<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
---------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED ____SEPTEMBER 30, 1998____
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________ TO ___________________
COMMISSION FILE NO.
0-19731
GILEAD SCIENCES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 94-3047598
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 LAKESIDE DRIVE, FOSTER CITY, CALIFORNIA 94404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 574-3000
</TABLE>
------------------------
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 /X/ No / /
Number of shares outstanding of the issuer's common stock, par value $.001
per share, as of October 30, 1998: 30,531,399
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GILEAD SCIENCES, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements and Notes..................................................
Consolidated Balance Sheets--September 30, 1998 and December 31, 1997........................ 3
Consolidated Statements of Operations--for the three months and nine months ended September
30, 1998 and 1997.......................................................................... 4
Consolidated Statements of Cash Flows--for the nine months ended September 30, 1998 and
1997....................................................................................... 5
Notes to Consolidated Financial Statements................................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........ 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................................. 12
SIGNATURES ............................................................................................. 13
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
GILEAD SCIENCES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER DECEMBER
30, 31,
1998 1997
----------- -----------
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $ 43,167 $ 31,990
Short-term investments............................................ 252,694 290,308
Other current assets.............................................. 9,710 17,960
----------- -----------
Total current assets............................................ 305,571 340,258
Property and equipment, net......................................... 9,731 10,313
Other assets........................................................ 1,402 1,498
----------- -----------
$ 316,704 $ 352,069
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 2,700 $ 3,303
Accrued clinical and preclinical expenses......................... 10,869 12,989
Other accrued liabilities......................................... 7,357 5,705
Deferred revenues................................................. 9,558 9,541
Current portion of equipment financing obligations and long-term
debt............................................................ 814 1,853
----------- -----------
Total current liabilities....................................... 31,298 33,391
Non-current portion of equipment financing obligations and long-term
debt.............................................................. 747 1,331
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.001 per share, issuable in series;
5,000,000 shares authorized; 1,133,786 shares of Series B
convertible preferred issued and outstanding at September 30,
1998 and December 31, 1997 (liquidation preference of
$40,000)........................................................ 1 1
Common stock, par value $.001 per share; 60,000,000 shares
authorized; 30,505,900 shares and 30,041,584 shares issued and
outstanding at September 30, 1998 and December 31, 1997,
respectively.................................................... 31 30
Additional paid-in capital........................................ 485,933 479,737
Accumulated other comprehensive income............................ 1,146 344
Deferred compensation............................................. (188) (286)
Accumulated deficit............................................... (202,264) (162,479)
----------- -----------
Total stockholders' equity.......................................... 284,659 317,347
----------- -----------
$ 316,704 $ 352,069
----------- -----------
----------- -----------
</TABLE>
Note: The consolidated balance sheet at December 31, 1997 has been derived from
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See accompanying notes
3
<PAGE>
GILEAD SCIENCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
<S> <C> <C> <C> <C>
1998 1997 1998 1997
---------- ---------- ---------- ----------
Revenues:
Product sales, net.............................................. $ 1,444 $ 2,326 $ 4,837 $ 9,316
Contract revenues............................................... 1,211 2,347 17,300 20,438
Royalty revenues................................................ 383 264 1,497 374
---------- ---------- ---------- ----------
Total revenues.................................................... 3,038 4,937 23,634 30,128
Costs and expenses:
Cost of product sales........................................... 120 180 464 995
Research and development........................................ 16,720 13,604 53,978 39,126
Selling, general and administrative............................. 7,875 6,233 23,060 18,525
---------- ---------- ---------- ----------
Total costs and expenses.......................................... 24,715 20,017 77,502 58,646
---------- ---------- ---------- ----------
Loss from operations.............................................. (21,677) (15,080) (53,868) (28,518)
Interest income, net.............................................. 4,118 4,749 14,083 12,949
---------- ---------- ---------- ----------
Net loss.......................................................... $ (17,559) $ (10,331) $ (39,785) $ (15,569)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic and diluted net loss per common share....................... $ (0.58) $ (.35) $ (1.31) $ (0.53)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Common shares used to calculate basic and diluted net loss per
common share.................................................... 30,482 29,406 30,293 29,147
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes
4
<PAGE>
GILEAD SCIENCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.............................................................................. $ (39,785) $ (15,569)
Adjustments used to reconcile net loss to net cash used in operating activities:
Depreciation and amortization....................................................... 2,068 2,277
Changes in assets and liabilities:
Other current assets.............................................................. 8,250 (56)
Other assets...................................................................... 96 (171)
Accounts payable.................................................................. (603) (909)
Accrued clinical and preclinical expenses......................................... (2,120) 2,643
Other accrued liabilities......................................................... 1,652 1,352
Deferred revenues................................................................. 17 2,777
----------- -----------
Total adjustments............................................................... 9,360 7,913
----------- -----------
Net cash used in operating activities........................................... (30,425) (7,656)
----------- -----------
Cash flows from investing activities:
Purchases of short-term investments................................................... (346,076) (333,197)
Sales of short-term investments....................................................... 285,540 163,491
Maturities of short-term investments.................................................. 98,952 47,464
Capital expenditures.................................................................. (1,389) (3,111)
----------- -----------
Net cash provided by (used in) investing activities............................. 37,027 (125,353)
----------- -----------
Cash flows from financing activities:
Payments of equipment financing obligations and long-term debt........................ (1,622) (2,526)
Proceeds from issuance of common stock................................................ 6,197 9,221
Proceeds from issuance of preferred stock............................................. -- 40,000
----------- -----------
Net cash provided by financing activities....................................... 4,575 46,695
----------- -----------
Net increase (decrease) in cash and cash equivalents.................................... 11,177 (86,314)
Cash and cash equivalents at beginning of period........................................ 31,990 131,984
----------- -----------
Cash and cash equivalents at end of period.............................................. $ 43,167 $ 45,670
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
5
<PAGE>
GILEAD SCIENCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The information at September 30, 1998, and for the three- and nine-month
periods ended September 30, 1998 and 1997, is unaudited but includes all
adjustments (consisting only of normal recurring adjustments) which, in the
opinion of management, are necessary to state fairly the financial information
set forth therein in accordance with generally accepted accounting principles.
Such interim results are not necessarily indicative of results to be expected
for the full fiscal year. These financial statements should be read in
conjunction with the audited financial statements for the fiscal year ended
December 31, 1997 included in the Company's annual report to security holders
furnished to the Securities and Exchange Commission pursuant to Rule 14a-3(b) in
connection with the Company's 1998 Annual Meeting of Stockholders.
NEW ACCOUNTING STANDARD
On January 1, 1998, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 130, Reporting Comprehensive Income, which establishes new
requirements for reporting and displaying comprehensive income and its
components. The adoption of SFAS No. 130 has no impact on the Company's net
income or stockholders' equity. This new accounting standard requires net
unrealized gains or losses on the Company's available-for-sale securities to be
reported as accumulated other comprehensive income on the balance sheet. Such
amounts were previously identified separately in stockholders' equity. Prior
year financial statements have been reclassified to conform to the requirements
of SFAS No. 130.
Following are the components of comprehensive income (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net loss.......................................................... $ (17,559) $ (10,331) $ (39,785) $ (15,569)
Net unrealized gains on available-for-sale securities............. 965 383 802 273
---------- ---------- ---------- ----------
Comprehensive income (loss)....................................... $ (16,594) $ (9,948) $ (38,983) $ (15,296)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Since its inception in June 1987, Gilead has devoted the substantial portion
of its resources to its research and development programs, with significant
expenses relating to commercialization beginning in 1996. With the exception of
the second quarter of 1997 and the third quarter of 1996, when the Company
recognized significant revenue related to collaborations, the Company has
incurred losses in every quarter since its inception. Gilead expects to incur
losses at least in 1998 and 1999, due primarily to its research and development
programs, including preclinical studies, clinical trials and manufacturing, as
well as marketing and sales efforts in support of VISTIDE-Registered Trademark-
(cidofovir injection) and other potential products.
Gilead is independently marketing VISTIDE in the United States for the
treatment of cytomegalovirus (CMV) retinitis in patients with AIDS. Pharmacia &
Upjohn (P&U) has the exclusive right to market VISTIDE outside of the United
States and has launched the product in several European countries since VISTIDE
was approved for marketing in Europe by the European Commission during the
second quarter of 1997.
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This report contains forward-looking statements relating to clinical and
regulatory developments, marketing and sales matters, future expense levels,
financial results and Year 2000 matters. These statements involve inherent risks
and uncertainties. The Company's actual results may differ significantly from
the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, the risks summarized
below and described in more detail in the Company's Annual Report on Form 10-K
for the year ended December 31, 1997. In particular, factors that could result
in a material difference include, but are not limited to, those relating to the
development, regulatory approval and marketing of pharmaceutical products and,
in the case of Year 2000 matters, the ability to identify and correct all
relevant computer code and the success of remedial efforts implemented by third-
party suppliers and business partners.
The successful development and commercialization of the Company's products
will require substantial and ongoing efforts at the forefront of the life
sciences industry. The Company is pursuing preclinical or clinical development
of a number of product candidates. Even if these product candidates appear
promising during various stages of development, they may not reach the market
for a number of reasons. Such reasons include the possibilities that the
potential products will be found ineffective or unduly toxic during preclinical
or clinical trials, fail to receive necessary regulatory approvals, be difficult
to manufacture on a large scale, be uneconomical to market or be precluded from
commercialization by either proprietary rights or competing products of others.
As a company in an industry undergoing rapid change, the Company faces
significant challenges and risks, including the risks inherent in its research
and development programs, uncertainties in obtaining and enforcing patents, the
lengthy and expensive regulatory approval process, intense competition from
pharmaceutical and biotechnology companies, increasing pressure on
pharmaceutical pricing from payors, patients and government agencies and
uncertainties associated with the market acceptance of and size of the market
for VISTIDE or any of the Company's products in development.
The Company expects that its financial results will continue to fluctuate
from quarter to quarter and that such fluctuations may be substantial. There can
be no assurance that the Company will successfully develop, commercialize,
manufacture and market additional products or achieve sustained profitability.
As of September 30, 1998, the Company's accumulated deficit was approximately
$202.3 million.
The risks facing Gilead are discussed in greater detail in the Company's
Annual Report on Form 10-K for the year ended December 31, 1997. Stockholders
and potential investors in the Company should
7
<PAGE>
carefully consider these risks in evaluating the Company and should be aware
that the realization of any of these risks could have a dramatic and negative
impact on the Company's stock price.
RESULTS OF OPERATIONS
REVENUES
The Company had total revenues of $3.0 million and $4.9 million for the
quarters ended September 30, 1998 and 1997, respectively. For the nine-month
periods ended September 30, 1998 and 1997, total revenues were $23.6 million and
$30.1 million, respectively. In both of these comparisons, the decline in total
revenues is primarily due to higher contract revenues in the 1997 periods and
lower net product sales in the 1998 periods.
For the quarters ended September 30, 1998 and 1997, total revenues include
aggregate net product sales and royalties of $1.8 million and $2.6 million,
respectively. In the nine-month periods, total revenues include aggregate net
product sales and royalties of $6.3 million in 1998 and $9.7 million in 1997.
These net product sales and royalties result primarily from sales of VISTIDE in
the United States and Europe. The decline in VISTIDE-related revenues reflects a
continuing decline in the incidence of CMV retinitis as a result of more
effective human immunodeficiency virus (HIV) therapies. In future periods,
VISTIDE product sales revenues and royalties are expected to continue to be
modest.
Also included in total revenues are contract revenues of $1.2 million and
$2.3 million for the quarters ended September 30, 1998 and 1997, respectively.
In the nine-month periods, total revenues include contract revenues of $17.3
million in 1998 and $20.4 million in 1997. Contract revenues for the nine-month
period ended September 30, 1997 include a $10.0 million milestone payment from
Pharmacia and Upjohn following the marketing authorization for VISTIDE in the
European Union.
Each of the 1998 and 1997 periods include revenue from F. Hoffmann-La Roche
Ltd. (Roche) associated with the development of GS 4104 for the treatment and
prevention of viral influenza. Contract revenues for the three- and nine-month
periods ended September 30, 1998 include $0.9 million and $15.5 million,
respectively, received from Roche as reimbursement of expenses related to the
development of GS 4104. The $15.5 million received from Roche during the nine
months ended September 30, 1998 includes $5.2 million attributable to research
and development expenses incurred in the fourth quarter of 1997, which were
subject to Roche's approval as of December 31, 1997. Such expenses were approved
for reimbursement in the first quarter of 1998. Contract revenues for the three-
and nine-month periods ended September 30, 1997 include $1.3 million and $7.9
million, respectively, received from Roche as reimbursement of expenses related
to the development of GS 4104.
In June 1998, the Company's collaborative research and development agreement
with Glaxo Wellcome Inc. related to the Company's code blocker program and the
funding for that program was terminated, resulting in reduced revenues in each
of the 1998 periods as compared to the 1997 periods.
OPERATING COSTS AND EXPENSES
The Company's cost of product sales relates to VISTIDE and was $0.1 million
and $0.2 million for the quarters ended September 30, 1998 and 1997,
respectively. Cost of product sales for the nine-month periods ended September
30, 1998 and 1997 was $0.5 million and $1.0 million, respectively. The Company's
declining cost of sales corresponds to the overall decrease in net product
sales.
Research and development (R&D) expenses for the third quarter of 1998 were
$16.7 million compared to $13.6 million for the same period in 1997, which
represents a 22.9% increase. For the nine-month periods ended September 30, 1998
and 1997, R&D expenses were $54.0 million and $39.1 million, respectively, or an
increase of 38.0%. Such increases in R&D expenses are primarily due to expenses
associated with the advancement of four therapeutic drug candidates into later
stages of clinical development. The Company expects its R&D expenses to continue
to increase significantly for the remainder of
8
<PAGE>
1998 and throughout 1999, reflecting anticipated increased expenses related to
clinical trials for several product candidates as well as related increases in
staffing and manufacturing.
Selling, general and administrative (SG&A) expenses were $7.9 million and
$6.2 million for the quarters ended September 30, 1998 and 1997, respectively,
representing an increase of 26.3%. For the nine-month periods ended September
30, 1998 and 1997, SG&A expenses were $23.1 million and $18.5 million,
respectively, or a 24.5% increase. The increases in SG&A expenses in the 1998
periods as compared to the corresponding 1997 periods relate to expenses
incurred to support an increasing level of R&D activities. The Company expects
its SG&A expenses will continue to increase significantly over 1997 expense
levels, primarily to support the increased level of R&D activities and, to a
lesser extent, to support the expansion of sales and marketing capacity in
anticipation of the potential launch of PREVEON-Registered Trademark- (adefovir
dipivoxil), an investigational reverse transcriptase inhibitor currently being
studied to treat HIV.
NET INTEREST INCOME
The Company had net interest income of $4.1 million and $4.7 million for the
quarters ended September 30, 1998 and 1997, respectively, representing a
decrease of 13.3%. This decline in net interest income reflects both a lower
return on the investment portfolio and less invested cash in the 1998 quarter as
compared to the 1997 quarter. Net interest income earned during the nine-month
periods ended September 30, 1998 and 1997 was $14.1 million and $12.9 million,
or an increase of 8.8%. This increase is primarily due to a higher return on the
investment portfolio during the 1998 period, offset in part by a declining
balance of invested cash.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents and short-term investments totaled $295.9 million
at September 30, 1998, compared to $322.3 million at December 31, 1997. The
decrease is primarily due to the net use of cash to fund operations, and the
uses of cash to purchase property and equipment and repay debt obligations. Such
uses of cash were offset in part by cash received from exercises of employee
stock options. During the last quarter of 1998, the Company expects to incur R&D
and SG&A expenses significantly in excess of amounts incurred in the last
quarter of 1997.
The Company believes that its existing capital resources, supplemented by
net product revenues and contract and royalty revenues, will be adequate to
satisfy its capital needs for the foreseeable future. The Company's future
capital requirements will depend on many factors, including the progress of the
Company's research and development, the scope and results of preclinical studies
and clinical trials, the cost, timing and outcomes of regulatory reviews, the
rate of technological advances, determinations as to the commercial potential of
the Company's products under development, the commercial performance of VISTIDE
and any of the Company's products in development that receive marketing
approval, administrative and legal expenses, the status of competitive products,
the establishment of manufacturing capacity or third-party manufacturing
arrangements, the expansion of sales and marketing capabilities, possible
geographic expansion and the establishment of additional collaborative
relationships with other companies.
The Company may in the future require additional funding, which could be in
the form of proceeds from equity or debt financings or additional collaborative
agreements with corporate partners. If such funding is required, there can be no
assurance that it will be available on favorable terms, if at all.
IMPACT OF YEAR 2000
The Company is implementing a Year 2000 project to address the issue of
computer software and hardware correctly processing dates through and beyond the
Year 2000. The goal of this project is to ensure that all computer software and
hardware that the Company uses or relies upon is retired, replaced or made Year
2000 compliant before December 31, 1999.
9
<PAGE>
There are three primary aspects to the Company's Year 2000 project:
computers and other equipment, information systems software and third-party
suppliers and business partners. Gilead is addressing each of these areas on a
phased basis, as follows: 1) educating the internal user community at Gilead; 2)
conducting an inventory of all software and hardware; 3) evaluating all software
and hardware for Year 2000 compliance; 4) implementing modifications, retirement
or replacement of software or hardware, prioritized based on an analysis of
importance to Gilead's business; 5) testing and validating all modified or
replaced software and hardware; and 6) designing and implementing contingency
and business continuation plans for critical systems.
To date, Gilead has completed the education and inventory phases of the
project, and estimates that 75% of software and hardware has completed the
evaluation phase. Implementation of modifications or replacement and testing and
validation are on schedule, and the Company anticipates that all of these
activities will be complete by the second quarter of 1999.
The Company has prioritized the implementation phase to first address
software or hardware that affects product manufacture, quality control and
safety, employee safety, revenues or cash reserves. Two systems that have been
identified as critical to Gilead's operations are software programs from JD
Edwards, Inc. ("JDE") and Beckman-Coulter, Inc. ("Beckman"). The JDE system is
an enterprise-wide program that tracks financial information, processes sales
orders and monitors purchasing and manufacturing activities. The Beckman system
monitors and records laboratory data. The Company is presently upgrading both
systems to Year 2000 compliant versions. The JDE upgrade is approximately 80%
complete and the Company expects this upgraded system to be operational by the
end of 1998. The Beckman system upgrades are approximately 50% complete and are
scheduled to be finished during the second quarter of 1999.
To date, the Company has initiated evaluations of more than 50% of its
critical third-party suppliers and business partners. The Company anticipates
completing these evaluations by the second quarter of 1999, on a prioritized
basis. Responses to Gilead's inquiries regarding Year 2000 compliance in many
cases have been general and nonbinding. These responses largely reflect the
status of ongoing Year 2000 compliance efforts by these third parties; their
efforts are in most cases not complete. Among the most critical third parties
the Company relies on are the financial institutions that manage Gilead's cash
and investments of approximately $300 million, the Company's stock transfer
agent, contract manufacturers, contract research and laboratory organizations
and the U.S. Food and Drug Administration. The Company intends to continue
monitoring and evaluating these third parties to the extent practical through
the end of 1999.
Gilead anticipates that the total cost of its Year 2000 compliance efforts
will not be material to its financial condition or results of operations. The
current estimate for external costs of total compliance efforts is approximately
$2 million, of which $0.5 million has been incurred to date. Of the amount
incurred to date, $0.3 million has been expensed and the remainder has been
capitalized. The $1.5 million of remaining costs includes $1.0 million of
capitalizable costs, primarily computer hardware and software, and $0.5 million
of costs to be charged to expense, primarily consulting fees. These external
costs are included in Gilead's operating budgets for 1998 and 1999. However,
this estimate does not include any costs to Gilead that may be associated with
the failure of any third-party supplier or business partner to achieve Year 2000
compliance.
The Company is also developing a series of contingency plans for certain of
its critical applications. These plans involve, among other actions, manual
solutions, increased inventories and modified staffing strategies. These
contingency plans are expected to be finalized and ready for implementation
before the end of 1999.
The Company's Year 2000 project is designed to significantly reduce
uncertainty and risk arising from the Year 2000 problem. The Company believes
that the implementation actions described above reduce the potential for
disruption of operations or significant financial impact. Due to the uncertainty
inherent in
10
<PAGE>
the Year 2000 problem, however, there can be no assurance that Year 2000
failures will not have a material impact on the Company's operations, financial
results or financial condition. In particular, the Company cannot predict with
any certainty whether its critical third-party suppliers and business partners
will achieve Year 2000 compliance, or whether the failure of any such third
party to do so would have a material effect on the Company's business.
11
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. 27--Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended September
30, 1998.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
GILEAD SCIENCES, INC.
--------------------------------------------
(Registrant)
Date: November 10, 1998 /S/ JOHN C. MARTIN
--------------------------------------------
John C. Martin
President and Chief Executive Officer
Date: November 10, 1998 /S/ MARK L. PERRY
--------------------------------------------
Mark L. Perry
Senior Vice President, Chief Financial
Officer and General Counsel
(Principal Financial and Accounting Officer)
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 43,167
<SECURITIES> 252,694
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 305,571<F1>
<PP&E> 9,731<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 316,704
<CURRENT-LIABILITIES> 31,298
<BONDS> 747
0
1
<COMMON> 31
<OTHER-SE> 284,627
<TOTAL-LIABILITY-AND-EQUITY> 316,704
<SALES> 4,837
<TOTAL-REVENUES> 23,634
<CGS> 464
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 77,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (39,785)
<INCOME-TAX> 0
<INCOME-CONTINUING> (39,785)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,785)
<EPS-PRIMARY> (1.31)
<EPS-DILUTED> (1.31)
<FN>
<F1>CURRENT ASSETS INCLUDES RECEIVABLES, ALLOWANCES, INVENTORY AND OTHER CURRENT
ASSETS
<F2>PP&E IS NET OF ACCUMULATED DEPRECIATION
</FN>
</TABLE>
