Analyst Conference Summary

conference date: April 21, 2009 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2009 (first quarter)

Forward-looking statements

Overview: Continues to grow revenues and profits.

Basic data (GAAP) :

Revenues were $1.53 billion, up 7% sequentially from $1.43 billion and up 22% from $1.26 billion in the year-earlier quarter.

Net income was $589 million, up 4% sequentially from $568 million and up 21% from $488 million year-earlier.

Earnings per share (EPS) were $0.63, up 5% sequentially from $0.60 and up 23.5% from $0.51 year-earlier.

Guidance:

Excluding CV Therapeutics:

Full year 2009 product revenue $5.9 to $6.0 billion. Non-GAAP product gross margin 76 to 78%. Expenses non-GAAP: R&D $800 to $820 million; SG&A $720 to $740 million. Tax rate 26 to 27%. Stock based compensation expense $0.14 to $0.16 per share.

Conference Highlights:

Acquisition of CV Therapeutics closed on April 17, 2009, at a value of $1.4 billion. The integration of CV is going well. $400 million was borrowed at a low interest rate to help fund the acquisition; expect to pay that off by the end of 2009. $26 million estimated Q1 revenues for their Renexa.

Currency exchange rates had an unfavorable impact of $22.3 million on revenues, compared to year-earlier.

Non-GAAP net income (excludes stock-based compensation) was $619 million or $0.66 per share, up 20% from year earlier.

$641 million in operating cash flow. 5 million shares of stock were repurchased. Cash and equivalents ended at $3.61 billion, up from $$3.24 billion at the end of 2008.

77.6% non-GAAP product gross margin. A slight year/year decrease due to Atripla increase in mix.

Product sales were $1.45 billion, up 27% y/y. Antiviral franchise revenues were $1.34 billion, up 28% y/y.

Royalty, contract and other revenues were $83 million, down 29% y/y.

Product sales were

Antiviral inventory, including the supply chain, remained flat sequentially. We have not seen a significant increase in patients seeking financial assistance. US HIV revenues performed strongly lead by Atripla and Truvada. 7% increase in anti-viral therapy patients in U.S. 4 out of 5 new patients used Atripla, Truvada, or both. Europe also seeing revenue growth.

Letairis for pulmonary arterial hypertension (PAH) subscribing base has grown significantly over the last year. "We are very committed to the growth of Letairis."

Cost of goods sold was $329 million. Research and development expense $189 million. Selling, general and administrative expense was $204 million. Leaving income from operations of $808 million. Interest and other expense was negative $12 million [partly due to APB 14-1 and SFAS 160 adoption]. There was also a loss of $2.5 million attributable to noncontrolling interest.

Solid progress in pipeline programs. Two Phase I studies of GS 9350 were good. Elvitegravir is in Phase III in combination with ritonavir, to be compared to twice-daily raltegravir for HIV. Also in a Elvitegravir with Truvada Phase II trial. For HCV completed enrollment in Phase IIb study of 9190. However, the FDA decided Gilead needs additional studies before aztreonam for inhalation can be approved. Cicletanine hydrochloride Phase II trial has begun enrolling pulmonary arterial hypertension patients.

Q&A:

Was your French reimbursement included in your prior guidance? Yes. The French market is the number 2 market outside the U.S. We think Atripla will be very appealing because of its cost efficiency. Product should be available in June to patients.

More on reimbursements, including Medicaid? About 35% of U.S. patients go through federal programs. ADAP program purchases have been smoother this year than in the past.

Pfizer-Glazo HIV alliance threat? If they develop more products, that is a good thing for patients. However, they don't appear to have anything competitive with Gilead in their pipelines.

Your revenue guidance now looks conservative, so what causes uncertainty? We are concerned because of potential currency fluctuations and unknowns from CVT acquisition. We will include CV Therapeutics in guidance next quarter.

9350 results, what does "good" mean? ELT normalizations were positive, so we initiated a phase IIb study. Data details will be presented later this year.

CV Therapy has about 130 people in its sales force. We are doing sizing analysis. If we do a resistant hypertension launch (Darusentan) we may need additional salespeople for specialists.

Viread and Hepsera prices were increased by 7.9% on April 1.

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