GILD Gilead Sciences 10-Q 2026-09-30 section summaries

Gilead Sciences (GILD) — Q3 and nine months ended September 30, 2026

Dollars in millions, except per-share amounts.

Results

Q3 revenue grew 6.8%, while nine-month revenue grew 7.2%. The nine-month reversal to operating and net losses primarily reflects $11,307 of acquired in-process R&D (IPR&D) expense and $1,750 of IPR&D impairment charges, compared with $485 and $190, respectively, in 9M 2025. Q3 net income declined despite higher operating income; other expense was $130 versus $569 of other income in Q3 2025. Q3 effective tax rates were 20.7% versus 16.2%; the 9M 2026 effective rate was (31.1)%, primarily because acquired IPR&D expense from the Arcellx, Tubulis and Ouro acquisitions was nondeductible.

Product revenue

Growth in HIV and liver disease, including Q3 Biktarvy sales of $4,059 (from $3,686), Descovy of $1,046 (from $701), and Yeztugo of $305 (from $39), was partly offset by lower Veklury and cell-therapy sales. Livdelzi sales were $203 versus $105. Royalty, contract and other revenue was much lower partly because the prior-year period included recognition of $400 of previously constrained intellectual-property revenue; the comparable 9M 2026 recognition was $156. Gilead reports one operating segment, assessed company-wide by its CEO/CODM.

Balance sheet and cash flow

Tangible equity—equity less goodwill and other intangible assets—was negative $8,783. Hepcludex’s $550 IPR&D asset was reclassified to finite-lived assets after FDA accelerated approval for chronic hepatitis delta in May 2026. In contrast, Gilead impaired the remaining $1,750 NSCLC IPR&D asset for sacituzumab govitecan after discontinuing the Phase 3 EVOKE-03 study.

Operating cash flow rose substantially, with the cash-flow reconciliation reflecting large noncash acquisition-related charges. Acquisition cash outflow, net of cash acquired, was $11,337. Gilead issued $3,000 principal of senior notes, repaid $2,750 principal of notes, paid $3,108 of dividends and repurchased $1,144 of shares; cash declined by $1,126 during the period.

Acquisitions, investments and financing

The 2026 acquisitions expanded oncology and immunotherapy programs and were treated as asset acquisitions. Gilead recorded acquired IPR&D expense of $1,900 for Ouro Medicines, $3,100 for Tubulis and $7,000 for Arcellx. Ouro cost approximately $1,900, including $1,600 cash net of cash acquired; its gamgertamig program includes potential milestones of up to $500. Tubulis cost approximately $3,200 cash net of cash acquired, with up to approximately $1,900 in future milestones. Arcellx cost approximately $6,400 cash net of cash acquired; the transaction settled Gilead’s pre-existing $773 investment. A $5-per-share contingent value right, approximately $300 in total, is payable if anito-cel reaches specified cumulative sales. Lakefront contributed $860 toward Ouro-related upfront consideration, recorded as a reduction of acquired IPR&D expense; Gilead retains commercialization rights and will pay 20%–23% royalties on gamgertamig sales. In October 2026, Gilead agreed to acquire PepStar’s oral IL-23R program for $1,275 upfront, with closing expected in Q4.

Total debt, net, included $23,815 of long-term debt and $2,416 of current debt. In addition to the senior-note issuance, Gilead borrowed $1,100 under a variable-rate term loan and cancelled the remaining $3,600 of authorized undrawn commitments. No amounts were drawn on its $2,500 revolving facility, and Gilead reported covenant compliance. All available-for-sale debt securities were sold during 2026; year-end 2025 fair value had been $3,044. Equity securities and equity-method investments totaled $6,714, down from $8,909. Fair-value movements contributed to other-income volatility; net unrealized equity-investment losses were $167 in Q3 2026 versus gains of $494, and losses of $30 for 9M versus gains of $201.

Other exposures and risks

Net receivables were $5,007, including $42 of credit-loss allowances; approximately 65% related to three wholesalers and affiliates. Inventory was $4,424, including $654 of pre-commercial Trodelvy inventory whose manufacturing process had not yet received FDA approval. In 9M, Gilead recorded $63 of SG&A expense for donated equity securities to the Gilead Foundation, where certain officers serve as directors.

Generic manufacturers have challenged patents for Descovy, Odefsey and Vemlidy. HIV antitrust litigation remains a potential material exposure; Gilead won the Phase I jury trial, but plaintiffs appealed, and Aetna’s remaining Truvada/Atripla claims were scheduled for trial in January 2027. In product-liability cases involving older HIV drugs, California state cases were dismissed with prejudice in October 2026 after a favorable state supreme court ruling; Gilead agreed to pay approximately $39 to about 2,470 federal plaintiffs, with a bellwether trial set for September 2027. Separately, Gilead reached an October 2026 settlement in a Texas qui tam case without admitting liability or wrongdoing.

Gilead Sciences — Q3 and nine months ended September 30, 2026

Consolidated results

Q3 revenue grew 7%, led by HIV products and Trodelvy. Net income declined 20%, with lower equity-security results, higher operating expenses and taxes partly offset by revenue growth and lower acquired IPR&D expense. For the first nine months, acquisition-related IPR&D charges and the Trodelvy impairment drove a shift to a net loss.

Revenue by product category and selected products

HIV sales rose 18% in Q3, reflecting higher demand and average realized prices, favorable inventory dynamics, and growth in Biktarvy, Descovy and Yeztugo. Liver-disease revenue increased, led by Livdelzi, partly offset by lower HCV sales. Trodelvy grew on higher demand; total oncology revenue rose 9%. By contrast, Veklury sales fell with fewer COVID-19-related hospitalizations, while cell therapy faced continuing competitive pressure. Q3 royalty, contract and other revenue was sharply lower because Q3 2025 included $400 million of previously constrained intellectual-property-sale revenue; 9M 2026 included a further $156 million recognized in Q2.

Costs, impairment and other income-statement items

Product gross margin improved to 81.0% from 78.6% in Q3 and to 79.9% from 78.1% for 9M, primarily because a royalty-related obligation expired. SG&A growth reflected increased HIV promotional spending, acquisition integration, legal and employee-related costs, and donations of equity securities to the Gilead Foundation. The 9M increase included $332 million of acquisition-related stock-based compensation in G&A; R&D personnel, infrastructure and support costs also included $229 million of acquisition-related stock-based compensation.

Nine-month acquired IPR&D expense included $7.0 billion for Arcellx, $3.1 billion for Tubulis and $1.0 billion net for Ouro Medicines, as well as $80 million for a collaboration. The acquisitions added anito-cel and antibody-drug conjugate assets, and the autoimmune-disease T-cell engager gamgertamig; Lakefront shares Ouro upfront and contingent payments equally, subject to adjustments. Separately, Gilead recorded a $1.750 billion pre-tax impairment of the Trodelvy NSCLC IPR&D asset after discontinuing the Phase 3 EVOKE-03 study with Keytruda and concluding the asset would generate no future cash flows. The comparable 9M 2025 period included a $190 million partial impairment of the bulevirtide IPR&D asset.

Cash flow and liquidity

Higher operating cash flow reflected lower tax payments, increased collections from product sales, the Lakefront collaboration payment and lower inventory spending, partly offset by higher operating expenses. Investing outflows primarily reflected cash paid for the three acquisitions, partly offset by marketable-securities liquidations. Financing outflows reflected debt-offering proceeds and lower repurchases, partly offset by higher debt repayments and a contingent-consideration payment. Cash and cash equivalents were $6.4 billion at September 30, 2026. Management expects available liquidity and capital resources to meet cash needs for the next 12 months and the foreseeable future.

Other notable developments and risks

Q3 other expense, net, was $130 million, compared with $569 million of other income in Q3 2025, primarily reflecting a shift from equity-security gains to losses and lower interest income. Equity securities produced a $164 million Q3 loss versus a $483 million gain; for 9M, they produced gains of $321 million versus $198 million. The 9M effective tax rate was (31.1)%, versus 18.0%, primarily because acquired IPR&D from Arcellx, Tubulis and Ouro was non-deductible. In October, the board declared a quarterly dividend of $0.82 per share, payable December 30, 2026.

FDA approvals and authorizations included Bixlenvo for virologically suppressed adults with HIV, accelerated approval of Hepcludex for chronic HDV, and Tecartus full approval for adult relapsed/refractory mantle cell lymphoma. Trodelvy received U.S. first-line mTNBC approval and European authorizations in specified settings. The FDA accepted Yeztugo’s potential once-weekly oral formulation NDA, with a February 2, 2027 target action date. A future pricing headwind is the CMS-set Medicare Maximum Fair Price for Biktarvy, effective January 1, 2028. Foreign-currency exposure was 22% of Q3 product sales versus 27% a year earlier; hedged FX had an $8 million unfavorable Q3 impact, while the 9M net FX impact was $127 million favorable.

Market risk. Gilead reported no material changes in its market-risk disclosures since its 2025 Form 10-K, except for matters discussed in the quarterly report’s Notes 3 (Fair Value Measurements), 4 (Investments), 5 (Derivatives), and 9 (Debt and Credit Facilities).

Disclosure Controls and Internal Controls

Gilead’s CEO and CFO concluded that its disclosure controls and procedures were effective as of September 30, 2026, providing reasonable assurance that information required to be disclosed is recorded, processed, summarized, and reported on a timely basis. The company emphasizes that controls provide reasonable, not absolute, assurance.

During Q3 2026, Gilead made changes to internal controls to address implementation of an enterprise resource planning (ERP) system and related systems. Deployment is expected to occur in phases over the next few years, and management will continue evaluating control changes as implementation progresses. The filing identifies no specific control deficiency.

Item 1A — Risk Factors

Products, demand and commercialization

Gilead depends substantially on HIV treatment and prevention products. Generic competition, market-share losses, or failure to develop and launch new products or indications could erode sales and force reductions in investment, including R&D. Development and launches require significant spending and may fail late, leaving excess inventory or purchase commitments. Clinical trials can be delayed, miss endpoints, reveal safety issues, or fail to support approval; accelerated approvals may also be withdrawn if confirmatory studies fail. In June 2026, Gilead and Merck discontinued Phase 3 EVOKE-03, testing sacituzumab govitecan-hziy with pembrolizumab for certain first-line metastatic non-small cell lung cancer patients, and Gilead recorded an impairment charge in Q2 2026.

CAR T therapies Yescarta and Tecartus depend on reliable patient-specific cell engineering, conditioning medicines, side-effect treatments, and a complex network of collection centers, vendors, hospitals, and shipping. Disruptions or manufacturing quality, capacity, and reliability problems at facilities in California, Maryland, and the Netherlands could constrain treatment or cause product loss. Adoption may remain limited, including if hospital reimbursement is inadequate; Medicare’s higher severity-adjusted DRG 018 payment may still not cover some hospitals’ costs. The FDA required a class-wide boxed warning for T-cell malignancies. REMS requirements for Yescarta and Tecartus addressing cytokine release syndrome and neurologic toxicity ended in June 2025.

Demand and reported sales can diverge from patient use. Veklury sales depend on COVID-19 trends and competing treatments. Government and other non-retail buyers, including ADAPs, may purchase according to budgets and grant cycles, and formulary restrictions can limit access. European cost controls have prompted some purchasers to reduce inventories. Approximately 90% of U.S. gross product sales historically went through three wholesalers—Cardinal Health, Cencora, and McKesson, including specialty affiliates. Wholesaler and pharmacy purchasing patterns can create quarterly volatility; strong second-half wholesaler buying has typically been followed by first-quarter inventory drawdowns.

Pricing, reimbursement and policy

Private and government payer controls, rebates, Medicaid and 340B discounts, and increasingly restrictive coverage can pressure prices and profitability. The Inflation Reduction Act (IRA) provides for Medicare drug-price negotiation for 10 drugs in 2026, 15 in 2027 and 2028, and 20 in 2029 and thereafter; it also includes inflation rebates and higher manufacturer discounts under redesigned Part D. Biktarvy was selected for a Maximum Fair Price effective January 2028. CMS completed price-setting in October 2026, and Gilead says the price is substantially below its current Medicare price. Gilead expects IRA provisions to increase payment and rebate obligations and affect prices and profitability, potentially extending to other payer segments. Implementation remains uncertain, although legal challenges to negotiation have so far been unsuccessful; the Supreme Court declined review in May 2026.

The July 2025 One Big Beautiful Bill Act changes Medicaid eligibility and enrollment, largely beginning in 2027, and eliminates enhanced ACA exchange subsidies; Gilead says these changes have reduced and may further reduce coverage and patient access. A December 2025 agreement gives Gilead a three-year exemption for branded products and associated ingredients from Section 232 tariffs, conditional on further U.S. manufacturing investment. It also covers MFN Medicaid prices for select existing products through the GENEROUS Model, MFN pricing for future U.S. launches, a new direct-to-patient Epclusa price, and return of part of increased international revenues to the U.S. if foreign drug prices rise. CMS’s GLOBE Medicare Part B model is scheduled to begin in April 2027, but CMS says it will waive GLOBE requirements during Gilead’s GENEROUS participation. Proposed Part D GUARD rules, evolving MFN initiatives, and other legislation add uncertainty. A separate proclamation imposed 100% tariffs on patented pharmaceuticals and related ingredients beginning to take effect in July 2026; broader or future trade measures could raise costs or disrupt supply.

Medicaid and 340B exposure is complicated by delayed claims: U.S. payer claims typically arrive one to three quarters in arrears, so rebate estimates may differ significantly from actual payments. Gilead says 340B growth has increased deeply discounted sales and cites alleged diversion and duplicate-discount violations that can be difficult to identify. Its March 2022 contract-pharmacy integrity initiative applies to branded HCV products, not Asegua products, and requires claims data for certain arrangements. Litigation and state laws create uncertainty over the initiative; adverse outcomes could constrain it. Recent court decisions also raise False Claims Act qui tam risks, including potential damages, penalties, legal costs, and reputational harm. EU price reductions, parallel trade, potential Canadian imports, and lower-price-market exports may also affect pricing and sales elsewhere, including through U.S. MFN policies.

Regulation, supply and intellectual property

Gilead relies on external manufacturers, testing laboratories, suppliers, CROs, and partners; some materials or products have single-source dependencies. Replacing suppliers can take time or require regulatory qualification. Quality failures, inspection deficiencies, recalls, or interruptions could delay trials, approvals, or supply, cause lost revenue and inventory write-offs, or require costly remediation. Proposed U.S. measures, including the BIOSECURE Act, could restrict relationships with certain biotechnology entities, including in China, and disrupt trials or manufacturing. Changing global regulation, agency resource constraints, and post-approval safety or manufacturing findings could delay reviews, require additional studies or labeling restrictions, or lead to narrowed indications or withdrawal.

Patents, licenses, trade secrets, and successful defense against generic challenges are central to Gilead’s business. Patent applications or extensions may not provide expected protection; litigation is costly and uncertain, and generic challenges or settlement terms may permit earlier entry and price erosion. Third-party infringement claims could require damages, licenses, or cessation of commercialization. Proposed EU pharmaceutical legislation could reduce market-protection exclusivity for some products.

Litigation, transactions and other risks

Litigation and government investigations consume resources and management attention, have reduced and are expected to continue reducing earnings, and may result in damages, penalties, injunctions, or significant royalty payments. Product-liability insurance is limited and may not cover claims in full. Complex compliance obligations—including healthcare, pricing, privacy, data security, marketing, and anti-bribery rules—can lead to substantial sanctions, government-program exclusion, reimbursement consequences, or reputational harm. Counterfeit and unauthorized products threaten patients and revenue; Gilead seized thousands of bottles bearing counterfeit supply-chain documentation after unauthorized distributors sold counterfeit medicine to U.S. pharmacies.

Gilead plans to invest $32 billion in the U.S. through 2030 to expand manufacturing and accelerate R&D. Construction, permitting, labor, cost, validation, or inspection delays could defer production, increase expenses, create underutilized assets, or impair returns. Acquisitions, collaborations, licenses, and investments may not deliver expected benefits and can produce impairment charges. Strategic transactions have used substantial cash and added debt, potentially weakening credit ratings, borrowing flexibility, and capacity for investment, buybacks, and dividends. Partner underperformance or disputes can also delay development, launches, and revenue.

Cyberattacks, including ransomware and AI-enabled threats, may expose data or disrupt operations; outages affecting Kite Konnect could compromise cell-therapy chain of identity and custody. Gilead also faces talent-retention, tax, inflation, interest-rate, foreign-exchange, geopolitical, and climate risks. It is a net receiver of foreign currencies, primarily euros, and generally benefits from a weaker U.S. dollar. Natural disasters could disrupt critical sites and require significant recovery spending. Evolving sustainability and patient-access expectations, and failure to meet announced goals, could harm reputation, recruitment, and investor or partner appeal.

Rule 10b5-1 Trading Plans

Gilead disclosed three Rule 10b5-1 trading plans adopted in August 2026. These plans authorize potential future sales; they do not report completed transactions.

• CFO Andrew Dickinson: Adopted August 7, 2026; permits sales of up to 272,582 shares through May 31, 2028, subject to plan conditions.
• EVP and General Counsel Keeley Cain Wettan: Adopted August 7, 2026; covers net shares issued after tax withholding upon potential vesting and settlement of 14,185 restricted stock units and up to 1,860 performance stock units. The plan runs through September 30, 2027.
• Director Kelly Kramer: Adopted August 13, 2026; permits sales of up to 19,872 shares through August 10, 2027, subject to plan conditions.