.
If third parties successfully obtain valid and enforceable patents, and successfully prove infringement of those patents by our HCV products, we could be prevented from selling these products unless we were able to obtain a license under such patents. Such a license may not be available on commercially reasonable terms or at all.
Interference Proceedings and Litigation with Idenix Pharmaceuticals, Inc. (Idenix), Universita Degli Studi di Cagliari (UDSG), Centre National de la Recherche Scientifique and L‘Universite Montpellier II
In February 2012, we received notice that the U.S. Patent and Trademark Office (USPTO) had declared Interference No. 105,871 (First Idenix Interference) between our U.S. Patent No. 7,429,572 (the ‘572 patent) and Idenix’s pending U.S. Patent Application No. 12/131,868 to determine who was the first to invent certain nucleoside compounds. In January 2014, the USPTO Patent Trial and Appeal Board (PTAB) determined that Pharmasset and not Idenix was the first to invent the compounds. Idenix was acquired by Merck & Co. Inc. (Merck) in August 2014. Idenix has appealed the PTAB’s decisions to the U.S. District Court for the District of Delaware, which has stayed that appeal pending the outcome of the appeal of the interference involving Idenix’s U.S. Patent No. 7,608,600 (the ‘600 patent) as described below. In light of the decision in the Second Idenix Interference in our favor (as described below), we believe that the District Court will dismiss the First Idenix Interference with prejudice or enter judgment against Idenix and in our favor.
In December 2013, after receiving our request to do so, the USPTO declared Interference No. 105,981 (Second Idenix Interference) between our pending U.S. Patent Application No. 11/854,218 and Idenix’s ‘600 patent. The ‘600 patent includes claims directed to methods of treating HCV with nucleoside compounds. In March 2015, the PTAB determined that Pharmasset and not Idenix was the first to invent the claimed methods of treating HCV. Idenix appealed this decision in both the U.S. District Court for the District of Delaware and the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC heard oral arguments in September 2016 and affirmed the PTAB decision in June 2017. In November 2017, the CAFC denied Idenix’s petition for a rehearing. Idenix may file further petitions in the United States Supreme Court. We filed a motion to dismiss the appeal in Delaware, which was granted. Idenix appealed the dismissal to the CAFC, and that court had stayed this other appeal pending a decision in the Second Idenix Interference. We believe that the appeal from the Delaware dismissal should be dismissed in light of the recent decision of the CAFC affirming the PTAB’s prior decision in the Second Idenix Interference that Idenix is not entitled to its patent.
We believe that the Idenix claims involved in the First and Second Idenix Interferences, and similar U.S. and foreign patents claiming the same compounds, metabolites and uses thereof, are invalid. As a result, we filed an Impeachment Action in the Federal Court of Canada to invalidate Idenix Canadian Patent No. 2,490,191 (the ‘191 patent), which is the Canadian patent that corresponds to the ‘600 patent. Idenix asserted that the commercialization of Sovaldi in Canada will infringe its ‘191 patent and that our Canadian Patent No. 2,527,657, corresponding to our ‘572 patent, is invalid. In November 2015, the Canadian court held that Idenix’s patent is invalid and that our patent is valid. Idenix appealed the decision to the Canadian Federal Court of Appeal in November 2015. In July 2017, the Canadian Federal Appeal Court affirmed the lower court’s decision in our favor. In September 2017, Idenix appealed the decision to the Supreme Court of Canada.
We filed a similar legal action in Norway in the Oslo District Court seeking to invalidate Idenix’s Norwegian patent corresponding to the ‘600 patent. In September 2013, Idenix filed an invalidation action in the Norwegian proceedings against our Norwegian Patent No. 333700, which corresponds to the ‘572 patent. In March 2014, the Norwegian court found all claims in the Idenix Norwegian patent to be invalid and upheld the validity of all claims in our patent. Idenix appealed the decision to the Norwegian Court of Appeal. In April 2016, the Court of Appeal issued its decision invalidating the Idenix patent and upholding our patent. The decision revoking Idenix’s patent is now final.
In January 2013, we filed a legal action in the Federal Court of Australia seeking to invalidate Idenix’s Australian patent corresponding to the ‘600 patent. In April 2013, Idenix asserted that the commercialization of Sovaldi in Australia infringes its Australian patent corresponding to the ‘600 patent. In March 2016, the Australian court revoked Idenix’s Australian patent. Idenix has appealed this decision. The appeal hearing was held in November 2016 and we are awaiting the decision.
In March 2014, the European Patent Office (EPO) granted Idenix European Patent No. 1 523 489 (the ‘489 patent), which corresponds to the ‘600 patent. The same day that the ‘489 patent was granted, we filed an opposition with the EPO seeking to revoke the ‘489 patent. An opposition hearing was held in February 2016, and the EPO ruled in our favor and revoked the ‘489 patent. Idenix has appealed. In March 2014, Idenix also initiated infringement proceedings against us in the United Kingdom (UK), Germany and France alleging that the commercialization of Sovaldi would infringe the UK, German and French counterparts of the ‘489 patent. A trial was held in the UK in October 2014. In December 2014, the High Court of Justice of England and Wales (UK Court) invalidated all challenged claims of the ‘489 patent on multiple grounds. Idenix appealed. In November 2016, the appeals court affirmed the UK Court’s decision invalidating Idenix’s patent, and in April 2017, the UK Supreme Court refused Idenix’s application for permission to appeal. In March 2015, the German court in Düsseldorf determined that the Idenix patent was highly likely to be invalid and stayed the infringement proceedings pending the outcome of the opposition hearing held by


the EPO in February 2016. Idenix has not appealed this decision of the German court staying the proceedings. Upon Idenix’s request, the French proceedings have been stayed.
In December 2013, Idenix, UDSG, Centre National de la Recherche Scientifique and L’Université Montpellier II sued us in U.S. District Court for the District of Delaware alleging that the commercialization of sofosbuvir will infringe the ‘600 patent and that an interference exists between the ‘600 patent and our U.S. Patent No. 8,415,322. Also in December 2013, Idenix and UDSG sued us in the U.S. District Court for the District of Massachusetts alleging that the commercialization of sofosbuvir will infringe U.S. Patent Nos. 6,914,054 (the ‘054 patent) and 7,608,597 (the ‘597 patent). In June 2014, the court transferred the Massachusetts litigation to the U.S. District Court for the District of Delaware.
Prior to trial in December 2016, Idenix committed to give us a covenant not to sue with respect to any claims arising out of the ‘054 patent related to sofosbuvir and withdrew that patent from the trial. In addition, Idenix declined to litigate the ‘600 patent infringement action at trial in light of the appeal then pending at the CAFC regarding who was the first to invent the subject matter claimed in the ‘600 patent. In January 2017, the District Court stayed Idenix’s infringement claim on the ‘600 patent pending the outcome of the appeal of the Second Idenix Interference. Unless Idenix is successful in persuading the United States Supreme Court to consider a further appeal to challenge the Federal Circuit’s June 2017 decision in our favor in the Second Idenix Interference, we will ask for dismissal of, or for judgment to be entered against Idenix on, the ‘600 infringement and interference claims. A jury trial was held in December 2016 on the remaining ‘597 patent. In December 2016, the jury found that we willfully infringed the asserted claims of the ‘597 patent and awarded Idenix $2.54 billion in past damages. The parties have filed post-trial motions and briefings, and the district judge heard oral arguments in September 2017. In September 2017, the judge denied Idenix’s motion for enhanced damages and attorney’s fees. We expect the judge to rule on outstanding motions in late 2017 or early 2018. Once the judge has issued these rulings, the case will move to the CAFC.
Although we cannot predict with certainty the ultimate outcome of this litigation, we believe the jury verdict to be in error, and also believe that errors were also made by the court with respect to certain rulings before and during trial. We are confident in the merits of our case and will vigorously pursue this position in post-trial motions and on appeal. We expect that our arguments in the pending post-trial motions and on appeal will focus on one or more of the arguments that we made to the judge and jury, those being (i) when properly construed, we do not infringe the claims of the ‘597 patent, (ii) the patent is invalid for failure to properly describe the claimed invention and (iii) the patent is invalid because it does not enable one of skill in the art to practice the claimed invention.
In assessing whether we should accrue a liability for this litigation on our Condensed Consolidated Financial Statements, we considered various factors, including the legal and factual circumstances of the case, the USPTO’s invalidation of an Idenix patent similar to the ‘597 patent in dispute in this case, the jury’s verdict, the court’s post-trial orders, the current status of the proceedings, applicable law, the views of legal counsel and the likelihood that the jury’s verdict will be upheld on appeal. As a result of this review, we have determined, in accordance with applicable accounting standards, that it is not probable that we will incur a loss as a result of this litigation, and therefore have not recorded a liability for this matter. While we believe a loss is not probable, it is reasonably possible that a loss could occur. If the jury’s verdict is not upheld on appeal, the loss will be zero. If the jury’s verdict is upheld on appeal, our estimated potential loss as of September 30, 2017 would include (i) the $2.54 billion determined by the jury, which represents 10% of our adjusted revenues from sofosbuvir-containing products from launch through August 2016, (ii) approximately $269 million, which represents 10% of our adjusted revenues from sofosbuvir-containing products from September 2016 through January 25, 2017, (iii) pre- and post-judgment interest and (iv) approximately $539 million, which represents going forward royalties yet to be assessed by the court, which we have estimated assuming 14% of our adjusted revenues from sofosbuvir-containing products from January 26, 2017 through September 30, 2017 based on post-trial briefings filed by Idenix with the court, and which would be payable based on adjusted revenues from sofosbuvir-containing products for the period from January 26, 2017 through expiry of the Idenix patent in May 2021. Therefore, we estimate the range of possible loss through September 30, 2017 to be between zero and $3.6 billion. The parties agreed to stay consideration of going forward royalties until the appeal from the jury verdict and post-trial motions has been resolved. Idenix may appeal the court’s denial of enhanced damages.
If the jury’s verdict is upheld on appeal, the amount we could be required to pay could be material. The timing and magnitude of the amount of any such payment could have a material adverse impact on our results of operations and stock price.
Litigation with Merck
In August 2013, Merck contacted us requesting that we pay royalties on the sales of sofosbuvir and obtain a license to U.S. Patent No. 7,105,499 (the ‘499 patent) and U.S. Patent No. 8,481,712 (the ‘712 patent), which it co-owns with Ionis Pharmaceuticals, Inc. The ‘499 and ‘712 patents cover compounds which do not include, but may relate to, sofosbuvir. We filed a lawsuit in August 2013 in the U.S. District Court for the Northern District of California seeking a declaratory judgment that the Merck patents are invalid and not infringed. During patent prosecution, Merck amended its patent application in an attempt to cover compounds related to sofosbuvir. Initially, in March 2016, a jury determined that we had not established that Merck’s patents are invalid for lack of written description or lack of enablement and awarded Merck $200 million in damages. However, in June 2016, the court ruled in our favor on our defense of unclean hands and determined that Merck may not recover any damages from us for the ‘499


and ‘712 patents. The judge has determined that Merck is required to pay our attorney’s fees due to the exceptional nature of this case. In July 2017, the court issued a decision setting the amount of attorney fees awarded to us.
Merck has filed notices of appeal to the CAFC regarding the court’s decision on our defense of unclean hands and its award of attorney’s fees. We appealed the issue relating to the invalidity of Merck’s patent. If the decision on our defense of unclean hands is reversed on appeal and Merck’s patent is upheld, we may be required to pay damages and a royalty on sales of sofosbuvir-containing products following the appeal. In that event, the judge has indicated that she will determine the amount of the royalty, if necessary, at the conclusion of any appeal in this case.
Litigation with the University of Minnesota
The University of Minnesota (the University)“University”) has obtained U.S. Patent No. 8,815,830 (the ‘830 patent)“’830 patent”), which purports to broadly cover nucleosides with antiviral and anticancer activity. In August 2016, the University filed a lawsuit against us in the U.S. District Court for the District of Minnesota, alleging that the commercialization of sofosbuvir-containing products infringes the ‘830’830 patent. We believe that the ‘830’830 patent is invalid and will not be infringed by the continued commercialization of sofosbuvir. In October 2017, the court granted our motion to transfer the case to California. We have also filed four petitions for inter partes review inwith the USPTOU.S. Patent and Trademark Office Patent Trial and Appeal Board (“PTAB”) alleging that all asserted claims are invalid for anticipation and obviousness.
Petitions for Inter Partes Review filed by Initiative for Medicines, Access & Knowledge
In October 2017, we received notice that Initiative for Medicines, Access & Knowledge (I-MAK) submitted multiple The PTAB instituted one of these petitions requesting inter partes review to the PTAB alleging that certain patents associated with sofosbuvir are invalid as either not novel or obvious. We strongly believe I-MAK’s petitions are without merit and that sofosbuvir, the only approved HCV drug of its kind, is both novel and not obvious. Accordingly, we will defend against these allegations. If the PTAB decides to initiate one or more inter partes reviews, a decision would be expected about a year later. Either party can appeal the PTAB’s decision to the CAFC.
European Patent Claims
Inmerits hearing was held in February 2015, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering sofosbuvir that expires in 2028. In October 2016, the EPO upheld the validity of certain claims of our sofosbuvir patent. We have appealed this decision, seeking to restore all of the original claims, and several of the original opposing parties have also appealed, requesting full revocation. The appeal process may take several years.
In April 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024.
In January 2016, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering tenofovir alafenamide (TAF) that expires in 2021. In July 2017, the EPO upheld the validity of the claims of our TAF patent. We are awaiting a written decision from the EPO. The parties that filed the oppositions may appeal this decision. The appeal process may take several years.
In July 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032.
In March 2016, three parties filed oppositions in the EPO requesting revocation of our granted European patent covering cobicistat that expires in 2027.
While we are confident in the strength of our patents, we cannot predict the ultimate outcome of these oppositions. If we are unsuccessful in defending these oppositions, some or all of our patent claims may be narrowed or revoked and the patent protection for sofosbuvir, TAF and cobicistat in Europe could be substantially shortened or eliminated entirely. If our patents are revoked, and no other European patents are granted covering these compounds, our exclusivity may be based entirely on regulatory exclusivity granted by the European Medicines Agency. Sovaldi has been granted regulatory exclusivity that will prevent generic sofosbuvir from entering the European Union for 10 years following approval of Sovaldi, or January 2024. If we lose patent protection for sofosbuvir prior to 2028, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost, which may cause our stock price to decline.
Litigation Related to Axi-Cel
In October 2017, we acquired Kite, which is now our wholly-owned subsidiary. Through the acquisition, we acquired axicabtagene ciloleucel (axi-cel), a chimeric antigen receptor T cell (CAR T) therapy. In October 2017, we received approval from FDA for axi-cel, now known commercially as Yescarta.
We own patents and patent applications that claim axi-cel chimeric DNA segments. Third parties may have, or may obtain rights to, patents that allegedly could be used to prevent or attempt to prevent us from commercializing axi-cel or to require us to


obtain a license in order to commercialize axi-cel. For example, we are aware that Juno Therapeutics, Inc. (Juno) has exclusively licensed Patent No. 7,446,190 (the ‘190 patent), which was issued to Sloan Kettering Cancer Center. In September 2017, Juno and Sloan Kettering Cancer Center filed a lawsuit against Kite in2018, the U.S. District Court for the CentralNorthern District of California allegingstayed the litigation until after the PTAB concluded the inter partes review that it had initiated. In May 2021, the commercialization of axi-cel infringes the ‘190 patent.
In August 2015, Kite filedPTAB issued a petition for inter partes review in the USPTO alleging thatwritten decision finding the asserted claims of the ‘190University’s patent invalid. In July 2021, the University appealed this decision, and in March 2023, a three-judge panel of the Court of Appeals for the Federal Circuit affirmed the PTAB’s decision. The litigation in the U.S. District Court was dismissed in April 2023 after the University represented to the Court that it did not intend to pursue further appeals.
Litigation with NuCana plc. (“NuCana”)
NuCana has obtained European Patent No. 2,955,190 (the “EP ’190 patent”) that allegedly covers sofosbuvir. In opposition proceedings before the European Patent Office (“EPO”) held in February 2021, the EPO Opposition Division upheld the validity of the EP ’190 patent in amended form. The EPO subsequently held an appeal hearing in March 2023 and revoked the EP ’190 patent, including the amended patent. We had also initiated proceedings to invalidate the U.K. counterparts of the EP ’190 patent and a related patent, European Patent No. 3,904,365 (the EP ‘365 patent) in the High Court of England & Wales. NuCana had filed counterclaims against us in the High Court of England & Wales alleging patent infringement of the U.K. counterparts and seeking damages and other relief. The U.K. case was heard in early 2023, and the judge issued a judgment in March 2023 invalidating both patents.
In April 2021, NuCana also filed a lawsuit against us in Germany at the Landgericht Düsseldorf alleging patent infringement of the German counterpart of the EP ’190 patent and seeking damages and injunctive relief. In April 2022, we filed an action for grant of a compulsory license before the Federal Patent Court in Germany. In July 2022, the Düsseldorf court determined that NuCana’s German counterpart of the EP ’190 patent is infringed and granted an injunction. In August 2022, Gilead filed a notice of appeal regarding the Düsseldorf court’s decision, and a hearing is scheduled for August 2023. Following the revocation of the EP ’190 patent by the EPO, we expect the injunction in Germany to be lifted.
22

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 invalidassigned 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 obvious.pre-exposure prophylaxis (“PrEP”). In December 2016,November 2019, the U.S. Department of Justice filed a lawsuit against us in the U.S. District Court of Delaware, alleging that the sale of Truvada and Descovy for use as PrEP infringes the HHS Patents. In February 2020, PTAB declined to institute our petitions for inter partes review of the HHS Patents. In April 2020, we filed a breach of contract lawsuit against the U.S. federal government in the U.S. Court of Federal Claims, alleging violations of 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 Court of Federal Claims was held in June 2022, and in November 2022, the Court determined that the claimsgovernment breached the three MTAs. The Court also made findings of fact relating to the CTAs but declined to issue a decision on breach of the ‘190 patent are not invalid due to obviousness. In February 2017, Kite filed a Notice of Appeal toCTAs until after trial in the CAFC. That appeal is currently pending.
WeDelaware District Court. Although we cannot predict with certainty the ultimate outcome of intellectual property claims relatedeach of these litigation matters, we believe that the U.S. federal government breached the MTAs and CTA, that Truvada and Descovy do not infringe the HHS Patents and that the HHS Patents are invalid over prior art descriptions of Truvada’s use for PrEP and post-exposure prophylaxis as well because physicians and patients were using the claimed methods years before HHS filed the applications for the patents. A trial date for the lawsuit in the Delaware District Court has been set for May 2023. A separate trial at the Court of Federal Claims to axi-cel. If Juno’s patentdetermine the damages Gilead is upheld as valid and Juno successfully proves infringement of that patent by axi-cel, we couldowed based on the government’s breach has yet to be prevented from selling Yescarta unless we were able to obtain a license to this patent. Such a license may not be available on commercially reasonable terms or at all.set.
Litigation with Generic Manufacturers
As part of the approval process for some of our products, FDA granted us a New Chemical Entity (NCE)(“NCE”) exclusivity period during which other manufacturers’ applications for approval of generic versions of our productproducts 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)(“ANDA”), the application form typically used by manufacturers seeking approval of a generic drug. The sale of generic versions of our products earlier thanprior 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. For sofosbuvir, this date falls in December 2017. Consequently, it is possible that one or more generics may file an ANDA for Sovaldi in December 2017.
Current legal proceedings of significance with generic manufacturers include:
HIV Products
In June 2014,October 2021, we received noticea letter from Lupin Ltd. (“Lupin”) indicating that Apotex Inc. (Apotex) submitted an abbreviated new drug submission (ANDS) to Health Canada requesting permission to manufacture and market a generic version of Truvada and a separate ANDS requesting permission to manufacture and market a generic version of Viread. In the notice, Apotex alleges that three of the patents associated with Truvada and two of the patents associated with Viread are invalid, unenforceable and/or will not be infringed by Apotex’s manufacture, use or sale of a generic version of Truvada or Viread. In August 2014, we filed lawsuits against Apotex in the Federal Court of Canada seeking orders of prohibition against approval of these ANDS. A hearing in those cases was held in April 2016. In July 2016, the court issued an order prohibiting Health Canada from approving Apotex’s generic version of our Viread product until the expiry of our patents in July 2017. The court declined to prohibit approval of Apotex’s generic version of our Truvada product. The court’s decision did not rule on the validity of the patents. The launch of Apotex’s generic version of our Truvada product would be at risk of infringement of our patents, including patents that we were unable to assert in the present lawsuit, and liability for our damages. Apotexit has appealed the court’s decision.
In February 2016, we received notice that Mylan Pharmaceuticals, Inc. (Mylan) submitted an ANDA to FDA requesting permission to manufacturemarket and marketmanufacture a generic version of Tybost (cobicistat).Symtuza, a product commercialized by Janssen and for which Gilead shares in revenues. In the notice, Mylan alleges that theNovember 2021, we, along with Janssen Products, L.P. and Janssen (“Janssen”), filed a patent covering cobicistat is invalidinfringement lawsuit against Lupin as obvious and that Mylan’s generic product cannot infringe an invalid claim. In March 2016, we filed lawsuits against Mylanco-plaintiffs in the U.S. District Court of Delaware. Trial has been scheduled for October 2023. 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, filed a patent infringement lawsuit against Apotex as co-plaintiffs in the U.S. District Court of Delaware. We separately filed an additional lawsuit against Apotex asserting infringement of two additional patents in the same court. Trial has not yet been scheduled in the lawsuits against Apotex.
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.
European Patent Claims
In 2015, several parties filed oppositions in the EPO requesting revocation of one of our granted European patents covering sofosbuvir that expires in 2028. In 2016, the EPO upheld the validity of certain claims of our sofosbuvir patent. We have appealed this decision, seeking to restore all of the original claims, and several of the original opposing parties have also appealed, requesting full revocation. The appeal hearing was held in November 2022, but a final decision regarding the validity of the claims has not yet been announced.
In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024. The EPO conducted an oral hearing for this opposition in 2018 and upheld the claims. The original opposing parties have appealed, requesting full revocation. The hearing for the appeal has been scheduled for September 2023.
23

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032. In 2019, the EPO upheld the validity of the claims of our TAF hemifumarate patent. Three parties have appealed this decision. The appeal hearing was held in March 2023 and the EPO affirmed the validity of the TAF hemifumarate patent.
The appeal process for sofosbuvir opposition proceedings may take several years . While we are confident in the strength of our patents, we cannot predict the ultimate outcome of these oppositions. If we are unsuccessful in defending these oppositions, some or all of our patent claims may be narrowed or revoked and the patent protection for sofosbuvir in the EU could be substantially shortened or eliminated entirely. If our patents are revoked, and no other European patents are granted covering these compounds, our exclusivity may be based entirely on regulatory exclusivity granted by EMA. If we lose patent protection for sofosbuvir, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost.
Antitrust and Consumer Protection
We, along with Bristol-Myers Squibb Company (“BMS”) and Johnson & Johnson, Inc., have been named as defendants in class action lawsuits filed in 2019 and 2020 related to various drugs used to treat HIV, including drugs used in combination antiretroviral therapy. Plaintiffs allege that we (and the other defendants) engaged in various conduct to restrain competition in violation of federal and state antitrust laws and state consumer protection laws. The lawsuits, which have been consolidated, are pending in the U.S. District Court for the Northern District of West Virginia.California. The trial in Delaware is scheduled for January 2018,lawsuits seek to bring claims on behalf of direct purchasers consisting largely of wholesalers and the parties have agreed to dismiss the action in West Virginia. The patent in suit that covers Tybost is also listed in the Orange Book for Stribildindirect or end-payor purchasers, including health insurers and Genvoya.
In May 2017, we received notice that Amneal Pharmaceuticals LLC (Amneal) submitted an ANDA to FDA requesting permission to manufactureindividual patients. Plaintiffs seek damages, permanent injunctive relief and market a generic version of Truvada at low dosage strengths.other relief. In the notice, Amneal allegessecond half of 2021 and first half of 2022, several plaintiffs filed separate lawsuits effectively opting out of the class action cases, asserting claims that two patents associated with emtricitabine are invalid, unenforceable and/or will not be infringed by Amneal’s manufacture, use or sale of generic versions of Truvada at low dosage strengths. In July 2017, we filed a lawsuit against Amneal insubstantively the U.S. District Court forsame as the District of Delaware for infringement of our patents.
In June 2017, we received notice that Macleods Pharmaceuticals Ltd. (Macleods) submitted ANDAs to FDA requesting permission to manufacture and market generic versions of Truvada and Atripla. In the notices, Macleods alleges that two patents associated with emtricitabine, three patents associatedputative classes. These cases have been coordinated with the emtricitabine and tenofovir disoproxil fumarate (TDF) fixed dose combination and three patents associated with the emtricitabine, TDF and efavirenz fixed dose combination are invalid, unenforceable and/or will not be infringed by Macleod’s manufacture, use or sale of generic versions of Truvada or Atripla. In July 2017, we filed a lawsuit against Macleods in the U.S. District Courtclass actions. Trial has been set for the District of Delaware for infringement of these patents.


TAF LitigationMay 2023.
In January 2016, AIDS Healthcare Foundation,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. (AHF)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 a complaint within the U.S. District Court for the Northern District of California against Gilead, Japan Tobacco, Inc.by Jacksonville Police Officers and Japan Tobacco International, U.S.A. (together, JT), and Emory University (Emory). In April 2016, AHF amended its complaint to add Janssen and Johnson & Johnson Inc. (J&J) as defendants. AHFFire Fighters Health Insurance Trust (“Jacksonville Trust”) on behalf of end-payor purchasers. Jacksonville Trust claims that U.S. Patent Nos. 7,390,791; 7,800,788; 8,754,065; 8,148,374;the 2014 settlement agreement between us and 8,633,219 are invalid. In addition, AHF claims that Gilead, independentlythe Cipla Defendants, which settled a patent dispute relating to patents covering our Emtriva, Truvada and together with JT, Akros, JanssenAtripla products and J&J, is violatingpermitted generic entry prior to patent expiry, violates certain federal and state antitrust and unfair competition lawsconsumer 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 marketFirst Judicial District Court for salesthe State of TAFNew Mexico, County of Santa Fe by offering TAF as part of a fixed-dose combination product with elvitegravir, cobicistat and emtricitabine (Genvoya), a fixed-dose combination product with elvitegravir and rilpivirine (Odefsey) and in a fixed-dosed combination product with elvitegravir (Descovy). AHF sought a declaratory judgment of invalidity against each of the patents as well as monetary damages. In May 2016,New Mexico Attorney General. The New Mexico Attorney General alleges that we JT, Janssen and J&J‎ filed motions to dismiss all of AHF’s claims, which AHF opposed. In June 2016, a hearing was held on the motions to dismiss. In July 2016, the judge granted our and(and the other defendants’ motionsdefendants) restrained competition in violation of New Mexico antitrust and dismissed allconsumer 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 AHF’s claims. AHF subsequently appealedplaintiffs.
Product Liability
We have been named as a defendant in one class action lawsuit and various product liability lawsuits related to Viread, Truvada, Atripla, Complera and Stribild. Plaintiffs allege that Viread, Truvada, Atripla, Complera and/or Stribild caused them to experience kidney, bone and/or tooth injuries. The lawsuits, which are pending in state or federal court in California, Delaware, 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 court’s decision dismissingCalifornia First District Court of Appeal considers the challengemerits of plaintiffs’ theories of liability. The first bellwether trial in California federal court is scheduled to begin in January 2024. We intend to vigorously defend ourselves in these actions. While we believe these cases are without merit, we cannot predict the validity of our TAF patents. The appeal hearing was heldultimate outcome. If plaintiffs are successful in June 2017, andtheir claims, we are awaiting a decision.could be required to pay significant monetary damages.
Department of Justice InvestigationsGovernment Investigation
In June 2011,2017, we received a subpoena from the U.S. Attorney’s Office for the NorthernSouthern District of CaliforniaNew York requesting documents related to our promotional speaker programs for HIV. We are cooperating with this inquiry.
24

Qui Tam Litigation
A former sales employee filed a qui tam lawsuit against Gilead in March 2017 in U.S. District Court for the manufacture, and related quality and distribution practices,Eastern District of Complera, Atripla, Truvada, Viread, Emtriva, Hepsera and Letairis. We cooperated withPennsylvania. Following the government’s inquiry. In April 2014, the U.S. Department of Justice informed us that, following an investigation, it declineddecision not to intervene in athe 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 by two former employees.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 2014,2021, the former employees served a First Amended Complaint. In January 2015, the federal districttrial court issued an order granting in its entirety, without prejudice,granted our motion to dismiss with prejudice. Health Choice has appealed the First Amended Complaint. In February 2015,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 plaintiffsTexas 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 pending final judgment in the Eastern District of Pennsylvania lawsuit filed in March 2017, as discussed above. Health Choice filed a Second Amended Complaintmotion to lift the stay, and in June 2015,April 2023, the federal districttrial court issued an order granting ourgranted Health Choice’s motion to dismisslift the Second Amended Complaint. In July 2015, the plaintiffsstay. Gilead has filed a notice of appeal inmotion to the U.S.Texas Court of Appeals for the Ninth Circuit. In July 2017, a three-judge panelrequesting reinstatement of the Ninth Circuit reversedstay until final judgment in the Eastern District of Pennsylvania lawsuit.
We intend to vigorously defend ourselves in these actions. While we believe these cases are without merit, we cannot predict the ultimate outcomes. If any of these plaintiffs are successful in their claims, we could be required to pay significant monetary damages.
Securities Litigation
Immunomedics and remandedseveral of its former officers and directors have been named as defendants in putative class actions filed in 2018 and 2019, which were consolidated in September 2019. Plaintiffs filed a consolidated complaint in November 2019 and an amended complaint in July 2021. Plaintiffs allege that Immunomedics and the case back toindividual defendants violated the federal securities laws in connection with Immunomedics’ Biologics License Application for Trodelvy, and seek certification of a class of shareholders, damages and other relief. The consolidated lawsuit is pending in the U.S. District Court for the Northern District of California. We are appealingNew Jersey. In June 2022, plaintiffs filed their Motion for Class Certification, and Immunomedics submitted its Opposition in July 2022. The parties have agreed to settle this decision to the Supreme Courtlitigation. A motion seeking preliminary approval of the United States. In October 2017,settlement was granted in February 2023. The court has not yet entered a final order approving the Ninth Circuit granted our motion to stay the case pending the appeal.
In February 2016, we received a subpoena from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our support of 501(c)(3) organizations that provide financial assistance to patients and documents concerning our provision of financial assistance to patients for our HCV products. Other companies have disclosed similar inquiries. We are cooperating with this inquiry. In October 2017, we received a civil investigative demand from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our copay coupon program and Medicaid price reporting methodology. We intend to cooperate with this inquiry.settlement.
Other Matters
We are a party to various legal actions that arose in the ordinary course of our business. We do not believe that these other legal actions will have a material adverse impact on our consolidated business, financial position, or results of operations.
10.STOCKHOLDERS’ EQUITY
The following table summarizes the changes in stockholders’ equity (in millions):operations or cash flows.
25
  
Gilead Stockholders’ Equity 
 
Noncontrolling
Interest
 
Total Stockholders’ Equity 
 Common Stock  
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 Shares Amount
Balance at December 31, 2016 1,310
 $1
 $454
 $278
 $18,154
 $476
 $19,363
Net income (loss) —
 —
 —
 —
 8,493
 (13) 8,480
Other comprehensive loss, net of tax —
 —
 —
 (29) —
 —
 (29)
Change in noncontrolling interest —
 —
 —
 —
 —
 (54) (54)
Issuances under employee stock purchase plan 1
 —
 83
 —
 —
 —
 83
Issuances under equity incentive plans 9
 —
 95
 —
 —
 —
 95
Stock-based compensation —
 —
 305
 —
 —
 —
 305
Repurchases of common stock (13) —
 (31) —
 (903) —
 (934)
Dividends declared —
 —
 —
 —
 (2,055) —
 (2,055)
Balance at September 30, 2017 1,307
 $1
 $906
 $249
 $23,689
 $409
 $25,254



Accumulated Other Comprehensive Income (Loss)11.EARNINGS PER SHARE
The following table summarizes the changes in AOCI by component, net of tax (in millions):
  Foreign Currency Translation Unrealized Gains and Losses on Available-for-Sale Securities Unrealized Gains and Losses on Cash Flow Hedges Total
Balance at December 31, 2016 $132
 $(16) $162
 $278
Other comprehensive income (loss) before reclassifications (51) 311
 (278) (18)
Amounts reclassified from AOCI —
 (7) (4) (11)
Net current period other comprehensive income (loss) (51) 304
 (282) (29)
Balance at September 30, 2017 $81
 $288
 $(120) $249
The amounts reclassified for gains and losses on cash flow hedges are recorded as part of Product sales on our Condensed Consolidated Statements of Income. See Note 4, Derivative Financial Instruments for additional information. Amounts reclassified for gains and losses on available-for-sale securities are recorded as part of Other income (expense), net, on our Condensed Consolidated Statements of Income.
Stock Repurchase Program
In the first quarter of 2016, our Board of Directors authorized a $12.0 billion stock repurchase program (2016 Program) under which repurchases may be made in the open market or in privately negotiated transactions. We started repurchases under the 2016 Program in April 2016.
During the nine months ended September 30, 2017, we repurchased and retired 12 million shares of our common stock for $848 million through open market transactions under the 2016 Program. As of September 30, 2017, the remaining authorized repurchase amount under the 2016 Program was $8.2 billion.
11.NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS
Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding and other dilutive securities outstanding during the period. The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents, the assumed conversion of our outstanding convertible senior notes and the assumed exercise of the warrants related to our outstanding convertible senior notes were determined under the treasury stock method. Both the convertible senior notes and the associated warrants were settled in 2016.
We have excluded stock options and equivalents of 9 million for the three and nine months ended September 30, 2017 and 4 million for the three and nine months ended September 30, 2016 from the computation of diluted net income per share attributable to Gilead common stockholders because their effect was antidilutive.
The following table summarizesshows the calculation of basic and diluted net incomeearnings per share attributable to Gilead:
 Three Months Ended
March 31,
(in millions, except per share amounts)20232022
Net income attributable to Gilead$1,010 $19 
Shares used in basic earnings per share attributable to Gilead calculation1,248 1,255 
Dilutive effect of stock options and equivalents13 6 
Shares used in diluted earnings per share attributable to Gilead calculation1,261 1,262 
Basic earnings per share attributable to Gilead$0.81 $0.02 
Diluted earnings per share attributable to Gilead$0.80 $0.02 
Potential shares of common stock excluded from the computation of diluted earnings per share attributable to Gilead common stockholders (in millions, except per share amounts):because their effect would have been antidilutive were 3 million and 16 million for the three months ended March 31, 2023, and 2022, respectively.
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Net income attributable to Gilead $2,718
 $3,330
 $8,493
 $10,393
Shares used in per share calculation - basic 1,306
 1,322
 1,307
 1,347
Effect of dilutive securities:        
Stock options and equivalents 13
 13
 12
 15
Conversion spread related to the convertible senior notes —
 —
 —
 2
Warrants related to the convertible senior notes —
 4
 —
 5
Shares used in per share calculation - diluted 1,319
 1,339
 1,319
 1,369
Net income per share attributable to Gilead common stockholders - basic $2.08
 $2.52
 $6.50
 $7.72
Net income per share attributable to Gilead common stockholders - diluted $2.06
 $2.49
 $6.44
 $7.59


12.SEGMENT INFORMATION
We have one operating segment, which primarily focuses on the discovery, development and commercialization of innovative medicines in areas of unmet medical need. Therefore, our results of operations are reported on a consolidated basis consistent with internal management reporting reviewed by our chief operating decision maker, our Chief Executive Officer. Total product sales on an individual product basis are summarized in the following table (in millions):
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
Antiviral products:        
Genvoya $988
 $461
 $2,614
 $921
Harvoni 973
 1,860
 3,726
 7,441
Epclusa 882
 640
 2,945
 704
Truvada 811
 858
 2,337
 2,698
Atripla 439
 650
 1,366
 1,998
Descovy 316
 88
 853
 149
Odefsey 296
 105
 781
 174
Viread 274
 303
 834
 862
Complera/Eviplera 237
 411
 744
 1,160
Stribild 229
 621
 831
 1,527
Sovaldi 219
 825
 847
 3,460
Vosevi 123
 —
 123
 —
Other 56
 19
 122
 56
Total antiviral products 5,843
 6,841
 18,123
 21,150
Other products:        
Letairis 213
 215
 654
 593
Ranexa 164
 170
 517
 467
AmBisome 92
 91
 276
 262
Zydelig 40
 39
 110
 129
Other 50
 49
 145
 136
Total product sales $6,402
 $7,405
 $19,825
 $22,737
12.INCOME TAXES
The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our total revenues (as a percentage of total revenues)Income tax benefit (expense):
Three Months Ended
March 31,
(in millions, except percentages)20232022
Income (loss) before income taxes$1,300 $(152)
Income tax benefit (expense)$(316)$164 
Effective tax rate24.3 %107.9 %
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2017 2016 2017 2016
McKesson Corp. 25% 23% 23% 22%
AmerisourceBergen Corp. 21% 18% 20% 18%
Cardinal Health, Inc. 19% 16% 18% 16%
13.INCOME TAXES
Our effective income tax ratesrate of 26.1% and 25.6%24.3% for the three and nine months ended September 30, 2017, respectively,March 31, 2023 differed from the U.S. federal statutory rate of 35%21% primarily due to earnings from non-U.S. subsidiaries that operate$244 million of non-deductible Acquired in-process research and development expenses recorded in jurisdictionsconnection with lower tax rates than the United States and where the earnings are considered indefinitely reinvested, partially offset by state taxes, and our portionacquisition of the non-tax deductible branded prescription drug fee.Tmunity.
We file federal, state and foreignOur effective income tax returns inrate of 107.9% for three months ended March 31, 2022 differed from the United States and in many foreign jurisdictions. ForU.S. federal and California income tax purposes, the statutestatutory rate of limitations is open for 2010 and onwards. For certain acquired entities, the statute of limitations is open for all years from inception21% primarily due to our utilizationa decrease in state deferred tax liabilities associated with a partial IPR&D impairment charge of their net operating losses and credits carried over from prior years.$2.7 billion.


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 theour 2016 to 2018 tax years from 2010 to 2014 and by various state and foreign jurisdictions.years. There are differinginterpretations 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 record liabilities related to uncertain tax positions in accordance with the income tax guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Resolution of one or more of these uncertain tax positions in any period may have a material impact on the results of operations for that period.
26
We believe that in the coming 12 months, it is reasonably possible that audits in multiple jurisdictions will conclude or that the statute of limitations on certain state and foreign income taxes will expire, or both. Given the uncertainty as to ultimate settlement terms, the timing of payment, and the impact of such settlements on other uncertain tax positions, an estimate of the range of change to the unrecognized tax benefits cannot be made.

14.SUBSEQUENT EVENT
Kite Pharma, Inc.
On October 3, 2017, the closing date, we acquired all of the outstanding common stock of Kite. As a result, Kite became our wholly-owned subsidiary. Kite uses a patient’s own immune cells to fight cancer. Kite has developed engineered cell therapies that express either a chimeric antigen receptor (CAR) or an engineered T cell receptor, depending on the type of cancer. Kite’s most advanced therapy candidate, axi-cel, is a CAR T therapy. In October 2017, axi-cel, now known commercially as Yescarta, was approved by FDA, making it the first to market as a treatment for refractory aggressive non-Hodgkin lymphoma, which includes diffuse large B-cell lymphoma (DLBCL), transformed follicular lymphoma (TFL) and primary mediastinal B-cell lymphoma (PMBCL). A marketing authorization application has also been filed for axi-cel for the treatment of relapsed/refractory DLBCL, TFL and PMBCL with the European Medicines Agency, representing the first known submission in Europe for a CAR T therapy. Kite has additional candidates in clinical trials in both hematologic cancers and solid tumors, including KITE-585, a CAR T therapy candidate that targets B-cell maturation antigen expressed in multiple myeloma. This transaction will be accounted for as a business combination.
The acquisition price was approximately $11.2 billion, consisting of approximately $11.1 billion in cash and approximately $0.1 billion representing the portion of the replaced stock-based compensation attributable to the pre-combination period. In addition, approximately $0.7 billion was excluded from the acquisition price representing the portion of the replaced stock-based compensation attributable to the post combination period, which is expected to be recognized through 2021. Given the timing of the closing of this transaction, we are currently in the process of valuing the assets acquired and liabilities assumed in the business combination. As a result, we are not yet able to provide the amounts to be recognized as of the closing date for the major classes of assets acquired and liabilities assumed and other related disclosures. We will include this and other related information in our Annual Report on Form 10-K for the year ending December 31, 2017.
We financed the transaction with $3.0 billion in senior unsecured notes issued in September 2017, a $6.0 billion term loan facility credit agreement entered into in September 2017 and drawn in October 2017, as well as cash on hand. See Note 8, Debt and Credit Facilities for additional information.


Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Item 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The forward-looking statements are contained principally in this section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Words such as “expect,” “anticipate,” “target,” “goal,” “project,” “hope,” “intend, “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “could,” “should,” “might,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements other than statements of historical fact are forward-looking statements, including statements regarding overall trends, operating cost and revenue trends, liquidity and capital needs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions. We have based these forward-looking statements on our current expectations about future events. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially from those suggested by these forward-looking statements for various reasons, including those identified below under “Risk Factors.” Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The forward-looking statements included in this report are made only as of the date hereof. Except as required under federal securities laws and the rules and regulations of the Securities and Exchange Commission, we do not undertake and specifically decline any obligation to update any of these statements or to publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise. In evaluating our business, you should carefully consider the risks described in the section entitled “Risk Factors” under Part II, Item 1A in addition to the other information in this Quarterly Report on Form 10-Q. Any of the risks contained herein could materially and adversely affect our business, results of operations and financial condition.
You should read the following management’s discussion and analysis is intended to provide material information around events and uncertainties known to management relevant to an assessment of ourthe 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, 20162022 and our unaudited Condensed Consolidated Financial Statements for the ninethree months ended September 30, 2017March 31, 2023 and the related notes thereto and other disclosures (including the disclosures under Part II, Item 1A, “1A. Risk Factors”)Factors) included in this Quarterly Report on Form 10-Q. Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles10-Q where other material events and uncertainties not otherwise discussed below are presented in U.S. dollars.disclosed.
Management Overview
Gilead Sciences, Inc. (Gilead, we, our(“Gilead,” “we,” “our” or us), incorporated in Delaware on June 22, 1987,“us”) is a research-based biopharmaceutical company that discovers, developshas pursued and commercializesachieved 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 in areas of unmet medical need. With each new discoveryto prevent and investigational drug candidate, we strive to transformtreat life-threatening diseases, including HIV, viral hepatitis and simplify care for people with life-threatening illnesses around the world.cancer. We have operationsoperate in more than 3035 countries worldwide, with headquarters in Foster City, California. Gilead’s primary areas
Key Business Updates
The following highlights are based on press releases recently issued. 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 focus include human immunodeficiency virus (HIV), liver diseases such as chronic hepatitis C virus (HCV) infection and chronic hepatitis B virus (HBV) infection, hematology/oncology, cardiovascular and inflammation/respiratory diseases. We seek to add to our existing portfoliois not incorporated by reference into this Quarterly Report on Form 10-Q.
Oncology
Cell Therapy
•In February 2023, we completed the acquisition of products through our internal discoveryTmunity, a clinical stage private biotech company, which provides preclinical and clinical development programs and through product acquisition and in-licensing strategies.programs. This includes an “armored” CAR T technology platform that has the potential to be applied to a variety of CAR Ts to enhance anti-tumor activity, as well as rapid manufacturing processes.
Our portfolio of marketed products includes AmBisome®, Atripla®, Cayston®, Complera®/Eviplera®, Descovy®, Emtriva®, Epclusa®, Genvoya®, Harvoni®, Hepsera®, Letairis®, Odefsey®, Ranexa®, Sovaldi®, Stribild®, Truvada®, Tybost®, Vemlidy®, Viread®, Vitekta®, Vosevi®, YescartaTM and Zydelig®. We have U.S. and international commercial sales operations, with marketing subsidiaries in over 30 countries. We also sell and distribute certain products through our corporate partners under royalty-paying collaborative agreements.
Business Highlights
During the third quarter of 2017,•In March 2023, we continued to advance our product pipeline across our therapeutic areas with the goal of delivering best-in-class drugs that advance the current standard of care and/or address unmet medical need. Recent key developments include:
Kite Acquisition
In October 2017, we acquired all of the outstanding common stock of Kite Pharma, Inc. (Kite) for $180 per share in cash, or approximately $11.2 billion, excluding approximately $0.7 billion relating to the portion of the replaced stock-based compensation attributable to the post combination period. We financed the transaction with $3.0 billion in senior unsecured notes, a $6.0 billion term loan facility credit agreement and cash on hand. Kite is an industry leader in the emerging field of cell therapy, which uses a patient’s own immune cells to fight cancer. Kite has developed engineered cell therapies that express either a chimeric antigen receptor or an engineered T cell receptor, depending on the type of cancer. The acquisition resulted in Kite becoming our wholly-owned subsidiary and established us as a leader in cellular therapy.


Through the acquisition, we acquired axicabtagene ciloleucel (axi-cel), a chimeric antigen receptor T cell (CAR T) therapy. In October 2017, we received approvalannounced primary overall survival results from the U.S. Food and Drug Administration (FDA)Phase 3 ZUMA-7 study for axi-cel, now known commercially as Yescarta, making it the first to market as ainitial treatment forof adult patients with relapsed or refractory aggressive non-Hodgkin lymphoma, which includes diffuse(“R/R”) large B-cell lymphoma (DLBCL)(“LBCL”), transformed follicular lymphoma (TFL) and primary mediastinal B-cell lymphoma (PMBCL). We have also filedwhich showed a marketing authorization applicationstatistically significant improvement for axi-celYescarta in overall survival versus historical treatment.
Other
•In February 2023, we received FDA approval of Trodelvy for the treatment of relapsed/refractory DLBCL, TFL and PMBCL with the European Medicines Agency, representing the first known submission in Europe for a CAR T therapy. Approval in Europe is expected in 2018, although there can be no assurance that we will receive such approval on a timely basis or at all. In addition to axi-cel, we also acquired therapy candidates in clinical trials in both hematologic cancers and solid tumors, including KITE-585, a CAR T therapy candidate that targets B-cell maturation antigen expressed in multiple myeloma.
Other Key Announcements
We announced results from a Phase 2, randomized, placebo-controlled trial evaluating two doses of GS-0976, an oral, investigational inhibitor of acetyl-CoA carboxylase, inadult patients with nonalcoholic steatohepatitis. The data demonstrate that the higher dose of GS-0976 (20 mg taken orally once daily) when administered for 12 weeks was associated with statistically significant reductions in hepatic steatosis (buildup of fatunresectable locally advanced or metastatic hormone receptor-positive, human epidermal growth factor receptor 2-negative (“HR+/HER2-”) breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the liver) andmetastatic setting.
Inflammation
•In March 2023, we exercised an option to license investigational targeted protein degrader molecule NX‑0479 (“GS-6791”) from Nurix. GS-6791 is a noninvasive marker of fibrosis compared to placebo. 
We announced detailed 48-week results from a Phase 3 study evaluating the efficacy and safety of switching virologically suppressed HIV-1 infected adult patients from a multi-tablet regimen containing a boosted protease inhibitor (bPI) to a fixed-dose combination of bictegravir (50 mg) (BIC), an investigational integrase strand transfer inhibitor, and emtricitabine/tenofovir alafenamide (200/25 mg) (FTC/TAF), a dual-NRTI backbone. In the ongoing study, BIC/FTC/TAF was found to be statistically non-inferior to regimens containing bPIs and demonstrated no treatment-emergent resistance at 48 weeks.
China Food and Drug Administration approved Sovaldi (sofosbuvir 400 mg) forpotent, selective, oral IRAK4 degrader with potential applications in the treatment of HCV infection. Sovaldi was approved for the treatment of adultsrheumatoid arthritis and adolescents (aged 12 to 18 years) infected with HCV genotypes 1, 2, 3, 4, 5 or 6 as a component of a combination antiviral treatment regimen. Sovaldi is our first HCV medicine approved in China.other inflammatory diseases.
FDA granted priority review for our new drug application (NDA) for an investigational, fixed-dose combination of BIC/FTC/TAF for the treatment of HIV-1 infection. We filed the NDA for BIC/FTC/TAF with a priority review voucher on June 12, 2017, and FDA has set a target action date under PDUFA of February 12, 2018.Key Financial Results
Financial Highlights
Three Months Ended
March 31,
(in millions, except percentages and per share amounts)20232022Change
Total revenues$6,352 $6,590 (4)%
Net income attributable to Gilead$1,010 $19 NM
Diluted earnings per share attributable to Gilead$0.80 $0.02 NM
________________________________
NM - Not Meaningful
Total revenues were $6.5decreased by 4% to $6.4 billion for the third quarter of 2017,three months ended March 31, 2023, compared to $7.5 billion for the third quarter of 2016,same period in 2022, primarily due to lower sales of Veklury, partially offset by higher product sales which were $6.4 billion compared to $7.4 billion for the same quarter of 2016.in HIV, Cell Therapy and Trodelvy.
Research and development (R&D) expenses were $789 million for the third quarter of 2017, compared to $1.1 billion for the third quarter of 2016, primarily due to the 2016 impacts of a $200 million milestone expense associated with Nimbus Apollo, Inc. (Nimbus) and a $117 million impairment charge related to in-process R&D (IPR&D).
27

Net income attributable to Gilead was $2.7$1.0 billion, or $2.06$0.80 diluted earnings per diluted share, for the third quarter of 2017,three months ended March 31, 2023, compared to $3.3 billion$19 million, or $2.49$0.02 diluted earnings per diluted share for the third quarter of 2016, primarily due to lower product sales and a higher effective tax rate, partially offset by lower expenses.
As of September 30, 2017, we had $41.4 billion of cash, cash equivalents and marketable securities, compared to $36.6 billion as of June 30, 2017. Thissame period in 2022. The increase was primarily due to the issuancefollowing items net of $3.0their related tax effect: a $2.7 billion aggregate principal amount of senior unsecured notesin-process research and development (“IPR&D”) impairment recorded in September 2017 to partially fund our acquisition of Kite, which was completed in October 2017. During the thirdfirst quarter of 2017, cash flow from2022, which did not repeat in 2023, partially offset by higher operating activities was $2.7 billion.expenses and lower revenues in 2023.
Results of Operations
Total Revenues
The following table summarizes the period-over-period changes in our Total revenues:
Three Months Ended March 31, 2023Three Months Ended March 31, 2022
(in millions, except percentages)U.S.EuropeOther InternationalTotalU.S.EuropeOther InternationalTotalChange
Product sales:
HIV$3,364 $528 $298 $4,190 $2,862 $550 $295 $3,707 13 %
Oncology431 202 37 670 292 117 11 420 59 %
Cell Therapy269 148 31 448 172 92 10 274 64 %
Trodelvy162 54 6 222 119 25 2 146 52 %
Liver Disease318 140 217 675 279 123 233 635 6 %
Chronic hepatitis C virus (“HCV”)232 114 99 445 199 95 105 399 12 %
Chronic hepatitis B virus (“HBV”) / hepatitis delta virus (“HDV”)86 26 117 230 80 28 128 235 (2)%
Veklury252 111 209 573 801 304 430 1,535 (63)%
Other69 72 58 199 94 81 62 236 (16)%
Total product sales4,434 1,053 819 6,306 4,329 1,174 1,031 6,534 (3)%
Royalty, contract and other revenues18 26 2 46 27 27 3 56 (18)%
Total revenues$4,452 $1,079 $821 $6,352 $4,355 $1,202 $1,033 $6,590 (4)%

See Note 2. Revenues of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further disaggregation of revenue by product.
HIV
HIV product sales and royalty, contract and other revenues:
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
(In millions, except percentages) 2017 2016 Change 2017 2016 Change
Revenues:            
Product sales $6,402
 $7,405
 (14)% $19,825
 $22,737
 (13)%
Royalty, contract and other revenues 110
 95
 16 % 333
 333
 — %
Total revenues $6,512
 $7,500
 (13)% $20,158
 $23,070
 (13)%


Product sales for the three months ended September 30, 2017
Total product sales were $6.4increased by 13% to $4.2 billion for the three months ended September 30, 2017,March 31, 2023, compared to $7.4 billion for the same period in 2016,2022, primarily due to a decrease in antiviral product sales.favorable pricing dynamics, higher demand for Biktarvy and Descovy for pre-exposure prophylaxis (“PrEP”) and lower inventory draw-downs, partially offset by unfavorable foreign currency exchange impact.
AntiviralOncology
Cell Therapy
Cell Therapy product sales which include sales of our HIV, HBV and HCV products, were $5.8 billion forincreased by 64% to $448 million the three months ended September 30, 2017,March 31, 2023, compared to $6.8 billion for the same period in 2016. HIV2022, primarily due to increased Yescarta demand for the treatment of R/R LBCL and HBVincreased Tecartus demand for R/R mantle cell lymphoma and R/R adult acute lymphoblastic leukemia.
Trodelvy
Trodelvy product sales were $3.6 billion for the three months ended September 30, 2017, comparedincreased by 52% to $3.5 billion for the same period in 2016. The increase was primarily driven by the continued uptake of our TAF-based products: Genvoya, Descovy and Odefsey. HCV product sales, which consist of Harvoni, Epclusa, Sovaldi and Vosevi, were $2.2 billion for the three months ended September 30, 2017, compared to $3.3 billion for the same period in 2016. The decrease was due to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa, which was approved by FDA and the European Commission in June and July 2016, respectively, and sales of Vosevi, which was approved by FDA and the European Commission in July 2017.
In the HCV market, following the approval of the newer HCV products, there was a rapid increase in the number of patients who were treated and cured followed by a decline in the number of patients seeking care and being able to access HCV treatment. As a result of this dynamic, we expect patient starts to continue to decline relative to 2016 in all major markets and this was a primary driver for the decreases of our HCV products sales for the three and nine months ended September 30, 2017 as compared to the same periods in 2016. We also expect product sales to be further impacted by the effects of competition from new HCV products on net price and market share. We anticipate that the effect of competition on net pricing and market share will be more fully reflected beginning in the fourth quarter of 2017.
Other product sales, which include sales of Letairis, Ranexa and AmBisome, were $559$222 million for the three months ended September 30, 2017,March 31, 2023, compared to $564 million for the same period in 2016.2022, primarily due to increased adoption in metastatic triple-negative breast cancer in the U.S. and Europe as well as the launch of the indication for pre-treated HR+/HER2- metastatic breast cancer in the U.S.
Of our totalLiver Disease
HCV
HCV product sales 29%increased by 12% to $445 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to favorable pricing dynamics and timing of purchases in the U.S.
28

HBV / HDV
HBV and HDV product sales were generated outside the United States$230 million during the three months ended September 30, 2017. March 31, 2023 and remained relatively flat compared to the same period in 2022.    
Veklury
Veklury product sales decreased by 63% to $573 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to lower demand driven by reduced hospitalization rates in all regions. Sales of Veklury generally reflect COVID-19 related rates and severity of infections and hospitalizations as well as the availability, uptake and effectiveness of vaccinations and alternative treatments for COVID-19. As a result, future sales of Veklury are difficult to predict and may vary significantly from one period to the next.
Other
Other product sales decreased by 16% to $199 million for the three months ended March 31, 2023, compared to the same period in 2022, primarily due to lower demand for AmBisome and Letairis.
Foreign Currency Exchange Impact
We facedgenerally face exposure to movements in foreign currency exchange rates, primarily in the Euro. We useduse foreign currency exchange contracts to hedge a percentageportion of our foreign currency exposure. Foreign currency exchange, net of hedges, did not have a material impact onexposures.
Of our total product salessales, 30% and 34% were generated outside the U.S. for the three months ended September 30, 2017, compared to the same period in 2016.
Product sales in the United States were $4.5 billion for the three months ended September 30, 2017, compared to $5.1 billion for the same period in 2016. Declines in sales of our HCV products were partially offset by increases in sales of our HIVMarch 31, 2023 and HBV products. The declines in sales of our HCV products were primarily due to lower Harvoni and Sovaldi sales volume as a result of lower total market patient starts and increased competition, partially offset by sales of Vosevi. The increases in the sales of our HIV and HBV products were primarily driven by sales of our TAF-based products, partially offset by decreases in our tenofovir disoproxil fumarate (TDF)-based products and the prior year impact of a favorable revision to our rebate reserves of $332 million.
Product sales in Europe were $1.2 billion for the three months ended September 30, 2017, compared to $1.4 billion for the same period in 2016. The decrease was primarily due to lower Harvoni and Sovaldi sales volume, partially offset by sales of Epclusa. Sales of our HIV and HBV products for the three months ended September 30, 2017 were flat compared to the same period in 2016. Foreign currency exchange, net of hedges, did not have a material impact on our product sales for the three months ended September 30, 2017, compared to the same period in 2016.
Product sales in other locations were $663 million for the three months ended September 30, 2017, compared to $931 million for the same period in 2016,primarily due to lower sales in Japan. Sales in Japan were $170 million for the three months ended September 30, 2017, compared to $452 million for the same period in 2016, primarily due to lower Harvoni and Sovaldi sales volume as a result of lower total market patient starts and increased competition.
Product sales for the nine months endedSeptember 30, 2017
Total product sales were $19.8 billion for the nine months ended September 30, 2017, compared to $22.7 billion for the same period in 2016, primarily due to a decrease in antiviral product sales.
Antiviral product sales were $18.1 billion for the nine months ended September 30, 2017, compared to $21.2 billion for the same period in 2016. HIV and HBV product sales were $10.5 billion for the nine months ended September 30, 2017, compared to $9.5 billion for the same period in 2016. The increase was primarily driven by the continued uptake of our TAF-based products. HCV product sales were $7.6 billion for the nine months ended September 30, 2017, compared to $11.6 billion for the same period in 2016. The decrease was due to lower sales of Harvoni and Sovaldi across all major markets, partially offset by sales of Epclusa and Vosevi.
Other product sales, which include sales of Letairis, Ranexa and AmBisome, were $1.7 billion for the nine months ended September 30, 2017, compared to $1.6 billion for the same period in 2016.
Of our total product sales, 30% were generated outside the United States during the nine months ended September 30, 2017. We faced exposure to movements in foreign currency exchange rates, primarily in the Euro. We used foreign currency exchange


contracts to hedge a percentage of our foreign currency exposure.2022, respectively. Foreign currency exchange, net of hedges, had an unfavorable impact on our total product sales of $147$106 million for the nine months ended September 30, 2017, compared to the same period in 2016.
Product sales in the United States were $14.0 billion for the nine months ended September 30, 2017, compared to $14.3 billion for the same period in 2016. Declines in sales of our HCV products were partially offset by increases in sales of our HIV and HBV products. The declines in sales of our HCV products were primarily due to lower Harvoni and Sovaldi sales volume as a result of lower total market patient starts and increased competition, partially offset by sales of Epclusa and Vosevi. The increases in the sales of our HIV and HBV products were primarily driven by sales of our TAF-based products, partially offset by decreases in our TDF-based products and the prior year impact of a favorable revision to our rebate reserves of $332 million.
Product sales in Europe were $3.9 billion for the nine months ended September 30, 2017, compared to $4.7 billion for the same period in 2016. The decrease was primarily due to lower Harvoni and Sovaldi sales volume, partially offset by sales of Epclusa. Sales of our HIV and HBV products for the nine months ended September 30, 2017 were flat compared to the same period in 2016. In addition, foreign currency exchange, net of hedges, had an unfavorable impact of $118 million on our product sales for the nine months ended September 30, 2017, compared to the same period in 2016.
Product sales in other locations were $2.0 billion for the nine months ended September 30, 2017, compared to $3.7 billion for the same period in 2016,primarily due to lower sales in Japan. Sales in Japan were $556 million for the nine months ended September 30, 2017, compared to $2.2 billion for the same period in 2016, primarily due to lower Harvoni and Sovaldi sales volume as a result of lower total market patient starts and increased competition.
The following table summarizes the period-over-period changes in our product sales by product:
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
(In millions, except percentages) 2017 2016 Change 2017 2016 Change
Antiviral products:            
HCV products            
Harvoni $973
 $1,860
 (48)% $3,726
 $7,441
 (50)%
Epclusa 882
 640
 38 % 2,945
 704
 *
Sovaldi 219
 825
 (73)% 847
 3,460
 (76)%
Vosevi 123
 —
 *
 123
 —
 *
HIV and HBV            
Genvoya 988
 461
 114 % 2,614
 921
 *
Truvada 811
 858
 (5)% 2,337
 2,698
 (13)%
Atripla 439
 650
 (32)% 1,366
 1,998
 (32)%
Descovy 316
 88
 *
 853
 149
 *
Odefsey 296
 105
 *
 781
 174
 *
Viread 274
 303
 (10)% 834
 862
 (3)%
Complera/Eviplera 237
 411
 (42)% 744
 1,160
 (36)%
Stribild 229
 621
 (63)% 831
 1,527
 (46)%
Other 56
 19
 *
 122
 56
 118 %
Total antiviral products 5,843
 6,841
 (15)% 18,123
 21,150
 (14)%
Other products:            
Letairis 213
 215
 (1)% 654
 593
 10 %
Ranexa 164
 170
 (4)% 517
 467
 11 %
AmBisome 92
 91
 1 % 276
 262
 5 %
Zydelig 40
 39
 3 % 110
 129
 (15)%
Other 50
 49
 2 % 145
 136
 7 %
Total product sales $6,402
 $7,405
 (14)% $19,825
 $22,737
 (13)%
_______________________            
* Percentage not meaningful


Following is additional discussion of our results by product:
Harvoni
Harvoni sales accounted for 17% and 21% of our total antiviral product sales for the three and nine months ended September 30, 2017, respectively, and 27% and 35% of our total antiviral product sales for the three and nine months ended September 30, 2016, respectively.
For the three months ended September 30, 2017, product sales were $718 million in the United States, $110 million in Europe and $145 million in other locations, compared to $1.1 billion in the United States, $380 million in Europe and $396 million in other locations for the same period in 2016. The decreases in all major markets were primarily due to lower sales volume.
For the nine months ended September 30, 2017, product sales were $2.6 billionin the United States, $583 million in Europe and $515 million in other locations, compared to $4.0 billion in the United States, $1.4 billion in Europe and $2.0 billion in other locations for the same period in 2016. The decreases in all major markets were primarily due to lower sales volume. In the United States, the decrease was also due toMarch 31, 2023, based on a favorable revision to our sales return reserve of $181 million in the second quarter of 2016.
Epclusa
Epclusa sales accounted for 15% and 16% of our total antiviral product sales for the three and nine months ended September 30, 2017, respectively, and 9% and 3% of our total antiviral product sales for the three and nine months ended September 30, 2016, respectively.
For thecomparison using foreign currency exchange rates from three months ended September 30, 2017, product sales were $543 million in the United StatesMarch 31, 2022.
Costs and $263 million in Europe, compared to $593 million in the United States and $40 million in Europe for the same period in 2016. In the United States, the decrease was due to lower average net selling price, partially offset by higher sales volume driven by a shift in the market from Sovaldi to Epclusa. In Europe, the increase was driven by higher sales volume as Epclusa was approved by the European Commission in July 2016.
For the nine months ended September 30, 2017, product sales were $2.1 billion in the United States and $649 million in Europe, compared to $657 million in the United States and $40 million in Europe for the same period in 2016. The increases were primarily due to higher sales volume as Epclusa was approved by FDA and the European Commission in June and July 2016, respectively.
Sovaldi
Sovaldi sales accounted for 4% and 5% of our total antiviral product sales for the three and nine months ended September 30, 2017, respectively, and 12% and 16% of our total antiviral product sales for the three and nine months ended September 30, 2016, respectively.
For the three months ended September 30, 2017, product sales were $32 million in the United States, $19 million in Europe and $168 million in other locations, compared to $363 million in the United States, $184 million in Europe and $278 million in other locations for the same period in 2016. The decreases were primarily due to lower sales volume driven by a shift in the market from Sovaldi to Epclusa.
For the nine months ended September 30, 2017, product sales were $120 million in the United States, $238 million in Europe and $489 million in other locations, compared to $1.8 billion in the United States, $727 million in Europe and $950 million in other locations for the same period in 2016. The decreases were primarily due to lower sales volume driven by a shift in the market from Sovaldi to Epclusa. In the United States, the decrease was also due to a favorable revision to our sales return reserve of $98 million in the second quarter of 2016.
TAF-based regimens - Genvoya, Descovy and Odefsey
Genvoya was approved by FDA and the European Commission in November 2015. Descovy was approved by FDA and the European Commission in April 2016. Odefsey was approved by FDA and the European Commission in March and June 2016, respectively.
Product sales of our newly launched TAF-based regimens accounted for 27% and 23% of our total antiviral product sales for three and nine months ended September 30, 2017, respectively, and 10% and 6% of our total antiviral product sales for the three and nine months ended September 30, 2016, respectively.
For the three months ended September 30, 2017, sales of our TAF-based regimens were $1.3 billion in the United States and $248 million in Europe, compared to $567 million in the United States and $79 million in Europe for the same period in 2016. The increases were primarily driven by higher sales volume as patients shifted away from TDF-based regimens.


For the nine months ended September 30, 2017, sales of our TAF-based regimens were $3.6 billion in the United States and $594 million in Europe, compared to $1.1 billion in the United States and $137 million in Europe for the same period in 2016. The increases were primarily driven by higher sales volume as patients shifted away from TDF-based regimens.
TDF-based regimens - Stribild, Complera/Eviplera, Atripla, Truvada and Viread
Product sales of these TDF-based regimens accounted for 34% of our total antiviral product sales for three and nine months ended September 30, 2017, and 42% and 39% of our total antiviral product sales for the three and nine months ended September 30, 2016, respectively.
For the three months ended September 30, 2017, sales of our TDF-based regimens were $1.3 billion in the United States, $461 million in Europe and $192 million in other locations, compared to $2.0 billion in the United States, $644 million in Europe and $206 million in other locations for the same period in 2016. In the United States, the decreases were primarily due to lower sales volume as a result of the continued uptake of our TAF-based regimens and a favorable revision to our rebate reserves of $312 million relating to Stribild and Complera in the third quarter of 2016, partially offset by the increased usage of Truvada for pre-exposure prophylaxis (PrEP). In Europe, the decreases were primarily due to lower sales volume as a result of loss of exclusivity of Truvada and Viread and the continued uptake of our TAF-based regimens.
For the nine months ended September 30, 2017, sales of our TDF-based regimens were $4.0 billion in the United States, $1.5 billion in Europe and $627 million in other locations, compared to $5.6 billion in the United States, $2.0 billion in Europe and $642 million in other locations for the same period in 2016. In the United States, the decreases were primarily due to lower sales volume as a result of the continued uptake of our TAF-based regimens and a favorable revision to our rebate reserves of $312 million relating to Stribild and Complera in the third quarter of 2016, partially offset by the increased usage of Truvada for PrEP. In Europe, the decreases were primarily due to lower sales volume as a result of loss of exclusivity of Truvada and Viread and the continued uptake of our TAF-based regimens.
Cost of Goods Sold and Product Gross Margin
The following table summarizes our cost of goods sold and product gross margin:
  Three Months Ended Nine Months Ended
  September 30, September 30,
(In millions, except percentages) 2017 2016 2017 2016
Cost of goods sold $1,032
 $1,129
 $3,115
 $3,186
Product gross margin 84% 85% 84% 86%
Our product gross margin for the three and nine months ended September 30, 2017 decreased compared to the same period in 2016 primarily due to changes in our product mix, as our HCV product sales decreased as a percentage of total product sales.
Operating Expenses
The following table summarizes the period-over-period changes in our R&D expensescosts and selling, generalexpenses:
Three Months Ended
March 31,
(in millions, except percentages)20232022Change
Cost of goods sold$1,401 $1,424 (2)%
Product gross margin77.8 %78.2 %-42 bps
Research and development expenses$1,447 $1,178 23 %
Acquired in-process research and development expenses$481 $8 NM
In-process research and development impairment$— $2,700 NM
Selling, general and administrative expenses$1,319 $1,083 22 %

NM - Not Meaningful
Product Gross Margin
Product gross margin was 77.8% for the three months ended March 31, 2023 and administrative (SG&A) expenses:
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
(In millions, except percentages) 2017 2016 Change 2017 2016 Change
Research and development expenses $789
 $1,141
 (31)% $2,584
 $3,890
 (34)%
Selling, general and administrative expenses $879
 $831
 6 % $2,626
 $2,406
 9 %
remained relatively flat compared to the same period in 2022.
Research and Development Expenses
Research and development (“R&D&D”) expenses consist primarily of clinical studies performed by contract research organizations, materials and supplies, licenses and fees, up-front payments under collaboration arrangements, milestone payments, personnel costs including salaries, benefits and stock-based compensation expense, infrastructure, materials and overhead allocations consisting of varioussupplies and other support costs, research and facilities-related costs.clinical studies performed by contract research organizations and our collaboration partners and other outside services.
We do not track total R&D expenses by product candidate, therapeutic area or development phase. However, we manage our R&D expenses by identifying the R&D activities we anticipate willexpect 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 continuallyregularly review our R&D pipeline and the status of developmentactivities based on unmet medical need and, as necessary, reallocate resources among theour internal R&D portfolio and external opportunities that we believe will best support the futurelong-term growth of our business.
We do not track total R&D expenses by product candidate, therapeutic area or development phase.
29

The following table provides a breakout of expenses by major cost type:
Three Months Ended
March 31,
(in millions)20232022
Personnel, infrastructure and other support costs$817 $682 
Clinical studies and other costs629 496 
Total$1,447 $1,178 
Research and development expenses increased by 23% to $1.4 billion for the three months ended September 30, 2017 decreased by $352 million or 31%,March 31, 2023, compared to the same period in 2016, primarily2022. Personnel, infrastructure and other support costs as well as Clinical studies and other costs both increased due to new study launches and clinical activities primarily related to oncology.
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 2016 impactscosts of rights to IPR&D projects.
Acquired in-process research and development expenses were $481 million for the three months ended March 31, 2023, primarily related to a $200$244 million milestone expensecharge associated with Nimbusour acquisition of Tmunity in February 2023 and a $117$212 million upfront payment associated with the collaboration with Arcellx, which we entered into in January 2023. Expenses for the three months ended March 31, 2022 were minimal. See Note6. 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
In-process research and development impairment was $2.7 billion for the three months ended March 31, 2022 related to a partial impairment charge related toon our HR+/HER2- IPR&D.
R&D expenses forintangible asset. No IPR&D impairment charges were recorded during the ninethree months ended September 30, 2017 decreased by $1.3 billion or 34%, compared to the same period in 2016, primarily due to the 2016 impacts of our purchase of Nimbus, up-front collaboration expenses related to our license and collaboration agreement with Galapagos NV, milestone expense associated with Nimbus and impairment charges related to IPR&D.March 31, 2023.
Selling, General and Administrative Expenses
SG&ASelling, general and administrative expenses relate to salesare recorded when incurred and marketing, finance, human resources, legal and other administrative activities. Expenses areconsist primarily comprised of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses, and other general and administrative costs. SG&Acosts related to sales and marketing, finance, human resources, legal and other administrative activities.
Selling, general and administrative expenses also include the branded prescription drug (BPD) fee.
SG&A expensesincreased by 22% to $1.3 billion for the three months ended September 30, 2017 were flatMarch 31, 2023, compared to the same period in 2016.
SG&A expenses for the nine months ended September 30, 2017 increased by $220 million or 9%, compared to the same period in 2016,2022, primarily due to higher BPDincreased commercial activities, mainly in oncology, and increased corporate spend, including an increase in our allocation of the branded prescription drug fee expense resulting from a favorable adjustment of $191 million in the first quarter of 2016.and corporate grants.
Interest Expense and Other Income (Expense), Net
The following table summarizes the period-over-period changes in Interest expense and Other income (expense), net:
Three Months Ended
March 31,
(in millions, except percentages)20232022Change
Interest expense$(230)$(238)(4)%
Other income (expense), net$(174)$(111)57 %
Interest expense for the three months ended September 30, 2017 increasedMarch 31, 2023 decreased by 4% to $291$230 million, compared to $242 million for the same period in 2016. Interest expense for the nine months ended September 30, 2017 increased to $821 million, compared to $699 million for the same period in 2016. The increases for both periods were2022, primarily due to the issuance of $5.0 billion aggregate principal amount of senior unsecured noteslower outstanding debt balances.
The changes in September 2016.
Provision for Income Taxes
Our provision forOther income taxes was $959 million and $951 million(expense), net for the three months ended September March 31, 2023 compared to the same period in 2022, primarily reflect higher net unrealized losses from equity securities, partially offset by higher interest income due to rising interest rates.
30 2017 and 2016, respectively.

Income Taxes
The following table summarizes the period-over-period changes in Income tax benefit (expense):
Three Months Ended
March 31,
(in millions, except percentages)20232022Change
Income (loss) before income taxes$1,300 $(152)$1,453 
Income tax benefit (expense)$(316)$164 $480 
Effective tax rate24.3 %107.9 %(83.6)%
Our effective tax rate was 26.1% and 22.2%decreased for the three months ended September 30, 2017 and 2016, respectively.
Our provision for income taxes was $2.9 billion and $2.8 billion for the nine months ended September 30, 2017 and 2016, respectively. Our effective tax rate was 25.6% and 21.2% for the nine months ended September 30, 2017 and 2016, respectively.
The increases in the effective tax rates for the three and nine months ended September 30, 2017March 31, 2023 compared to the same periodsperiod in 2016 were2022, primarily due to changesa partial IPR&D impairment charge of $2.7 billion recorded in the geographic mix of earnings.three months ended March 31, 2022.
Liquidity and Capital Resources
We believe thatcontinually evaluate our existingliquidity and capital resources, supplemented byincluding our cash flows generated from operating activities, will be adequateaccess to satisfyexternal capital, so that we can adequately and efficiently finance our capital needs for the foreseeable future. The following table summarizes our cash, cash equivalents and marketable securities and working capital:operations.
(In millions) September 30, 2017 December 31, 2016
Cash, cash equivalents and marketable securities $41,360
 $32,380
Working capital $25,720
 $10,370
Cash, Cash Equivalents and Marketable SecuritiesLiquidity
Cash, cash equivalents and marketable debt securities totaled $41.4were $7.2 billion at September 30, 2017, an increaseand $7.6 billion as of $9.0 billion when compared to $32.4 billion atMarch 31, 2023 and December 31, 2016. During the nine months ended September 30, 2017, we generated $9.1 billion in operating cash flow, issued $3.0 billion aggregate principal amount of senior unsecured notes in September 2017 to partially fund our acquisition of Kite, which was completed in October 2017, paid cash dividends of $2.0 billion2022, respectively. Cash and utilized $848 million to repurchase stock.
Of the total cash, cash equivalents and marketable securities at September 30, 2017, approximately $32.4 billion was generateddecreased by $476 million from operations in foreign jurisdictions and is intended for use in our foreign operations. We do not rely on unrepatriated earnings as a source of funds for our domestic business as we expect to have sufficient cash flow and borrowing capacity in the United States to fund our domestic operational and strategic needs.


Working Capital
Working capital was $25.7 billion at September 30, 2017, compared to $10.4 billion at December 31, 2016. The increase of $15.4 billion was primarily driven by an increase in cash, cash equivalents and short-term marketable securities resulting from a shift in the duration of our marketable securities portfolio2022 to reduce interest rate riskand the $3.0 billion issuance of senior unsecured notes in connection with our acquisition of Kite, partially offset by $1.7 billion increase in current portion of long-term debt.
Cash Flows
March 31, 2023. The following table summarizes our cash flow activities:
Three Months Ended
 Nine Months EndedMarch 31,
 September 30,
(In millions) 2017 2016
Cash provided by (used in):    
(in millions)(in millions)20232022
Net cash provided by (used in):Net cash provided by (used in):
Operating activities $9,145
 $13,508
Operating activities$1,744 $1,840 
Investing activities $(6,053) $(9,310)Investing activities$(826)$(1,070)
Financing activities $46
 $(7,377)Financing activities$(1,406)$(1,794)
Effect of exchange rate changes on cash and cash equivalentsEffect of exchange rate changes on cash and cash equivalents$13 $(18)
Cash Provided by Operating Activities
CashNet cash provided by operating activities was $9.1 billion for the nine months ended September 30, 2017. Cash flows from operating activities represent the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for non-cash items and changes in operating assets and liabilities.
Cash Net cash provided by operating activities decreased by $4.4was $1.7 billion for the ninethree months ended September 30, 2017 whenMarch 31, 2023 compared to the same period in 2016, primarily due to lower product sales.
Cash Used in Investing Activities
Cash used in investing activities was $6.1 billion for the nine months ended September 30, 2017. Cash flows from investing activities primarily consist of net purchases of marketable securities and other investments and our capital expenditures. Cash used in investing activities decreased by $3.3 billion for the nine months ended September 30, 2017, when compared to the same period in 2016, primarily due to higher net purchases of marketable securities in 2016.
Cash Provided by (Used in) Financing Activities
Cash provided by financing activities was $46 million for the nine months ended September 30, 2017, compared to cash used in financing activities of $7.4$1.8 billion for the same period in 2016.2022. The change was primarily due to lower repurchases of our common stockcollections as well as higher inventory and operating spend in 2017,2023, partially offset by lower net proceeds fromthe effect of the non-recurring payment of a $1.25 billion settlement related to bictegravir litigation in 2022.
Investing Activities
Net cash used in investing activities was $826 million for the three months ended March 31, 2023 compared to $1.1 billion for the same period in 2022. The change was primarily due to a decrease in acquisition spend, including acquired IPR&D.
Financing Activities
Net cash used in financing activities was $1.4 billion for the three months ended March 31, 2023 compared to $1.8 billion for the same period in 2022. During the three months ended March 31, 2023, we utilized cash of $969 million for dividend payments and $400 million for common stock repurchases. During the three months ended March 31, 2022, we utilized cash of $500 million for debt repayments, $945 million for dividend payments and $352 million for common stock repurchases.
Capital Resources and Material Cash Requirements
A summary of our debt issuances.
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, 2022. See Notes 6. Acquisitions, Collaborations and Other Arrangements, 9. Debt and Credit Facilities,
In connection with our acquisition of Kite, we entered into the following financing arrangements:
In September 2017, we issued $3.0 billion aggregate principal amount of senior unsecured notes consisting of $750 million principal amount of floating rate notes due September 2018, $750 million principal amount of floating rate notes due March 2019, 10. Commitments and $500 million principal amount of floating rate notes due September 2019 (collectively, the Floating Rate Notes)Contingencies and $1.0 billion principal amount of 1.85% senior notes due September 2019. The Floating Rate Notes bear interest rates equal to three month LIBOR, plus 0.17% with respect to the Floating Rate Notes due September 2018, 0.22% with respect to the Floating Rate Notes due March 2019 and 0.25% with respect to the Floating Rate Notes due September 2019. The Fixed Rate Notes will pay interest semiannually and the Floating Rate Notes will pay interest quarterly.  
In September 2017, we entered into a $6.0 billion principal amount term loan facility credit agreement consisting of a $1.0 billion principal amount 364-day senior unsecured term loan facility, a $2.5 billion principal amount three-year senior unsecured term loan facility and a $2.5 billion principal amount five-year senior unsecured term loan facility (collectively, the Term Loan Facilities). In October 2017, we drew $6.0 billion principal amount on the Term Loan Facilities and used the proceeds to finance our acquisition of Kite. The Term Loan Facilities bear interest at floating rates based on LIBOR plus an applicable margin which will vary based on our debt rating from Fitch Ratings, Inc, Moody’s Investors Service, Inc. and S&P Global Ratings. The 364-day senior unsecured term loan facility and three-year senior unsecured term loan facility will be due and payable at maturity. The five-year senior unsecured term loan facility will be payable in quarterly amounts equal to 2.5% of the initial principal amount of the five-year senior unsecured term loan facility on each fiscal quarter end date after the second anniversary of the closing date,


with any remaining balance due and payable at maturity. We may reduce the commitments under any of the Term Loan Facilities and may terminate or permanently prepay loans under any of the Term Loan Facilities in whole or in part at any time, without premium or penalty. Amounts repaid under the Term Loan Facilities cannot be reborrowed.
We are required to comply with certain covenants under the credit agreements and note indentures governing our senior notes. As of September 30, 2017, we were not in violation of any covenants. Additionally, as of September 30, 2017, no amounts were outstanding under our revolving credit facility.
The summary of our borrowings under various financing arrangements is included in Note 8, Debt and Credit Facilities12. Income Taxes of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.10-Q for any material changes to our capital resources and material cash requirements during the three months ended March 31, 2023.
31

Critical Accounting Policies, Estimates and Judgments
The preparation of our Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, management evaluates its significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates. Estimates are assessed each period and updated to reflect current information. A summary of our critical accounting policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016.2022. There were no material changes to our critical accounting policies and estimates during the ninethree months ended September 30, 2017.March 31, 2023.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Recent Accounting Pronouncements
See Note 1, Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes inItem 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information about our market risk during the nine months ended September 30, 2017 compared to the disclosuresis presented in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2016.2022. See Notes 3. Fair Value Measurements, 4. Available-For-Sale Debt Securities and Equity Securities and 5. Derivative Financial Instruments of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for any material changes to these disclosures.
Item 4.CONTROLS AND PROCEDURES
Item 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation as of September 30, 2017March 31, 2023 was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “disclosure controls and procedures,” which are defined in Rule 13a-15(e) under the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act)“Exchange Act”), as controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in theU.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the company’sour management, including itsour Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at September 30, 2017.as of March 31, 2023.
Changes in Internal Control over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017,March 31, 2023, and has concluded that there was no change during such quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls


and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

32

PART II.OTHER INFORMATION

PART II.    OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
Item 1.LEGAL PROCEEDINGS
For a description of our significant pending legal proceedings, please see Note 9,10. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item I1 of this Quarterly Report on Form 10-Q.
Item 1A.RISK FACTORS
Item 1A.     RISK FACTORS
In evaluating our business, you should carefully consider the following discussion of material risks, events and uncertainties that make an investment in us speculative or risky in addition to the other information in this Quarterly Report on Form 10-Q. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business resultsand operations, growth, reputation (including the commercial or scientific reputation of operationsour products), prospects, product pipeline and sales, operating and financial condition.results, financial condition, cash flows, liquidity and stock price. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors; our operations could also be affected by factors, and, therefore,events or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.
A substantial portionProduct and Commercialization Risks
Certain of our revenues is derived from sales of products subject us to treat HCV and HIV. If we are unable to increase HIV salesadditional or if HCV sales decrease more than anticipated, then our results of operations may be adversely affected.heightened risks.
During the nine months ended September 30, 2017, sales of Harvoni, Epclusa, Sovaldi and Vosevi for the treatment of HCV accounted for approximately 39% of our total product sales. The primary drivers of our HCV product revenues are patient starts, net pricing and market share. Since the second quarter of 2015, the number of new patient starts has diminished, and we expect patient starts to continue to decline relative to 2016 in all major markets, resulting in a decrease in our HCV product sales. Our HCV revenues have declined and are expected to further decline as a result of increased competition from new HCV products, which has further eroded net pricing and market share. We anticipate that this impact on pricing and market share will be more fully reflected beginning in the fourth quarter of 2017. Our HCV product sales could also be further impacted by a larger than anticipated shift in our payer mix to more highly discounted payer segments and geographic regions.
In addition, future sales of our HCV products are difficult to estimate because demand depends, in part, on the extent of reimbursement of our HCV products by private and government payers. In light of continued financial crises experienced by several countries in the European Union, some governments have announced or implemented measures to further reduce healthcare expenditures. We may continue to experience global pricing pressure which could result in larger discounts or rebates on our products or delayed reimbursement, which negatively impacts our product sales and results of operations. Also, private and public payers can choose to exclude our HCV products from their formulary coverage lists or limit the types of patients for whom coverage will be provided, which would negatively impact the demand for, and revenues of, our HCV products. Any change in the formulary coverage, reimbursement levels or discounts or rebates offered on our HCV products to payers may impact our anticipated revenues. We expect pricing pressure in the HCV market to continue. If we are unable to achieve our forecasted HCV sales, our stock price could experience significant volatility.HIV
We receive a substantial portion of our revenue from sales of our products for the treatment and prevention of HIV infection, which include Genvoya, Truvada, Atripla, Descovy, Stribild, Odefsey and Complera/Eviplera.infection. During the ninethree months ended September 30, 2017,March 31, 2023, sales of our HIV products accounted for approximately 52%66% of our total product sales. Most of our HIV products contain tenofovir alafenamide (TAF), tenofovir disoproxil fumarate (TDF) and/or emtricitabine, which belong to the nucleoside class of antiviral therapeutics. In addition, if the treatment paradigm for HIV changes, causing nucleoside-based therapeutics to fall out of favor, or if we are unable to maintain or increase our HIV product sales, our results of operations would likely suffer and we would likely need to scale back our operations, including our spending on research and development (R&D) efforts.
We may be unable to sustain or increase sales of our HCV or HIV products for any number of reasons, including but not limitedmarket share gains by competitive products, including generics, or the inability to introduce new HIV medications necessary to remain competitive. In such case, we may need to scale back our operations, including our future drug development and spending on research and development (“R&D”) efforts. For example, many of our HIV products contain tenofovir alafenamide (“TAF”), which belongs to the reasons discussed abovenucleoside class of antiviral therapeutics. If there are any changes to the treatment or prevention paradigm for HIV that cause nucleoside-based therapeutics to fall out of favor, our HIV product sales would be adversely impacted.
Veklury
We face risks related to our supply and sale of Veklury, which was approved by U.S. Food and Drug Administration (“FDA”) as a treatment for patients with coronavirus disease 2019 (“COVID-19”). While Veklury sales generally reflect COVID-19 related rates and severity of infections and hospitalizations, as well as the following:
Asavailability, uptake and effectiveness of vaccines and alternative treatments for COVID-19, we are unable to accurately predict our HCVrevenues or supply needs over the short- and HIV products are used over a longer period of time in many patients and in combination with other products, and additional studies are conducted, new issues with respectlong-term due to safety, resistance and interactions with other drugs may arise, which could cause us to provide additional warnings or contraindications on our labels, narrow our approved indications or halt sales of a product, each of which could reduce our revenues.
As our products mature, private insurers and government payers often reduce the amount they will reimburse patients for these products, which increases pressure on us to reduce prices.
If physicians do not see the benefit of our HCV or HIV products, the sales of our HCV or HIV products will be limited.
As new branded or generic products are introduced into major markets, our ability to maintain pricing and market share may be affected. For example, TDF, onedynamic nature of the active pharmaceutical ingredients in Stribild, Complera/Eviplera, Atripla and Truvada, and the main active pharmaceutical ingredient in Viread, now has generic competition in the European Union and is expected to face generic competition in the United States and other countries in late 2017. In addition, because emtricitabine, the other active pharmaceutical ingredient of Truvada, faced generic competition in


the European Union in 2016, Truvada has started to face generic competition in the European Union and other countries outside of the United States in 2017. This has had a negative impact on our business and results of operations.
If we fail to commercialize new products or expand the indications for existing products, our prospects for future revenues may be adversely affected.
COVID-19 pandemic. If we do not introduce new productsaccurately forecast demand or manufacture Veklury at levels to align with actual demand, then we may experience product shortages or build excess inventory that may need to be written off. We also remain subject to significant public attention and scrutiny over the complex decisions made regarding clinical data, supply, allocation, distribution and pricing of Veklury, all of which affects our corporate reputation.
Cell Therapy
Advancing a novel and personalized therapy such as Yescarta or Tecartus, which are chimeric antigen receptor (“CAR”) T-cell therapies, creates significant challenges, including:
•educating and certifying medical personnel regarding the procedures and the potential side effects, such as cytokine release syndrome and neurologic toxicities, in compliance with the Risk Evaluation and Mitigation Strategy program required by FDA;
•securing sufficient supply of other medications to manage side effects, such as tocilizumab and corticosteroids, which may not be available in sufficient quantities, may not adequately control the side effects and/or may have detrimental impacts on the efficacy of cell therapy;
•developing and maintaining a robust and reliable process for engineering a patient’s T cells in our facilities and infusing them back into the patient; and
33

•conditioning patients with chemotherapy in advance of administering our therapy, which may increase salesthe risk of ouradverse side effects.
The use of engineered T cells as a potential cancer treatment is a recent development and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical community. While FDA has approved some cell therapies, including Yescarta and Tecartus, we must continue to demonstrate to the medical community the potential advantages of cell therapy compared to existing and future therapeutics. For challenges related to the reimbursement of Yescarta and Tecartus, see also “Our existing products we will not be ableare subject to increase or maintainreimbursement pressures from government agencies and other third parties, required rebates and other discounts on our total revenues nor continueproducts and other pricing pressures.”
We rely on third-party sites to expand our R&D efforts. Drug development is inherently riskycollect patients’ white blood cells, known as apheresis centers, as well as shippers, couriers, and many product candidates fail during the drug development process. For example, during 2016 we announced that we terminated our Phase 2 and 2b studies of simtuzumabhospitals for the treatmentlogistical collection of idiopathic pulmonary fibrosis, nonalcoholic steatohepatitis (NASH)patients’ white blood cells and primary sclerosing cholangitis,ultimate delivery of Yescarta and Tecartus to patients. These vendors may encounter disruptions or difficulties that could result in product loss and regulatory action. Apheresis centers may also choose not to participate in our Phase 2 and 2/3 studies of GS-5745 for the treatment of Crohn’s Disease and ulcerative colitis, our Phase 2 studies of selonsertib for the treatment of pulmonary arterial hypertension and diabetic kidney disease and our studies of eleclazine for the treatment of cardiovascular diseases. In addition,quality certification process, or we may decide to terminate product development after expending significant resources and effort. For example, after completion of two Phase 3 studies of momelotinib for the treatment of myelofibrosis in 2016, we decided to terminate the development of momelotinib. In addition, if we arebe unable to obtain regulatorycomplete such certification in a timely manner or at all, which could delay or constrain our manufacturing and commercialization efforts.
We operate an automated CAR T-cell therapy manufacturing facility in Frederick, Maryland. We have not previously manufactured our products in an automated facility on a commercial scale, and as a result, we may require additional time and resources in order to effectively increase manufacturing capacity. We also operate a new retroviral vector manufacturing facility in Oceanside, California, which received FDA approval for product candidates from our recent acquisition of Kite Pharma, Inc. (Kite)commercial production in October 2022. We also have not previously manufactured viral vectors on a commercial scale, and as a result, we may require additional time and resources in order to effectively commercialize Kite’s product candidates,increase manufacturing capacity. In addition, we may not be able to realize the anticipated benefits fromproduce or otherwise obtain an amount of viral vector supply sufficient to satisfy demand for our acquisition of Kite, including any expected future revenues from Kite’s product candidates.
We have filed our new drug application (NDA) and marketing authorization application (MAA) in the United States and European Union, respectively, for the approval of a once-daily, single-tablet regimen containing bictegravir (50 mg) and emtricitabine/tenofovir alafenamide (200/25 mg) for the treatment of HIV-1 infection in adults. We have also filed a MAA in the European Union for the approval of axicabtagene ciloleucel (axi-cel) for the treatment of relapsed/refractory diffuse large B-cell lymphoma, transformed follicular lymphoma and primary mediastinal B-cell lymphoma. These and any future marketing applicationsfinished products. If we file may not be approved by the regulatory authorities on a timely basis, or at all. Even if marketing approval is granted for these products, there may be significant limitations on their use. Further, we may beare unable to filemeet product demand, we will have difficulty meeting sales forecasts for our marketing applications for newfinished products.
Our inabilitysuccess depends on developing and commercializing new products or expanding the indications for existing products.
If we are unable to launch commercially successful new products or new indications for existing products, our business will be adversely impacted. The launch of commercially successful products is necessary to grow our business, cover our substantial R&D expenses, and offset revenue losses when existing products lose market share due to factors such as competition and loss of patent exclusivity. There are many difficulties and uncertainties inherent in drug development and the introduction of new products. The product development cycle is characterized by significant investments of resources, long lead times and unpredictable outcomes due to the nature of developing medicines for human use. We expend significant time and resources on our product pipeline without any assurance that we will recoup our investments or that our efforts will be commercially successful. A high rate of failure is inherent in the discovery and development of new products, and failure can occur at any point in the process, including late in the process after substantial investment.
We face challenges in accurately predictforecasting sales because of the difficulties in predicting demand for our products uptake of new products orand fluctuations in customer inventories makes it difficult for us to accurately forecast sales and may cause our forecasted revenues and earnings to fluctuate, which could adversely affect our financial results and our stock price.purchasing patterns or wholesaler inventories.
We may be unable to accurately predict demand for our products, including the uptake of new products, as demand is dependentdepends on a number of factors. For example, because our HCV products represent a cure and competitors’ HCV products have enteredproduct demand may be adversely affected if physicians do not see the market, revenues from our HCV products are difficult for us and investors to estimate. The primary driversbenefit of our HCV product revenues are patient starts, net pricing and market share. In our experience, the number of patient starts is very difficult to accurately predict. In addition, demand for our HCV products will depend on the extent of reimbursement of our HCV products by private and public payers in the United States and other countries. Private and public payers can choose to exclude our HCV products from their formulary coverage lists or limit the types of patients for whom coverage will be provided, which would negatively impact the demand for and revenues of our HCV products. We continue to experience pricing pressure in the United States, the European Union and other countries. Any change in the formulary coverage, reimbursement levels or discounts or rebates offered on our HCV products to payers may negatively impact our anticipated revenues. In addition, because rebate claims for product discounts are made by payers one or two quarters in arrears, we estimate the rebates we will be required to pay in connection with sales during a particular quarter based on claims data from prior quarters. For example, in the first quarter of 2016, we received higher than expected prior quarter rebate claims. This had the effect of lowering our revenue for the quarter. Because HCV-related revenues are difficult to predict, investors may have widely varying expectations that may be materially higher or lower than our actual or anticipated revenues. To the extent our actual or anticipated HCV product revenues exceed or fall short of these expectations, our stock price may experience significant volatility.
During the nine months ended September 30, 2017, approximately 88% of our product sales in the United States were to three wholesalers, McKesson Corp., AmerisourceBergen Corp. and Cardinal Health, Inc. The U.S. wholesalers with whom we have entered into inventory management agreements make estimates to determine end user demand and may not be completely effective in matching their inventory levels to actual end user demand. As a result, changes in inventory levels held by those wholesalers can cause our operating results to fluctuate unexpectedly if our sales to these wholesalers do not match end user demand. In addition, inventory is held at retail pharmacies and other non-wholesaler locations with whom we have no inventory management agreements and no control over buying patterns. Adverse changes in economic conditions or other factors may cause retail pharmacies to reduce their inventories of our products, which would reduce their orders from wholesalers and, consequently, the wholesalers’ orders from us, even if end user demand has not changed. For example, during the fourth quarter of 2016, strong wholesaler and sub-wholesaler purchases of our products resulted in inventory draw-down by wholesalers and sub-wholesalers in the first quarter of 2017. As inventory in the distribution channel fluctuates from quarter to quarter, we may continue to see fluctuations in our earnings and a mismatch between prescription demand for our products and our revenues.


In addition,Additionally, the non-retail sector in the United States,U.S., which includes government institutions, including state AIDS Drug Assistance Programs, (ADAPs), the U.S. Department of Veterans Affairs, (VA), correctional facilities and large health maintenance organizations, tends to be even less consistent in terms of buying patterns and often causes quarter-over-quarter fluctuations that do not necessarily mirror actual patient demand for our products. Federal and state budget pressures, including sequestration, as well as the annual grant cycles for federal and state funds, may cause purchasing patterns to not reflect patient demand offor our products. For example, in the first quarters of certain prior years, we observed large non-retail purchases of our HIV products by a number of state ADAPs that exceeded patient demand. We believe such purchases were driven by the grant cycle for federal ADAP funds. Additionally, during the second half of 2016, we experienced fluctuations in VA new HCV patient starts and purchasing patterns due to VA funding. We expect to continue to experience fluctuations in the purchasing patterns of our non-retail customers which may result in fluctuations in our product sales, revenues and earnings in the future.customers. In light of the global economic downturn and budget crises faced by many European countries, we have observed variations in purchasing patterns induced by cost containment measures in Europe. We believe these measures have caused some government agencies and other purchasers to reduce inventory of our products in the distribution channels, which has decreased our revenues and caused fluctuations in our product sales and earnings. Wewe may continue to see this trend in the future.
Yescarta, a chimeric antigen receptor T cell (CAR T) therapy, represents a novel approach to cancer treatment that creates significant challenges for us.
34
Yescarta, a CAR T therapy, involves (i) harvesting T cells from the patient’s blood, (ii) engineering T cells to express cancer-specific receptors, (iii) increasing the number of engineered T cells and (iv) infusing the functional cancer-specific T cells back into the patient. Advancing this novel and personalized therapy creates significant challenges, including:

educating and certifying medical personnel regarding the therapy procedures and the potential side effect profile of our therapy, such as the potential adverse side effects related to cytokine release syndrome and neurologic toxicities, in compliance with the Risk Evaluation and Mitigation Strategy (REMS) program required by FDA for Yescarta;
using medicines to manage adverse side effects of our therapy, such as tocilizumab and corticosteroids, which may not be available in sufficient quantities, may not adequately control the side effects and/or may have a detrimental impact on the efficacy of the treatment;
sourcing clinical and commercial supplies for the materials used to manufacture and process Yescarta;
developing a robust and reliable process, while limiting contamination risks, for engineering a patient’s T cells ex vivo and infusing the engineered T cells back into the patient; and
conditioning patients with chemotherapy in advance of administering our therapy, which may increase the risk of adverse side effects.
The use of engineered T cells as a potential cancer treatment is a recent development and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical community. We may not be able to establish or demonstrate in the medical community the safety and efficacy of Yescarta and the potential advantages and side effects compared to existing and future therapeutics. If we fail to overcome these significant challenges, our sales of Yescarta and our stock price could be adversely affected.
We may be required to pay significant damages to Merck as a result of a jury’s finding that we willfully infringed a patent owned by Merck’s Idenix subsidiary.
In December 2013, Idenix, Universita Degli Studi di Cagliari (UDSG), Centre National de la Recherche Scientifiquesell and L’Université Montpellier II sued us in U.S. District Court for the District of Delaware alleging that the commercialization of sofosbuvir will infringe Idenix’s U.S. Patent No. 7,608,600 (the ‘600 patent) and that an interference exists between the ‘600 patent and our U.S. Patent No. 8,415,322. Also in December 2013, Idenix and UDSG sued us in the U.S. District Court for the District of Massachusetts alleging that the commercialization of sofosbuvir will infringe U.S. Patent Nos. 6,914,054 (the ‘054 patent) and 7,608,597 (the ‘597 patent). In June 2014, the court transferred the Massachusetts litigation to the U.S. District Court for the District of Delaware. Idenix was acquired by Merck in August 2014.
Prior to trial in December 2016, Idenix committed to give us a covenant not to sue with respect to any claims arising out of the ‘054 patent related to sofosbuvir and withdrew that patent from the trial. In addition, Idenix declined to litigate the ‘600 patent infringement action at trial in light of the appeal then pending at the U.S. Court of Appeals for the Federal Circuit (CAFC) regarding who was the first to invent the subject matter claimed in the ‘600 patent. In January 2017, the District Court stayed Idenix’s infringement claim on the ‘600 patent pending the outcome of the appeal of the interference decision on that patent (the Second Idenix Interference), described above. Unless Idenix is successful in persuading the United States Supreme Court to consider a further appeal to challenge the Federal Circuit’s June 2017 decision in our favor in the Second Idenix Interference, we will ask for dismissal of, or for judgment to be entered against Idenix on, the ‘600 infringement and interference claims. A jury trial was held in December 2016 on the ‘597 patent. In December 2016, the jury found that we willfully infringed the asserted claims of


the ‘597 patent and awarded Idenix $2.54 billion in past damages. The parties have filed post-trial motions and briefings, and the district judge heard oral argument in September 2017. In September 2017, the judge denied Idenix’s motions for enhanced damages and attorney’s fees. We expect the judge to rule on outstanding motions in late 2017 or early 2018. Once the judge has issued these rulings, the case will move to the CAFC.
Although we cannot predict with certainty the ultimate outcome of this litigation, we believe the jury verdict to be in error, and that errors were also made by the court with respect to certain rulings before and during trial. We expect that our arguments in the pending post-trial motions and on appeal will focus on one or more of the arguments we made to the judge and jury, those being (i) when properly construed, we do not infringe the claims of the ‘597 patent, (ii) the patent is invalid for failure to properly describe the claimed invention and (iii) the patent is invalid because it does not enable one of skill in the art to practice the claimed invention.
If the jury’s verdict is upheld on appeal, our estimated potential loss as of September 30, 2017 would include (i) the $2.54 billion determined by the jury, which represents 10% of our adjusted revenues from sofosbuvir-containing products from launch through August 2016, (ii) approximately $269 million, which represents 10% of our adjusted revenues from sofosbuvir-containing products from September 2016 through January 25, 2017, (iii) pre- and post-judgment interest, and (iv) approximately $539 million, which represents going forward royalties yet to be assessed by the court, which we have estimated assuming 14% of our adjusted revenues from sofosbuvir-containing products from January 26, 2017 through September 30, 2017 based on post-trial briefings filed by Idenix with the court, and which would be payable based on adjusted revenues from sofosbuvir-containing products for the period from January 26, 2017 through expiry of the Idenix patent in May 2021. Therefore, we estimate the range of possible loss through September 30, 2017 to be between zero and $3.6 billion. The parties agreed to stay consideration of going forward royalties until the appeal from the jury verdict and post-trial motions has been resolved. Idenix may appeal the court’s denial of enhanced damages.
If the jury’s verdict is upheld on appeal, the amount we could be required to pay could be material. The timing and magnitude of the amount of any such payment could have a material adverse impact on our results of operations and stock price.
Our results of operations may be adversely affected by current and potential future healthcare reforms.
Legislative and regulatory changes to government prescription drug procurement and reimbursement programs occur relatively frequently in the United States and foreign jurisdictions. In the United States, we, along with other pharmaceutical manufacturers of branded drug products, are required to pay a portion of an industry fee (also known as the branded prescription drug (BPD) fee), calculated based on select government sales during the year as a percentage of total industry government sales. The amount of the annual BPD fee imposed on the pharmaceutical industry as a whole is $4.0 billion in 2017, which will increase to a peak of $4.1 billion in 2018, and then decrease to $2.8 billion in 2019 and thereafter. Our BPD fee expenses were $270 million in 2016, $414 million in 2015 and $590 million in 2014. The BPD fee is not tax deductible.
There has been extensive discussion about a possible repeal or amendment of The Patient Protection and Affordable Care Act (the Affordable Care Act) as well as other government actions intended to eliminate the Affordable Care Act, any of which could negatively impact the use and/or reimbursement of our products. In October 2017, President Trump signed an Executive Order directing federal agencies to review regulations applicable to association health plans and short-term health insurance, and announced that the administration would halt federal subsidies to insurance plans under the Affordable Care Act. Previously in January 2017, the new administration issued an Executive Order directing federal agencies with authorities and responsibilities under the Affordable Care Act to waive, defer, grant exemptions from, or delay the implementation of any provision of the Affordable Care Act that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. It is expected that Congress will continue to consider legislation to repeal and replace some or all elements of the Affordable Care Act.
In addition, many states have proposed legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing by requiring biopharmaceutical manufacturers to publicly report proprietary pricing information or to place a maximum price ceiling on pharmaceutical products purchased by state agencies. If such proposed legislation is passed, we may experience additional pricing pressures on our products. For example, in October 2017, California’s governor signed a prescription drug price transparency state bill into law, requiring prescription drug manufacturers to provide advance notice and explanation for price increases of certain drugs that exceed a specified threshold. Similar bills have been previously introduced at the federal level and we expect that additional legislation may be introduced this year. The potential effect of health insurance market destabilization during ongoing repeal and replace discussions, as well as the impact of potential changes to the way the Medicaid program is financed, will likely affect patients’ sources of insurance and resultant drug coverage. Discussions continue at the federal level regarding policies that would either allow or require the U.S. government to directly negotiate drug prices with pharmaceutical manufacturers for Medicare patients, require manufacturers to pay higher rebates in Medicare Part D, give states more flexibility on drugs that are covered under the Medicaid program, and other policy proposals that could impact reimbursement for our products. Other discussions have centered on legislation that would permit the re-importation of prescription medications from Canada or other countries. It is difficult to predict the impact, if any, of any such legislation, executive actions or Medicaid flexibility on the use and reimbursement


distribute most of our products in the United States, includingU.S. exclusively through the potential forwholesale channel. For the importation of generic versionsthree months ended March 31, 2023, approximately 90% of our products.
Further, Yescarta is expectedproduct sales in the U.S. were to three wholesalers, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. The U.S. wholesalers with whom we have entered into inventory management agreements make estimates to determine end-user demand and may not be administered on an in-patient basis. It is possible that federal government reimbursement through programs like Medicare and Medicaid will be insufficientaccurate in matching their inventory levels to cover the complete cost associated with the therapy. This could impact the willingness of some hospitalsactual end-user demand. As a result, changes in inventory levels held by those wholesalers can cause our operating results to offer the therapy and doctorsfluctuate unexpectedly if our sales to recommend the therapy and could lessen the attractiveness of our therapy to patients.
these wholesalers do not match end-user demand. In addition, state Medicaid programs could request additional supplemental rebates on our products as a result of the increase in the federal base Medicaid rebate. Private insurers could also use the enactment of these increased rebates to exert pricing pressure on our products, and to the extent that private insurers or managed care programs follow Medicaid coverage and payment developments, the adverse effects may be magnified by private insurers adopting lower payment schedules.
Our existing products are subject to reimbursement from government agenciesinventory is held at retail pharmacies and other third parties. Pharmaceutical pricingnon-wholesaler locations with whom we have no inventory management agreements and reimbursement pressuresno control over buying patterns. Adverse changes in economic conditions, increased competition or other factors may cause retail pharmacies to reduce profitability.
Successful commercializationtheir inventories of our products, depends, in part, onwhich would reduce their orders from wholesalers and, consequently, the availabilitywholesalers’ orders from us, even if end-user demand has not changed. In addition, we have observed that strong wholesaler and sub-wholesaler purchases of governmental and third-party payer reimbursement for the cost of suchour products and related treatments in the markets wherefourth quarter typically results in inventory draw-down by wholesalers and sub-wholesalers in the subsequent first quarter. As inventory in the distribution channel fluctuates from quarter to quarter, we sellmay continue to see fluctuations in our products. Government health authorities, private health insurersearnings and other organizations generally provide reimbursement. In the United States, the European Union and other significant or potentially significant marketsa mismatch between prescription demand for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services. A significant portion of our sales of the majority of our products are subject to significant discounts from list price. See also our risk factor “A substantial portion of our revenues is derived from sales of products to treat HCV and HIV. If we are unable to increase HIV sales or if HCV sales decrease more than anticipated, then our results of operations may be adversely affected.”
We face significant competition.revenues.
We face significant competition from global pharmaceutical and biotechnology companies, specialized pharmaceutical firms and generic drug manufacturers.
New branded or generic products entering major markets affects our ability to maintain pricing and market share. Our products compete with other available products based primarily on efficacy, safety, tolerability, acceptance by doctors, ease of patient compliance, ease of use, price, insurance and other reimbursement coverage, distribution and marketing.
Our HCV products, Sovaldi, Harvoni, Epclusa and Vosevi, compete primarily with Mavyret (glecaprevir/pibrentasvir) marketed by AbbVie Inc. (AbbVie) and Zepatier (elbasvir and grazoprevir) marketed by Merck & Co. Inc. (Merck).
Our HIV products compete primarily with products from ViiV Healthcare (ViiV), which markets fixed-dose combination products that compete with Descovy, Odefsey, Genvoya, Stribild, Complera/Eviplera, Atripla and Truvada. For example, two products marketed by ViiV, Tivicay (dolutegravir), an integrase inhibitor, and Triumeq, a single-tablet triple-combination antiretroviral regimen, have adversely impacted sales of our HIV products. In addition, lamivudine, marketed by ViiV, competes with emtricitabine, the active pharmaceutical ingredient of Emtriva and a component of Genvoya, Stribild, Complera/Eviplera, Atripla and Truvada. For Tybost, we compete with ritonavir marketed by AbbVie.
We also face competition from generic HIV products. Generic versions of lamivudine and Combivir (lamivudine and zidovudine) are available in the United States and certain other countries. Generic versions of Sustiva (efavirenz), a component of Atripla, are now available in Canada and Europe and we anticipate competition from generic efavirenz in the United States in December 2017. We have observed some pricing pressure related to the Sustiva component of our Atripla sales. TDF, one of the active pharmaceutical ingredients in Stribild, Complera/Eviplera, Atripla and Truvada, and the main active pharmaceutical ingredient in Viread, now has generic competition in the European Union and is expected to face generic competition in the United States and other countries in late 2017. In addition, because emtricitabine, the other active pharmaceutical ingredient of Truvada, faced generic competition in the European Union in 2016, Truvada has started to face generic competition in the European Union and other countries outside of the United States in 2017.
Our HBV products, Vemlidy, Viread and Hepsera, face competition from Baraclude (entecavir) marketed by BMS as well as generic entecavir. Our HBV products also compete with Tyzeka/Sebivo (telbivudine) marketed by Novartis Pharmaceuticals Corporation (Novartis).
Yescarta will compete with other companies developing advanced T cell therapies for the treatment of relapsed/refractory diffuse large B-cell lymphoma, including Novartis and Juno Therapeutics, Inc. (Juno).
Letairis competes with Tracleer (bosentan) and Opsumit (macitentan) marketed by Actelion Pharmaceuticals US, Inc. and also with Adcirca (tadalafil) marketed by United Therapeutics Corporation and Pfizer Inc. (Pfizer).
Ranexa competes predominantly with generic compounds from three distinct classes of drugs for the treatment of chronic angina in the United States, including generic and/or branded beta-blockers, calcium channel blockers and long-acting nitrates.
AmBisome competes with Vfend (voriconazole) marketed by Pfizer and caspofungin, a product developed by Merck that is marketed as Cancidas in the United States and as Caspofungin elsewhere. In addition, we are aware of at least three lipid formulations


that claim similarity to AmBisome becoming available outside of the United States. These formulations may reduce market demand for AmBisome. Furthermore, the manufacture of lipid formulations of amphotericin B is very complex and if any of these formulations are found to be unsafe, sales of AmBisome may be negatively impacted by association.
In addition, a A number of companies are pursuing the development of products and technologies which arethat may be competitive with our existing products or research programs. These competing companies include large pharmaceutical and biotechnology companies and specialized pharmaceutical firms and large pharmaceutical companies acting either independently or together with other pharmaceuticalsuch companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection andor may establish collaborative arrangements for competitive products or programs. IfWe may be adversely impacted if any of these competitors gain market share as a result of new technologies, commercialization strategies or otherwise.
Our existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and other discounts on our products and other pricing pressures.
Product Reimbursements
Successful commercialization of our products depends, in part, on the availability and amount of third-party payer reimbursement for our products and related treatments and medical services in the markets where we sell our products. As our products mature, pricing pressures from private insurers and government payers often result in a reduction of the net product prices.
Legislative and regulatory actions affecting government prescription drug procurement and reimbursement programs occur relatively frequently. For example, in September 2020, FDA issued a final rule implementing a pathway for the importation of certain prescription drugs from Canada. This rule is subject to ongoing litigation. We may be adversely impacted by any such legislative and regulatory actions, though it could adversely affectis difficult to predict the impact, if any, on the use and reimbursement of our resultsproducts.
Product Pricing, Discounts and Rebates
In the U.S., the European Union (“EU”) and other significant or potentially significant markets for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of operationsmedical products and stock price.services. The volume of drug pricing-related legislation has dramatically increased in recent years, including:
Patient assistance•U.S. Congress has enacted laws requiring manufacturer refunds on certain amounts of discarded drug from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024.
35

•U.S. Congress has enacted the Inflation Reduction Act of 2022 (the “Act”), which, among other changes, (1) requires the Department of Health and Human Services to “negotiate” Medicare prices for certain drugs (starting with 10 drugs in 2026, adding 15 drugs in 2027 and 2028, and adding 20 drugs in 2029 and subsequent years), (2) imposes an inflation-based rebate on Medicare Part B utilization starting in 2023 and Part D utilization beginning October 1, 2022, and (3) restructures the Medicare Part D benefit to cap out-of-pocket expenses for Part D beneficiaries beginning in 2024 and, effective January 1, 2025, increases Part D plans’ contributions in the catastrophic coverage phase and increases manufacturers’ discount contributions across coverage phases such that manufacturers must pay a 10% discount in the initial coverage phase and a 20% discount in the catastrophic phase on drugs utilized by all Part D beneficiaries, including low income subsidy patients. We continue to evaluate the impact of the Act on our business but expect the Act will increase our payment obligations under the redesigned Part D discount program, limit the prices we can charge, and increase the rebates we must provide government programs for our products, thereby reducing our profitability and negatively impacting our financial results. Centers for Medicare & Medicaid Services (“CMS”) has recently issued a number of guidance documents but how certain provisions will be implemented remains unclear. There may be additional guidance, legislation or rulemaking issued that could reflect the government’s evolving views, and select provisions may become subject to legal challenges in the future. Therefore, the full impact of the Act on the profitability of our business and the pharmaceutical industry as a whole remains uncertain at this time.
•Many state legislatures are considering, or have already passed into law, legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as requiring manufacturers to publicly report proprietary pricing information, creating review boards for prices, establishing drug payment limits, and encouraging the use of generic drugs. These initiatives and such other legislation may cause added pricing pressures on our products, and the resulting impact on our business is uncertain.
•Many countries outside the U.S., including the EU member states, have comeestablished complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions. The outcome of these reviews cannot be predicted and could have an adverse effect on the pricing and reimbursement of our medical products in the EU member states. Reductions in the pricing of our medical products in one member state could affect the price in other member states and have a negative impact on our financial results.
A substantial portion of our product sales is subject to significant discounts from list price, including rebates that we may be required to pay state Medicaid agencies and discounts provided to covered entities under Section 340B of the Public Health Service Act (“340B”). Changes to the 340B program or the Medicaid program at the federal or state level could have a material adverse effect on our business. For example, the continued growth of the 340B program limits the prices we may charge on an increasing scrutiny by governments, legislative bodiespercentage of sales. Changes to the calculation of rebates under the Medicaid program could substantially increase our Medicaid rebate obligations and enforcement agencies. These activities may resultdecrease the prices we charge 340B-covered entities.
In March 2022, we implemented a contract pharmacy integrity initiative for our branded hepatitis C virus (“HCV”) products. This integrity initiative does not involve any products from Asegua Therapeutics LLC. Our integrity initiative requires covered entities that enter into 340B bill to/ship to arrangements with contract pharmacies for our branded HCV products to provide claims level data for units dispensed from such contract pharmacies; covered entities without an in-house pharmacy that choose not to participate in actionsthe initiative can designate a single contract pharmacy for shipment. Certain manufacturers that have implemented other contract pharmacy integrity programs have received enforcement letters from the effectU.S. Department of reducing prices or harming our business or reputation.
Recently, there hasHealth and Human Services (“HHS”) asserting that those programs violate the 340B statute, have been enhanced scrutinyreferred to the HHS Office of company-sponsored patient assistance programs, including insurance premium and co-pay assistance programs and donations to third-party charities that provide such assistance. If we, or our vendors or donation recipients, are deemed to have failed to comply with relevant laws, regulations or government guidance in anyInspector General for assessment of these areas, we could be subject to criminal and civil sanctions, including significant fines, civil monetary penalties, and exclusion from participationhave been subject to administrative dispute resolution proceedings brought on behalf of covered entities. These manufacturers are currently challenging HHS’ position in government healthcare programs,ongoing litigation. We believe that our integrity initiative complies with the requirements of the 340B statute. However, additional legal or legislative developments with respect to the 340B program, including Medicare and Medicaid, actions against executives overseeingpotential litigation with HHS, may negatively impact our business, and burdensome remediation measures.ability to implement or continue our integrity initiative.
In February 2016,addition, standard reimbursement structures may not adequately reimburse for innovative therapies. For example, beginning in fiscal year 2021, CMS established a new severity-adjusted diagnosis-related group (“DRG”) 018 for Medicare inpatient reimbursement of CAR T-cell products such as Yescarta and Tecartus. While the new DRG has a significantly higher base payment amount than the prior DRG 016, the payment available may not be sufficient to reimburse some hospitals for their cost of care for patients receiving Yescarta and Tecartus. When reimbursement is not aligned well to account for treatment costs, Medicare beneficiaries may be denied access as this misalignment could impact the willingness of some hospitals to offer the therapy and of doctors to recommend the therapy. Additionally, in the EU, there are barriers to reimbursement in individual countries that could limit the uptake of Yescarta and Tecartus.
Moreover, we receivedestimate the rebates we will be required to pay in connection with sales during a subpoenaparticular quarter based on claims data from prior quarters. In the U.S., actual rebate claims are typically made by payers one to three quarters in arrears. Actual claims and payments may vary significantly from our estimates.
36

We may experience adverse impacts resulting from the U.S. Attorney’s Office forimportation of our products from lower price markets or the Districtdistribution of Massachusetts requesting documents related toillegally diverted or counterfeit versions of our support of 501(c)(3) organizations that provide financial assistance to patients and documents concerning our provision of financial assistance to patients for our HCV products. Other companies have disclosed similar inquiries. We are cooperating with this inquiry. In October 2017, we received a civil investigative demand from the U.S. Attorney’s Office for the District of Massachusetts requesting documents related to our copay coupon program and Medicaid price reporting methodology. We intend to cooperate with this inquiry.
It is possible that any actions taken by the U.S. Department of Justice as a result of this inquiry or any future action taken by federal or local governments, legislative bodies and enforcement agencies could result in civil penalties or injunctive relief, negative publicity or other negative actions that could harm our reputation, reduce demandPrices for our products and/or reduce coverage of our products, including by federal health care programs such as Medicareare based on local market economics and Medicaidcompetition and state health care programs. If any or all of these events occur, our business and stock price could be materially and adversely affected.
Approximately 30% of our productsometimes differ from country to country. Our sales occur outside the United States, and currency fluctuations and hedging expenses may cause our earnings to fluctuate, which could adversely affect our stock price.
Because a significant percentage of our product sales are denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates. When the U.S. dollar strengthens against these foreign currencies, the relative value of sales made in the respective foreign currency decreases. Conversely, when the U.S. dollar weakens against these currencies, the relative value of such sales increases. Overall, we are a net receiver of foreign currencies and, therefore, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.
We use foreign currency exchange forward and option contracts to hedge a percentage of our forecasted international sales, primarily those denominated in the Euro. We also hedge certain monetary assets and liabilities denominated in foreign currencies, which reduces but does not eliminate our exposure to currency fluctuations between the date a transaction is recorded and the date cash is collected or paid. Foreign currency exchange, net of hedges, had an unfavorable impact on our product sales of $147 million for the nine months ended September 30, 2017, compared to the same period in 2016.
We cannot predict future fluctuations in the foreign currency exchange rates of the U.S. dollar. If the U.S. dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation, our results of operations will be adversely affected and our stock price may decline.
Additionally, the expenses that we recognize in relation to our hedging activities can also cause our earnings to fluctuate. The level of hedging expenses that we recognize in a particular period is impacted by the changes in interest rate spreads between the foreign currencies that we hedge and the U.S. dollar.
If significant safety issues arise for our marketed products or our product candidates, our future salescountries with relatively higher prices may be reduced which would adversely affect our resultsif products can be imported and resold into those countries from lower price markets. U.S. sales could also be affected if FDA permits importation of operations.
The data supporting the marketing approvals for our products and forming the basis for the safety warnings in our product labels were obtained in controlled clinical trials of limited duration and, in some cases,drugs from post-approval use. As our products are used over longer periods of time by many patients with underlying health problems, taking numerous other medicines, we


expect to continue to find new issues such as safety, resistance or drug interaction issues, which may require us to provide additional warnings or contraindications on our labels or narrow our approved indications, each of which could reduce the market acceptance of these products.
Regulatory authorities have been moving towards more active and transparent pharmacovigilance and are making greater amounts of stand-alone safety information and clinical trial data directly available to the public through websites and other means, such as periodic safety update report summaries, risk management plan summaries and various adverse event data. Safety information, without the appropriate context and expertise, may be misinterpreted and lead to misperception or legal action which may potentially cause our product sales or stock price to decline.
For Yescarta, a novel CAR T therapy, treatment-related adverse effects may not be appropriately recognized and managed by the treating medical staff, as toxicities resulting from personalized T cell therapy are not typically encountered in the general patient population and by medical personnel. Common medicines that may be used at academic medical centers and hospitals to help manage adverse side effects of Yescarta, such as tocilizumab and corticosteroids, may not be available in sufficient quantities, may not adequately control such adverse side effects and/or may have a detrimental impact on the efficacy of the treatment.Canada. We have trained and expect to continue to train medical personnel to understand the side effect profile of Yescarta in complianceentered into agreements with generic drug manufacturers as well as licensing agreements with the REMS program required by FDA for Yescarta, although we can give no assurances on the efficacyMedicines Patent Pool, a United Nations-backed public health organization, which allow generic drug manufacturers to manufacture generic versions of our training efforts. Inadequate training in recognizing or managing the potential adverse effects of Yescarta, or the disregard or modification of our training by medical staff, could result in more severe or prolonged toxicities or even patient deaths.
Further, if serious safety, resistance or drug interaction issues arise with our marketed products, sales of these products could be limited or halted by us or by regulatory authorities and our results of operations would be adversely affected.
Our operations depend on compliance with complex FDA and comparable international regulations. Failure to obtain broad approvals on a timely basis or to maintain compliance could delay or halt commercialization of our products.
The products we develop must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by FDA, the European Medicines Agency (EMA) and comparable regulatory agencies in other countries. We are continuing clinical trials for manycertain of our products for currentlydistribution in certain low- and middle-income countries. We may be adversely affected if any generic versions of our products, whether or not produced and/or distributed under these agreements, are exported to the U.S., the EU or markets with higher prices.
In the EU, we are required to permit products purchased in one EU member state to be sold in another member state. Purchases of our products in member states where our selling prices are relatively low for resale in member states in which our selling prices are relatively high can affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter.
Additionally, diverted products may be used in countries where they have not been approved and additional uses. We anticipate that we will file for marketing approval in additional countries and for additional indications andpatients may source the diverted products overoutside the next several years.legitimate supply chain. These diverted products may fail to receive such marketing approvals on a timely basis, be handled, shipped and stored inappropriately, which may affect the quality and/or at all.
Further, how we manufacture and sell our products is subject to extensive regulation and review. Discovery of previously unknown problems with our marketed products or problems with our manufacturing, safety reporting or promotional activities may result in restrictions on our products, including withdrawalefficacy of the products fromand could harm patients and adversely impact us.
We are also aware of the market. If we failexistence of various suppliers around the world that, without Gilead’s authorization, purport to comply with applicable regulatory requirements, including those related to promotion and manufacturing, we could be subject to penalties including fines, suspensions of regulatory approvals, product recalls, seizure ofsource our products and criminal prosecution.generic versions of our products and sell them for use in countries where those products have not been approved. As a result, patients may be at risk of taking unapproved medications that may not be what they purport to be, may not have the potency they claim to have or may contain harmful substances, which could harm patients and adversely impact us.
Further, third parties have illegally distributed and sold, and may continue to illegally distribute and sell, illegally diverted and counterfeit versions of our medicines, which do not meet the rigorous quality standards of our manufacturing and supply chain. For example, under FDA rules,as part of a U.S. civil enforcement lawsuit in coordination with law enforcement, and pursuant to court order, we seized thousands of bottles of Gilead-labeled medication with counterfeit supply chain documentation. Our investigation revealed that pharmaceutical distributors that are often requirednot authorized by Gilead to conduct post-approval clinical studiessell Gilead medicine sold purportedly genuine Gilead medicine sourced from an illegal counterfeiting scheme to assessindependent pharmacies nationwide.
Illegally diverted and counterfeit versions of Gilead-branded medicines exist and may pose a known serious risk signals of serious riskto patient health and safety. Our actions to stop or to identify an unexpected serious risk and implement a REMS for our products, which could include a medication guide, patient package insert, a communication plan to healthcare providers or other elements as FDA deems are necessary to assure safe use of the drug, which could include imposing certain restrictions onprevent the distribution or useand sale of a product. Failure to comply with these or other requirements imposed by FDA could result in significant civil monetary penaltiesillegally diverted and counterfeit versions of our medicines around the world may be costly and unsuccessful, which may adversely affect patients and our operating results may be adversely affected.reputation and business, including our product revenues and financial results.
The resultsProduct Development and anticipated timelines ofSupply Chain Risks
We face risks in our clinical trials, are uncertainincluding the potential for unfavorable results, delays in anticipated timelines and may not support continued development of a product candidate, which would adversely affect our prospects for future revenue growth.disruption.
We are required to demonstrate the safety and efficacy of productsproduct candidates that we develop for each intended use through extensive preclinical studies and clinical trials. The results from preclinical and early clinicalthese studies do not always accurately predict results in later, large-scale clinical trials. Even successfully completed large-scale clinical trials may not result in marketable products. For example, during 2016 we announced that we terminated our Phase 2 and 2b studies of simtuzumab for the treatment of idiopathic pulmonary fibrosis, NASH and primary sclerosing cholangitis, our Phase 2 and 2/3 studies of GS-5745 for the treatment of Crohn’s Disease and ulcerative colitis, our Phase 2 studies of selonsertib for the treatment of pulmonary arterial hypertension and diabetic kidney disease, and our studies of eleclazine for the treatment of cardiovascular diseases, after determining that study data showed insufficient evidence of treatment benefit. In addition, after completion of two Phase 3 studies of momelotinib for the treatment of myelofibrosis in 2016, we decided to terminate development of momelotinib. If any of our product candidates fails to achieve its primary endpoint in clinical trials, if safety issues arise or if the results from our clinical trials are otherwise inadequate to support regulatory approval of our product candidates, commercialization of that product candidate could be delayed or halted. In addition, we may also face challenges in clinical trial protocol design.
If the clinical trials for any of the product candidates in our pipeline are delayed or terminated, our prospects for future revenue growth would be adversely impacted. For example, weWe face numerous risks and uncertainties with our product candidates,


including Descovy for pre-exposure prophylaxis (PrEP); selonsertib for the treatment of NASH; andecaliximab for the treatment of gastric cancer; and filgotinib for the treatment of rheumatoid arthritis, Crohn’s disease and ulcerative colitis, each currently in Phase 3 clinical trials that could result in delays or prevent completion of the development and approval of theseour product candidates. These risks includecandidates, including challenges in clinical trial protocol design, our ability to enroll patients in clinical trials, the possibility of unfavorable or inadequate trial results to support further development of our product candidates, including failure to meet a trial’s primary endpoint, safety issues arising from our clinical trials, and the need to modify or delay our clinical trials or to perform additional trials. For example, in October 2022, we announced that FDA issued a complete response letter for our Biologics License Application for bulevirtide for the treatment of adults with hepatitis delta virus infection. In addition, see Note 7. Intangible Assets of the Condensed Consolidated Financial Statements included in Part I, Item I of this Quarterly Report on Form 10-Q for a discussion of the partial in-process research and development impairment charge that we recognized during the three months ended March 31, 2022 related to assets we acquired from Immunomedics, Inc. (“Immunomedics”) in 2020.
37

As a result, we may be unable to successfully complete our clinical trials and the risk of failing to obtainon our anticipated timelines, or at all. Based on trial results, it is possible that FDA and other regulatory body approvals. As a result,authorities do not approve our product candidates, may never be successfully commercialized.or that any market approvals include significant limitations on the products’ use. In addition, clinical trials involving our commercial products can raise new safety issues for our existing products, which could adversely impact our business. Further, we may make a strategic decision to discontinue development of our product candidates if, for example, we believe commercialization will be difficult relative to other opportunities in our pipeline. If these programsTherefore, our product candidates may never be successfully commercialized, and otherswe may be unable to recoup the significant R&D and clinical trial expenses incurred. We expect to expend significant time and resources on our clinical trial activities without any assurance that we will recoup our investments or that our efforts will be commercially successful.
There are also risks associated with the use of third parties in our pipeline cannot be completed on a timely basis or at all, then our prospects for future revenue growth may be adversely impacted. In addition, clinical trials involving our commercial products could raise new safety issues for our existing products, which could in turn decrease our revenues and harm our business.
Due to our reliance on third-party contract research organizations to conduct our clinical trials, we are unable to directly control the timing, conduct, expense and quality of our clinical trials.
trial activities. We extensively outsource our clinical trial activities and usually perform only a small portion of the start-up activities in-house. We rely on independent third-party contract research organizations (CROs)(“CROs”) to perform most of our clinical studies, including document preparation, site identification, screening and preparation, pre-study visits, training, program management, patient enrollment, ongoing monitoring, site management and bioanalytical analysis. Many important aspects of the services performed for us by the CROs are out of our direct control. If there is any dispute or disruption in our relationship with our CROs, our clinical trials may be delayed. Moreover, in our regulatory submissions, we rely on the quality and validity of the clinical work performed by third-party CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals couldmay be adversely affected.
We depend on relationships with other companies for sales and marketing performance, technology, development, logistics and commercialization of product candidates and revenues. Failure to maintain these relationships, poor performance by these companiesmay face manufacturing difficulties, delays or disputes with these companies could negatively impact our business.
We rely on a number of significant collaborative relationships with major pharmaceutical companies for our sales and marketing performance in certain territories. These include collaborations with Janssen for Odefsey, Complera/Eviplera and Symtuza in Europe; BMS for Atripla in the United States, Europe and Canada; F. Hoffmann-La Roche Ltd. (together with Hoffmann-La Roche Inc., Roche) for Tamiflu worldwide; and GSK for ambrisentan in territories outside of the United States. In some countries, we rely on international distributors for sales of Truvada, Viread, Hepsera, Emtriva and AmBisome. Some of these relationships also involve the clinical development of these products by our partners. Reliance on collaborative relationships poses a number of risks, including the risk that:
we are unable to control the resources our corporate partners devote to our programs or products;
disputes may arise with respect to the ownership of rights to technology developed with our corporate partners;
disagreements with our corporate partners could cause delays in, or termination of, the research, development or commercialization of product candidates or result in litigation or arbitration;
contracts with our corporate partners may fail to provide significant protection or may fail to be effectively enforced if one of these partners fails to perform;
our corporate partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue alternative technologies or products either on their own or in collaboration with our competitors;
our corporate partners with marketing rights may choose to pursue competing technologies or to devote fewer resources to the marketing of our products than they do to products of their own development; and
our distributors and our corporate partners may be unable to pay us, particularly in light of current economic conditions.
Given these risks, there is a great deal of uncertainty regarding the success of our current and future collaborative efforts. If these efforts fail, our product development or commercialization of new products could be delayed or revenues from products could decline.
Yescarta is available only through a REMS program, which is required by FDA to mitigate the potential risks of the product. Only hospitals and their associated clinics certified in the REMS program are permitted to dispense Yescarta. All relevant staff involved in the prescribing, dispensing or administering of Yescarta must be trained on the REMS program requirements and must successfully complete a REMS program knowledge assessment. Failure of hospitals and clinics to enroll in the Yescarta REMS program or to successfully complete and comply with the program requirements may result in regulatory action from FDA or decreased sales of Yescarta, which could harm our business and our reputation.


For Yescarta, we rely on technology partners to assist in the development and maintenance of the Kite Konnect platform. This platform is critical to ensure positive prescriber and patient experience as well as chain of identity and chain of custody of Yescarta. If the technology platform is incomplete, insufficiently maintained or develops technological issues, we may experience a disruption to the sales and logistics of our Yescarta business, which could extend for a significant period of time, and we may need to expend considerable resources and time to repair or improve the platform in cooperation with our partners. In addition, we rely on sites to collect patient white blood cells, known as apheresis centers, shippers, couriers, and hospitals for the logistical collection of patient’s white blood cells and ultimate delivery of Yescarta to patients. Any disruption or difficulties incurred by any of these vendors could result in product loss and regulatory action and harm our Yescarta business and our reputation.
In addition, to ensure that any apheresis center is prepared to ship cells to our manufacturing facilities, we plan to conduct quality certifications of each apheresis center. Accordingly, we plan to target 70-90 key transplant and lymphoma centers; however, apheresis centers may choose not to participate in the certification process or we may be unable to complete certification in a timely manner or at all, which could delay or restrain our manufacturing and commercialization efforts. As a result, our sales of Yescarta may be limited which could harm our results of operations.
Our success will depend to a significant degree on our ability to defend our patents and other intellectual property rights both domestically and internationally. We may not be able to obtain effective patents to protect our technologies from use by competitors and patents of other companies could require us to stop using or pay for the use of required technology.
Patents and other proprietary rights are very important to our business. Our success will depend to a significant degree on our ability to:
obtain patents and licenses to patent rights;
preserve trade secrets;
defend against infringement and efforts to invalidate our patents; and
operate without infringing on the intellectual property of others.
If we have a properly drafted and enforceable patent, it can be more difficult for our competitors to use our technology to create competitive products and more difficult for our competitors to obtain a patent that prevents us from using technology we create. As part of our business strategy, we actively seek patent protection both in the United States and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology.
We have a number of U.S. and foreign patents, patent applications and rights to patents related to our compounds, products and technology, but we cannot be certain that issued patents will be enforceable or provide adequate protection or that pending patent applications will result in issued patents. Patent applications are confidential for a period of time before a patent is issued. As a result, we may not know if our competitors filed patent applications for technology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our products. In addition, if competitors file patent applications covering our technology, we may have to participate in litigation, interference or other proceedings to determine the right to a patent. Litigation, interference or other proceedings are unpredictable and expensive, such that, even if we are ultimately successful, our results of operations may be adversely affected by such events.
For example, TDF, one of the active pharmaceutical ingredients in Stribild, Complera/Eviplera, Atripla and Truvada, and the main active pharmaceutical ingredient in Viread, now has generic competition in the European Union and is expected to face generic competition in the United States and other countries in late 2017. In addition, because emtricitabine, the other active pharmaceutical ingredient of Truvada, faced generic competition in the European Union in 2016, Truvada has started to face generic competition in the European Union and other countries outside of the United States in 2017. The entry of these generic products may lead to market share and price erosion and have a negative impact on our business and results of operations. In addition, patents do not cover the ranolazine compound, the active ingredient of Ranexa. Instead, when it was discovered that only a sustained-release formulation of ranolazine would achieve therapeutic plasma levels, patents were obtained on those formulations and the characteristic plasma levels they achieve. Patents do not cover the active ingredients in AmBisome.
We may obtain patents for certain products many years before marketing approval is obtained for those products. Because patents have a limited life, which may begin to run prior to the commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply for patent term extensions or supplementary protection certificates in some countries.
Generic manufacturers have sought, and may continue to seek, FDA approval to market generic versions of our products through an abbreviated new drug application (ANDA), the application form typically used by manufacturers seeking approval of a generic drug. See a description of our ANDA litigation in Note 9, Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and risk factor entitled


“Litigation with generic manufacturers has increased our expenses which may continue to reduce our earnings. If we are unsuccessful in all or some of these lawsuits, some or all of our claims in the patents may be narrowed or invalidated and generic versions of our products could be launched prior to our patent expiry.” beginning on page 49.
Our success depends in large part on our ability to operate without infringing upon the patents or other proprietary rights of third parties.
If we infringe the valid patents of third parties, we may be prevented from commercializing products or may be required to obtain licenses from these third parties. We may not be able to obtain alternative technologies or any required license on reasonable terms or at all. If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our products. For example, we are aware of patents and patent applications owned by other parties that may claim to cover the use of sofosbuvir and axi-cel. We are also aware of U.S. Patent Nos. 9,044,509 and 9,579,333 assigned to the U.S. Department of Health and Human Services that purports to claim a process of protecting a primate host from infection by an immunodeficiency retrovirus by administering a combination of emtricitabine and tenofovir or TDF prior to exposure of the host to the immunodeficiency retrovirus. We have been in contact with the U.S. Department of Health and Human Services about the scope and relevance of the patents and have explained that we do not believe that these patents are valid because the patent office was not given the most relevant prior art and because physicians and patients were using the claimed methods years before the Centers for Disease Control and Prevention filed the applications for the patents. See also a description of our litigation regarding sofosbuvir and axi-cel in Note 9, Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and the risk factors entitled “If any party is successful in establishing exclusive rights to our HCV products, our revenues and earnings from the sale of those products could be adversely affected” beginning on page 45 and “If any party is successful in establishing exclusive rights to axi-cel, our anticipated revenues and earnings from the sale of that product could be adversely affected” beginning on page 47.
Furthermore, we also rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation. For example, a great deal of our liposomal manufacturing expertise, which is a key component of our liposomal technology, is not covered by patents but is instead protected as a trade secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and vendors. These agreements provide that all confidential information developed or made known to an individual during the course of their relationship with us will be kept confidential and will not be used or disclosed to third parties except in specified circumstances. In the case of employees, the agreements provide that all inventions made by an individual while employed by us will be our exclusive property. We cannot be certain that these parties will comply with these confidentiality agreements, that we have adequate remedies for any breach or that our trade secrets will not otherwise become known or be independently discovered by our competitors. Under some of our R&D agreements, inventions become jointly owned by us and our corporate partner and in other cases become the exclusive property of one party. In certain circumstances, it can be difficult to determine who owns a particular invention and disputes could arise regarding those inventions. If our trade secrets or confidential information become known or independently discovered by competitors or if we enter into disputes over ownership of inventions, our business and results of operations could be adversely affected.
If any party is successful in establishing exclusive rights to our HCV products, our revenues and earnings from the sale of those products could be adversely affected.
We own patents and patent applications that claim sofosbuvir (Sovaldi) as a chemical entity and its metabolites and the fixed-dose combinations of ledipasvir and sofosbuvir (Harvoni), sofosbuvir and velpatasvir (Epclusa) and sofosbuvir, velpatasvir and voxilaprevir (Vosevi). Third parties may have, or may obtain rights to, patents that allegedly could be used to prevent or attempt to prevent us from commercializing our HCV products. For example, we are aware of patents and patent applications owned by other parties that may be alleged by such parties to cover the use of our HCV products. We cannot predict the ultimate outcome of intellectual property claims related to our HCV products, and we have spent, and will continue to spend, significant resources defending against these claims.
If third parties successfully obtain valid and enforceable patents, and successfully prove infringement of those patents by our HCV products, we could be prevented from selling sofosbuvir unless we were able to obtain a license under such patents. Such a license may not be available on commercially reasonable terms or at all.
Interference Proceedings and Litigation with Idenix Pharmaceuticals, Inc. (Idenix), Universita Degli Studi di Cagliari (UDSG), Centre National de la Recherche Scientifique and L’Universite Montpellier II
In February 2012, we received notice that the U.S. Patent and Trademark Office (USPTO) had declared Interference No. 105,871 (First Idenix Interference) between our U.S. Patent No. 7,429,572 (the ‘572 patent) and Idenix’s pending U.S. Patent Application No. 12/131,868 to determine who was the first to invent certain nucleoside compounds. In January 2014, the USPTO Patent Trial and Appeal Board (PTAB) determined that Pharmasset and not Idenix was the first to invent the compounds. Idenix has appealed the PTAB’s decisions to the U.S. District Court for the District of Delaware, which has stayed that appeal pending


the outcome of the appeal of the interference involving Idenix’s U.S. Patent No. 7,608,600 (the ‘600 patent) as described below. In light of the decision in the Second Idenix Interference in our favor (as described below), we believe that the District Court will dismiss the First Idenix Interference with prejudice or enter judgment against Idenix and in our favor.
In December 2013, after receiving our request to do so, the USPTO declared Interference No. 105,981 (Second Idenix Interference) between our pending U.S. Patent Application No. 11/854,218 and Idenix’s ‘600 patent. The ‘600 patent includes claims directed to methods of treating HCV with nucleoside compounds. In March 2015, the PTAB determined that Pharmasset and not Idenix was the first to invent the claimed methods of treating HCV. Idenix appealed this decision in both the U.S. District Court for the District of Delaware and the CAFC. The CAFC heard oral arguments in September 2016 and affirmed the PTAB decision in June 2017. In November 2017, the CAFC denied Idenix’s petition for a rehearing. Idenix may file further petitions in the United States Supreme Court. We filed a motion to dismiss the appeal in Delaware, which was granted. Idenix appealed the dismissal to the CAFC and that court had stayed this other appeal pending a decision in the Second Idenix Interference. We believe that the appeal from the Delaware dismissal should be dismissed in light of the recent decision of the CAFC affirming the PTAB’s prior decision in the Second Idenix Interference that Idenix is not entitled to its patent.
We believe that the Idenix claims involved in the First and Second Idenix Interferences, and similar U.S. and foreign patents claiming the same compounds, metabolites and uses thereof, are invalid. As a result, we filed an Impeachment Action in the Federal Court of Canada to invalidate Idenix Canadian Patent No. 2,490,191 (the ‘191 patent), which is the Canadian patent that corresponds to the ‘600 patent. Idenix asserted that the commercialization of Sovaldi in Canada will infringe its ‘191 patent and that our Canadian Patent No. 2,527,657, corresponding to our ‘572 patent, is invalid. In November 2015, the Canadian court held that Idenix’s patent is invalid and that our patent is valid. Idenix appealed the decision to the Canadian Federal Court of Appeal in November 2015. In July 2017, the Canadian Federal Appeal Court affirmed the lower court’s decision in our favor. In September 2017, Idenix appealed the decision to the Supreme Court of Canada.
We filed a similar legal action in Norway in the Oslo District Court seeking to invalidate Idenix’s Norwegian patent corresponding to the ‘600 patent. In September 2013, Idenix filed an invalidation action in the Norwegian proceedings against our Norwegian Patent No. 333700, which corresponds to the ‘572 patent. In March 2014, the Norwegian court found all claims in the Idenix Norwegian patent to be invalid and upheld the validity of all claims in our patent. Idenix appealed the decision to the Norwegian Court of Appeal. In April 2016, the Court of Appeal issued its decision invalidating the Idenix patent and upholding our patent. The decision revoking Idenix’s patent is now final.
In January 2013, we filed a legal action in the Federal Court of Australia seeking to invalidate Idenix’s Australian patent corresponding to the ‘600 patent. In April 2013, Idenix asserted that the commercialization of Sovaldi in Australia infringes its Australian patent corresponding to the ‘600 patent. In March 2016, the Australian court revoked Idenix’s Australian patent. Idenix has appealed this decision. The appeal hearing was held in November 2016 and we are awaiting the decision.
In March 2014, the European Patent Office (EPO) granted Idenix European Patent No. 1 523 489 (the ‘489 patent), which corresponds to the ‘600 patent. The same day that the ‘489 patent was granted, we filed an opposition with the EPO seeking to revoke the ‘489 patent. An opposition hearing was held in February 2016, and the EPO ruled in our favor and revoked the ‘489 patent. Idenix has appealed. In March 2014, Idenix also initiated infringement proceedings against us in the United Kingdom (UK), Germany and France alleging that the commercialization of Sovaldi would infringe the UK, German and French counterparts of the ‘489 patent. A trial was held in the UK in October 2014. In December 2014, the High Court of Justice of England and Wales (UK Court) invalidated all challenged claims of the ‘489 patent on multiple grounds. Idenix appealed. In November 2016, the appeals court affirmed the UK Court’s decision invalidating Idenix’s patent, and in April 2017, the UK Supreme Court refused Idenix’s application for permission to appeal. In March 2015, the German court in Düsseldorf determined that the Idenix patent was highly likely to be invalid and stayed the infringement proceedings pending the outcome of the opposition hearing held by the EPO in February 2016. Idenix has not appealed this decision of the German court staying the proceedings. Upon Idenix’s request, the French proceedings have been stayed.
See also our risk factor “We may be required to pay significant damages to Merck as a result of a jury’s finding that we willfully infringed a patent owned by Merck’s Idenix subsidiary.”
Idenix was acquired by Merck in August 2014, and Merck continues to pursue the Idenix claims described herein.
Litigation with Merck
In August 2013, Merck contacted us requesting that we pay royalties on the sales of sofosbuvir and obtain a license to U.S. Patent No. 7,105,499 (the ‘499 patent) and U.S. Patent No. 8,481,712 (the ‘712 patent), which it co-owns with Ionis Pharmaceuticals, Inc. The ‘499 and ‘712 patents cover compounds which do not include, but may relate to, sofosbuvir. We filed a lawsuit in August 2013 in the U.S. District Court for the Northern District of California seeking a declaratory judgment that the Merck patents are invalid and not infringed. During patent prosecution, Merck amended its patent application in an attempt to cover compounds related to sofosbuvir. Initially, in March 2016, a jury determined that we had not established that Merck’s patents are invalid for lack of written description or lack of enablement and awarded Merck $200 million in damages. However, in June 2016, the court


ruled in our favor on our defense of unclean hands and determined that Merck may not recover any damages from us for the ‘499 and ‘712 patents. The judge has determined that Merck is required to pay our attorney’s fees due to the exceptional nature of this case. In July 2017, the court issued a decision setting the amount of attorney fees awarded to Gilead.
Merck has filed notices of appeal to the CAFC regarding the court’s decision on our defense of unclean hands and its award of attorney’s fees. We appealed the issue relating to the invalidity of Merck’s patent. If the decision on our defense of unclean hands is reversed on appeal and Merck’s patent is upheld, we may be required to pay damages and a royalty on sales of sofosbuvir-containing products following the appeal. In that event, the judge has indicated that she will determine the amount of the royalty, if necessary, at the conclusion of any appeal in this case.
Litigation with the University of Minnesota
The University of Minnesota (the University) has obtained Patent No. 8,815,830 (‘830 patent), which purports to broadly cover nucleosides with antiviral and anticancer activity.  In August 2016, the University filed a lawsuit against us in the U.S. District Court for the District of Minnesota, alleging that the commercialization of sofosbuvir-containing products infringes the ‘830 patent.  We believe that the ‘830 patent is invalid and will not be infringed by the continued commercialization of sofosbuvir. In October 2017, the court granted our motion to transfer the case to California. We have also filed four petitions for inter partes review in the USPTO alleging that all asserted claims are invalid for anticipation and obviousness.
Petitions for Inter Partes Review filed by Initiative for Medicines, Access & Knowledge
In October 2017, we received notice that Initiative for Medicines, Access & Knowledge (I-MAK) submitted multiple petitions requesting inter partes review to the PTAB alleging that certain patents associated with sofosbuvir are invalid as either not novel or obvious. We strongly believe I-MAK’s petitions are without merit and that sofosbuvir, the only approved HCV drug of its kind, is both novel and not obvious. Accordingly, we will defend against these allegations. If the PTAB decides to initiate one or more inter partes reviews, a decision would be expected about a year later. Either party can appeal the PTAB’s decision to the CAFC.
European Patent Claims
In February 2015, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering sofosbuvir that expires in 2028. In October 2016, the EPO upheld the validity of certain claims of our sofosbuvir patent. We anticipate that the challengers will appeal this decision in favor of our patent. We have appealed this decision, seeking to restore all of the original claims, and several of the original opposing parties have also appealed, requesting full revocation. The appeal process may take several years.
In April 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024.
While we are confident in the strength of our patents, we cannot predict the ultimate outcome of these actions. If we are unsuccessful in defending these oppositions, some or all of our patent claims may be narrowed or revoked and the patent protection for sofosbuvir in Europe could be substantially shortened or eliminated entirely. If our patents are revoked, and no other European patents are granted covering these compounds, our exclusivity may be based entirely on regulatory exclusivity granted by EMA. Sovaldi has been granted regulatory exclusivity that will prevent generic sofosbuvir from entering the European Union for 10 years following approval of Sovaldi, or January 2024. If we lose patent protection for sofosbuvir prior to 2028, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost, which may cause our stock price to decline.
If any party is successful in establishing exclusive rights to axi-cel, our anticipated revenues and earnings from the sale of that product could be adversely affected.
In October 2017, we acquired Kite, which is now our wholly-owned subsidiary. Through the acquisition, we acquired axicabtagene ciloleucel (axi-cel), a CAR T therapy. In October 2017, we received approval from FDA for axi-cel, now known commercially as Yescarta.
We own patents and patent applications that claim axi-cel chimeric DNA segments. Third parties may have, or may obtain rights to, patents that allegedly could be used to prevent or attempt to prevent us from commercializing axi-cel or to require us to obtain a license in order to commercialize axi-cel. For example, we are aware that Juno has exclusively licensed Patent No. 7,446,190 (the ‘190 patent) which was issued to Sloan Kettering Cancer Center. In September 2017, Juno and Sloan Kettering Cancer Center filed a lawsuit against Kite in the U.S. District Court for the Central District of California, alleging that the commercialization of axi-cel infringes the ‘190 patent.
In August 2015, Kite filed a petition for inter partes review in the USPTO alleging that the asserted claims of the ‘190 patent are invalid as obvious. In December 2016, the PTAB determined that the claims of the ‘190 patent are not invalid due to obviousness. In February 2017, Kite filed a Notice of Appeal to the CAFC. That appeal is currently pending.


We cannot predict the ultimate outcome of intellectual property claims related to axi-cel. If Juno’s patent is upheld as valid and Juno successfully proves infringement of that patent by axi-cel, we could be prevented from selling Yescarta unless we were able to obtain a license to this patent. Such a license may not be available on commercially reasonable terms or at all.
Manufacturing problems,interruptions, including at our third-party manufacturers and corporate partners, could cause inventory shortages and delay product shipments and regulatory approvals, which may adversely affect our results of operations.
In order to generate revenue from our products, we must be able to produce sufficient quantities of our products to satisfy demand. Many of our products are the result of complex manufacturing processes. The manufacturing process for pharmaceutical products is also highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations.partners.
Our products, which are either manufactured at our own facilities or by third-party manufacturers orand corporate partners.partners, are the result of complex, highly regulated manufacturing processes. We depend on third partiesthird-party manufacturers and corporate partners to perform manufacturing activities effectively and on a timely basis for the majority of our solid doseactive pharmaceutical ingredients and drug products. In addition, Roche, either by itself or throughThese third parties is responsible for manufacturing Tamiflu.are independent entities subject to their own unique operational and financial risks that are out of our control. We and our third-party manufacturers and our corporate partners are subject to Good Manufacturing Practices (GMP)(“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and EMA. SimilarEuropean Medicines Agency (“EMA”), as well as comparable regulations are in effect in other countries.jurisdictions. Manufacturing operations are also subject to routine inspections by regulatory agencies.
OurAny adverse developments affecting or resulting from our manufacturing operations or the operations of our third-party manufacturers and corporate partners are independent entities who are subject to their own unique operational and financial risks which are outmay result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the commercial supply of our control. If we or any of these third-party manufacturers or corporate partnersproducts. We have incurred, and will continue to incur, inventory write-off charges and other expenses for products that fail to perform as required, thismeet specifications and quality standards, and we may need to undertake costly remediation efforts or seek more costly manufacturing alternatives. Such developments could impairincrease our abilitymanufacturing costs, cause us to deliverlose revenues or market share and damage our products on a timely basis or receive royalties orreputation. In addition, manufacturing issues may cause delays in our clinical trials and applications for regulatory approval. Further, we may have to write-off the costs of manufacturing any batch that fails to pass quality inspection or meet regulatory approval. In addition, we, our third-party manufacturers and our corporate partners may only be able to produce some of our products at one or a limited number of facilities and, therefore, have limited manufacturing capacity for certain products. To the extent these risks materialize and affect their performance obligations to us, our financial results may be adversely affected.
Our manufacturing operations are subject to routine inspections by regulatory agencies. IfFor example, if we are unable to remedy any deficiencies cited by FDA or other regulatory agencies in thesetheir inspections, our currently marketedexisting products and the timing of regulatory approval of productsproduct candidates in development could be adversely affected. Further, there is risk that regulatory agencies in other countries where marketing applications are pending will undertake similar additional reviews or apply a heightened standard of review, which could delay the regulatory approvals for products in those countries. IfOur business may be adversely affected if approval of any of our product candidates were delayed or if production of our marketed products was interrupted, our anticipated revenues and our stock price would be adversely affected.were interrupted.
We have limited experience managing the T cell engineering process, and our processes may be more difficult or more expensive than the approaches taken by our competitors. We cannot be sure that the manufacturing processes employed by us will result in engineered T cells that will be safe and effective. In addition, we may encounter difficulties in production, particularly in scaling up and validating initial production to meet patient demand and ensuring the absence of contamination. These problems could include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Further, if contaminants are discovered in our supply of Yescarta or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could require substantial resources and management attention. We cannot assure you that any stability or other issues relating to the manufacture of Yescarta will not occur in the future or that any such issues may be remedied on a timely basis or at all. In addition, we may fail to manage the logistics of collecting and shipping patient material to the manufacturing site and shipping Yescarta back to the patient. Logistical and shipment delays and problems caused by us, our vendors or other factors not in our control, such as weather and natural disasters, could prevent or delay the delivery of our products and product candidates to patients. Additionally, we are required to maintain a complex chain of identity and custody with respect to patient material as such material moves to the manufacturing facilities, through the manufacturing process, and back to the patient. Failure to maintain chain of identity and custody could result in patient death, loss of product or regulatory action, which could have an adverse effect on us, our reputation and our stock price.
We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell our products, which wouldcould limit our ability to generate revenues.
We need access to certain supplies and products to conduct our clinical trials and to manufacture and sell our products. If we are unable to purchase sufficient quantitiesenough of these materials or find suitable alternatealternative materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture and sell our products wouldcould be limited, which would limit our ability to generate revenues.limited.
38

Suppliers of key components and materials must be named in the NDAnew drug application or MAAmarketing authorization application filed with FDA, EMA or otherthe regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification


of a new supplier is required. Even after a manufacturer is qualified by the regulatory authority, the manufacturer must continue to expend time, money and effort in the area of production and quality control to ensuremaintain full compliance with GMP. Manufacturers are subject to regular periodic inspections by the regulatory authorities following initial approval. If, as a result of these inspections, a regulatory authority determines that the equipment, facilities, laboratories or processes do not comply with applicable regulations and conditions of product approval, the regulatory authority may suspend the manufacturing operations. If the manufacturing operations of any of the single suppliers for our products are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand, which would in turn decrease our revenues and harm our business.demand. In addition, if deliverydeliveries of materialmaterials from our suppliers wereare interrupted for any reason, we may be unable to ship certain of our products for commercial supply or to supply our productsproduct candidates in development for clinical trials. In addition,Also, some of our products and the materials that we utilize in our operations are mademanufactured by only one supplier or at only one facility. For example,facility, which we manufacture certain drug product intermediates utilizedmay not be able to replace in AmBisome exclusivelya timely manner and on commercially reasonable terms, or at ourall. Problems with any of the single suppliers or facilities we depend on, including in San Dimas, California. In the event of a disaster, includingsuch as an earthquake, equipment failure or other difficulty, we may be unable to replace this manufacturing capacity in a timely manner and may be unable to manufacture AmBisome to meet market needs.
In addition, we depend on a single supplier for amphotericin B, the active pharmaceutical ingredient of AmBisome, and high-quality cholesterol in the manufacture of AmBisome. We also rely on a single source for the active pharmaceutical ingredients found in Letairis and Cayston. Astellas US LLC, which markets Lexiscan in the United States, is responsible for the commercial manufacture and supply of product in the United States and is dependent on a single supplier for the active pharmaceutical ingredient of Lexiscan. Problems with any of the single suppliers we depend on may negatively impact our development and commercialization efforts.
A significant portion of the raw materials and intermediates used to manufacture our antiviral products are supplied by third-party manufacturers and corporate partners outside of the United States.U.S. As a result, any political or economic factors in a specific country or region, including any changes in or interpretations of trade regulations, compliance requirements or tax legislation, that would limit or prevent third parties outside of the United StatesU.S. from supplying these materials wouldcould adversely affect our ability to manufacture and supply our antiviral products to meet market needs and have a material and adverse effect on our operating results.
If we were to encounter any of these difficulties, our ability to provide our products andconduct clinical trials on product candidates and to patients would be jeopardized.
Litigation with generic manufacturers has increased our expenses which may continue to reduce our earnings. If we are unsuccessful in all or some of these lawsuits, some or all of our claims in the patents may be narrowed or invalidatedmanufacture and generic versions ofsell our products could be impaired.
Regulatory and Other Legal Risks
Our operations depend on compliance with complex FDA and comparable international regulations. Failure to obtain broad approvals on a timely basis or to maintain compliance could delay or halt commercialization of our products.
The products we develop must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by FDA, EMA and comparable regulatory agencies in other countries. We have filed, and anticipate that we will continue to file, for marketing approval in additional countries and for additional indications and products. These and any future marketing applications we file may not be approved by the regulatory authorities on a timely basis, or at all. Even if marketing approval is granted for these products, there may be significant limitations on their use. We cannot state with certainty when or whether any of our product candidates under development will be approved or launched; whether we will be able to develop, license or acquire additional product candidates or products; or whether any products, once launched, priorwill be commercially successful.
Further, how we manufacture and sell our products is subject to extensive regulation and review. For example, under FDA rules, we are often required to conduct post-approval clinical studies to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk. In certain circumstances, we may be required to implement a Risk Evaluation and Mitigation Strategy program for our products, which could include a medication guide, patient package insert, a communication plan to healthcare providers, restrictions on distribution or use of a product and other elements FDA deems necessary to assure safe use of the drug. Discovery of previously unknown problems with our marketed products or product candidates, including serious safety, resistance or drug interaction issues, or problems with our manufacturing, safety reporting or promotional activities, may result in regulatory approvals being delayed, denied or granted with significant restrictions on our products, including limitations on or the withdrawal of the products from the market.
Failure to comply with these or other requirements imposed by FDA could result in significant civil monetary penalties, fines, suspensions of regulatory approvals, product recalls, seizure of products and criminal prosecutions.
39

We are impacted by evolving laws, regulations and legislative or regulatory actions applicable to the healthcare industry.
The healthcare industry is subject to various federal, state and international laws and regulations pertaining to drug approval, reimbursement, rebates, price reporting, healthcare fraud and abuse, and data privacy and security. In the U.S., these laws include anti-kickback and false claims laws, Federal Food, Drug, and Cosmetic Act, laws and regulations relating to the Medicare and Medicaid programs and other federal and state programs, such as the Medicaid Rebate Statute and the 340B statute, laws that regulate written and verbal communications about our products, individual state laws relating to pricing and sales and marketing practices, the Health Insurance Portability and Accountability Act and other federal and state laws relating to the privacy and security of health information. Actual or alleged violations of these laws or any related regulations may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, civil monetary penalties, exclusion from participation in federal and state healthcare programs, including Medicare, Medicaid and U.S. Department of Veterans Affairs and U.S. Department of Defense health programs, actions against executives overseeing our business and significant remediation measures, negative publicity or other consequences. These laws and regulations are broad in scope and subject to changing and evolving interpretations, which could require us to incur substantial costs associated with compliance, alter one or more of our sales or marketing practices, or impact our ability to obtain or maintain regulatory approvals. The resulting impact on our business is uncertain and could be material.
In addition, government price reporting and payment regulations are complex, and we are continually assessing the methods by which we calculate and report pricing in accordance with these obligations. Our methodologies for calculations are inherently subjective and may be subject to review and challenge by various government agencies, which may disagree with our interpretation. If the government disagrees with our reported calculations, we may need to restate previously reported data and could be subject to additional financial and legal liability.
There also continues to be enhanced scrutiny of company-sponsored patient assistance programs, including co-pay assistance programs and manufacturer donations to third-party charities that provide such assistance. There has also been enhanced scrutiny by governments on reimbursement and other patient support offerings, clinical education programs and promotional speaker programs. If we, or our agents and vendors, are deemed to have failed to comply with laws, regulations or government guidance in any of these areas, we could be subject to criminal or civil sanctions. Any similar violations by our competitors could also negatively impact our industry reputation and increase scrutiny over our business and our products.
For a description of our government investigations and related litigation, see Note 10. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
We are subject to risks if significant safety issues arise for our marketed products or our product candidates.
As additional studies are conducted after obtaining marketing approval for our products, and as our products are used over longer periods of time by many patients, including patients with underlying health problems or those taking other medicines, we expect to continue finding new issues related to safety, resistance or drug interactions. Any such issues may require changes to our patent expiry.product labels, such as additional warnings, contraindications or even narrowed indications, or to halt sales of a product.
Regulatory authorities have been moving towards more active and transparent pharmacovigilance and are making greater amounts of stand-alone safety information and clinical trial data directly available to the public through websites and other means, such as periodic safety update report summaries, risk management plan summaries and various adverse event data. Safety information, without the appropriate context and expertise, may be misinterpreted and lead to misperception or legal action.
Our success depends to a significant degree on our ability to obtain and defend our patents and other intellectual property rights both domestically and internationally, and to operate without infringing upon the patents or other proprietary rights of third parties.
Patents and other proprietary rights are very important to our business. As part of our business strategy, we actively seek patent protection both in the approval process for someU.S. and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology. Our success depends to a significant degree on our ability to:
•obtain patents and licenses to patent rights;
•preserve trade secrets and internal know-how;
•defend against infringement of our products, FDA granted uspatents and efforts to invalidate them; and
•operate without infringing on the intellectual property of others.
40

Because patent applications are confidential for a New Chemical Entity (NCE) exclusivity period during which other manufacturers’of time after filing, we may not know if our competitors have filed applications for approval of generic versionstechnology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our productpatent applications. If competitors file patent applications covering our technology, we may have to participate in litigation, post-grant proceedings before the U.S. Patent and Trademark Office or other proceedings to determine the right to a patent or validity of any patent granted. Such litigation and proceedings are unpredictable and expensive, and could divert management attention from other operations, such that, even if we are ultimately successful, we may be adversely impacted.
Patents covering our existing compounds, products and processes, and those that we will likely file in the future, may not be approved. Generic manufacturersprovide complete or adequate protection. Filing patent applications is a fact-intensive and complex process. We may challengefile patent applications that ultimately do not result in patents or have patents that do not provide adequate protection for the related product.Future litigation or other proceedings regarding the enforcement or validity of our existing patents protecting products that have been granted NCE exclusivity one year prior toor any future patents could result in the endinvalidation of our patents or substantially reduce their protection. In addition, we may face criticism as a result of our legitimate use of the NCE exclusivity period. patent systems to protect our investments in new and useful innovations in medicine.
Generic manufacturers have sought, and may continue to seek, FDA approval for a similar or identical drugto market generic versions of our products through an ANDA,abbreviated new drug application (“ANDA”), the application formprocess typically used by manufacturers seeking approval of a generic drug. To seek approvalFor a description of our ANDA litigation, see Note 10. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. ANDA litigation and related settlement and license agreements, in some cases, may result in a loss of exclusivity for aour patents sooner than we would otherwise expect. In addition, loss of exclusivity may be earlier than expected under these settlement and license agreements under certain circumstances. For example, settlement and license agreements with generic version of a product having NCE status, amanufacturers typically include acceleration clauses that permit generic manufacturer may submit its ANDA to FDA four years afterentry before the branded product’s approval. For sofosbuvir, thisagreed-upon entry date falls in December 2017. Consequently, it is possible that one or morecertain circumstances, and generic manufacturers may file an ANDA for sofosbuvir in December 2017.
Current legal proceedings of significance with some of our generic manufacturers include:
Apotex
In June 2014, we received notice that Apotex Inc. (Apotex) submitted an abbreviated new drug submission (ANDS)continue to Health Canada requesting permission to manufacture and market a generic version of Truvada and a separate ANDS requesting permission to manufacture and market a generic version of Viread. In the notice, Apotex alleges that three ofchallenge the patents associated with Truvada and two of the patents associated with Viread are invalid, unenforceable and/or will not be infringed by Apotex’s manufacture, use or sale of a generic version of Truvada or Viread. In August 2014, we filed lawsuits against Apotex in the Federal Court of Canada seeking orders of prohibition against approval of these ANDS. A hearing in those cases was held in April 2016. In July 2016, the court issued an order prohibiting Health Canada from approving Apotex’s generic version ofprotecting our Viread product until the expiry of our patents in July 2017.products. The court declined to prohibit approval of Apotex’s generic version of our Truvada product. The court’s decision did not rule on the validity of the patents. The launch of Apotex’s generic version of our Truvada product would be at risk of infringement of our patents, including patents that we were unable to assert in the present lawsuit, and liability for our damages. Apotex has appealed the court’s decision.


Mylan
In February 2016, we received notice that Mylan Pharmaceuticals, Inc. (Mylan) submitted an ANDA to FDA requesting permission to manufacture and market a generic version of Tybost (cobicistat). In the notice, Mylan alleges that the patent covering cobicistat is invalid as obvious and that Mylan’s generic product cannot infringe an invalid claim. In March 2016, we filed lawsuits against Mylan in the U.S. District Court for the District of Delaware and U.S. District Court for the Northern District of West Virginia. The trial in Delaware is scheduled for January 2018, and the parties have agreed to dismiss the action in West Virginia. The patent in suit that covers Tybost is also listed in the Orange Book for Stribild and Genvoya.
Amneal
In May 2017, we received notice that Amneal Pharmaceuticals LLC (Amneal) submitted an ANDA to FDA requesting permission to manufacture and market a generic version of Truvada at low dosage strengths. In the notice, Amneal alleges that two patents associated with emtricitabine are invalid, unenforceable and/or will not be infringed by Amneal’s manufacture, use or saleentry of generic versions of Truvada at low dosage strengths. In July 2017, we filed a lawsuit against Amnealour products has, and may in the U.S. District Court for the District of Delaware for infringement of our patents.future, lead to market share and price erosion.
Macleods
In June 2017, we received notice that Macleods Pharmaceuticals Ltd. (Macleods) submitted ANDAs to FDA requesting permission to manufacture and market generic versions of Truvada and Atripla. In the notices, Macleods alleges that two patents associated with emtricitabine, three patents associated with the emtricitabine and TDF fixed dose combination and three patents associated with the emtricitabine, TDF and efavirenz fixed dose combination are invalid, unenforceable and/or will not be infringed by Macleod’s manufacture, use or sale of generic versions of Truvada or Atripla. In July 2017, we filed a lawsuit against Macleods in the U.S. District Court for the District of Delaware for infringement of these patents.
We cannot predict the ultimate outcome of the foregoing actions and other litigation with generic manufacturers, and we may spend significant resources enforcing and defending these patents. If we are unsuccessful infound to infringe the valid patents of third parties, we may be required to pay significant monetary damages or we may be prevented from commercializing products or may be required to obtain licenses from these lawsuits,third parties. We may not be able to obtain alternative technologies or any required license on commercially reasonable terms or at all. If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our original claimsproducts. For example, we are aware of patents and patent applications owned by other parties that such parties may claim to cover the use of our products and research activities. For a description of our pending patent litigation, see Note 10. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Furthermore, we also rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and vendors. We cannot be certain that these parties will comply with these confidentiality agreements, that we have adequate remedies for any breach or that our trade secrets, internal know-how or technological innovation will not otherwise become known or be independently discovered by our competitors. Under some of our R&D agreements, inventions become jointly owned by us and our corporate partner and in other cases become the patents mayexclusive property of one party. In certain circumstances, it can be narrowed or invalidateddifficult to determine who owns a particular invention and the patent protection for Truvada, Viread and Letairis in the United States and Atripla, Truvada and Viread in Canadadisputes could arise regarding those inventions. We could be substantially shortened. Further,adversely affected if allour trade secrets, internal know-how, technological innovation or confidential information become known or independently discovered by competitors or if we enter into disputes over ownership of the patents covering one or more products are invalidated, FDA or Health Canada could approve the requests to manufacture a generic version of such products in the United States or Canada, respectively, prior to the expiration date of those patents. The sale of generic versions of these products earlier than their patent expiration would have a significant negative effect on our revenues and results of operations.inventions.
We face credit riskspotentially significant liability and increased expenses from our emerging market and Southern European customers that may adversely affect our results of operations.
We have exposure to customer credit risks in emerging markets and Southern Europe. Southern European product sales to government-owned or supported customers in Southern Europe, specifically Spain, Portugal, Italy and Greece have historically been subject to significant payment delays due to government funding and reimbursement practices. This has resulted and may continue to result in days sales outstanding being significantly higher in these countries due to the average length of time that accounts receivable remain outstanding. As of September 30, 2017, our accounts receivable, net in Southern Europe, specifically Spain, Portugal, Italy and Greece, totaled approximately $375 million, of which $121 million were greater than 120 days past due, including $59 million greater than 365 days past due.
Historically, receivable balances with certain publicly-owned hospitals accumulate over a period of time and are then subsequently settled as lump sum payments. This pattern is also experienced by other pharmaceutical companies that sell directly to hospitals. If significant changes were to occur in the reimbursement practices of these European governments or if government funding becomes unavailable, we may not be able to collect on amounts due to us from these customers and our results of operations would be adversely affected.
Imports from countries where our products are available at lower prices and unapproved generic or counterfeit versions of our products could have a negative impact on our reputation and business.
Prices for our products are based on local market economics and competition and sometimes differ from country to country. Our sales in countries with relatively higher prices may be reduced if products can be imported into those or other countries from lower price markets. There have been cases in which other pharmaceutical products were sold at steeply discounted prices in the developing world and then re-exported to European countries where they could be re-sold at much higher prices. If this happens with our products, particularly Truvada and Viread, which we have agreed to make available at substantially reduced prices to more than 130 countries participating in our Gilead Access Program, or Atripla and Complera, which Merck and Janssen, respectively, distributes at substantially reduced prices to HIV-infected patients in developing countries, our revenues would be adversely affected. In addition, we have entered into voluntary licensing agreements with generic drug companies in India, South


Africa and China, as well as a licensing agreement with the Medicines Patent Pool, a United Nations-backed public health organization, which allows generic drug companies to manufacture generic versions of HIV products incorporating our licensed compounds, TDF, TAF, emtricitabine, cobicistat, elvitegravir and bictegravir (upon regulatory approval in the United States), for distribution in low- and middle-income countries. We have also entered into licensing agreements with India-based generic manufacturers to produce and distribute generic versions of our HCV products to developing countries. If generic versions of our HIV and HCV products under these licenses are then re-exported to the United States, Europe or other markets outside of these developing world countries, our revenues would be adversely affected. We also make our HCV products available in low- and middle-income countries at significantly discounted prices. If the discounted HCV products are re-exported from these low- and middle-income countries into the United States or other higher price markets, our revenues could be adversely affected.
In addition, purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high may adversely impact our revenues and gross margin and may cause our sales to fluctuate from quarter to quarter. For example, in the European Union, we are required to permit products purchased in one country to be sold in another country. Purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high can affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter. These quarterly fluctuations may impact our earnings, which could adversely affect our stock price and harm our business.
We are also aware of the existence of various “Buyers Clubs” around the world that promote the personal importation of generic versions of our HCV products that have not been approved for use in the countries into which they are imported. As a result, patients may be at risk of taking unapproved medications which may not be what they purport to be, may not have the potency they claim to have or may contain harmful substances. To the extent patients take unapproved generic versions of one or more of our medications and are injured or not cured by these products, our brand or the commercial or scientific reputation of our HCV products could be harmed.
Further, third parties may illegally distribute and sell counterfeit versions of our products, which do not meet the rigorous quality standards of our manufacturing and supply chain. For example, in the first quarter of 2017, bottles of counterfeit drugs labeled under the Harvoni brand name were discovered at a retail pharmacy chain and pharmaceutical wholesalers in Japan. We investigated this matter and accelerated planned changes to our product packaging to make counterfeiting more difficult. We cooperated and continue to cooperate with the Japanese health ministry. Also, in the third quarter of 2017, bottles of counterfeit drugs labeled under the Sovaldi brand name were discovered at a retail pharmacy chain and pharmaceutical wholesalers in Germany. We investigated this matter and determined that a number of wholesalers had obtained Sovaldi from an unapproved source. We cooperated and continue to cooperate with the German regulatory authorities. We actively take actions to discourage counterfeits of our products around the world, including working with local regulatory and legal authorities to enforce laws against counterfeit drugs. Counterfeit drugs pose a serious risk to patient health and safety. Our reputation and business could suffer as a result of counterfeit drugs sold under our brand name.
Expensive litigation and government investigations have increasedrelating to our expenses which may continue to reduce our earnings.products and operations.
We are involved in a number of litigation, investigation and other dispute-related matters that require us to expend substantial internal and financial resources. These matters could require us to pay significant monetary amounts, including royalty payments for past and future sales. For example, on February 1, 2022, we reached an agreement with ViiV Healthcare Company and related parties (collectively, “ViiV”) for a global resolution of all claims related to our sales of Biktarvy, pursuant to which (1) Gilead agreed to make a one-time payment of $1.25 billion and an ongoing royalty at a rate of 3% on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the U.S. until October 5, 2027, and (2) ViiV granted Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir.
We expect these matters will continue to require a high level of internal and financial resources for the foreseeable future. These matters have reduced, and willare expected to continue to reduce, our earnings. Please see a description of our litigation, investigation and other dispute-related matters in Note 9, Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The outcome of such lawsuits or any other lawsuits that may be brought against us, the investigations or any other investigations that may be initiated, are inherently uncertain, and adverse developments or outcomes can result in significant expenses, monetary damages, penalties or injunctive relief against us that could significantly reduce our earnings and cash flows and harm our business.require significant management attention.
In some countries, we may be required to grant compulsory licenses for our products or our patents may not be enforced.
41
In a number of developing countries, government officials and other interested groups have suggested that pharmaceutical companies should make drugs for HCV or HIV infection available at low cost. Alternatively, governments in those developing countries could require that we grant compulsory licenses to allow competitors to manufacture and sell their own versions of our products, thereby reducing our product sales. For example, there is growing attention on the availability of HCV therapies and some activists are advocating for the increased availability of HCV therapies through other means including compulsory licenses. The government of Malaysia has exercised Government Rights under Section 84 of the Malaysian Patents Act to practice the patented invention of sofosbuvir for a period of three years for use only in government hospitals and clinics. We are challenging the Malaysian government’s actions. In the past, certain offices of the government of Brazil have expressed concern over the affordability of our HIV products and declared that they were considering issuing compulsory licenses to permit the manufacture of otherwise patented products for HIV infection, including Viread. In addition, concerns over the cost and availability of Tamiflu related to a potential avian flu pandemic and H1N1 influenza generated international discussions over compulsory licensing of



our Tamiflu patents. For example, the Canadian government considered allowing Canadian manufacturers to manufacture and export the active ingredient in Tamiflu to eligible developing and least developed countries under Canada’s Access to Medicines Regime. Furthermore, Roche issued voluntary licenses to permit third-party manufacturing of Tamiflu. For example, Roche granted a sublicense to Shanghai Pharmaceutical (Group) Co., Ltd. for China and a sublicense to India’s Hetero Drugs Limited for India and certain developing countries. If compulsory licenses permit generic manufacturing to override our product patents for our HCV, HIV or other products, or if we are required to grant compulsory licenses for these products, it could reduce our earnings and cash flows and harm our business.
In addition, certain countries do not permit enforcement of our patents, or permit our patents to issue, and third-party manufacturers are able to sell generic versions of our products in those countries. For example, in July 2009, the Brazilian patent authority rejected our patent application for tenofovir disoproxil fumarate, the active pharmaceutical ingredient in Viread. This was the highest level of appeal available to us within the Brazilian patent authority. Because we do not currently have a patent in Brazil, the Brazilian government now purchases its supply of tenofovir disoproxil fumarate from generic manufacturers. In the first quarter of 2017, the Brazilian Health Regulatory Agency rejected our patent applications related to sofosbuvir and our HCV products. We successfully appealed those decisions, and those applications are now under examination at the Brazilian Patent and Trademark Office. Sales of generic versions of our products could significantly reduce our sales and adversely affect our results of operations, particularly if generic versions of our products are imported into territories where we have existing commercial sales.
We may face significant liability resulting from our products that may not be covered by insurance and such liability could materially reduce our earnings.
The testing, manufacturing, marketing and use of our commercial products, as well as product candidates in development, involve substantial risk of product liability claims. These claims may be made directly by consumers, healthcare providers, pharmaceutical companies or others. We may not have sufficientlimited insurance coverage for product liabilities that may arise. In addition, the cost to defend lawsuits or pay damages for product liabilityarise and claims may exceed our insurance coverage. If we do not maintain adequate coverage
For a description of our litigation, investigation and other dispute-related matters, see Note 10. Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. The outcome of such legal proceedings or if claims exceedany other legal proceedings that may be brought against us, the investigations or any other investigations that may be initiated and any other dispute-related matters, are inherently uncertain, and adverse developments or outcomes can result in significant expenses, monetary damages, penalties or injunctive relief against us.
Operational Risks
Our business has been, and may in the future be, adversely affected by outbreaks of epidemic, pandemic or contagious diseases, including the effects from the COVID-19 pandemic.
Actual or threatened outbreaks of epidemic, pandemic or contagious diseases, or other public health emergencies, may significantly disrupt our coverage,global operations and adversely affect our business, financial condition will be adversely affected. In addition, negative publicity associatedand results of operations. As we have seen with any claims, regardlessthe COVID-19 pandemic, outbreaks can result in global supply chain and logistics disruptions and distribution constraints. The impact of their merit, may decrease the futurean outbreak or other public health crisis on our results of operations and financial condition would depend on numerous evolving factors, but could involve higher operating expenses, lower demand for our products as a result of governmental, business and impairindividuals’ actions taken in response to such an event (including quarantines, travel restrictions and interruptions to healthcare services, which can impact enrollment in or operation of our clinical trials or limit patients’ ability or willingness to access and seek care), challenges associated with the safety of our employees and safe occupancy of our job sites, and financial condition.market volatility and significant macroeconomic uncertainty in global markets. An outbreak or public health emergency also could amplify many of the other risks described throughout the “Risk Factors” section of this Quarterly Report on Form 10-Q.
Business disruptions from natural or man-made disasters may harmWe face risks associated with our future revenues.global operations.
Our worldwideglobal operations are accompanied by certain financial, political, economic and other risks, including those listed below:
•Foreign Currency Exchange: For the three months ended March 31, 2023, approximately 30% of our product sales were outside the U.S. Because a significant percentage of our product sales is denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates. Overall, we are a net receiver of foreign currencies, and therefore, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar. Our hedging program does not eliminate our exposure to currency fluctuations. We may be adversely impacted if the U.S. dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation. For example, see Part I, Item 2 of this Quarterly Report on Form 10-Q for a discussion of our exposure to movements in foreign currency exchange rates, primarily in the Euro, and the impacts from foreign currency exchange, net of hedges, for the three months ended March 31, 2023.
•Interest Rates and Inflation: We hold interest-generating assets and interest-bearing liabilities, including our available-for-sale debt securities and our senior unsecured notes and credit facilities. Fluctuations in interest rates, including the U.S. Federal Reserve’s recent increases in interest rates, could beexpose us to increased financial risk. In addition, high inflation, such as what we are seeing in the current economic environment, has adversely impacted and may continue to adversely impact our business and financial results.
•Anti-Bribery: We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws that govern our international operations with respect to payments to government officials. Our international operations are heavily regulated and require significant interaction with foreign officials. We operate in parts of the world that have experienced governmental corruption to some degree. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state-controlled, in a manner that is different than local custom. It is possible that certain of our practices may be challenged under these laws. In addition, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees and agents. Enforcement activities under anti-bribery laws could subject us to administrative and legal proceedings and actions, which could result in civil and criminal sanctions, including monetary penalties and exclusion from healthcare programs.
42

Other risks inherent in conducting a global business include:
•Restrictive government actions against our intellectual property and other foreign assets such as nationalization, expropriation, the imposition of compulsory licenses or similar actions, including waiver of intellectual property protections.
•Protective economic policies taken by foreign governments, such as trade protection measures and import and export licensing requirements, which may result in the imposition of trade sanctions or similar restrictions by the U.S. or other governments.
•Business interruptions stemming from natural or man-made disasters, such as climate change, earthquakes, hurricanes, flooding, fires, extreme heat, drought or actual or threatened public health emergencies, or efforts taken by third parties to prevent or mitigate such disasters, such as public safety power shutoffs and facility shutdowns, for which we may be uninsured or inadequately insured. Ournot have sufficient insurance. For example, our corporate headquarters in Foster City and our Santa Monica location, which together house a majority of ourcertain R&D activities, and our San Dimas, La Verne, Oceanside and El Segundo manufacturing facilities are located in California, a seismically active region. AsIn the event of a major earthquake, we may not carry adequatesufficient earthquake insurance, and significant recovery time could be required to resume operations,operations.
•Political instability or disruption in a geographic region where we operate, regardless of cause, including war, terrorism, social unrest and political changes, including in China, Russia and Ukraine.
Our aspirations, goals and disclosures related to environmental, social and governance (“ESG”) matters expose us to numerous risks, including risks to our reputation and stock price.
Institutional and individual investors are increasingly using ESG screening criteria to determine whether Gilead qualifies for inclusion in their investment portfolios. We are frequently asked by investors and other stakeholders to set ambitious ESG goals and provide new and more robust disclosure on goals, progress toward goals and other matters of interest to ESG stakeholders. In response, we have adapted the tracking and reporting of our corporate responsibility program to various evolving ESG frameworks, and we have established and announced goals and other objectives related to ESG matters. These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, conditionlegal and operating resultsother risks, any of which could be materially adversely affected inhave a material negative impact, including on our reputation and stock price.
Our ability to achieve any goal or objective, including with respect to environmental and diversity initiatives, is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (1) the eventavailability and cost of a major earthquake. In addition,low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements affecting ESG standards or disclosures, (3) the availability of suppliers that can meet our Yescarta business is also reliant onsustainability, diversity and other standards, (4) our ability to managerecruit, develop and retain diverse talent in our labor markets and (5) the logisticsimpact of collectingour organic growth and shipping patient materialacquisitions or dispositions of businesses or operations.
The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our selection of disclosure frameworks that seek to align with various reporting standards may change from time to time and may result in a lack of consistent or meaningful comparative data from period to period. In addition, regulatory authorities may impose mandatory disclosure requirements with respect to ESG matters. For example, in March 2022, U.S. Securities and Exchange Commission (“SEC”) proposed rule changes that would require companies to make certain climate-related disclosures, including information about climate-related risks, greenhouse gas emissions and certain climate-related financial statement metrics. Our processes and controls may not reflect evolving standards for identifying, measuring and reporting ESG matters, immediately or at all, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our manufacturing facilitiesgoals or reported progress in achieving such goals. In addition, enhancements to our processes and shipping Yescarta backcontrols to reflect evolving reporting standards may be costly and require additional resources.
If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, business partner or acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.
We depend on relationships with third parties for sales and marketing performance, technology, development, logistics and commercialization of products. Failure to maintain these relationships, poor performance by these companies or disputes with these third parties could negatively impact our business.
We rely on a number of collaborative relationships with third parties for our sales and marketing performance in certain territories. In some countries, we rely on international distributors for sales of certain of our products. Some of these relationships also involve the clinical development of these products by our partners. Reliance on collaborative relationships poses a number of risks, including the risk that:
43

•we are unable to control the resources our corporate partners devote to our programs or products;
•disputes may arise with respect to the patient. Any logisticalownership of rights to technology developed with our corporate partners;
•disagreements with our corporate partners could cause delays in, or termination of, the research, development or commercialization of product candidates or result in litigation or arbitration;
•contracts with our corporate partners may fail to provide significant protection or may fail to be effectively enforced if one of these partners fails to perform;
•our corporate partners have considerable discretion in electing whether to pursue the development of any additional products and shipment delays caused by such naturalmay pursue alternative technologies or man-made disasters could preventproducts either on their own or delayin collaboration with our competitors;
•our corporate partners with marketing rights may choose to pursue competing technologies or to devote fewer resources to the deliverymarketing of our products than they do to patientsproducts of their own development; and
•our distributors and our corporate partners may be unable to pay us.
Given these risks, there is a great deal of uncertainty regarding the success of our current and future collaborative efforts. If these efforts fail, our product development or commercialization of new products could harmbe delayed or revenues from products could decline.
Due to the specialized and technical nature of our Yescarta business.business, the failure to attract, develop and retain highly qualified personnel could adversely impact us.
Our future success will depend in large part on our continued ability to attract, develop and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, governmental regulation and commercialization. Our ability to do so also depends in part on how well we maintain a strong workplace culture that is attractive to employees. In addition, competition for qualified personnel in the biopharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. We are dependent on information technology systems, infrastructureface competition for personnel from other companies, universities, public and data.private research institutions, government entities and other organizations. Additionally, changes to U.S. immigration and work authorization laws and regulations could make it more difficult for employees to work in or transfer to one of the jurisdictions in which we operate.
Significant cybersecurity incidents could give rise to legal liability and regulatory action under data protection and privacy laws and adversely affect our business and operations.
We are dependent upon information technology systems, infrastructure and data, including our new Kite Konnect platform.platform, which is critical to maintain chain of identity and chain of custody of Yescarta and Tecartus. The multitude and complexity of our computer systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and randomransomware attack. Likewise, data privacy or securitycybersecurity incidents or breaches by employees or others may pose a risk thatcan result in the exposure of sensitive data, including our intellectual property or trade secrets or the personal information of our employees, patients, customers or other business partners may be exposed to unauthorized persons or to the public. CyberattacksCybersecurity attacks and incidents are increasing in their frequency, sophistication and intensity. Cyberattacks couldMalicious actors seek to steal money, gain unauthorized access to, destroy or manipulate data, and disrupt operations, and some of their attacks may not be recognized or discovered until launched or after initial entry into the environment, such as novel or zero-day attacks that are launched before patches are available and defenses can be readied. Malicious actors are also increasingly developing methods to avoid prevention, detection and alerting capabilities, including employing counter-forensic tactics making response activities more difficult. Such attacks and incidents include, for example, the deployment of harmful malware, ransomware, denial-of-service, social engineering and other means to affect service reliability and operations and threaten data confidentiality, integrity and availability. Our business and technology partners face similar risks and any security breach of their systems could adversely affect our security posture. While
Like many companies, we have invested,experienced cybersecurity incidents, including data breaches and continueservice interruptions. When cybersecurity incidents occur, our policy is to invest,respond and address them in the protection ofaccordance with applicable governmental regulations and other legal requirements, including our data and information technology infrastructure, therecybersecurity protocols. There can be no assurance that our efforts in response to cybersecurity incidents, as well as our investments to protect our information technology infrastructure and data, will shield us from significant losses, brand and reputational harm and potential liability or the effortsprevent any future interruption or breach of our partners and vendors, will prevent service interruptions, or identify breaches in our systems, that could adversely affect our business and operations and/or result insystems. Such cybersecurity incidents can cause the loss of critical or sensitive information, including personal information, and could give rise to legal liability and regulatory action under data protection and privacy laws.
44

Regulators globally are also imposing new data privacy and security requirements, including new and greater monetary fines for privacy violations. For example, the General Data Protection Regulation (“GDPR”) established regulations regarding the handling of personal data, and non-compliance with the GDPR may result in monetary penalties of up to four percent of worldwide revenue. In addition, new domestic data privacy and security laws, such as the California Consumer Privacy Act and the California Privacy Rights Act and other laws that have been or may be passed, similarly introduce requirements with respect to personal information, and non-compliance with such laws may result in liability through private actions (subject to statutorily defined damages in the event of certain data breaches) and enforcement. Other changes or new laws or regulations associated with the enhanced protection of personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.
Strategic and Financial Risks
We are subject to risks associated with engaging in business acquisitions, licensing arrangements, collaborations, options, equity investments, asset divestitures and other strategic transactions.
We have engaged in, and may in the future engage in, such transactions as part of our business strategy. We may not identify suitable transactions in the future and, if we do, we may not complete such transactions in a timely manner, on a cost-effective basis, or at all, including the possibility that a governmental entity or regulatory body may delay or refuse to grant approval for the consummation of the transaction. If we are successful in making an acquisition or closing a licensing arrangement or collaboration, the products, intellectual property and technologies that are acquired or licensed may not be successful or may require significantly greater resources and investments than anticipated. As part of our annual impairment testing of our goodwill and other indefinite-lived intangible assets in the fourth quarter, and earlier if impairment indicators exist, as required under U.S. generally accepted accounting principles, we may need to recognize impairment charges related to the products, intellectual property and technologies that are acquired or licensed. For example, as a result of an impairment analysis we conducted following our receipt of data in March 2022 from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with hormone receptor-positive, human epidermal growth receptor 2-negative metastatic breast cancer, we recognized a partial in-process research and development impairment charge on our Condensed Consolidated Statements of Income during 2022. For option structured deals, there is no assurance that we will elect to exercise our option right, and it is possible that disagreements, uncertainties or other circumstances may arise, including with respect to whether our option rights have been appropriately triggered, which may hinder our ability to realize the expected benefits. For equity investments in our strategic partners, such as in connection with our collaborations with Arcus Biosciences, Inc. and Galapagos NV, the value of our equity investments may fluctuate and decline in value. If we are not successful in the execution or implementation of these transactions, our financial condition, cash flows and results of operations may be adversely affected, and our stock price could decline.
We have paid substantial amounts of cash and incurred additional debt to finance our strategic transactions. Additional indebtedness and a lower cash balance could result in a downgrade of our credit ratings, limit our ability to borrow additional funds or refinance existing debt on favorable terms, increase our vulnerability to adverse economic or industry conditions, and reduce our financial legal, business or reputational harmflexibility to us. In addition,continue with our liability insurancecapital investments, stock repurchases and dividend payments. For example, as a result of the cash used and the debt issued in connection with our acquisition of Immunomedics in 2020, S&P Global Ratings downgraded our credit rating. We may not be sufficient in type or amountadversely impacted by any failure to cover us against claims related to security breaches, cyberattacks and other related breaches.


overcome these additional risks.
Changes in our effective income tax rate could reduce our earnings.
We are subject to income taxes in the United StatesU.S. and various foreign jurisdictions including Ireland.jurisdictions. Due to economic and political conditions, various countries are actively considering and have made changes to existing tax laws. Welaws, and we cannot predict the form or timing of potential legislative changes that could have a material adverse impact on our results of operations. In addition, significant judgment is required in determining our worldwide provision for income taxes. Various factors may have favorable or unfavorable effects on our incomesuch changes. Our effective tax rate including, but not limited to, changes in forecasted demand for our HCV products, our portion of the non-tax deductible annual BPD fee, the accounting for stock options and other share-based awards, mergers and acquisitions, the ability to manufacture product in our Cork, Ireland facility, the amortization of certain acquisition related intangibles for which we receive no tax benefit, future levels of R&D spending,rates are affected by changes in the mix of earnings in the variouscountries with differing statutory tax jurisdictions in which we operate,rates, changes in overall levelsthe valuation of pre-tax earningsdeferred tax assets and resolutionliabilities, the introduction of federal, statenew taxes, and foreign incomechanges in tax audits. The impact onlaws, regulations, administrative practices and interpretations, including in the U.S., Germany and Ireland.
We are also subject to the examination of our income tax provision resulting from the above mentioned factors may be significant and could have a negative impact on our consolidated results of operations.
Our income tax returns are subject to auditand other tax matters by federal, state and foreign tax authorities. We are currently under examination by the U.S. Internal Revenue Service for theand tax years from 2010 - 2014 and byauthorities in various state and foreign jurisdictions. 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. ResolutionWe may be adversely affected by the resolution of one or more of these exposures in any reporting period could have a material impact on the results of operations for that period.
If we fail to attract and retain highly qualified personnel, we may be unable to successfully develop new product candidates, conduct our clinical trials and commercialize our product candidates.
45
Our future success will depend in large part on our continued ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. Competition for qualified personnel in the biopharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. We may not be able to attract and retain quality personnel on acceptable terms. If we are unsuccessful in our recruitment and retention efforts, our business may be harmed.
There can be no assurance that we will pay dividends or continue to repurchase stock.

Our Board of Directors authorized a dividend program under which we intend to pay quarterly dividends of $0.52 per share, subject to quarterly declarations by our Board of Directors. Our Board of Directors also approved the repurchase of up to $12.0 billion of our common stock, of which $8.2 billion is available for repurchase as of September 30, 2017. Any future declarations, amount and timing of any dividends and/or the amount and timing of such stock repurchases are subject to capital availability and determinations by our Board of Directors that cash dividends and/or stock repurchases are in the best interest of our stockholders and are in compliance with all respective laws and our agreements applicable to the declaration and payment of cash dividends and the repurchase of stock. Our ability to pay dividends and/or repurchase stock will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements, results of operations, financial condition and other factors beyond our control that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments, our dividend program and/or stock repurchases could have a negative effect on our stock price.
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
In the first quarter of 2016,2020, our Board of Directors authorized a $12.0$5.0 billion sharestock repurchase program (2016 Program)(“2020 Program”), with no fixed expiration. Purchases under which repurchasesthe 2020 Program may be made in the open market or in privately negotiated transactions. We started repurchases under the 2016 Program in April 2016.
During the third quarter of 2017, we repurchased and retired 2 million shares of our common stock for $153 million through open market transactions. The table below summarizes our stock repurchase activity under the 2016 Program for the three months ended September 30, 2017:March 31, 2023:

Total Number
of Shares
Purchased (in thousands)		Average
Price Paid
per Share		Total Number of
Shares Purchased
as Part of a Publicly
Announced Program (in thousands)		Maximum Fair
Value of Shares
that May Yet Be
Purchased Under
the 2020 Program (in millions)
January 1 - January 31, 20231,449 $84.76 1,254 $4,768 
February 1 - February 28, 20231,531 $84.04 1,470 $4,644 
March 1 - March 31, 20233,560 $79.61 2,137 $4,474 
Total6,540 (1)$81.79 4,862 (1)

(1)    The difference between the total number of shares purchased and the total number of shares purchased as part of a publicly announced program is due to shares of common stock withheld by us from employee restricted stock awards in order to satisfy applicable tax withholding obligations.

 
Total Number 
of Shares 
Purchased
(in thousands)
 
Average 
Price Paid
per Share
(in dollars)
 
 Total Number of Shares Purchased as Part of Publicly Announced Program
(in thousands)
 
Maximum Fair Value of Shares that May Yet Be Purchased Under the Program
(in millions)
July 1 - July 31, 2017716
 $72.10
 673
 $8,256
August 1 - August 31, 2017992
 $73.94
 791
 $8,198
September 1 - September 30, 2017567
 $83.48
 549
 $8,152
Total2,275
(1) 
$75.74
 2,013
(1) 
 
_________________________________________       
(1)
The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced program is due to shares of common stock withheld by us from employee restricted stock awards in order to satisfy applicable tax withholding obligations.
Item 3.DEFAULTS UPON SENIOR SECURITIES
Item 3.DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4.MINE SAFETY DISCLOSURES
Item 4.    MINE SAFETY DISCLOSURES
Not applicable.
Item 5.OTHER INFORMATION
Item 5.    OTHER INFORMATION
Not applicable.
Item 6.EXHIBITS
Item 6.    EXHIBITS
Reference is made to the Exhibit Index included herein.

46


Exhibit Index
Exhibit
Footnote		Exhibit NumberDescription of Document
(1)3.1
(2)3.2
4.1
Reference is made to Exhibit 3.1 and Exhibit 3.2
(3)4.2
(3)4.3
(4)4.4
(5)4.5
(6)4.6
(7)4.7
(8)4.8
(9)4.9
(10)4.10
(11)10.1*
(12)10.2*
(13)10.3*
(14)10.4*
(15)10.5*
(16)10.6*
(17)10.7*
(18)10.8*
(19)10.9*
(20)10.10*
10.11*, **
(21)10.12*
(22)10.13*
(23)10.14*
(24)10.15*
(15)10.16*
(24)10.17*
(20)10.18*
(17)10.19*
(18)10.20*
(19)10.21*
10.22*, **
(17)10.23*
(22)10.24*
47

Exhibit
Footnote
Exhibit Number Description of Document
(1)1.1 
Underwriting Agreement, dated September 14, 2017, among Registrant and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as representatives of the several underwriters listed in Schedule 1 thereto
    
(2)2.1 
Agreement and Plan of Merger, dated August 27, 2017, by and among Kite Pharma, Inc., Registrant and Dodgers Merger Sub, Inc.
    
(3)3.1 
Restated Certificate of Incorporation of Registrant
    
(4)3.2 
Amended and Restated Bylaws of Registrant
    
 4.1 Reference is made to Exhibit 3.1 and Exhibit 3.2
    
(5)4.2 
Indenture related to Senior Notes, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee
    
(5)4.3 
First Supplemental Indenture related to Senior Notes, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee (including form of Senior Notes)
    
(6)4.4 
Second Supplemental Indenture related to Senior Notes, dated as of December 13, 2011, between Registrant and Wells Fargo, National Association, as Trustee (including Form of 2014 Note, Form of 2016 Note, Form of 2021 Note, Form of 2041 Note)
    
(7)4.5 
Third Supplemental Indenture related to Senior Notes, dated as of March 7, 2014, between Registrant and Wells Fargo, National Association, as Trustee (including Form of 2019 Note, Form of 2024 Note, Form of 2044 Note)
    
(8)4.6 
Fourth Supplemental Indenture related to Senior Notes, dated as of November 17, 2014, between Registrant and Wells Fargo, National Association, as Trustee (including Form of 2020 Note, Form of 2025 Note, Form of 2045 Note)
    
(9)4.7 
Fifth Supplemental Indenture, dated as of September 14, 2015, between Registrant and Wells Fargo Bank, National Association, as Trustee (including Form of 2018 Note, Form of 2020 Note, Form of 2022 Note, Form of 2026 Note, Form of 2035 Note and Form of 2046 Note)
    
(10)4.8 
Sixth Supplemental Indenture, dated as of September 20, 2016, between Registrant and Wells Fargo Bank, National Association, as Trustee (including Form of 2022 Note, Form of 2023 Note, Form of 2027 Note, Form of 2036 Note and Form of 2047 Note)
    
(11)4.9 
Seventh Supplemental Indenture, dated as of September 21, 2017, between Registrant and Wells Fargo Bank, National Association, as Trustee (including Form of Fixed Rate Note, Form of Form of September 2018 Note, Form of March 2019 Note and Form of September 2019 Note)
    
(12)10.1 
Term Loan Facility Credit Agreement, dated as of September 8, 2017, among Registrant, Bank of America, N.A., as Administrative Agent, certain other lenders party thereto, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as Joint Lead Arrangers and Joint Bookrunners, and Wells Fargo Bank, National Association, as Syndication Agent
    
*(13)10.2 
Gilead Sciences, Inc. 2004 Equity Incentive Plan, as amended and restated May 10, 2017
    
*(14)10.3 
Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants prior to February 2008)
    
*(15)10.4 
Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants made February 2008 through April 2009)
    
*(16)10.5 
Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in May 2009)
    
*(17)10.6 
Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in February 2010)
    
*(18)10.7 
Form of employee stock option agreement used under 2004 Equity Incentive Plan (for 2011 and subsequent year grants)
    
*(15)10.8 
Form of non-employee director stock option agreement used under 2004 Equity Incentive Plan (for grants prior to 2008)
    
*(15)10.9 
Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for initial grants made in 2008)
    
*(15)10.10 
Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants made in May 2008 and through May 2012)
    
*(16)10.11 
Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants commencing in May 2009 and through May 2012)
    
*(19)10.12 
Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants made in May 2013)
    
*(19)10.13 
Form of non-employee director option agreement (non-U.S.) used under 2004 Equity Incentive Plan (for annual grants made in May 2013)
    
*(20)10.14 
Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants made in and after May 2014)
    
*(21)10.15 
Form of restricted stock unit issuance agreement used under 2004 Equity Incentive Plan (for annual grants to non-employee directors in May 2012)
    
*(16)10.16 
Form of restricted stock award agreement used under 2004 Equity Incentive Plan (for annual grants to certain non-employee directors prior to May 2012)
    
*(19)10.17 
Form of restricted stock unit issuance agreement used under 2004 Equity Incentive Plan (for annual grants to non-employee directors commencing in May 2013)
    
*(20)10.18 
Form of restricted stock unit issuance agreement used under 2004 Equity Incentive Plan (for annual grants to non-employee directors commencing in and after May 2014)
    

(19)10.25*
10.26*, **
(15)10.27*
(16)10.28*
(17)10.29*
(18)10.30*
(19)10.31*
(20)10.32*
10.33*, **
(24)10.34*
(20)10.35*
(24)10.36*
(25)10.37*
(15)10.38*
(24)10.39*
(17)10.40*
(27)10.41
(15)10.42*
(15)10.43*
(15)10.44*
(17)10.45*
(17)10.46*
(17)10.47*
(17)10.48*
10.49*, **
10.50*, **
10.51*, **
10.52*, **
(28)10.53*Form of Indemnity Agreement entered into between Registrant and its directors and executive officers
(28)10.54*Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees
(29)10.55*
 +(30)10.56Amendment Agreement, dated October 25, 1993, between Registrant, the Institute of Organic Chemistry and Biochemistry (IOCB) and Rega Stichting v.z.w. (REGA), together with the following exhibits: the License Agreement, dated December 15, 1991, between Registrant, IOCB and REGA (the 1991 License Agreement); the License Agreement, dated October 15, 1992, between Registrant, IOCB and REGA (the October 1992 License Agreement); and the License Agreement, dated December 1, 1992, between Registrant, IOCB and REGA (the December 1992 License Agreement)
 +(31)10.57
 +(32)10.58
 +(33)10.59
 +(34)10.60
 +(35)10.61
48

*(19) +(35)10.19
Form of restricted stock unit issuance agreement (non-U.S.) used under 2004 Equity Incentive Plan (for annual grants to non-employee directors commencing in May 2013)
*(16)10.20
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers made in 2009)
*(17)10.21
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers made in 2010)
*(18)10.22
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers made in 2011)
*(22)10.23
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers made in 2012)
*(23)10.24
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for TSR Goals in 2013 and 2014)
*(24)10.25
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for TSR Goals (US) in 2016)
*(24)10.26
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for TSR Goals (US) with Director Retirement Provisions in 2016 )
*(23)10.27
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for Revenue Goals in 2013 and 2014)
*(24)10.28
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for Revenue Goals (US) in 2016)
*(24)10.29
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for Revenue Goals (US) with Director Retirement Provisions in 2016)
*(25)10.30
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for TSR Goals - Non-US in 2015)
*(24)10.31
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for TSR Goals -Non-US in 2016)
*(25)10.32
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for Revenue Goals - Non-US in 2015)
*(24)10.33
Form of performance share award agreement used under the 2004 Equity Incentive Plan (for Revenue Goals - Non-US in 2016)
*(26)10.34
Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers made prior to May 2009)
*(16)10.35
Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants to certain executive officers commencing in May 2009)
*(27)10.36
Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (service-based vesting for certain executive officers commencing in November 2009)
*(18)10.37
Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (service-based vesting for certain executive officers commencing in 2011)
*(28)10.38
Gilead Sciences, Inc. Employee Stock Purchase Plan, restated on January 22, 2015
*(29)10.39
Gilead Sciences, Inc. Deferred Compensation Plan-Basic Plan Document
*(29)10.40
Gilead Sciences, Inc. Deferred Compensation Plan-Adoption Agreement
*(29)10.41
Addendum to the Gilead Sciences, Inc. Deferred Compensation Plan
*(30)10.42
Gilead Sciences, Inc. 2005 Deferred Compensation Plan, as amended and restated on October 23, 2008
*(31)10.43
Gilead Sciences, Inc. Severance Plan, as amended on March 8, 2016
*(32)10.44
Gilead Sciences, Inc. Corporate Bonus Plan, amended on November 4, 2015
*(33)10.45
Amended and Restated Gilead Sciences, Inc. Code Section 162(m) Bonus Plan
*(34)10.46
2016 Base Salaries for the Named Executive Officers
*(35)10.47
Offer Letter dated April 16, 2008 between Registrant and Robin Washington
*(36)10.48
Offer Letter dated May 20, 2016 between Registrant and Kevin Young
*(37)10.49Form of Indemnity Agreement entered into between Registrant and its directors and executive officers
*(37)10.50Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees
*(38)10.51
Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees (revised in September 2006)
+(39)10.52Amendment Agreement, dated October 25, 1993, between Registrant, the Institute of Organic Chemistry and Biochemistry (IOCB) and Rega Stichting v.z.w. (REGA), together with the following exhibits: the License Agreement, dated December 15, 1991, between Registrant, IOCB and REGA (the 1991 License Agreement), the License Agreement, dated October 15, 1992, between Registrant, IOCB and REGA (the October 1992 License Agreement) and the License Agreement, dated December 1, 1992, between Registrant, IOCB and REGA (the December 1992 License Agreement)

10.62
 +(40)10.53
 +(41)10.54
Sixth Amendment Agreement to the License Agreement, between IOCB/REGA and Registrant, dated August 18, 2006 amending the October 1992 License Agreement and the December 1992 License Agreement
 +(42)10.55
Seventh Amendment Agreement to the License Agreement, between IOCB/REGA and Registrant dated July 1, 2013 amending the October 1992 License Agreement and the December 1992 License Agreement
 +(43)10.56
Exclusive License Agreement between Registrant (as successor to Triangle Pharmaceuticals, Inc.), Glaxo Group Limited, The Wellcome Foundation Limited, Glaxo Wellcome Inc. and Emory University, dated May 6, 1999
 +(44)10.57
Royalty Sale Agreement by and among Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 18, 2005
 +(44)10.58
Amended and Restated License Agreement by and between Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 21, 2005
 +(45) ++(36)10.5910.63
 +(46) ++(36)10.6010.64
 +(46) +(37)10.6110.65
 +(47)10.62
Third Amendment (Revised) to License Agreement between Japan Tobacco Inc. and Registrant, dated June 10, 2015
 +(46)10.63
Fourth Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated July 5, 2011
 +(48)10.64
Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated October 10, 2013
 +(49)10.65
Fifth Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated September 29, 2014
 +(50)10.66
Amended and Restated Collaboration Agreement by and among Registrant, Gilead Sciences Ireland UC (formerly Gilead Sciences Limited) and Janssen R&D Ireland, dated December 23, 2014
+(51) +(38)10.6710.66

 ++(16)31.110.67
31.1**
31.231.2**
32.1*32***
101***The following materials from Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Income, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements.

(1)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 20, 2017, and incorporated herein by reference.101.INS**XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
(2)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on August 28, 2017, and incorporated herein by reference.101.SCH**Inline XBRL Taxonomy Extension Schema Document
(3)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 8, 2014, and incorporated herein by reference.101.CAL**Inline XBRL Taxonomy Extension Calculation Linkbase Document
(4)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 23, 2015, and incorporated herein by reference.101.DEF**Inline XBRL Taxonomy Extension Definition Linkbase Document
(5)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 1, 2011, and incorporated herein by reference.101.LAB**Inline XBRL Taxonomy Extension Label Linkbase Document
(6)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 13, 2011, and incorporated herein by reference.101.PRE**Inline XBRL Taxonomy Extension Presentation Linkbase Document
(7)Filed104Cover Page Interactive Data File, formatted in Inline XBRL (included as an exhibit to Registrant’s Current Report on Form 8-K filed on March 7, 2014, and incorporated herein by reference.Exhibit 101)
(8)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on November 17, 2014, and incorporated herein by reference.
(9)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 14, 2015, and incorporated herein by reference.
(10)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 20, 2016, and incorporated herein by reference.
(11)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 21, 2017, and incorporated herein by reference.
(12)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 13, 2017, and incorporated herein by reference.
(13)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 12, 2017, and incorporated herein by reference.
(14)Filed as an exhibit to Registrant’s Current Report on Form 8-K/A filed on February 22, 2006, and incorporated herein by reference.
(15)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference.
(16)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference.
(17)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference.
(18)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference.
(19)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference
(20)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and incorporated herein by reference.
(21)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and incorporated herein by reference.
(22)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, and incorporated herein by reference.
(23)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and incorporated herein by reference.
(24)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2016, and incorporated herein by reference.
(25)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, and incorporated herein by reference.
(26)Filed as an exhibit to Registrant’s Current Report on Form 8-K first filed on December 19, 2007, and incorporated herein by reference.
(27)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, and incorporated herein by reference.
(28)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 8, 2015, and incorporated herein by reference.
(29)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference.
(30)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and incorporated herein by reference.
(31)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 11, 2016, and incorporated herein by reference.
(32)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015, and incorporated herein by reference.
(33)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 17, 2016, and incorporated herein by reference.
(34)Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on February 3, 2016, and incorporated herein by reference.

(35)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and incorporated herein by reference.
(36)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2016, and incorporated herein by reference.
(37)Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (No. 33-55680), as amended, and incorporated herein by reference.
(38)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.
(39)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994, and incorporated herein by reference.
(40)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
(41)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference.
(42)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.
(43)Filed as an exhibit to Triangle Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q/A filed on November 3, 1999, and incorporated herein by reference.
(44)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.
(45)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference.
(46)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, and incorporated herein by reference.
(47)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, and incorporated herein by reference.
(48)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013, and incorporated herein by reference.
(49)Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, and incorporated herein by reference.
(50)Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference.
(51)Filed as an exhibit to Kite Pharma, Inc.’s Registration Statement on Form S-1/A (No. 333-196081) filed on June 17, 2014, and incorporated herein by reference.

*Management contract or compensatory plan or arrangement.
**This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.
***XBRL information is filed herewith.
+Certain confidential portions of this Exhibit were omitted by means of marking such portions with an asterisk (the Mark). This Exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to Registrant’s Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.


(1)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 9, 2019, and incorporated herein by reference.

(2)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on February 6, 2023, and incorporated herein by reference.

(3)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 1, 2011, and incorporated herein by reference.

(4)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 13, 2011, and incorporated herein by reference.
(5)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 7, 2014, and incorporated herein by reference.
(6)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on November 17, 2014, and incorporated herein by reference.
(7)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 14, 2015, and incorporated herein by reference.
(8)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 20, 2016, and incorporated herein by reference.
(9)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on September 30, 2020, and incorporated herein by reference.
(10)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and incorporated herein by reference.
(11)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 12, 2017, and incorporated herein by reference.
(12)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, and incorporated herein by reference.
(13)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 5, 2022, and incorporated herein by reference.
(14)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference.
(15)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, and incorporated herein by reference.
(16)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and incorporated herein by reference.
(17)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and incorporated herein by reference.
(18)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and incorporated herein by reference.
(19)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, and incorporated herein by reference.
(20)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, and incorporated herein by reference
(21)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference.
(22)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, and incorporated herein by reference
(23)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014, and incorporated herein by reference.
(24)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, and incorporated herein by reference.
(25)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 8, 2015, and incorporated herein by reference.
(26)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, and incorporated herein by reference.
(27)    Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on December 10, 2018, and incorporated herein by reference.
(28)    Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (No. 33-55680), as amended, and incorporated herein by reference.
(29)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.
(30)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994, and incorporated herein by reference.
(31)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.
(32)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference.
(33)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, and incorporated herein by reference.
(34)    Filed as an exhibit to Triangle Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q/A filed on November 3, 1999, and incorporated herein by reference.
(35)    Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.
(36)    Filed as an exhibit to Registrant’s Amendment No. 1 to Annual Report on Form 10-K/A filed on April 18, 2019, and incorporated herein by reference.
(37)    Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, and incorporated herein by reference.
(38)    Filed as an exhibit to Kite Pharma, Inc.’s Registration Statement on Form S-1/A (No. 333-196081) filed on June 17, 2014, and incorporated herein by reference.
*    Management contract or compensatory plan or arrangement.
**    Filed herewith.
***    Furnished herewith.
+    Certain confidential portions of this Exhibit were omitted by means of marking such portions with an asterisk (the Mark). This Exhibit has been filed separately with the Secretary of the Securities and Exchange Commission without the Mark pursuant to Registrant’s Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
++    Certain confidential portions of this Exhibit were omitted by means of marking such portions with the Mark because the identified confidential portions are (i) not material and (ii) would be competitively harmful if publicly disclosed.
49

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

GILEAD SCIENCES, INC.
(Registrant)
Date:May 3, 2023GILEAD SCIENCES, INC./s/ DANIEL P. O’DAY
(Registrant)
Date:November 6, 2017
/s/    JOHN F. MILLIGAN        
John F. Milligan, Ph.D.Daniel P. O’Day
PresidentChairman and Chief Executive Officer
(Principal Executive Officer)
Date:November 6, 2017May 3, 2023
/s/ ROBIN L. WASHINGTON        
ANDREW D. DICKINSON
Robin L. Washington
Executive Vice President and Andrew D. Dickinson
Chief Financial Officer

(Principal Financial and Accounting Officer)

5950