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Item 8. Financial Statements and Supplementary Data

2022-02-23 compared with 2021-02-25 · 585 added, 623 removed, 1210 unchanged (50% of the section changed)

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Years ended December 31, 2021, 2020 and 2019

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Audited Consolidated Financial Statements:

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Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Stockholders’ Equity

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Description of the Matter As more fully described in Note 1, the Company estimates reductions to its revenues for amounts payable to payers and healthcare providers in the United States under various government and commercial rebate programs in the period that the related sales occur.

Rebates may vary by product, payer and individual payer plans, which may not be known at the point of sale.

Rebates may vary by product, payer and individual payer plans, some of which may not be known at the point of sale.

Estimated reductions to revenue are based on product sales, historical and expected payer mix, discount rates, and various other estimated and actual data, adjusted for current period expectations.

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We also tested the completeness and accuracy of data utilized in the controls, and the accuracy of calculations supporting management’s estimates.

To test management’s estimation methodology for determining the payer mix, our audit procedures included, among others, evaluating evidence contrary to the estimated amounts, performing a sensitivity analysis on the rates used in the estimates and performing a comparison of actual payments related to amounts accrued during the current and prior years.

Valuation of in-process research and development intangible assets

Description of the Matter At December 31, 2020, the Company’s in-process research and development (“IPR&D”) intangible assets from acquisitions prior to 2020 were $1.1 billion.

To test management’s estimation methodology for determining the payer mix, our audit procedures included, among others, analytically evaluating management’s estimates, evaluating evidence contrary to the estimated amounts, performing a sensitivity analysis on the rates used in the estimates and performing a comparison of actual payments related to amounts accrued during the current and prior years.

Valuation of in-process research and development intangible assets acquired from Immunomedics, Inc.

Description of the Matter At December 31, 2021, the Company’s in-process research and development (IPR&D) intangible assets acquired in connection with the 2020 acquisition of Immunomedics, Inc.

were $14.7 billion.

As discussed in Note 1, intangible assets with indefinite useful lives related to purchased IPR&D projects are measured at their respective fair values as of the acquisition date and are considered indefinite-lived until the completion or abandonment of the associated R&D efforts.

The Company tests indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if they become aware of any events or changes that would indicate the fair values of the assets are below their carrying amounts.

Auditing the impairment test was complex due to the significant judgment required in estimating the fair values of the IPR&D intangible assets.

In particular, the fair value estimates required the use of valuation methodologies that were sensitive to significant assumptions (e.g., discount rate, projected research and development costs, probability of technical success, addressable patient population, projected market share and product profitability), which were affected by expected future market or economic conditions.

How We Addressed the Matter in Our Audit We evaluated and tested the design and operating effectiveness of the Company’s internal controls over the determination of the estimated fair value of the IPR&D intangible assets.

Auditing the impairment test of the IPR&D intangible assets acquired from Immunomedics was complex due to the significant judgment required in estimating their fair values.

In particular, the fair value estimates required the use of valuation methodologies that were sensitive to significant assumptions (e.g., discount rate, probability of technical and regulatory success, addressable patient population, treatment duration and projected market share), which were affected by expected future market or economic conditions.

For example, we tested controls over management's review of the valuation methodologies and the significant assumptions used to develop the fair value estimates.

We also tested management's controls to validate that the data used in the fair value estimates were complete and accurate.

To test the estimated fair value of the Company’s IPR&D intangible assets, our audit procedures, among others, included evaluating the Company’s use of appropriate valuation methodologies with the assistance of a valuation specialist, performing sensitivity analyses to determine which assumptions had the greatest impact on the overall determination of value, and testing the completeness and accuracy of the underlying data.

To test the estimated fair value of the Company's IPR&D intangible assets acquired from Immunomedics, our audit procedures, among others, included evaluating the Company's use of appropriate valuation methodologies with assistance from a valuation specialist, evaluating sensitivity analyses to determine which assumptions had the greatest impact on the overall determination of value, and testing the completeness and accuracy of the underlying data.

Our audit procedures over the most significant assumptions included comparing the assumptions to current industry, market and economic trends, to historical results of the Company's business and other guideline companies within the same industry and to other relevant factors.

For example, to evaluate the probability of technical success, we considered the phase of development of the IPR&D projects, and the Company's history of obtaining regulatory approval.

Valuation of intangible assets acquired in a business combination

Description of the Matter As described in Note 6, on October 23, 2020, the Company completed its acquisition of Immunomedics, Inc.

(“Immunomedics”) for $20.6 billion in cash consideration.

The transaction was accounted for as a business combination using the acquisition method of accounting.

The acquisition date fair values of acquired finite-lived intangible assets, comprised of commercial product rights, and indefinite-lived intangible assets, comprised of IPR&D intangible assets, was estimated to be $4.6 billion and $15.8 billion, respectively, using a probability-weighted income approach that discounts expected future cash flows to present value.

Auditing the acquisition date fair values of the intangible assets acquired from Immunomedics was complex due to the significant judgment required in estimating the fair values of each asset.

In particular, the fair value estimates required the use of valuation methodologies that were sensitive to significant assumptions (e.g., discount rate, projected research and development costs, probability of technical success, addressable patient population, treatment duration, projected market share and product profitability), which were affected by expected future market or economic conditions.

For example, we tested controls over management's review of the valuation methodologies and the significant assumptions used to develop the fair value estimates of the intangible assets.

We also tested management's controls to validate that the data used in the fair value estimates were complete and accurate.

To test the estimated fair value of the Company's intangible assets acquired from Immunomedics, our audit procedures, among others, included evaluating the Company's use of appropriate valuation methodologies with the assistance of a valuation specialist, performing sensitivity analyses to determine which assumptions had the greatest impact on the overall determination of value and testing the completeness and accuracy of the underlying data used to develop the assumptions.

Our audit procedures over the significant assumptions included comparing the most significant assumptions to current industry, market and economic trends, to historical results of the Company's business and other guideline companies within the same industry and to other relevant factors.

For example, we evaluated the probability of technical success by considering the phase of development of the clinical projects, and the Company's history of obtaining regulatory approval.

For example, we evaluated the probability of technical and regulatory success by considering the phase of development of the clinical projects, and the Company's history of obtaining regulatory approval.

In addition, we evaluated the expected addressable patient populations by comparing the Company’s estimates to external industry forecasts.

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$ 5,338 $ 5,997

Short-term marketable securities

Short-term marketable debt securities 1,182 1,411

Accounts receivable, net 4,493 4,892

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Property, plant and equipment, net 5,121 4,967

Long-term marketable securities 502 1,488

Long-term marketable debt securities 1,309 502

Intangible assets, net 33,455 33,126

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Accrued government and other rebates

Other accrued liabilities

Accrued and other current liabilities 6,145 4,336

Current portion of long-term debt and other obligations, net

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Long-term income taxes payable 4,767 5,016

Deferred tax liability 4,356 3,914

Other long-term obligations 976 1,214

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5,600 authorized;

1,254 and 1,266 shares issued and outstanding, respectively

1,254 shares issued and outstanding as of December 31, 2021 and 2020

Additional paid-in capital

Accumulated other comprehensive income

Accumulated other comprehensive income (loss) 83 ( 60 )

Retained earnings

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Net income 6,201 89 5,364

Net (loss) income attributable to noncontrolling interest ( 34 ) ( 22 ) 5

Net loss attributable to noncontrolling interest 24 34 22

Net income attributable to Gilead $ 6,225 $ 123 $ 5,386

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GILEAD SCIENCES, INC.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,

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Available-for-sale debt securities:

Net unrealized gain, net of tax 43 54 43

Net unrealized gain (loss), net of tax ( 6 ) 43 54

Reclassifications to net income, net of tax — ( 42 ) ( 1 )

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Net unrealized gain (loss), net of tax 129 ( 103 ) 72

Reclassification to net income, net of tax ( 41 ) ( 126 ) 87

Reclassifications to net income, net of tax 58 ( 41 ) ( 126 )

Net change 187 ( 144 ) ( 54 )

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Comprehensive income (loss) 6,344 ( 56 ) 5,369

Comprehensive income (loss) attributable to noncontrolling interest ( 34 ) ( 22 ) 5

Comprehensive loss attributable to noncontrolling interest 24 34 22

Comprehensive income (loss) attributable to Gilead $ 6,368 $ ( 22 ) $ 5,391

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Consolidated Statements of Stockholders’ Equity

(in millions, except per share amounts)

(in millions, except per share amounts) Gilead Stockholders’ Equity Noncontrolling

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Shares Amount

Balance at December 31, 2017 1,308 $ 1 $ 1,264 $ 165 $ 19,012 $ 59 $ 20,501

Balance as of December 31, 2018 1,282 $ 1 $ 2,282 $ 80 $ 19,024 $ 147 $ 21,534

Cumulative effect from the adoption of new accounting standards — — — — 8 — 8

Change in noncontrolling interest — — — — — 83 83

Net income — — — — 5,455 5 5,460

Net income (loss) — — — — 5,386 ( 22 ) 5,364

Other comprehensive income, net of tax — — — 5 — — 5

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— — — — ( 3,239 ) — ( 3,239 )

Balance at December 31, 2018 1,282 1 2,282 80 19,024 147 21,534

Cumulative effect from the adoption of new accounting standards — — — — 8 — 8

Balance as of December 31, 2019 1,266 1 3,051 85 19,388 125 22,650

Cumulative effect from the adoption of new accounting standard — — — — ( 7 ) — ( 7 )

Change in noncontrolling interest — — — — — ( 72 ) ( 72 )

Net income (loss) — — — — 123 ( 34 ) 89

Other comprehensive income, net of tax — — — 5 — — 5

Other comprehensive income (loss), net of tax — — 1 ( 145 ) ( 1 ) — ( 145 )

Issuances under employee stock purchase plan 2 — 100 — — — 100

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— — — — ( 3,464 ) — ( 3,464 )

Balance at December 31, 2019 1,266 1 3,051 85 19,388 125 22,650

Cumulative effect from the adoption of new accounting standard (Note 1) — — — — ( 7 ) — ( 7 )

Change in noncontrolling interest (Note 11) — — — — — ( 72 ) ( 72 )

Balance as of December 31, 2020 1,254 1 3,880 ( 60 ) 14,381 19 18,221

Net income (loss) — — — — 6,225 ( 24 ) 6,201

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— — — — ( 3,618 ) — ( 3,618 )

Balance at December 31, 2020 1,254 $ 1 $ 3,880 $ ( 60 ) $ 14,381 $ 19 $ 18,221

Balance as of December 31, 2021 1,254 $ 1 $ 4,661 $ 83 $ 16,324 $ ( 5 ) $ 21,064

See accompanying notes.

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Deferred income taxes ( 116 ) ( 214 ) ( 2,098 )

Net (gains) losses from equity securities 1,662 ( 1,241 ) ( 115 )

Net (gain) loss from equity securities 610 1,662 ( 1,241 )

Acquired in-process research and development expenses 177 5,856 4,251

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Other ( 163 ) ( 171 ) ( 434 )

Net cash (used in) provided by investing activities ( 14,615 ) ( 7,817 ) 14,355

Net cash used in by investing activities ( 3,131 ) ( 14,615 ) ( 7,817 )

Financing Activities:

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Other ( 145 ) ( 138 ) ( 122 )

Net cash provided by (used in) financing activities 770 ( 7,634 ) ( 12,318 )

Net cash (used in) provided by financing activities ( 8,877 ) 770 ( 7,634 )

Effect of exchange rate changes on cash and cash equivalents ( 35 ) 43 ( 2 )

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Gilead Sciences, Inc.

(“Gilead”, “we”, “our” or “us”), incorporated in Delaware on June 22, 1987, is a research-based biopharmaceutical company that discovers, develops and commercializes innovative medicines in areas of unmet medical need.

With each new discovery and investigational drug candidate, we strive to transform and simplify care for people with life-threatening illnesses around the world.

We have operations in more than 35 countries worldwide, with headquarters in Foster City, California.

Gilead’s primary areas of focus include HIV, viral hepatitis and cancer.

We seek to add to our existing portfolio of products through our internal discovery and clinical development programs, product acquisition, in-licensing and strategic collaborations.

Our portfolio of marketed products includes AmBisome ® , Atripla ® , Biktarvy ® , Cayston ® , Complera ® , Descovy ® , Descovy for PrEP ® , Emtriva ® , Epclusa ® , Eviplera ® , Genvoya ® , Harvoni ® , Hepsera ® , Jyseleca ® , Letairis ® , Odefsey ® , Ranexa ® , Sovaldi ® , Stribild ® , Tecartus TM , Trodelvy ® , Truvada ® , Truvada for PrEP ® , Tybost ® , Veklury ® , Vemlidy ® , Viread ® , Vosevi ® , Yescarta ® and Zydelig ® .

The approval status of Jyseleca varies worldwide, and Jyseleca is not approved in the United States.

(“Gilead,” “we,” “our” or “us”) is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people.

We are committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis and cancer.

We operate in more than 35 countries worldwide, with headquarters in Foster City, California.

Our portfolio of marketed products includes AmBisome ® , Atripla ® , Biktarvy ® , Cayston ® , Complera ® , Descovy ® , Descovy for PrEP ® , Emtriva ® , Epclusa ® , Eviplera ® , Genvoya ® , Harvoni ® , Hepcludex ® (bulevirtide), Hepsera ® , Jyseleca ® (filgotinib), Letairis ® , Odefsey ® , Ranexa ® , Sovaldi ® , Stribild ® , Tecartus ® , Trodelvy ® , Truvada ® , Truvada for PrEP ® , Tybost ® , Veklury ® , Vemlidy ® , Viread ® , Vosevi ® , Yescarta ® and Zydelig ® .

The approval status of Hepcludex and Jyseleca vary worldwide, and Hepcludex and Jyseleca are not approved in the United States.

We also sell and distribute authorized generic versions of Epclusa and Harvoni in the United States through our separate subsidiary, Asegua Therapeutics, LLC.

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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 (loss) attributable to noncontrolling interests in our Consolidated Statements of Income equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties.

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 interests in our 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 the right to receive benefits from the VIE that could potentially be significant to the VIE.

We did not have any material VIEs as of December 31, 2021.

Certain reclassifications have been made to prior periods in the Consolidated Financial Statements and accompanying notes to conform with the current presentation.

Beginning 2020, acquired in-process research and development (“IPR&D”) expenses are reported separately from Research and development expenses on our Consolidated Statements of Income.

Our Consolidated Statements of Income for the year ended December 31, 2019 was conformed to separately present acquired IPR&D expenses.

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.

Our Chief Executive Officer (“CEO”), as the chief operating decision-maker, manages and allocates resources to the operations of our company on an entity-wide basis.

Managing and allocating resources on an entity-wide basis enables our CEO to assess the overall level of resources available and how to best deploy these resources across functions and research and development (“R&D”) projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities to best support the long-term growth of our business.

Our Chief Executive Officer, as the chief operating decision-maker (“CODM”), manages and allocates resources to the operations of our company on an entity-wide basis.

Managing and allocating resources on an entity-wide basis enables our CODM to assess the overall level of resources available and how to best deploy these resources across functions and research and development (“R&D”) projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities to best support the long-term growth of our business.

Revenues for a summary of disaggregated revenues by product and geographic region.

Significant Accounting Policies, Estimates and Judgments

The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures.

The preparation of these Consolidated Financial Statements in accordance with U.S.

generally accepted accounting principles 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 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.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the recent coronavirus disease (“COVID-19”) could have on our significant accounting estimates.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the coronavirus disease (“COVID-19”) could have on our significant accounting estimates.

Actual results may differ significantly from these estimates.

Reclassification

Beginning 2020, acquired in-process research and development (“IPR&D”) expenses are reported separately from Research and development expenses on our Consolidated Statements of Income.

Acquired IPR&D expenses on our Consolidated Statements of Income reflect IPR&D impairments as well as the initial 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 payments related to various collaborations and the initial costs of rights to IPR&D projects.

Our Consolidated Statements of Income for the years ended December 31, 2019 and 2018 have been conformed to separately present acquired IPR&D expenses.

Our Consolidated Statement of Cash Flows for the year ended December 31, 2019, has been conformed to separately present acquired IPR&D expenses exclusive of IPR&D impairments.

Comparative amounts in our Consolidated Statement of Cash Flows for the year ended December 31, 2018 were not material.

There was no change in income from operations or operating cash flow as a result of these reclassifications.

Revenue Recognition

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however, payment terms differ by jurisdiction, by customer and, in some instances, by type of product.

Variable consideration is included in the net sales price only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved.

If we expect, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, we do not adjust the amount of consideration for the effects of a significant financing component.

Revenues from product sales, net of gross-to-net deductions, are recorded only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with gross-to-net deductions is subsequently resolved.

Taxes assessed by governmental authorities and collected from customers are excluded from product sales.

Gross-to-Net Deductions

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and other pertinent internal or external information.

We assess and update our estimates every quarter to reflect actual claims and other current information.

We assess and update our estimates each reporting period to reflect actual claims and other current information.

Government and other chargebacks that are payable to our direct customers are generally classified as reductions of Accounts receivable on our Consolidated Balance Sheets.

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Research and Development Expenses

R&D expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations (“CROs”), materials and supplies, payments under collaborative and other arrangements, including milestone payments, license and option fees, as well as expense reimbursements to the collaboration partners and overhead allocations consisting of various support and infrastructure costs.

Upfront and milestone payments made to third-party collaborators are expensed as incurred up to the point of regulatory approval.

R&D expenses consist primarily of clinical studies performed by contract research organizations (“CROs”), materials and supplies, payments under collaborative and other arrangements including milestone payments, licenses and fees, expense reimbursements to the collaboration partners, personnel costs including salaries, benefits and stock-based compensation expense, and overhead allocations consisting of various support and infrastructure costs.

Milestone payments made to third-party collaborators are expensed as incurred up to the point of regulatory approval.

Milestone payments made upon regulatory approval are capitalized and amortized over the remaining useful life of the related product.

From time to time, we enter into development and collaboration agreements in which we share expenses with a collaborative partner.

We record payments received from our collaborative partners for their share of the development costs as a reduction of research and development expense.

We record payments received from our collaborative partners for their share of the development costs as a reduction of R&D expenses.

We charge R&D costs, including clinical study costs, to expense when incurred.

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All of our material CRO contracts are terminable by us upon written notice and we are generally only liable for actual services completed by the CRO and certain non-cancelable expenses incurred at any point of termination.

Payments we make for research and development services prior to the services being rendered are recorded as prepaid assets in our Consolidated Balance Sheets and are expensed as the services are provided.

Payments we make for R&D services prior to the services being rendered are recorded as prepaid assets in our Consolidated Balance Sheets and are expensed as the services are provided.

Acquired In-Process Research and Development Expenses

Acquired IPR&D expenses reflect IPR&D impairments as well as the initial 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 payments related to various collaborations and the initial costs of rights to IPR&D projects.

The acquired IPR&D is expensed on acquisition date.

Future costs to develop these IPR&D projects are recorded in Research and development expenses on our Consolidated Statements of Income as incurred.

Selling, General and Administrative Expenses

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We consider highly liquid investments with insignificant interest rate risk and an original maturity of three months or less on the purchase date to be cash equivalents.

Marketable and Nonmarketable Securities

Marketable and Non-Marketable Securities

Marketable Debt Securities

We determine the appropriate classification of our marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date.

All of our marketable debt securities are considered available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term marketable securities or long-term marketable securities.

All of our marketable debt securities are considered available-for-sale and carried at estimated fair values and reported in cash equivalents, short-term marketable debt securities or long-term marketable debt securities.

Unrealized gains and losses on available-for-sale debt securities are excluded from net income and reported in Accumulated other comprehensive income (loss) (“AOCI”) as a separate component of stockholders’ equity.

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We regularly review our investments for declines in fair value below their amortized cost basis to determine whether the impairment is due to credit-related factors or noncredit-related factors.

Our review includes the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost basis.

Our review includes the creditworthiness of the security issuers, the severity of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost bases.

When we determine that a portion of the unrealized loss is due to an expected credit loss, we recognize the loss amount in Other income (expense), net, with a corresponding allowance against the carrying value of the security we hold.

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For investments in entities over which we have significant influence but do not meet the requirements for consolidation and have not elected the fair value option, we use the equity method of accounting with our share of the underlying income or loss of such entities reported in Other income (expense), net on our Consolidated Statements of Income.

We have elected the fair value option to account for our equity investment in Galapagos NV (“Galapagos”) over which we have significant influence.

We believe the fair value option best reflects the underlying economics of the investment.

We have elected the fair value option to account for our equity investments in Arcus Biosciences, Inc.

(“Arcus”) and Galapagos NV (“Galapagos”) over which we have significant influence.

We believe the fair value option best reflects the underlying economics of these investments.

Collaborations and Other Arrangements for additional information.

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Estimates of our allowance for credit losses consider a number of factors including existing contractual payment terms, individual customer circumstances, historical payment patterns of our customers, a review of the local economic environment and its potential impact on expected future customer payment patterns and government funding and reimbursement practices.

The majority of our trade accounts receivable arises from product sales in the United States, Europe and Japan.

There were no material write-offs charged against the allowance for the year ended December 31, 2020.

Certain of the raw materials and components that we utilize in our operations are obtained through single suppliers.

Certain of the raw materials that we utilize in our operations are made at only one facility.

Since the suppliers of key components and raw materials must be named in a new drug application filed with U.S.

Food and Drug Administration (“FDA”) for a product, significant delays can occur if the qualification of a new supplier is required.

If delivery of material from our suppliers is interrupted for any reason, we may be unable to ship our commercial products or to supply our product candidates for clinical trials.

The majority of our trade accounts receivable arises from product sales in the United States and Europe.

Additions to the allowance for credit losses, write-offs and recoveries of customer receivables were no t material for the years ended December 31, 2021, 2020 and 2019.

Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis.

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Leasehold improvements Shorter of useful life or lease term

On January 1, 2019, we adopted Accounting Standards Update No.

2016-02 (Topic 842) “Leases,” which requires lessees to recognize right-of-use assets and lease liabilities for operating leases with a lease term greater than one year.

We adopted Topic 842 using the modified retrospective method.

As such, results for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting under Topic 840 “Leases.”

We determine if an arrangement contains a lease at inception.

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The determination of estimated fair value requires us to make significant estimates and assumptions.

As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period (up to one year from the acquisition date) with the corresponding offset to goodwill.

As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period, which may be up to one year from the acquisition date, with the corresponding offset to goodwill.

Transaction costs associated with business combinations are expensed as they are incurred.

When we determine net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an acquisition of assets and, therefore, no goodwill is recorded and contingent consideration, such as payments upon achievement of various developmental, regulatory and commercial milestones, generally is not recognized at the acquisition date.

In an asset acquisition, upfront payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are charged to expense in our Consolidated Statements of Income unless there is an alternative future use.

In an asset acquisition, upfront payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are expensed as incurred on our Consolidated Statements of Income unless there is an alternative future use.

Goodwill and Intangible Assets

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We record contingent consideration resulting from a business combination at its fair value on the acquisition date.

Each quarter thereafter, we revalue these obligations and record increases or decreases in their fair value in R&D expense within our Consolidated Statement of Income until such time that the related product candidate receives marketing approval.

Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value in Research and development expenses on our Consolidated Statements of Income until such time that the related product candidate receives marketing approval.

Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones, changes in projected revenues or changes in discount rates.

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Fair Value of Financial Instruments

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

We apply fair value accounting for all financial and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis.

We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

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We recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets.

Changes in the fair value of derivatives designated as part of a hedge transaction are recorded each period in current earnings or AOCI.

Changes in the fair value of derivatives that are not part of a hedge transaction are recorded each period in current earnings.

Unrealized changes in the fair value of derivatives designated as part of a hedge transaction are recorded in AOCI.

The unrealized gains or losses in AOCI are reclassified into Product sales on our Consolidated Statements of Income when the respective hedged transactions affect earnings.

Changes in the fair value of derivatives that are not part of a hedge transaction are recorded each period in Other income (expense), net on our Consolidated Statements of Income.

We assess, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting the changes in cash flows or fair values of the hedged items.

If we determine that a forecasted transaction is probable of not occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any related unrealized gain or loss on the contract is recognized in Other income (expense), net on our Consolidated Statements of Income.

Share-Based Compensation

We provide share-based compensation in the form of various types of equity-based awards, including restricted stock units (“RSU”s), performance share awards or units (“PSU”s) and stock options.

Compensation expense is recognized on the Consolidated Statements of Income based on the estimated fair value of the award on the grant date.

The estimated fair value of RSUs is based on the closing price of our common stock.

For PSUs, depending on the terms of the award, fair value on the date of grant is determined based on either the Monte Carlo valuation methodology or the closing stock price on the date of grant.

For stock option awards, estimated fair value is based on the Black-Scholes option valuation model.

Contingencies

We are a party to various legal actions.

We recognize accruals for such actions to the extent that we conclude that a loss is both probable and reasonably estimable.

We accrue the best estimate of 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, we disclose the possible loss or range of loss, or that the amount of loss cannot be estimated at this time.

Our income tax provision is computed under the liability method.

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Some of these estimates are based on interpretations of applicable tax laws or regulations.

We record liabilities related to unrecognized tax benefits in accordance with the guidance that 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.

An adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period.

We have elected to account for the tax on Global Intangible Low-Taxed Income (“GILTI”), enacted as part of the Tax Cuts and Jobs Act (“Tax Reform”), as a component of tax expense in the period in which the tax is incurred (“period cost method”).

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position.

The tax benefit recognized in the Consolidated Financial Statements for a particular tax position is based on the largest benefit that is more likely than not to be realized.

The amount of unrecognized tax benefits (“UTB”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination.

We recognize both accrued interest and penalties, where appropriate, related to UTB in Income tax (expense) benefit on our Consolidated Statements of Income.

We have elected to account for the tax on Global Intangible Low-Taxed Income, enacted as part of the Tax Cuts and Jobs Act, as a component of tax expense in the period in which the tax is incurred.

Other Significant Accounting Policies

Our other significant accounting policies are described in the remaining appropriate Notes to the Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13 “Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments” and has since modified the standard with several ASUs (collectively, “Topic 326”).

Topic 326 requires measurement and recognition of expected credit losses for financial assets.

On January 1, 2020, we adopted this standard using a modified retrospective approach.

The adoption did not have a material impact on our Consolidated Financial Statements.

In connection with the adoption of Topic 326, we made an accounting policy election to not measure an allowance for credit losses for accrued interest receivable.

In November 2018, the FASB issued Accounting Standards Update No.

2018-18 “Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606” (“ASU 2018-18”).

ASU 2018-18 clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under Topic 606, “Revenue from Contracts with Customers” when the counterparty is a customer.

In addition, the update precludes an entity from presenting consideration from a transaction in a collaborative arrangement as customer revenue if the counterparty is not a customer for that transaction.

On January 1, 2020, we adopted this standard and applied it retrospectively to January 1, 2018 when we initially adopted Topic 606.

The adoption did not have an impact on our Consolidated Financial Statements.

Disaggregation of Revenues

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Truvada 314 22 35 371 1,376 27 45 1,448 2,640 101 72 2,813

Other HIV (1)

25 5 28 58 30 5 12 47 40 7 14 61

Revenue share - Symtuza (1)

355 165 11 531 331 149 8 488 249 130 — 379

Total HIV product sales 13,651 2,287 1,000 16,938 13,315 2,312 811 16,438 11,654 2,350 623 14,627

Hepatitis C virus (“HCV”) Products

Ledipasvir/Sofosbuvir (3)

Other HIV (2)

15 18 17 50 25 5 28 58 30 5 12 47

Total HIV 12,828 2,366 1,121 16,315 13,651 2,287 1,000 16,938 13,315 2,312 811 16,438

Veklury 3,640 1,095 830 5,565 2,026 607 178 2,811 — — — —

Hepatitis C virus (“HCV”)

Sofosbuvir (3)

84 31 97 212 92 29 151 272 312 71 260 643

Sofosbuvir/Velpatasvir (4)

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119 74 14 207 132 48 13 193 182 118 28 328

Total HCV product sales 1,088 414 562 2,064 1,465 742 729 2,936 2,023 896 767 3,686

Veklury 2,026 607 178 2,811 — — — — — — — —

Cell Therapy Products

Yescarta 362 191 10 563 373 83 — 456 263 1 — 264

Total HCV 1,018 421 442 1,881 1,088 414 562 2,064 1,465 742 729 2,936

Hepatitis B virus (“HBV”) / Hepatitis Delta virus (“HDV”)

Vemlidy 384 34 396 814 356 29 272 657 309 21 158 488

Viread 11 28 72 111 14 34 137 185 32 69 142 243

Other HBV/HDV (6)

2 42 — 44 10 8 — 18 2 9 — 11

Total HBV/HDV 397 104 468 969 380 71 409 860 343 99 300 742

Tecartus 136 40 — 176 34 10 — 44 — — — —

Total Cell Therapy product sales 396 201 10 607 373 83 — 456 263 1 — 264

Yescarta 406 253 36 695 362 191 10 563 373 83 — 456

Total Cell Therapy 542 293 36 871 396 201 10 607 373 83 — 456

Trodelvy 370 10 — 380 49 — — 49 — — — —

Other Products

AmBisome 39 274 227 540 61 230 145 436 37 234 136 407

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Ranexa 10 — — 10 9 — — 9 216 — — 216

Vemlidy 356 29 272 657 309 21 158 488 245 12 64 321

Viread 14 34 137 185 32 69 142 243 50 82 175 307

Zydelig 26 35 1 62 31 39 2 72 47 54 2 103

100 80 29 209 136 45 14 195 151 43 9 203

Total Other product sales 931 385 570 1,886 1,412 430 447 2,289 2,257 449 394 3,100

Total Other 381 389 257 1,027 551 314 161 1,026 1,069 331 147 1,547

Total product sales 19,176 4,678 3,154 27,008 18,141 3,894 2,320 24,355 16,565 3,567 1,987 22,119

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_______________________________

(1) Represents our revenue from cobicistat (“C”), emtricitabine (“FTC”) and tenofovir alafenamide (“TAF”) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland Unlimited Company (“Janssen”).

(2) Includes Emtriva and Tybost.

(2) 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.

(3) Amounts consist of sales of Harvoni and the authorized generic version of Harvoni sold by our separate subsidiary, Asegua Therapeutics LLC.

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(5) Includes Vosevi and Sovaldi.

(6) Includes Cayston, Hepsera and Jyseleca.

(6) Includes Hepcludex and Hepsera.

(7) Includes Cayston and Jyseleca.

Revenues From Major Customers

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Revenues Recognized from Performance Obligations Satisfied in Prior Periods

Revenues recognized from performance obligations satisfied in prior years related to royalties for licenses of our intellectual property were $ 841 million and $ 741 million for the years ended December 31, 2020 and 2019, respectively.

Revenues recognized from performance obligations satisfied in prior years related to our revenue share with Janssen, as described in Note 11.

Collaborations and Other Arrangements, and royalties for licenses of our intellectual property were $ 851 million, $ 841 million and $ 741 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Estimates are assessed each period and updated to reflect current information.

Changes in estimates for variable consideration related to sales made in prior years resulted in a $ 101 million increase and a $ 257 million increase in revenues for the years ended December 31, 2020 and 2019, respectively.

Changes in estimates related to sales made in prior years resulted in $ 856 million, $ 101 million and $ 257 million increase in revenues for the years ended December 31, 2021, 2020 and 2019, respectively.

This was primarily related to changes in estimates for accrued government and other rebates and allowances for sales returns upon product expiration.

Contract Balances

Our contract assets, which consist of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation, totaled $ 174 million and $ 198 million as of December 31, 2021 and 2020, respectively.

Contract liabilities were $ 97 million and $ 45 million as of December 31, 2020 and 2019, respectively.

During 2020 and 2019, revenue recognized that was included in the contract liability balance as of the beginning of the respective years was not material.

Contract liabilities, which generally result from receipt of advance payment before our performance under the contract, were not material as of December 31, 2021 and 2020, respectively.

Revenue expected to be recognized in the future from contract liabilities as the related performance obligations are satisfied is not expected to be material in any one year.

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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;

• 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.

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Our financial instruments consist primarily of cash and cash equivalents, marketable debt securities, accounts receivable, foreign currency exchange contracts, equity securities, accounts payable and short-term and long-term debt.

Cash and cash equivalents, marketable debt securities, certain equity securities, and foreign currency exchange contracts are reported at their respective fair values in our Consolidated Balance Sheets.

Cash and cash equivalents, marketable debt securities, certain equity securities, and foreign currency exchange contracts are reported at their respective fair values on our Consolidated Balance Sheets.

Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer.

Short-term and long-term debt are reported at their amortized costs in our Consolidated Balance Sheets.

The remaining financial instruments are reported in our Consolidated Balance Sheets at amounts that approximate current fair values.

Short-term and long-term debt are reported at their amortized costs on our Consolidated Balance Sheets.

The remaining financial instruments are reported on our 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.

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:

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treasury securities $ 407 $ — $ — $ 407 $ 309 $ — $ — $ 309

Certificates of deposit — 216 — 216 — 3,517 — 3,517

government agencies securities — 4 — 4 — — — —

government securities — 50 — 50 — 43 — 43

Certificates of deposit — 249 — 249 — 216 — 216

Corporate debt securities — 1,363 — 1,363 — 1,142 — 1,142

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Equity securities:

Equity investment in Galapagos 1,648 — — 1,648 3,477 — — 3,477

Money market funds 3,661 — — 3,661 4,361 — — 4,361

Equity investment in Galapagos (1)

931 — — 931 1,648 — — 1,648

Equity investment in Arcus (1)

559 — — 559 212 — — 212

Other publicly traded equity securities 331 — — 331 531 — — 531

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Total $ 6,150 $ 2,170 $ — $ 8,320 $ 7,279 $ 1,729 $ — $ 9,008

Liability for MYR GmbH (“MYR”) contingent consideration $ — $ — $ 317 $ 317 $ — $ — $ — $ —

Deferred compensation plan 261 — — 261 218 — — 218

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Total $ 261 $ 5 $ 317 $ 583 $ 218 $ 121 $ — $ 339

Equity investments not measured at fair value and excluded from the above table were limited partnerships and other equity method investments of $ 58 million and $ 24 million at December 31, 2020 and 2019, respectively and other equity investments without readily determinable fair values of $ 204 million and $ 82 million at December 31, 2020 and 2019, respectively.

These amounts were included in Other long-term assets on our Consolidated Balance Sheets.

Changes in the fair value of equity securities resulted in net unrealized losses of $ 1.7 billion and net unrealized gains of $ 1.2 billion for the years ended December 31, 2020 and 2019, respectively, which were included in Other income (expense), net, on our Consolidated Statements of Income.

The following table summarizes the classification of our equity securities in our Consolidated Balance Sheets:

_______________________________

(1) See Note 11.

Collaborations and Other Arrangements for additional information.

Equity Securities

The following table summarizes the classification of our equity securities measured at fair value on a recurring basis on our Consolidated Balance Sheets:

(in millions) December 31, 2021 December 31, 2020

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Total $ 5,743 $ 6,970

Our available-for-sale debt securities are classified as cash equivalents, short-term marketable securities and long-term marketable securities in our Consolidated Balance Sheets.

Available-for-Sale Debt Securities for additional information.

Collaborations and Other Arrangements for additional information on our equity investment in Galapagos.

Changes in the fair value of equity securities resulted in net unrealized losses of $ 610 million and $ 1.7 billion and net unrealized gains of $ 1.2 billion for the years ended December 31, 2021, 2020 and 2019 respectively, which were included in Other income (expense), net, on our Consolidated Statements of Income.

Other Equity Securities

Equity method investments and other equity investments without readily determinable fair values were $ 338 million and $ 262 million as of December 31, 2021 and 2020, respectively, and were excluded from the above tables.

These amounts were included in Other long-term assets on our Consolidated Balance Sheets.

Related Party Transaction

During the second quarter of 2021, we donated certain equity securities at fair value to the Gilead Foundation, a California nonprofit organization (the “Foundation”).

The Foundation is a related party as certain officers of the company also serve as directors of the Foundation.

The donation expense of $ 212 million was recorded within Selling, general and administrative expenses on our Consolidated Statements of Income for the year ended December 31, 2021.

Level 2 Inputs

We estimate the fair values of Level 2 instruments by taking into consideration valuations obtained from third-party pricing services.

We estimate the fair values of Level 2 investments by taking into consideration valuations obtained from third-party pricing services.

The pricing services utilize industry standard valuation models, including both 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.

For our marketable securities, we review trading activity and pricing as of the measurement date.

These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data.

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.

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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 and swap rates.

These inputs include foreign currency exchange rates, London Interbank Offered Rates (“LIBOR”) and swap rates.

These inputs, where applicable, are observable at commonly quoted intervals.

The total estimated fair values of our aggregate short-term and long-term senior unsecured notes and term loan facility, determined using Level 2 inputs based on their quoted market values, were approximately $ 34.6 billion and $ 27.3 billion at December 31, 2020 and 2019, respectively, and the carrying values were $ 30.3 billion and $ 24.6 billion at December 31, 2020 and 2019, respectively.

The total estimated fair values of our aggregate short-term and long-term debt, determined using Level 2 inputs based on their quoted market values, were approximately $ 28.6 billion and $ 34.6 billion as of December 31, 2021 and 2020, respectively, and the carrying values were $ 25.6 billion and $ 30.3 billion as of December 31, 2021 and 2020, respectively.

Level 3 Inputs

In 2020, we measured assets acquired and liabilities assumed at fair value on a nonrecurring basis, in connection with our acquisition of Immunomedics, Inc.

(“Immunomedics”).

In connection with our first quarter 2021 acquisition of MYR, we measured assets acquired and liabilities assumed at fair value on a nonrecurring basis, except for the liability for contingent consideration.

The estimated fair value of the liability for contingent consideration was $ 341 million and $ 317 million as of the acquisition date and December 31, 2021, respectively.

The change in estimated fair value from the acquisition date was primarily due to the effect of foreign exchange remeasurement.

The contingent consideration was estimated using probability-weighted scenarios for U.S.

Food and Drug Administration (“FDA”) approval of Hepcludex.

Acquisitions for additional information.

In 2020, in connection with collaborations and other equity arrangements we entered into separately with Pionyr Immunotherapeutics, Inc.

In connection with our fourth quarter 2020 acquisition of Immunomedics, Inc.

(“Immunomedics”), we measured assets acquired and liabilities assumed at fair value on a nonrecurring basis.

The liability assumed related to the sale of future royalties is subsequently amortized using the effective interest method over the remaining estimated life.

The fair values of the liability related to the sale of future royalties were $ 1.3 billion and $ 1.1 billion as of December 31, 2021 and 2020, respectively, and the carrying value was $ 1.1 billion as of December 31, 2021 and 2020.

Acquisitions and Note 12.

Debt and Credit Facilities for additional information.

In 2020, in connection with collaborations and other equity arrangements we entered into with Pionyr Immunotherapeutics Inc.

(“Pionyr”) and Tizona Therapeutics, Inc.

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Collaborations and Other Arrangements for additional information.

In 2019 and 2018, we measured IPR&D intangible assets acquired in connection with the acquisition of Kite Pharma, Inc.

(“Kite”) at fair value on a nonrecurring basis, and recognized pre-tax impairment charges of $ 800 million and $ 820 million, respectively.

In 2019, we measured IPR&D intangible assets acquired in connection with the acquisition of Kite Pharma, Inc.

(“Kite”) at fair value on a nonrecurring basis, and recognized a pre-tax impairment charge of $ 800 million.

The fair values of the acquired IPR&D assets are estimated based on probability-adjusted discounted cash flow calculations using Level 3 fair value measurements, and inputs include estimated revenues, costs, probability of technical and regulatory success and discount rates.

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Goodwill and Intangible Assets for additional information.

The other level 3 liabilities were our contingent consideration liabilities, which were not material at December 31, 2020 and 2019.

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.

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treasury securities $ 408 $ — $ ( 1 ) $ 407 $ 308 $ 1 $ — $ 309

Certificates of deposit 216 — — 216 3,517 — — 3,517

government agencies securities 4 — — 4 — — — —

government securities 50 — — 50 43 — — 43

Certificates of deposit 249 — — 249 216 — — 216

Corporate debt securities 1,365 — ( 2 ) 1,363 1,140 2 — 1,142

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Cash and cash equivalents $ 6 $ 113

Short-term marketable securities 1,411 12,721

Long-term marketable securities 502 1,488

Short-term marketable debt securities 1,182 1,411

Long-term marketable debt securities 1,309 502

Total $ 2,497 $ 2,026

Accrued interest receivable excluded from both the fair value and amortized cost basis of the available-for-sale debt securities was $ 9 million and $ 37 million as of December 31, 2020 and 2019, respectively, and is recorded in Prepaid and other current assets on our Consolidated Balance Sheets.

There were no write-offs of accrued interest receivable during the years ended December 31, 2020 and 2019.

The following table summarizes our available-for-sale debt securities by contractual maturity:

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Total $ 2,501 $ 2,497

The following table summarizes our available-for-sale debt securities in an unrealized loss position:

Less Than 12 Months 12 Months or Greater Total

(in millions) Gross

Losses Estimated

Fair Value Gross

Losses Estimated

Fair Value Gross

Losses Estimated

December 31, 2019

Corporate debt securities $ ( 1 ) $ 1,866 $ — $ 4 $ ( 1 ) $ 1,870

We held a total of 75 and 305 positions which were in an unrealized loss position as of December 31, 2020 and 2019, respectively.

Aggregated gross unrealized losses on available-for-sale corporate debt securities were not material, and accordingly, no impairments were recognized for the years ended December 31, 2020 and 2019.

Gross realized gains and gross realized losses on available-for-sale debt securities were not material for the years ended December 31, 2020 and 2019.

We held a total of 534 and 75 positions which were in unrealized loss positions as of December 31, 2021 and 2020, respectively.

Aggregated gross unrealized losses on available-for-sale debt securities were not material for the years ended December 31, 2021 and 2020.

No impairment was recognized for the years ended December 31, 2021, 2020 and 2019.

DERIVATIVE FINANCIAL INSTRUMENTS

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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 unrealized 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 that are denominated in a non-functional currency.

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The derivative instruments we use to hedge this exposure are designated as cash flow hedges and have maturities of 18 months or less.

Upon executing a hedging contract and quarterly thereafter, we assess hedge effectiveness using regression analysis.

The unrealized gains or losses in AOCI are reclassified into product sales when the respective hedged transactions affect earnings.

The majority of gains and losses related to the hedged forecasted transactions reported in AOCI at December 31, 2020 are expected to be reclassified to product sales within 12 months.

The cash flow effects of our derivative contracts for the years ended December 31, 2020, 2019 and 2018 are included within Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

We had notional amounts on foreign currency exchange contracts outstanding totaling $ 2.4 billion and $ 2.9 billion at December 31, 2020 and 2019, respectively.

Upon executing a hedging contract and each reporting period thereafter, we assess hedge effectiveness using regression analysis.

The unrealized gains or losses in AOCI are reclassified into Product sales on our Consolidated Statements of Income when the respective hedged transactions affect earnings.

The majority of gains and losses related to the hedged forecasted transactions reported in AOCI as of December 31, 2021 are expected to be reclassified to Product sales within 12 months.

The cash flow effects of our derivative contracts for the years ended December 31, 2021, 2020 and 2019 were included within Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

We had notional amounts on foreign currency exchange contracts outstanding of $ 2.9 billion and $ 2.4 billion as of December 31, 2021 and 2020, respectively.

While all our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts on a gross basis.

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December 31, 2021

Asset Derivatives Liability Derivatives

Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value

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Foreign currency exchange contracts

Prepaid and other current assets $ — Other accrued liabilities $ ( 113 )

Prepaid and other current assets $ 75 Accrued and other current liabilities $ 4

Foreign currency exchange contracts

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Foreign currency exchange contracts

Prepaid and other current assets 12 Other accrued liabilities ( 1 )

Prepaid and other current assets — Accrued and other current liabilities —

Total derivatives not designated as hedges

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December 31, 2020

Asset Derivatives Liability Derivatives

Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value

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Foreign currency exchange contracts

Prepaid and other current assets $ 36 Other accrued liabilities $ ( 6 )

Prepaid and other current assets $ — Accrued and other current liabilities $ 113

Foreign currency exchange contracts

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Foreign currency exchange contracts

Prepaid and other current assets 1 Other accrued liabilities —

Prepaid and other current assets 12 Accrued and other current liabilities 1

Total derivatives not designated as hedges

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Gain (loss) reclassified from AOCI into Product sales

$ ( 67 ) $ 47 $ 127

Derivatives not designated as hedges:

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Derivative liabilities $ 121 $ — $ 121 $ ( 12 ) $ — $ 109

Forty Seven, Inc.

(“Forty Seven”)

On April 7, 2020, we acquired all of the then issued and outstanding common stock of Forty Seven, a clinical-stage immuno-oncology company focused on developing therapies targeting cancer immune evasion pathways and specific cell targeting approaches, for a price of $ 95.50 per share in cash, for total consideration of $ 4.7 billion, net of acquired cash.

As a result, Forty Seven became our wholly-owned subsidiary.

Forty Seven’s lead program, magrolimab, is an investigational monoclonal antibody in clinical development for the treatment of myelodysplastic syndrome, acute myeloid leukemia, non-Hodgkin lymphoma and solid tumors.

We accounted for the transaction as an asset acquisition since the lead asset, magrolimab, represented substantially all the fair value of the gross assets acquired.

At the acquisition date, we recorded a $ 4.5 billion charge representing an acquired IPR&D asset with no alternative future use in Acquired in-process research and development expenses on our Consolidated Statements of Income.

In connection with this acquisition, we recorded $ 202 million of assets acquired primarily consisting of deferred tax assets.

Liabilities assumed were not material.

We also recorded stock-based compensation expense of $ 144 million related to the cash settlement of unvested Forty Seven employee stock awards attributable to post-acquisition services, which was primarily recorded in Research and development expenses on our Consolidated Statements of Income, for the year ended December 31, 2020.

On September 13, 2020, we entered into an agreement and plan of merger (“Agreement and Plan of Merger”) to acquire Immunomedics, a company focused on the development of antibody-drug conjugate (“ADC”) technology.

Immunomedics researches and develops biopharmaceutical products, particularly antibody-based products for patients with solid tumors and blood cancers, and manufactures and markets Trodelvy.

Trodelvy, a Trop-2-directed ADC developed by Immunomedics, is the first ADC FDA approved for the treatment of adult patients with metastatic triple-negative breast cancer (“mTNBC”).

On October 23, 2020, the acquisition was completed and Immunomedics became a wholly-owned subsidiary of Gilead.

The financial results of Immunomedics were included in our consolidated financial results for the year ended December 31, 2020 from the date of the acquisition.

Immunomedics contributed $ 49 million of revenues and an immaterial net loss from the date of the acquisition through December 31, 2020.

The cash consideration for the acquisition was $ 20.6 billion, consisting of a $ 20.4 billion cash payment to the outstanding Immunomedics common stockholders and a $ 242 million cash payment to equity award holders of Immunomedics for the vested equity awards and accelerated vesting of stock-based awards attributable to the pre-combination period.

We financed the acquisition with the majority of the proceeds from the September 2020 senior unsecured notes offering, an additional $ 1.0 billion borrowing under a new senior unsecured term loan facility and cash on hand.

Debt and Credit Facilities for additional information.

The acquisition of Immunomedics was accounted for as a business combination using the acquisition method of accounting.

In the first quarter of 2021, we completed the acquisition of MYR, a German biotechnology company.

MYR focuses on the development and commercialization of therapeutics for the treatment of HDV.

The acquisition provided Gilead with Hepcludex, which was conditionally approved by the European Medicines Agency (“EMA”) in July 2020 for the treatment of chronic HDV infection in adults with compensated liver disease.

Upon closing, MYR became a wholly-owned subsidiary of Gilead.

The financial results of MYR were included in our Consolidated Financial Statements from the date of the acquisition.

Acquisition-related expenses were not material for the year ended December 31, 2021.

The aggregate consideration for this acquisition of € 1.3 billion (or $ 1.6 billion) primarily consisted of € 1.0 billion (or $ 1.2 billion) paid upon closing and contingent consideration of up to € 300 million, subject to customary adjustments, representing a potential future milestone payment upon FDA approval of Hepcludex.

The fair value of this contingent liability, estimated using probability-weighted scenarios for FDA approval, was $ 341 million as of the acquisition date and was initially recorded in Other long-term obligations on our Consolidated Balance Sheets.

In the second quarter of 2021, the balance was reclassified to Accrued and other current liabilities on our Consolidated Balance Sheets.

The estimated fair value of this contingent liability was $ 317 million as of December 31, 2021.

The change in estimated fair value from the acquisition date was primarily due to the effect of foreign exchange remeasurement.

The acquisition of MYR was accounted for as a business combination using the acquisition method of accounting.

This method requires, among other things, that assets acquired and liabilities assumed be generally recognized at fair value as of the acquisition date.

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The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

We also recorded share-based compensation expense of $ 289 million related to the cash settlement of the accelerated share-based compensation expense attributable to the post combination period, which was primarily recorded in Selling, general and administrative expenses and Research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2020.

The following table summarizes estimated fair values of assets acquired and liabilities assumed as of the acquisition date:

(in millions) Amount

Intangible assets:

Finite-lived intangible asset $ 845

Acquired IPR&D 1,190

Deferred income taxes, net ( 513 )

Other assets (and liabilities), net ( 187 )

Total identifiable net assets 1,335

Total consideration $ 1,561

Intangible Assets

The finite-lived intangible asset of $ 845 million represents the estimated fair value of Hepcludex for HDV in Europe as of the acquisition date.

The fair value was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to Hepcludex for HDV in Europe and a discount rate of 12 %.

The discount rate used represents the estimated rate that market participants would use to value this intangible asset.

This intangible asset is being amortized over an estimated useful life of 10 years.

Acquired IPR&D consists of Hepcludex for HDV in all other regions without regulatory approval, including the United States.

The estimated aggregate fair value of $ 1.19 billion as of the acquisition date was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to this asset and a discount rate of 12 %.

The discount rate used represents the estimated rate that market participants would use to value this intangible asset.

Some of the more significant assumptions inherent in the development of intangible asset fair values include:

estimates of projected future cash flows, including revenues and operating profits;

probability of success;

the discount rate selected;

the life of the potential commercialized products and the risks related to the viability of and potential alternative treatments in any future target markets, among other factors.

The inputs used for valuing these identifiable intangibles are unobservable and considered Level 3 under the fair value measurement and disclosure guidance.

Fair Value Measurements for additional information.

Deferred Income Taxes

The net deferred tax liability was based upon the difference between the estimated financial statement basis and tax basis of net assets acquired and an estimate for the final pre-acquisition net operating losses of MYR.

The excess of the consideration transferred over the fair values of assets acquired and liabilities assumed of $ 226 million was recorded as goodwill, which primarily reflects the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Goodwill recognized for MYR is no t expected to be deductible for income tax purposes.

There were no material measurement period adjustments recorded to the fair values of assets acquired and liabilities assumed during the year ended December 31, 2021.

In the fourth quarter of 2020, we completed the acquisition of Immunomedics, a company focused on the development of antibody-drug conjugate technology, for cash consideration of $ 20.6 billion.

Upon closing, Immunomedics became a wholly-owned subsidiary of Gilead.

The acquisition was financed with the majority of the proceeds from the September 2020 senior unsecured notes offering, an additional $ 1.0 billion borrowing under a new senior unsecured term loan facility and cash on hand.

In 2021, we repaid the borrowing under the senior unsecured term loan facility.

Debt and Credit Facilities for additional information.

We recorded share-based compensation expense of $ 289 million related to the cash settlement of the accelerated share-based compensation expense attributable to the post-combination period, which was primarily recorded in Selling, general and administrative expenses and Research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2020.

We also recorded other acquisition-related expenses of $ 39 million, primarily representing closing costs and related fees, in Selling, general and administrative expenses on our Consolidated Statements of Income for the year ended December 31, 2020.

The acquisition of Immunomedics was accounted for as a business combination using the acquisition method of accounting.

This method requires, among other things, that assets acquired and liabilities assumed be generally recognized at fair value as of the acquisition date.

There were no material measurement period adjustments recorded to the fair values of assets acquired and liabilities assumed during the year ended December 31, 2021.

The fair value estimates for the assets acquired and liabilities assumed have been completed.

The following table summarizes fair values of assets acquired and liabilities assumed as of the acquisition date:

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Outlicense contract 175

Deferred income taxes ( 4,565 )

Deferred tax liabilities ( 4,565 )

Liability related to future royalties ( 1,100 )

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Total consideration transferred $ 20,597

The fair value step-up adjustment of $ 881 million, included in the inventories of $ 946 million as of the acquisition date, was primarily determined by the estimated selling price of finished inventory less the cost to complete the manufacturing process and selling effort.

The step-up adjustment is being recorded in Cost of goods sold on our Consolidated Statements of Income as the inventory is sold to customers from the acquisition date.

The fair value step-up adjustment of $ 881 million, included in inventories of $ 946 million as of the acquisition date, was primarily determined by the estimated selling price of finished inventory less the cost to complete the manufacturing process and selling effort.

The step-up adjustment is recorded in Cost of goods sold on our Consolidated Statements of Income as the inventory is sold to customers and in Research and development expenses on our Consolidated Statements of Income for inventory used for clinical purposes.

Intangible Assets

The finite-lived intangible asset of $ 4.6 billion represents the estimated fair value of Trodelvy for mTNBC as of the acquisition date.

The fair value was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to Trodelvy for mTNBC and a discount rate of 7.0 %.

The finite-lived intangible asset of $ 4.6 billion represents the estimated fair value of Trodelvy for metastatic triple-negative breast cancer (“TNBC”) as of the acquisition date.

The fair value was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to Trodelvy for metastatic TNBC and a discount rate of 7.0 %.

The discount rate used represents the estimated rate that market participants would use to value this intangible asset.

This intangible asset is being amortized over an estimated useful life of 12 years.

Acquired intangible assets related to IPR&D consist of Trodelvy for hormone receptor positive (“HR+”), human epidermal growth factor receptor 2 negative (“HER2-”), metastatic breast cancer, Trodelvy for non-small cell lung cancer (“NSCLC”) and Trodelvy for urothelial cancer.

Acquired IPR&D assets consist of Trodelvy for hormone receptor positive, human epidermal growth factor receptor 2 negative, metastatic breast cancer, Trodelvy for non-small cell lung cancer and Trodelvy for urothelial cancer (“UC”).

The estimated aggregate fair value of $ 15.8 billion as of the acquisition date was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to these assets and a discount rate of 7.0 %.

The discount rate used represents the estimated rate that market participants would use to value these intangible assets.

Trodelvy for UC was granted accelerated approval by FDA in April 2021 and $ 1.0 billion was reclassified to finite-lived intangibles from IPR&D.

Goodwill and Intangible Assets for additional information.

Some of the more significant assumptions inherent in the development of intangible asset fair values include:

the amount and timing of projected future cash flows (including revenue, cost of sales, research and development costs, sales and marketing expenses);

the amount and timing of projected future cash flows (including revenue, cost of sales, research and development costs, and sales and marketing expenses);

probability of success;

the discount rate selected to measure inherent risk of future cash flows;

and the assessment of the asset’s life cycle and the competitive trends impacting the asset, among other factors.

Intangible assets related to IPR&D projects are considered to be indefinite-lived assets until the completion or abandonment of the associated R&D efforts.

the discount rate selected to measure the inherent risk of future cash flows;

the assessment of the asset’s life cycle and the competitive trends impacting the asset, among other factors.

We also recorded an intangible asset related to a license and supply agreement with a third party, which was entered into by Immunomedics prior to the acquisition.

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Deferred Income Taxes

The net deferred tax liability was based upon the difference between the estimated book basis and tax basis of net assets acquired and an estimate for the final pre-acquisition net operating losses of Immunomedics.

Liability Related to Future Royalties

We assumed a liability related to a funding arrangement, which was originally entered into by Immunomedics and RPI Finance Trust, a Delaware statutory trust (“RPI”), prior to the completion of our acquisition of Immunomedics.

We assumed a liability related to a funding arrangement, which was originally entered into by Immunomedics and RPI Finance Trust (“RPI”), prior to our acquisition of Immunomedics.

Under the funding agreement, RPI has the right to receive certain royalty amounts, subject to certain reductions, based on the net sales of Trodelvy for each calendar quarter during the term of the agreement through approximately 2036.

The acquisition date fair value of the liability was estimated as $ 1.1 billion, which was primarily determined based on current estimates of future royalty payments to RPI over the life of the arrangement using the real options method and effective annual interest rate of 2.5 %.

The liability is amortized using the effective interest rate method, resulting in recognition of interest expense over 16 years.

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The inputs used for valuation of this liability are unobservable and are considered Level 3 under the fair value measurement and disclosure guidance.

Fair Value Measurements for additional information.

The liability related to future royalties was categorized as debt and primarily included in Long-term debt, net on our Consolidated Balance Sheets.

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The excess of the consideration transferred over the fair values of assets acquired and liabilities assumed of $ 4.0 billion was recorded as goodwill, which primarily reflects the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Goodwill recognized for Immunomedics is not expected to be deductible for income tax purposes.

Supplemental Pro Forma Information

The following pro forma information presents the combined results of operations of Gilead and Immunomedics as if the acquisition of Immunomedics had been completed on January 1, 2019, with adjustments to give effect to pro forma events that are directly attributable to the acquisition:

Year Ended December 31

(in millions, unaudited) 2020 2019

Total revenues $ 24,778 $ 22,449

Net income (loss) attributable to Gilead $ ( 323 ) $ 4,488

The primary adjustments include:

(i) post-combination compensation expense of $ 289 million related to the acceleration of unvested share-based awards of Immunomedics, (ii) the impact of additional interest expense in connection with the Immunomedics acquisition borrowings as well as the liability related to future royalties, (iii) amortization of the finite-lived intangible asset related to Trodelvy for mTNBC beginning on April 22, 2020 when it received FDA accelerated approval, (iv) amortization of the acquired Immunomedics’ inventory related to Trodelvy mTNBC over the period in which the inventory was expected to be sold beginning on April 22, 2020, (v) amortization of the license and supply agreement with a third party over an estimated useful life of 15 years, (vi) the impacts of the sale of marketable securities based on their use as a source of liquidity to fund the acquisition, and (vii) acquisition-related transaction costs.

The unaudited pro forma financial results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of Gilead and Immunomedics.

Accordingly, these unaudited pro forma financial results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of 2019, nor are they indicative of future results of operations.

MYR GmbH (“MYR”)

On December 10, 2020, we entered into a definitive agreement pursuant to which we expect to acquire MYR, a German biotechnology company, for approximately € 1.2 billion in cash (or approximately $ 1.4 billion using a foreign currency exchange rate of 1.2 at December 31, 2020), which is payable upon closing of the transaction and a potential future milestone payment of up to € 300 million (or approximately $ 360 million using a foreign currency exchange rate of 1.2 at December 31, 2020), upon FDA approval of Hepcludex ® .

Both payments are subject to customary adjustments.

MYR focuses on the development and commercialization of therapeutics for the treatment of chronic hepatitis delta virus (“HDV”).

The acquisition will provide Gilead with Hepcludex, which was conditionally approved by the European Medicines Agency (“EMA”) in July 2020 for the treatment of chronic HDV infection in adults with compensated liver disease.

Consummation of the transaction is subject to expiration or termination of the waiting period under the Hart-Scott Rodino Antitrust Improvements Act, and receipt of merger control and foreign direct investment approvals in certain European jurisdictions and certain other customary closing conditions.

We anticipate that the closing of the transaction will occur by the end of the first quarter of 2021 and expect our acquisition of MYR to be accounted for as a business combination using the acquisition method of accounting upon closing.

Goodwill recognized for Immunomedics is no t expected to be deductible for income tax purposes.

Forty Seven, Inc.

(“Forty Seven”)

In the second quarter of 2020, we completed the acquisition of Forty Seven, a clinical-stage immuno-oncology company focused on developing therapies targeting cancer immune evasion pathways and specific cell targeting approaches, for total consideration of $ 4.7 billion, net of acquired cash.

Upon closing, Forty Seven became a wholly-owned subsidiary of Gilead.

We accounted for the transaction as an asset acquisition since the lead asset, magrolimab, represented substantially all the fair value of the gross assets acquired.

During the year ended December 31, 2020, we recorded a $ 4.5 billion charge representing an acquired IPR&D asset with no alternative future use in Acquired in-process research and development expenses, and stock-based compensation expense of $ 144 million primarily in Research and development expenses on our Consolidated Statements of Income.

The following table summarizes our Inventories:

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Amounts reported as Other long-term assets primarily consisted of raw materials as of December 31, 2021 and 2020.

Total inventories at December 31, 2020 include fair value adjustments resulting from the Immunomedics acquisition which will be recognized in future periods.

Acquisitions for additional information.

Inventory write down charges for the year ended December 31, 2020 were not material.

During the year ended December 31, 2019, we recorded inventory write down charges of $ 649 million, of which $ 547 million was related to slow moving and excess raw material and work in process inventory primarily due to lower long-term demand for our HCV products.

During the year ended December 31, 2018, we recorded inventory write down charges of $ 572 million, of which $ 440 million was related to excess raw materials primarily due to a sustained decrease in demand for Harvoni.

Total inventories as of December 31, 2021 and 2020 include $ 294 million and $ 797 million, respectively, of fair value adjustments resulting from the Immunomedics acquisition.

Inventory write-down charges were $ 228 million, $ 86 million and $ 649 million for the years ended December 31, 2021, 2020 and 2019, respectively.

During the year ended December 31, 2019, $ 547 million of the $ 649 million inventory write-down charges was related to slow-moving and excess raw material and work in process inventory primarily due to lower long-term demand for our HCV products.

PROPERTY, PLANT AND EQUIPMENT

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We had unamortized capitalized software costs, included in Office, computer equipment and other, of $ 131 million and $ 124 million as of December 31, 2021 and 2020, respectively.

Capitalized interest on construction in-progress is included in Property, plant and equipment.

Capitalized interest on construction in progress is included in Property, plant and equipment, net on our Consolidated Balance Sheets.

Interest capitalized in 2021 and 2020 was not material.

Long-Lived Assets

The net book value of our property, plant and equipment (less office, computer equipment and other) in the United States was $ 3.8 billion as of December 31, 2020, $ 3.5 billion as of December 31, 2019 and $ 3.2 billion as of December 31, 2018.

The corresponding amount in international locations was $ 897 million as of December 31, 2020, $ 791 million as of December 31, 2019 and $ 620 million as of December 31, 2018.

The net book value of our property, plant and equipment in the United States was $ 4.1 billion and $ 4.0 billion as of December 31, 2021 and 2020, respectively.

The corresponding amount in international locations was $ 963 million and $ 940 million as of December 31, 2021 and 2020, respectively.

All individual international locations accounted for less than 10% of the total balances.

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The following table summarizes the changes in the carrying amount of Goodwill:

(in millions) Amount

Balance at December 31, 2019 $ 4,117

Goodwill resulting from the acquisition of Immunomedics 3,991

Balance at December 31, 2020 $ 8,108

(in millions) 2021 2020

Beginning balance $ 8,108 $ 4,117

Goodwill resulting from acquisitions 226 3,991

Measurement period adjustments ( 2 ) —

Ending balance $ 8,332 $ 8,108

We perform an annual goodwill impairment assessment in the fourth quarter or earlier if impairment indicators exist.

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Intangible asset - sofosbuvir $ 10,720 $ ( 5,651 ) $ — $ 5,069 $ 10,720 $ ( 4,952 ) $ — $ 5,768

Intangible asset - axicabtagene ciloleucel (DLBCL) 6,200 ( 1,105 ) — 5,095 6,200 ( 761 ) — 5,439

Intangible asset - Trodelvy for mTNBC 4,600 ( 63 ) — 4,537 — — — —

Other 1,377 ( 540 ) ( 1 ) 836 1,098 ( 454 ) ( 6 ) 638

Intangible asset - axicabtagene ciloleucel (1)

7,110 ( 1,501 ) — 5,609 6,200 ( 1,105 ) — 5,095

Intangible asset - Trodelvy (2)

5,630 ( 507 ) — 5,123 4,600 ( 63 ) — 4,537

Intangible asset - Hepcludex 845 ( 72 ) — 773 — — — —

1,610 ( 650 ) 1 961 1,377 ( 540 ) ( 1 ) 836

Total finite-lived assets 25,915 ( 8,381 ) 1 17,535 22,897 ( 6,660 ) ( 1 ) 16,236

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________________________________

(1) Includes indefinite-lived assets - IPR&D recognized as part of the Immunomedics acquisition in October 2020.

Acquisitions for additional information.

(1) Gross carrying amount as of December 31, 2021 includes $ 910 million reclassified in the first quarter of 2021 from indefinite-lived assets - IPR&D following the March 2021 FDA approval of Yescarta for the treatment of adult patients with relapsed or refractory follicular lymphoma.

(2) Gross carrying amount as of December 31, 2021 includes Trodelvy for metastatic TNBC and Trodelvy for use in adult patients with locally advanced or metastatic UC.

The amount related to UC of $ 1.0 billion was reclassified to finite-lived assets from indefinite-lived assets - IPR&D upon the accelerated approval by FDA in April 2021.

(3) In October 2021, FDA granted approval of Tecartus for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia.

Accordingly, the related amount of $ 200 million was reclassified to finite-lived assets in the fourth quarter of 2021.

(4) Gross carrying amount as of December 31, 2021 includes IPR&D from our 2021 acquisition of MYR and remaining IPR&D from our 2020 acquisition of Immunomedics.

Gross carrying amount as of December 31, 2020 includes IPR&D from our 2020 acquisition of Immunomedics and remaining IPR&D from our 2017 acquisition of Kite.

Aggregate amortization expense related to finite-lived intangible assets was $ 1.7 billion, $ 1.2 billion and $ 1.1 billion for the years ended December 31, 2021, 2020 and 2019, respectively, and is primarily included in Cost of goods sold on our Consolidated Statements of Income.

Amounts capitalized as IPR&D are subject to impairment testing until the completion or abandonment of the associated R&D efforts .

During 2020, we performed quantitative impairment testing of our IPR&D intangible assets using a probability-weighted income approach that discounts expected future cash flows to present value using a discount rate of 8 %.

No IPR&D impairment charges were recorded in 2020.

During 2019, we performed quantitative impairment testing of our IPR&D intangible assets using a probability-weighted income approach that discounts expected future cash flows to present value.

The estimated net cash flows were discounted using a discount rate of 9.5 %, which is based on the estimated weighted-average cost of capital for companies with profiles similar to our profile and represents the rate that market participants would use to value the intangible assets.

During 2021, we performed a qualitative assessment of our IPR&D intangible asset obtained in connection with our first quarter 2021 acquisition of MYR and did not identify any indicators of impairment.

During 2021, 2020 and 2019, we performed quantitative impairment testing of our IPR&D intangible assets, other than the MYR asset described above, using a probability-weighted income approach that discounts expected future cash flows to present value using discount rates of 6.5 %, 8.0 % and 9.5 %, respectively .

The discount rates are based on the estimated weighted-average cost of capital for companies with profiles similar to our profile and represents the rate that market participants would use to value the intangible assets.

The discounted cash flow models used in valuing these intangible assets also require the use of Level 3 fair value measurements and inputs including estimated revenues, costs, and probability of technical and regulatory success.

In comparison to the 2018 assessment, we used lower estimated revenues in 2019 due to changes in the estimated market opportunities as new therapies or combinations of existing therapies were approved.

The lower estimated revenues reduced the fair value of the IPR&D intangible assets, primarily related to axicabtagene ciloleucel for the treatment of indolent B-cell non-Hodgkin lymphoma (“iNHL”), below carrying value resulting in the recognition of an impairment charge of $ 800 million, which was recorded within Research and development expenses on our Consolidated Statements of Income.

In 2018, we concluded that the KITE-585 program did not justify further efforts based on the totality of the clinical data gathered and discontinued the program.

As a result, the carrying value of the IPR&D relating to the KITE-585 program was written down to zero and we recorded an impairment charge of $ 820 million within Research and development expenses on our Consolidated Statements of Income.

No IPR&D impairment charges were recorded in 2021 and 2020.

During 2019, we lowered our estimated revenues related to our IPR&D intangible asset - axicabtagene ciloleucel for the treatment of indolent B-cell non-Hodgkin lymphoma due to changes in the estimated market opportunities as new therapies or combinations of existing therapies were approved.

The lower estimated revenues reduced the fair value of the IPR&D intangible assets below carrying value resulting in the recognition of an impairment charge of $ 800 million, which was recorded within Acquired in-process research and development expenses on our Consolidated Statements of Income.

The following table summarizes the estimated future amortization expense associated with our finite-lived intangible assets as of December 31, 2021:

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Accounts receivable, net $ 4,493 $ 4,892

Other Accrued Liabilities

The following table summarizes the components of Other accrued liabilities:

Accrued and other current liabilities

The following table summarizes the components of Accrued and other current liabilities:

(in millions) 2021 2020

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Allowance for sales returns 499 587

Other accrued expenses 2,287 2,051

Total $ 4,336 $ 3,074

Accrual for settlement related to bictegravir litigation (1)

Other accrued liabilities 2,930 2,287

Accrued and other current liabilities $ 6,145 $ 4,336

_______________________________

(1) See Note 14.

Commitments and Contingencies for additional information.

COLLABORATIONS AND OTHER ARRANGEMENTS

We continue to pursue licensing and strategic collaborations and other similar arrangements with third parties for, and equity investments in third parties focused on, the development and commercialization of certain products and product candidates.

We enter into licensing and strategic collaborations and other similar arrangements with third parties for the development and commercialization of certain products and product candidates.

These 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.

These arrangements may include non-refundable upfront payments, expense reimbursements or payments by us for options to 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 and cost-sharing arrangements.

Arcus Biosciences, Inc.

On May 29, 2020, we acquired 2.2 million shares of the common stock of Arcus, a publicly traded oncology-focused biopharmaceutical company, for approximately $ 61 million in a secondary equity offering.

Separately, on May 27, 2020, we entered into a transaction with Arcus, which included entry into an option, license and collaboration agreement (the “Arcus Collaboration Agreement”) and a common stock purchase agreement and an investor rights agreement (together, and as subsequently amended, the “Arcus Stock Purchase Agreements”).

Upon closing of the Arcus Collaboration Agreement and Arcus Stock Purchase Agreements, on July 13, 2020, we made an upfront payment of $ 175 million and acquired approximately 6.0 million additional shares of Arcus’ common stock for $ 200 million in accordance with the terms of the Arcus Collaboration Agreement and Arcus Stock Purchase Agreements.

Of the total $ 391 million initial cash payments made under the agreements and direct transactional costs, we recorded $ 135 million as an equity investment, which was calculated based on Arcus’ closing stock price of $ 22.67 on the closing date of the transaction.

We recorded our equity investments in Arcus in Other long-term assets on our Consolidated Balance Sheets as the investments are subject to contractual lock-up provisions for a period up to 2 years from the closing date of the agreements, subject to certain conditions.

We account for our equity investments in Arcus at fair value with changes in fair value recognized in Other income (expense), net for each reporting period.

The remaining $ 256 million was attributed to the acquired license and option rights of $ 175 million representing IPR&D assets with no alternative future use, $ 65 million of an issuance premium for the equity purchase and $ 16 million of direct transactional costs.

We also have equity investments in third parties focused on the development and commercialization of products and product candidates.

Merck & Co, Inc.

On March 13, 2021, we entered into a license and collaboration agreement with Merck Sharp & Dohme Corp., a subsidiary of Merck to jointly develop and commercialize long-acting investigational treatments in HIV that combine Gilead’s investigational capsid inhibitor, lenacapavir, and Merck’s investigational nucleoside reverse transcriptase translocation inhibitor, islatravir.

The collaboration will initially focus on long-acting oral and injectable formulations.

Under the terms of the agreement, Gilead and Merck will share global development and commercialization costs at 60 % and 40 %, respectively, across the oral and injectable formulation programs.

For long-acting oral products, if approved, Gilead would lead commercialization in the United States, and Merck would lead commercialization in the European Union (“EU”) and rest of the world.

For long-acting injectable products, if approved, Merck would lead commercialization in the United States and Gilead would lead commercialization in the EU and rest of the world.

Under the terms of the agreement, Gilead and Merck would jointly promote the combination products in the United States and certain other major markets.

If successful, we would share global product revenues with Merck equally until product revenues surpass certain pre-determined per formulation revenue tiers.

Upon passing $ 2.0 billion in net product sales for the oral combination in a given calendar year, our share of revenue would increase to 65 % for any revenues above the threshold for such calendar year.

Upon passing $ 3.5 billion in net product sales for the injectable combination in a given calendar year, our share of revenue will increase to 65 % for any revenues above the threshold for such calendar year.

Reimbursements of research and development costs to or from Merck are recorded within Research and development expenses on our Consolidated Statements of Income.

Expenses recognized under the agreement were not material for the year ended December 31, 2021.

No revenues have been recognized under the agreement for the year ended December 31, 2021.

We will also have the option to license certain of Merck’s investigational oral integrase inhibitors to develop in combination with lenacapavir.

Reciprocally, Merck will have the option to license certain of Gilead’s investigational oral integrase inhibitors to develop in combination with islatravir.

Each company may exercise its option for such investigational oral integrase inhibitor of the other company within the first five years after execution of the agreement, following completion of the first Phase 1 clinical trial of that integrase inhibitor.

Upon exercise of an option, the companies will split development costs and revenues, unless the non-exercising company decides to opt-out, in which case the non-exercising company will be paid a royalty.

In December 2021, Merck announced the decision of the parties to stop all dosing of participants in the Phase 2 clinical study evaluating an oral-weekly combination treatment regimen of lenacapavir and islatravir following the decision of FDA to place clinical holds on the investigational new drug applications for certain formulations of islatravir.

On May 27, 2020, we entered into a transaction with Arcus, a publicly traded oncology-focused biopharmaceutical company, which included entry into an option, license and collaboration agreement (the “Collaboration Agreement”) and a common stock purchase agreement and an investor rights agreement (together, and as subsequently amended the “Stock Purchase Agreements”).

In accordance with the terms of the Collaboration Agreement and Stock Purchase Agreements, which closed on July 13, 2020, we made an upfront payment of $ 175 million and acquired approximately 6.0 million shares of Arcus common stock for approximately $ 200 million.

Of the total $ 391 million initial cash payments, including transactional costs, made under the agreements, we recorded $ 135 million as an equity investment which was calculated based on Arcus’ closing stock price on the closing date of the transaction.

The remaining $ 256 million was attributed to (i) the acquired license and option rights of $ 175 million representing IPR&D assets with no alternative future use, (ii) $ 65 million of an issuance premium for the equity purchase and (iii) $ 16 million of direct transactional costs.

These amounts were expensed as Acquired in-process research and development expenses during the year ended December 31, 2020 on our Consolidated Statements of Income.

In an event subsequent to December 31, 2020, on January 31, 2021, we amended and restated the common stock purchase agreement, pursuant to which we acquired approximately 5.7 million additional shares of Arcus’ common stock for $ 220 million on February 8, 2021.

As a result, combined with our existing share holdings, we own 13.8 million shares of Arcus, representing approximately 19.5 % of the issued and outstanding voting stock of Arcus immediately following the closing of the transaction.

Gilead has the right to opt-in to all current and future investigational product candidates that emerge from Arcus’ research portfolio for the ten years following the closing of the transaction.

Upon our exercise of an option for a program, unless Arcus opts out according to the terms of the Arcus Collaboration Agreement, the companies will co-develop and share global development costs and co-commercialize and share profits in the U.S.

We will obtain exclusive rights to commercialize any optioned programs outside of the U.S., subject to any rights of Arcus’ existing partners, for which we will pay to Arcus tiered royalties ranging from the high teens to the low twenties on net sales.

Under the Arcus Collaboration Agreement, subject to certain limited exceptions, we are required to provide $ 100 million to Arcus on the second anniversary of the agreement and may pay an additional $ 100 million at our option on each of the fourth, sixth, and eighth anniversaries of the agreement, unless terminated early, as ongoing research and development support to extend our collaboration term to up to 10 years.

Accordingly, during the year ended December 31, 2020, we recorded a $ 100 million charge representing the contractually committed payment in Acquired in-process research and development expenses on our Consolidated Statements of Income.

Under the Arcus Collaboration Agreement, we will potentially provide up to $ 1.2 billion in opt-in and milestone payments with respect to current clinical product candidates, if and when such payments are triggered under the Arcus Collaboration Agreement.

Under the Arcus Stock Purchase Agreements, we have the right to purchase additional shares of Arcus from Arcus over the next five years , up to a maximum of 35 % of the outstanding voting stock.

Under the Stock Purchase Agreements, we have the right to purchase additional shares of Arcus from Arcus over the five-year period beginning on the closing of the Stock Purchase Agreements, up to a maximum of 35 % of the outstanding voting stock.

We are subject to a three-year standstill, restricting our ability to acquire voting stock of Arcus exceeding more than 35 % of the then-issued and outstanding voting stock of Arcus, subject to certain exceptions.

Additionally, we agreed not to dispose of any equity securities of Arcus prior to the second anniversary of the closing of the Arcus Stock Purchase Agreements without the prior consent of Arcus, subject to certain exceptions.

On June 19, 2020, we entered into a transaction with Pionyr, a privately held company pursuing novel biology in the field of immuno-oncology, which included entry into two separate merger agreements, one contemplating the initial acquisition of 49.9 % equity interest in Pionyr, and the other providing us the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Pionyr (together, the “Pionyr Merger and Option Agreements”) and a research and development service agreement.

On July 13, 2020, we closed the transaction with Pionyr and paid $ 269 million in cash and accrued an additional $ 6 million payable, subject to certain customary adjustments, to Pionyr’s shareholders in accordance with the terms of the Pionyr Merger and Option Agreements.

Additionally, we agreed not to dispose of any equity securities of Arcus prior to the second anniversary of the closing of the Stock Purchase Agreements without the prior consent of Arcus, subject to certain exceptions.

On May 29, 2020, in a separate secondary equity offering, we acquired 2.2 million shares of common stock of Arcus for approximately $ 61 million.

In the first quarter of 2021, we also acquired approximately 5.7 million additional shares of Arcus common stock for $ 220 million.

As a result, we currently own a total of 13.8 million shares of Arcus, which represented approximately 19.5 % of the issued and outstanding voting stock of Arcus immediately following the closing of the first quarter 2021 transaction.

Pursuant to the Collaboration Agreement, Gilead had the right to opt in to all current and future clinical-stage product candidates for up to ten years following the closing of the transaction.

In November 2021, we exercised our options to three of Arcus’ clinical stage programs and amended the Collaboration Agreement.

The option exercise and amendment transaction closed in December 2021, triggering collaboration opt-in payments of $ 725 million and waiving the $ 100 million option continuation payment which would have been due to Arcus in the third quarter of 2022.

The net option charge of $ 625 million was recorded within Research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2021.

The collaboration opt-in payments of $ 725 million were recorded in Accrued and other current liabilities on our Consolidated Balance Sheets as of December 31, 2021 and paid to Arcus in January 2022.

Our payments to Arcus will be included within Net cash provided by investing activities on our Consolidated Statements of Cash Flows in the first quarter of 2022.

Under the amended Collaboration Agreement, the companies will co-develop and share the global costs related to these clinical programs.

If the optioned molecules achieve regulatory approval, the companies will co-commercialize and equally share profits in the U.S.

Gilead will hold exclusive commercialization rights outside the U.S., subject to any rights of Arcus’s existing collaboration partners, and will pay to Arcus tiered royalties as a percentage of net sales ranging from the mid-teens and low twenties.

Under the Collaboration Agreement, we may also pay an additional $ 100 million at our option on each of the fourth, sixth and eighth anniversaries of the agreement, unless terminated early, to maintain the rights to opt-in to future Arcus programs for the duration of the contact term.

We elected and applied the fair value option to account for our equity investment in Arcus whereby the investment is marked to market each reporting period based on the market price of Arcus shares.

We believe the fair value option best reflects the underlying economics of the investment.

During the years ended December 31, 2021 and 2020, we recorded pre-tax unrealized gains of $ 127 million and $ 80 million, respectively, related to our investment in Arcus in Other income (expense), net on our Consolidated Statements of Income.

We initially recorded our equity investments in Arcus in Other long-term assets on our Consolidated Balance Sheets as the investments were subject to contractual lock-up provisions for a period of two years from the closing date of the Stock Purchase Agreements, subject to certain conditions.

In the third quarter of 2021, we reclassified our equity investments in Arcus to Prepaid and other current assets on our Consolidated Balance Sheets as the contractual lock-up provisions are expected to expire in July 2022.

Our equity investment in Arcus was $ 559 million and $ 212 million as of December 31, 2021 and 2020, respectively.

On June 19, 2020, we entered into a transaction with Pionyr, a privately held company pursuing novel biology in the field of immuno-oncology, which included entry into two separate merger agreements, one contemplating the initial acquisition of a 49.9 % equity interest in Pionyr, and the other providing us the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Pionyr (together, the “Pionyr Merger and Option Agreements”) and a research and development service agreement.

On July 13, 2020, we closed the transaction and made cash payments of $ 269 million.

We account for our investment in Pionyr using the equity method of accounting because our equity interest provides us with the ability to exercise significant influence over Pionyr.

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We determined that the resulting basis difference primarily relates to Pionyr’s IPR&D which has no alternative future use and that Pionyr is not a business as defined in ASC 805, “Business Combinations.” As a result, we immediately recorded a charge for this basis difference of $ 215 million in Acquired in-process research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2020.

The carrying value of our equity method investment in Pionyr was zero as of December 31, 2021 and 2020.

The estimated fair value of our exclusive option to acquire the remaining outstanding capital stock of Pionyr is approximately $ 70 million based on a probability-weighted option pricing model using unobservable inputs, which are considered Level 3 under the fair value measurement and disclosure guidance.

The estimated amount was recorded in Other long-term assets on our Consolidated Balance Sheets.

From the first anniversary of the closing date, we may choose to exercise our exclusive option to purchase the remaining equity interest from Pionyr’s current shareholders for a $ 315 million option exercise fee and up to $ 1.2 billion in potential future milestone payments upon achievement of certain development and regulatory milestones, in each case subject to certain negotiated adjustments.

The estimated amount is recorded in Other long-term assets on our Consolidated Balance Sheets.

We may choose to exercise our exclusive option to purchase the remaining equity interest from Pionyr’s current shareholders for a $ 315 million option exercise fee and up to $ 1.2 billion in potential future milestone payments upon achievement of certain development and regulatory milestones.

Such option to purchase will expire following the earliest occurrence of specified events, including the delivery of data following completion of certain Phase 1b trials by Pionyr.

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In addition, we committed to provide additional payments of up to $ 115 million to Pionyr upon achievement of certain development milestones.

We accrued $ 70 million milestone payments, related to the initiation of two Phase-1 studies, with a charge to Research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2020.

Subsequently, in February 2021, milestone cash payments of $ 70 million were made.

We accrued $ 70 million in milestone payments, related to the initiation of two Phase 1 studies, with a charge to Research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2020, and the payment was made in the first quarter of 2021.

On July 17, 2020, we entered into a transaction with Tizona, a privately held company developing cancer immunotherapies, which included entry into two separate merger agreements, one contemplating the initial acquisition of a 49.9 % equity interest in Tizona, and the other providing us the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Tizona (together, the “Tizona Merger and Option Agreements”) and a development agreement.

On August 25, 2020, we closed the transaction with Tizona and paid $ 302 million in cash to Tizona’s shareholders in accordance with the terms of the Tizona Merger and Option Agreements.

On August 25, 2020, we closed the transaction with Tizona and made cash payments of $ 302 million to Tizona’s shareholders in accordance with the terms of the Tizona Merger and Option Agreements.

We account for our investment in Tizona using the equity method of accounting because our equity interest provides us with the ability to exercise significant influence over Tizona.

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We determined that the resulting basis difference primarily relates to Tizona’s IPR&D with no alternative future use and that Tizona is not a business as defined in ASC 805, “Business Combinations.” As a result, during the year ended December 31, 2020, we immediately recorded a charge for this basis difference of $ 272 million in Acquired in-process research and development expenses on our Consolidated Statements of Income.

The carrying value of our equity method investment in Tizona was zero as of December 31, 2021 and 2020.

The estimated fair value of our exclusive option to acquire the remaining outstanding capital stock of Tizona is approximately $ 41 million based on a probability-weighted option pricing model using unobservable inputs, which are considered Level 3 under the fair value measurement and disclosure guidance.

The estimated amount was recorded in Other long-term assets on our Consolidated Balance Sheets.

From the first anniversary of the closing date, we may choose to exercise our exclusive option to purchase the remaining equity interest from Tizona’s current shareholders for up to $ 1.3 billion, including an option fee and potential future milestone payments upon achievement of certain development and regulatory milestones, in each case subject to certain negotiated adjustments.

The estimated amount is recorded in Other long-term assets on our Consolidated Balance Sheets.

We may choose to exercise our exclusive option to purchase the remaining equity interest from Tizona’s current shareholders for a $ 100 million option exercise fee and up to $ 1.2 billion in potential future milestone payments upon achievement of certain development and regulatory milestones.

Such option to purchase will expire following the earliest occurrence of specified events, including the delivery of data following completion of certain Phase 1b trials by Tizona.

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On August 17, 2020, we entered into a transaction with Tango, a privately held company pursuing innovative targeted immune evasion therapies for patients with cancer through its proprietary, CRISPR-enabled functional genomics target discovery platform, which included entry into an amended and restated research collaboration and license agreement and a stock purchase agreement (together, the “Tango Collaboration and Stock Purchase Agreements”).

Upon entering into this transaction, we made an upfront payment of $ 125 million and a $ 20 million equity investment in Tango, representing approximately 7 % of the issued and outstanding voting stock of Tango immediately following the transaction, in accordance with the terms of the Tango Collaboration and Stock Purchase Agreements.

Upon entering into this transaction, we made an upfront payment of $ 125 million and a $ 20 million equity investment in Tango.

During the year ended December 31, 2020, we recorded the $ 125 million upfront expense in Acquired in-process research and development expenses on our Consolidated Statements of Income.

Our equity investment in Tango is recorded at cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of Tango.

In the third quarter of 2021, we made an additional $ 13 million equity investment.

Tango became a publicly traded company in the third quarter of 2021, and accordingly our equity investment is recorded in Prepaid and other current assets on our Consolidated Balance Sheets at fair market value as of December 31, 2021.

Under the Tango Collaboration and Stock Purchase Agreements, Gilead has the right to option up to 15 programs over the seven-year collaboration for up to $ 410 million per program in opt-in, extension and milestone payments.

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On September 1, 2020, we entered into a transaction with Jounce, a publicly traded company developing novel cancer immunotherapies, which included entry into license, registration rights and stock purchase agreements (together, “Jounce License and Stock Purchase Agreement”).

In October 2020, we closed this transaction and made a total payment of $ 120 million in accordance with the terms of the Jounce License and Stock Purchase Agreement and recorded $ 56 million as an equity investment in Other long-term assets on our Consolidated Balance Sheets, representing approximately 14 % of the issued and outstanding voting stock of Jounce immediately following the transaction, which was calculated based on Jounce’s closing stock price of $ 10.06 on the closing date of the transaction.

During the year ended December 31, 2020, we recorded $ 64 million upfront expense in Acquired in-process research and development expenses on our Consolidated Statements of Income.

In addition, we will provide up to $ 685 million in future potential clinical, regulatory and commercial milestone payments upon achievement of certain milestones, and pay Jounce royalties ranging from high single digit to mid-teens based upon worldwide sales, subject to certain adjustments.

In October 2020, we closed this transaction and made a total payment of $ 120 million.

We recorded $ 64 million upfront expense in Acquired in-process research and development expenses on our Consolidated Statements of Income and $ 56 million as an equity investment in Other long-term assets on our Consolidated Balance Sheets, representing approximately 14 % of the issued and outstanding voting stock of Jounce immediately following the transaction, which was calculated based on Jounce’s closing stock price on the closing date of the transaction.

As of December 31, 2021, Jounce was eligible to receive from us up to $ 660 million in future potential clinical, regulatory and commercial milestone payments upon achievement of certain milestones, and royalties ranging from high single digit to mid-teens based upon worldwide sales, subject to certain adjustments.

Filgotinib Collaboration

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Upon closing, we made an upfront license fee payment and an equity investment in Galapagos by subscribing for 6.8 million new ordinary shares of Galapagos at a price of € 58 per share.

The equity investment, net of issuance premium, was $ 357 million.

We amended the terms of the filgotinib agreement in 2019 and then in 2020 agreed to amend the terms further.

We amended the terms of the agreement in 2019, 2020 and 2021.

Under the terms of the filgotinib agreement, as amended in 2019 (the “2019 Agreement”), we obtained an exclusive, worldwide, royalty-bearing, sublicensable license for filgotinib and products containing filgotinib.

As of December 31, 2019, Galapagos was eligible to receive from us potential future development and regulatory milestone-based payments of up to $ 640 million, sales-based milestone payments of up to $ 600 million, plus tiered royalties on global net sales ranging from 20 % to 30 %, with the exception of certain co-commercialization territories where profits would be shared equally.

The co-commercialization territories were the UK, Germany, France, Italy, Spain, Belgium, the Netherlands and Luxembourg.

We shared global development costs for filgotinib equally.

Termination of the agreement could be on a country-by-country basis and depends on the circumstances, including expiration of royalty term or in the co-commercialization territories, sale of a generic product, or material breach by either party.

We could also terminate the entire agreement without cause following a certain period.

In December 2020, following a Type A meeting with FDA to discuss the points raised in the Complete Response Letter related to the New Drug Application for filgotinib in the treatment of rheumatoid arthritis, Gilead and Galapagos agreed to amend the 2019 Agreement where Galapagos will assume development, manufacturing, commercialization and certain other rights for filgotinib in Europe.

Through a phased transition including the transfer of filgotinib’s marketing authorization to Galapagos, the parties intend to transfer most activities by December 31, 2021 and complete the transition by December 31, 2022.

The transfer will be subject to applicable local legal, regulatory and consultation requirements.

Beginning on January 1, 2021, Galapagos bears the development costs for certain studies, in lieu of the equal cost split contemplated by the 2019 Agreement.

All commercial economics on filgotinib in Europe will transfer to Galapagos as of January 1, 2022, subject to payment of tiered royalties of 8 % to 15 % of net sales in Europe to Gilead, starting in 2024.

In December 2020, following a Type A meeting with FDA to discuss the points raised in the Complete Response Letter related to the New Drug Application for filgotinib in the treatment of rheumatoid arthritis, Gilead and Galapagos agreed to amend the 2019 Agreement to allow Galapagos to assume development, manufacturing, commercialization and certain other rights for filgotinib in Europe which the parties reflected in an amendment to the 2019 Agreement in December 2021.

Beginning on January 1, 2021, Galapagos bore the development costs for certain studies, in lieu of the equal cost split contemplated by the 2019 Agreement.

The parties transferred filgotinib’s marketing authorizations in the EU and Great Britain to Galapagos in December 2021.

As of January 1, 2022, all commercial economics on filgotinib in Europe transferred to Galapagos, subject to payment of tiered royalties of 8 % to 15 % of net sales in Europe to Gilead, starting in 2024.

In connection with the amendments to the 2019 Agreement, Gilead agreed to irrevocably pay Galapagos € 160 million (or approximately $ 190 million ) , which is subject to certain adjustments for higher-than-budgeted development costs.

Of this total amount, Gilead paid € 35 million (or approximately $ 42 million) in January 2021 and will pay an additional € 75 million (or approximately $ 89 million) in 2021 and will pay € 50 million (or approximately $ 60 million) in 2022.

Of this total amount, Gilead paid € 35 million (or approximately $ 43 million) in January 2021 and paid an additional € 75 million (or approximately $ 88 million) in April 2021 and will pay € 50 million (or approximately $ 60 million) in 2022.

We accrued the full amount of this liability with a charge to Research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2020.

In addition, Galapagos will no longer be eligible to receive any future milestone payments relating to filgotinib in Europe.

For the periods presented, the payments between Galapagos and us for the development costs and milestones were not material.

Global Collaboration

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In 2019, we exercised a warrant to subscribe for 2.6 million ordinary shares of Galapagos at € 140.59 per share and purchased shares on the open market with an aggregate fair value of $ 586 million, which brought the number of shares owned by us to 16.7 million or approximately 25.8 % of the shares then issued and outstanding.

In 2019, our equity investment in Galapagos was initially classified as Other long-term assets on our Consolidated Balance Sheets as it is subject to contractual lock-up provisions.

We are subject to a 10-year standstill restricting our ability to acquire voting securities of Galapagos exceeding more than 29.9 % of the then-issued and outstanding voting securities of Galapagos.

We agreed not to, without the prior consent of Galapagos, dispose of any equity securities of Galapagos prior to the second anniversary of the closing of the Galapagos Subscription Agreement or dispose of any equity securities of Galapagos thereafter until the fifth anniversary of the closing of the Galapagos Subscription Agreement, if after such disposal we would own less than 20.1 % of the then-issued and outstanding voting securities of Galapagos, subject to certain exceptions and termination events.

In April 2021, we amended the Galapagos Subscription Agreement to extend the initial lock-up provision for certain Galapagos shares from August 2021 to August 2024.

We have two designees appointed to Galapagos’ board of directors.

As the initial contractual lock-up provision for certain Galapagos shares will expire in August 2021, the corresponding equity investment balance of $ 351 million was included within Prepaid and other current assets on our Consolidated Balance Sheets as of December 31, 2020.

At December 31, 2020 and 2019, Gilead’s total investment balance in Galapagos was $ 1.65 billion and $ 3.48 billion, respectively.

The initial contractual lock-up provision for certain Galapagos shares was due to expire in August 2021.

As such, $ 351 million was included within Prepaid and other current assets on our Consolidated Balance Sheets and the remainder of $ 1.3 billion was included within Other long-term assets on our Consolidated Balance Sheets as of December 31, 2020.

Subsequent to the extension of the contractual lock-up period, all of our equity investment in Galapagos was classified to Other long-term assets on our Consolidated Balance Sheets, and was $ 931 million as of December 31, 2021.

We have elected the fair value option to account for our equity investment in Galapagos whereby the investment is marked to market through earnings each reporting period based on the market price of Galapagos’ shares.

We believe the fair value option best reflects the underlying economics of the investment.

During the year ended December 31, 2020, we recorded a pre-tax unrealized loss of $ 1.83 billion related to our investment in Galapagos in Other income (expense), net on our Consolidated Statements of Income due to a decline in Galapagos’ stock price.

Fair Value Measurements for additional information.

Under the Galapagos Collaboration Agreement, we have an exclusive license for the development and commercialization of GLPG-1690, a Phase 3 candidate for idiopathic pulmonary fibrosis, in our territories and have an option to participate in the development and commercialization of Galapagos’ other current and future clinical programs that have entered clinical development during the first ten years of the collaboration, subject to extension in certain circumstances.

We may exercise our option for a program after the receipt of a data package from a completed, qualifying Phase 2 study for such program (or, in certain circumstances, the first Phase 3 study).

If GLPG-1690 receives marketing approval in the U.S., we will pay Galapagos $ 325 million as well as tiered royalties described below.

During the years ended December 31, 2021, 2020 and 2019, we recorded pre-tax unrealized losses of $ 717 million and $ 1.8 billion and a pre-tax unrealized gain of $ 1.2 billion, respectively, related to our investment in Galapagos in Other income (expense), net on our Consolidated Statements of Income due to changes in Galapagos’ stock price.

Under the Galapagos Collaboration Agreement, we had an exclusive license for the development and commercialization of GLPG-1690, a late-stage candidate for idiopathic pulmonary fibrosis, in our territories and had an option to participate in the development and commercialization of Galapagos’ other current and future clinical programs that have entered clinical development during the first ten years of the collaboration, subject to extension in certain circumstances.

Gilead and Galapagos terminated the Phase 3 clinical studies with GLPG-1690 in February 2021.

With respect to all other programs in Galapagos’ current and future pipeline, if we exercise our option to a program, we will pay a $ 150 million option exercise fee per program.

In addition, Galapagos will receive tiered royalties ranging from 20 % to 24 % on net sales in our territories of each Galapagos product optioned by us (including GLPG-1690).

In addition, Galapagos will receive tiered royalties ranging from 20 % to 24 % on net sales in our territories of each Galapagos product optioned by us.

If we exercise our option for a program, the parties will share equally in development costs and mutually agreed commercialization costs incurred subsequent to our exercise of the option.

Galapagos retains exclusive commercialization rights for the optioned programs in the European Union, the UK, Iceland, Norway, Lichtenstein and Switzerland, and we have exclusive commercialization rights for all other countries globally.

We may terminate the collaboration in its entirety or on a program-by-program and country-by-country basis with advance notice as well as following other customary termination events.

In 2020, Galapagos delivered to us a data package with respect to our option to participate in the development and commercialization of GLPG-1972, a Phase 2b candidate for osteoarthritis, under the Galapagos Collaboration Agreement, which we declined to exercise in November 2020.

In addition, Gilead and Galapagos announced the decision to halt the ISABELA Phase 3 clinical studies with GLPG-1690 in February 2021.

Complera/Eviplera and Odefsey

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This combination was approved in the U.S.

and European Union in 2011 and is sold under the brand name Complera in the U.S.

and Eviplera in the European Union.

and EU in 2011 and is sold under the brand name Complera in the U.S.

and Eviplera in the EU.

The agreement was amended in 2014 to expand the collaboration to include another product containing Janssen’s rilpivirine and our emtricitabine and tenofovir alafenamide (“Odefsey”).

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We retain a specified percentage of Janssen’s share of revenues, including up to 30 % in major markets.

Sales of these products are included in Product sales and Janssen’s shares of revenues are included in Cost of goods sold on our Consolidated Statements of Income.

Cost of goods sold relating to Janssen’s shares were $ 570 million, $ 574 million and $ 608 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Termination of the agreement may be on a product or country basis and will depend on the circumstances, including withdrawal of a product from the market, material breach by either party or expiry of revenue share payment term.

Sales of these products are included in Product sales and Janssen’s share of revenues is included in Cost of goods sold on our Consolidated Statements of Income.

Cost of goods sold relating to Janssen’s share was $ 530 million, $ 570 million and $ 574 million for the years ended December 31, 2021, 2020 and 2019, respectively.

We may terminate the agreement without cause with respect to the countries where we sell the products, in which case Janssen has the right to become the selling party for such country if the product has launched but has been on the market for fewer than 10 years.

In 2014, we amended a license and collaboration agreement with Janssen to develop and commercialize a fixed-dose combination of Janssen’s darunavir and our cobicistat, emtricitabine and tenofovir alafenamide.

This combination was approved in the U.S.

and European Union in July 2018 and September 2017, respectively, and is sold under the brand name Symtuza.

and EU in July 2018 and September 2017, respectively, and is sold under the brand name Symtuza.

Under the terms of the 2014 amendment, we granted Janssen an exclusive license to Symtuza worldwide.

Janssen is responsible for manufacturing, registration, distribution and commercialization of Symtuza worldwide.

We are responsible for the intellectual property related to cobicistat, emtricitabine and tenofovir alafenamide (“Gilead Compounds”) and are the exclusive supplier of the Gilead Compounds.

We are responsible for the intellectual property related to the Gilead Compounds and are the exclusive supplier of the Gilead Compounds.

Neither party is restricted from combining its drugs with any other drug products except those which are similar to the components of Symtuza.

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We record our share of the Symtuza revenue as Product sales on our Consolidated Statements of Income primarily because we supply the Gilead Compounds to Janssen for Symtuza.

Revenues for additional information on revenue recognized for the periods presented.

Janssen may terminate the agreement without cause on a country-by-country basis, in which case Gilead has the right to become the selling party for such country(ies) if the product has launched but has been on the market for fewer than 10 years.

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(“Japan Tobacco”)

In 2005, Japan Tobacco granted us exclusive rights to develop and commercialize elvitegravir, a novel HIV integrase inhibitor, in all countries of the world, excluding Japan, where Japan Tobacco retained such rights and paid a royalty to us based on its product sales in Japan.

Under the agreement, we are responsible for seeking regulatory approval in our territories and are required to use diligent efforts to commercialize elvitegravir for the treatment of HIV infection.

Effective December 2018, we entered into an agreement with Japan Tobacco to acquire the rights to market and distribute certain products in our HIV portfolio in Japan and to expand our rights to develop and commercialize elvitegravir to include Japan.

We are responsible for the marketing of the products as of January 1, 2019.

We are responsible for seeking regulatory approval in our territories and are required to use diligent efforts to commercialize elvitegravir for the treatment of HIV infection.

We bear all costs and expenses associated with such commercialization efforts and pay a royalty to Japan Tobacco based on our product sales.

Japan Tobacco also marketed and distributed certain other products in our HIV portfolio in Japan and paid a royalty to us based on these product sales.

We received approval for Stribild and Genvoya (elvitegravir-containing products) in 2012 and 2015, respectively.

Our sales of these products are included in Product sales.

Royalties due to Japan Tobacco based on our product sales are included in Cost of goods sold.

Royalties due from Japan Tobacco based on its product sales in Japan are included in Royalty, contract and other revenues on our Consolidated Statements of Income.

Our sales of these products are included in Product sales on our Consolidated Statements of Income.

Royalties due to Japan Tobacco are included in Cost of goods sold on our Consolidated Statements of Income.

Royalty expenses recognized were $ 250 million, $ 291 million and $ 358 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Royalty income recognized was not material for the periods presented.

Effective in December 2018, we entered into an agreement with Japan Tobacco to acquire the rights to market and distribute certain products in our HIV portfolio in Japan and to expand our rights to develop and commercialize elvitegravir to include Japan.

We are responsible for the marketing of the products as of January 1, 2019.

Under the terms of the agreement, we paid Japan Tobacco $ 559 million in cash, of which $ 194 million was paid as an upfront payment in 2018, and the remaining $ 365 million was paid in 2019.

We recognized an intangible asset of $ 550 million reflecting the estimated fair value of the marketing-related rights acquired from Japan Tobacco with the remaining $ 9 million recorded as Prepaid and other current assets on our Consolidated Balance Sheets.

Under the terms of the 2018 agreement, we paid Japan Tobacco $ 559 million in cash and recognized an intangible asset of $ 550 million reflecting the estimated fair value of the marketing-related rights acquired from Japan Tobacco.

The intangible asset is being amortized over nine years , representing the period over which the majority of the benefits are expected to be derived from the applicable products in our HIV portfolio.

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The net loss from the deconsolidation was not material.

Bristol-Myers Squibb Company (“BMS”)

North America

We had a collaboration arrangement with BMS to develop and commercialize a single tablet regimen containing our Truvada and BMS’s Sustiva (efavirenz) in the U.S.

This combination is sold under the brand name Atripla.

We and BMS structured this collaboration as a joint venture that operated as a limited liability company, which we consolidated.

On December 31, 2017, we terminated BMS’s participation in the collaboration following the launch of a generic version of Sustiva in the U.S.

and became the sole owner of the joint venture.

BMS is not permitted to commercialize Atripla in the U.S.

and Canada but is entitled to receive from us certain fees based on net sales of Atripla in 2018, 2019 and 2020 on a declining annual scale.

BMS supplies Sustiva to us at cost plus a markup during this three-year period but may terminate the supply agreement after a notice period.

BMS notified us of their voluntary termination of the supply agreement in 2019.

For the years ended December 31, 2020, 2019 and 2018, we recorded $ 19 million, $ 58 million and $ 198 million, respectively, of fee expenses within Cost of goods sold on our Consolidated Statements of Income.

Gilead Sciences Ireland UC, our wholly-owned subsidiary, and BMS have a collaboration agreement which sets forth the terms and conditions under which we and BMS commercialize and distribute Atripla in the European Union, Iceland, Liechtenstein, Norway and Switzerland (collectively, the “European Territory”).

The parties formed a limited liability company which we consolidate, to manufacture Atripla for distribution in the European Territory using efavirenz that it purchases from BMS at BMS’s estimated net selling price of efavirenz in the European Territory.

The parties also formed a limited liability company to hold the marketing authorization for Atripla in the European Territory.

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 manufacturing, product distribution, inventory management and warehousing and have primary responsibility for regulatory activities.

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.

As of December 31, 2020 and 2019, efavirenz purchased from BMS at BMS’s estimated net selling price of efavirenz in the European Territory was included in Inventories on our Consolidated Balance Sheets.

In September 2019, BMS elected to voluntarily terminate the agreement effective March 31, 2020.

Post termination, BMS is not permitted to commercialize Atripla in the European territory but is entitled to receive from us certain fees based on net sales of Atripla on a declining annual scale for a three-year period following the effective date of the termination.

Other Collaboration Arrangements That Are Not Individually Significant

During 2020, 2019 and 2018, we entered into several other collaborative, equity investments and licensing arrangements as well as other similar arrangements that we do not consider to be individually material.

During 2021, 2020 and 2019, we entered into several collaborations, equity investments and licensing arrangements as well as other similar arrangements that we do not consider to be individually material.

We recorded upfront collaboration expenses related to these arrangements of $ 177 million, $ 129 million and $ 331 million for the years ended December 31, 2021, 2020 and 2019, respectively, within Acquired in-process research and development expenses on our Consolidated Statements of Income.

Cash payments made related to our equity investments for the years ended December 31, 2020, 2019 and 2018 were $ 72 million, $ 118 million and $ 156 million, respectively, which were primarily recorded within Prepaid and other current assets and Other long-term assets on our Consolidated Balance Sheets.

Cash payments for our equity investments, other than those noted above, during the years ended December 31, 2021, 2020 and 2019 were $ 147 million, $ 72 million and $ 118 million, respectively, which were primarily recorded within Prepaid and other current assets and Other long-term assets on our Consolidated Balance Sheets.

Under the financial terms of these arrangements, we may be required to make payments upon achievement of various developmental, regulatory and commercial milestones, which could be significant.

Future milestone payments, if any, will be reflected in our Consolidated Statements of Income when the corresponding events become probable.

In connection with the regulatory approvals, milestone payments made were capitalized as intangible assets and are being amortized to Cost of goods sold through the terms of these collaboration arrangements.

In connection with the regulatory approvals, milestone payments made will be capitalized as intangible assets and will be amortized to Cost of goods sold through the terms of these collaboration arrangements.

In addition, we may be required to pay significant royalties on future sales if products related to these arrangements are commercialized.

The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.

The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty.

DEBT AND CREDIT FACILITIES

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Type of Borrowing Issue Date Due Date Interest Rate 2021 2020

Senior Unsecured November 2014 February 2020 2.35 % $ — $ 500

Senior Unsecured September 2015 September 2020 2.55 % — 1,999

Senior Unsecured March 2011 April 2021 4.50 % $ — $ 1,000

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Total long-term debt, net $ 25,179 $ 28,645

Senior Unsecured Notes

In September 2020, we issued senior unsecured notes consisting of (i) $ 500 million principal amount of floating rate notes due September 2021 and $ 500 million principal amount of floating rate notes due September 2023 (together, the “Floating Rate Notes”);

and (ii) $ 2.0 billion principal amount of 0.75 % senior notes due September 2023, $ 750 million principal amount of 1.20 % senior notes due October 2027, $ 1.0 billion principal amount of 1.65 % senior notes due October 2030, $ 1.0 billion principal amount of 2.60 % senior notes due October 2040 and $ 1.5 billion principal amount of 2.80 % senior notes due October 2050, the terms of which are summarized in the table above.

In February 2020, we repaid at maturity $ 500 million of principal balance related to our 2014 senior unsecured notes.

In September 2020, we repaid at maturity $ 2.0 billion principal balance related to our 2015 senior unsecured notes.

In 2019, we repaid $ 2.75 billion of our senior unsecured notes upon maturity.

In January 2021, we repaid $ 1.0 billion of senior unsecured notes prior to the April 2021 maturity.

Senior Unsecured Notes and Term Loan Facility

In 2021, we repaid $ 4.75 billion of debt, consisting of $ 3.75 billion senior unsecured notes and $ 1.0 billion of our senior unsecured term loan facility.

We repaid $ 1.0 billion of senior unsecured notes due April 2021 in the first quarter of 2021 and $ 1.25 billion of senior unsecured notes due December 2021 in the third quarter of 2021.

Additionally, we repaid $ 500 million of senior unsecured floating rate notes due upon maturity in September 2021.

In October 2021, we exercised our option to call $ 500 million of senior unsecured floating rate notes and $ 500 million of 0.75 % senior unsecured notes, both having a final maturity date of September 2023.

These two early repayments totaling $ 1.0 billion principal amount were made in the fourth quarter of 2021.

In December 2021, we exercised our option to call $ 500 million of senior unsecured notes having a final maturity of March 2022.

The notes were repaid in February 2022.

No new debt was issued in 2021.

Our senior unsecured 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 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 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 a make-whole premium as defined in the indenture.

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In each case, accrued and unpaid interest is also required to be redeemed to the date of redemption.

The September 2023 floating rate notes also have a call feature, exercisable at our option, to redeem the notes at par, in whole, or in part, approximately two years prior to maturity.

The $ 1.5 billion of 0.75 % senior unsecured notes due September 2023 also have a call feature, exercisable at our option, to redeem the notes at par, in whole or in part, after September 2021.

In the event of the occurrence of a change in control and a downgrade in the rating of our senior unsecured notes below investment grade by Moody’s Investors Service, Inc.

and S&P Global Ratings, the holders may require us to purchase all or a portion of their notes at a price equal to 101 % of the aggregate principal amount of the notes repurchased, plus accrued and unpaid interest to the date of repurchase.

We are required to comply with certain covenants under our senior unsecured notes and as of December 31, 2020 and 2019, we were not in violation of any covenants.

Term Loan Facility

We are required to comply with certain covenants under our note indentures governing our senior unsecured notes.

As of December 31, 2021 and 2020, we were not in violation of any covenants.

In September 2020, we entered into a commitment letter with a group of institutional lenders to provide for a three-year senior unsecured term loan facility in an aggregate principal amount of $ 1.0 billion.

Pursuant to the commitment letter, in October 2020, in connection with our acquisition of Immunomedics, we entered into a term loan credit agreement (the “Term Loan Facility”) and borrowed an aggregate principal amount of $ 1.0 billion.

The Term Loan Facility contains customary representations, warranties, affirmative and negative covenants and events of default.

The Term Loan Facility bears interest at the Eurodollar Rate plus the Applicable Percentage as defined in the Term Loan Facility.

We may terminate or reduce the amount borrowed under the Term Loan Facility in whole or in part at any time without premium or penalty.

In October 2020, in connection with our acquisition of Immunomedics, we entered into a term loan credit agreement (the “Term Loan Facility”) and borrowed an aggregate principal amount of $ 1.0 billion.

In 2021, we repaid $ 1.0 billion principal amount outstanding under the Term Loan Facility which was due upon maturity in October 2023.

Liability Related to Future Royalties

In connection with our acquisition of Immunomedics, we assumed a liability related to a funding arrangement, which was originally entered into by Immunomedics and RPI, prior to the completion of our acquisition of Immunomedics.

The liability related to future royalties was primarily included in Long-term debt, net on our Consolidated Balance Sheets.

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Revolving Credit Facilities

In May 2016, we entered into a $ 2.5 billion five-year revolving credit facility agreement maturing in May 2021 (the “2016 Revolving Credit Facility”).

In June 2020, we terminated the 2016 Revolving Credit Facility.

As of December 31, 2019, there were no amounts outstanding under the 2016 Revolving Credit Facility.

In June 2020, we entered into a new $ 2.5 billion five-year revolving credit facility maturing in June 2025 (the “2020 Revolving Credit Facility”), which has terms substantially similar to the 2016 Revolving Credit Facility.

In June 2020, we terminated our $ 2.5 billion five-year revolving credit facility maturing in May 2021 (the “2016 Revolving Credit Facility”) and entered into a new $ 2.5 billion five-year revolving credit facility maturing in June 2025 (the “2020 Revolving Credit Facility”).

The 2020 Revolving Credit Facility can be used for working capital requirements and for general corporate purposes, including, without limitation, acquisitions.

As of December 31, 2020, there were no amounts outstanding under the 2020 Revolving Credit Facility.

As of December 31, 2021 and 2020, there were no amounts outstanding under the 2020 Revolving Credit facility.

The 2020 Revolving Credit Facility contains customary representations, warranties, affirmative and negative covenants and events of default.

At December 31, 2020, we were in compliance with all covenants.

As of December 31, 2021, we were in compliance with all covenants.

Loans under the 2020 Revolving Credit Facility bear interest at either (i) the Eurodollar Rate plus the Applicable Percentage, or (ii) the Base Rate plus the Applicable Percentage, each as defined in the 2020 Revolving Credit Facility agreement.

We may terminate or reduce the commitments, and may prepay any loans under the new credit facility in whole or in part at any time without premium or penalty.

We may terminate or reduce the commitments, and may prepay any loans under the credit facility in whole or in part at any time without premium or penalty.

Contractual Maturities of Financing Obligations

The following table summarizes the aggregate future principal maturities of our senior unsecured notes and Term Loan Facility as of December 31, 2020:

The following table summarizes the aggregate future principal maturities of our senior unsecured notes as of December 31, 2021:

(in millions) Amount

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Interest Expense

Interest expense on our debt and credit facilities related to the contractual coupon rates and amortization of the debt discount and issuance costs was $ 994 million, $ 1.0 billion and $ 1.1 billion in 2020, 2019 and 2018, respectively.

Interest expense on our debt and credit facilities related to the contractual coupon rates and amortization of the debt discount and issuance costs was $ 1.0 billion in 2021, 2020 and 2019.

Our operating leases consist primarily of properties and equipment for our administrative, manufacturing and R&D activities.

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As of December 31, 2021 and 2020, we did not have material finance leases.

Operating lease expense, including variable costs and short-term leases, was $ 171 million and $ 162 million in 2020 and 2019, respectively.

Operating lease expense under the prior lease accounting standard was $ 109 million in 2018.

Operating lease expense, including variable costs and short-term leases, was $ 156 million, $ 171 million and $ 162 million in 2021, 2020 and 2019, respectively.

The following table summarizes balance sheet and other information related to our operating leases:

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Right-of-use assets, net Other long-term assets $ 542 $ 646

Lease liabilities - current Other accrued liabilities $ 107 $ 99

Lease liabilities - current Accrued and other current liabilities $ 101 $ 107

Lease liabilities - noncurrent Other long-term obligations $ 489 $ 608

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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.

It is not possible to determine the outcome of these matters or, unless otherwise noted, the outcome (including in excess of any accrual) is not expected to be material, and we cannot reasonably estimate the maximum potential exposure or the range of possible loss.

We did not have any material accruals for the matters described below in our Consolidated Balance Sheets as of December 31, 2020 and 2019.

Unless otherwise noted, the outcome of these matters either is not expected to be material or is not possible to determine such that we cannot reasonably estimate the maximum potential exposure or the range of possible loss.

In the third quarter of 2021, we reversed a $ 175 million previously recorded litigation accrual following a favorable court decision for the litigation related to axicabtagene ciloleucel described below.

In the fourth quarter of 2021, we recorded an accrual of $ 1.25 billion in Accrued and other current liabilities on our Consolidated Balance Sheets for the settlement related to bictegravir litigation described below.

Litigation Related to Sofosbuvir

In 2012, we acquired Pharmasset, Inc.

Through the acquisition, we acquired sofosbuvir, a nucleotide analog that acts to inhibit the replication of the HCV.

Through the acquisition, we acquired sofosbuvir, a nucleotide analog that acts to inhibit the replication of HCV.

In 2013, we received approval from FDA for sofosbuvir, now known commercially as Sovaldi.

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We have spent, and will continue to spend, significant resources defending against these claims.

Litigation with Idenix Pharmaceuticals, Inc.

(“Idenix”), Universita Degli Studi di Cagliari (“UDSG”), Centre National de la Recherche Scientifique and L’Université Montpellier II

In 2013, Idenix, UDSG, Centre National de la Recherche Scientifique and L’Université Montpellier II sued us in the U.S.

District Court for the District of Delaware alleging that the commercialization of sofosbuvir infringes U.S.

7,608,600 (the “’600 patent”).

We prevailed at all phases of litigation concerning the ’600 patent, and in 2018, the U.S.

Supreme Court denied Idenix’s petition for certiorari.

Also in 2013, Idenix and UDSG sued us in the U.S.

District Court for the District of Massachusetts alleging that the commercialization of sofosbuvir infringes U.S.

6,914,054 (the “’054 patent”) and 7,608,597 (the “’597 patent”).

In 2014, the court transferred the Massachusetts litigation to the U.S.

District Court for the District of Delaware.

Prior to trial in 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.

A jury trial was held in 2016 on the ’597 patent, and the jury found that we willfully infringed the asserted claims of the ’597 patent and awarded Idenix $ 2.54 billion in past damages.

In 2018, the judge invalidated Idenix’s ’597 patent and vacated the jury’s award of $ 2.54 billion in past damages.

Idenix appealed this decision to the U.S.

Court of Appeals for the Federal Circuit (“CAFC”), and in October 2019, the CAFC issued an opinion affirming the trial court’s decision that the ’597 patent is invalid.

In April 2020, the CAFC denied Idenix’s petition for rehearing en banc.

In January 2021, the U.S.

Supreme Court denied Idenix’s petition for review, making the judgment against Idenix final.

Litigation with the University of Minnesota

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Patent and Trademark Office Patent Trial and Appeal Board (“PTAB”) alleging that all asserted claims are invalid for anticipation and obviousness.

The PTAB instituted one of these petitions and has scheduled a merits hearing for February 2021.

The PTAB instituted one of these petitions and a merits hearing was held in February 2021.

In 2018, the U.S.

District Court for the Northern District of California stayed the litigation until after the PTAB concludes the inter partes review that it has initiated, which we expect will occur in 2021.

District Court for the Northern District of California stayed the litigation until after the PTAB concludes the inter partes review that it has initiated.

In May 2021, the PTAB issued a written decision finding the asserted claims of the University’s patent invalid.

In July 2021, the University appealed this decision.

The litigation in the U.S.

District Court will remain stayed through the appeal proceedings.

Litigation with NuCana plc.

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.

We believe that the amended EP ’190 patent claims are invalid.

Subsequently, we initiated proceedings to invalidate the UK counterpart of the EP ’190 patent in the High Court of England & Wales.

In March 2021, NuCana filed a counterclaim against us in the High Court of England & Wales alleging patent infringement of the UK counterpart and seeking damages and other relief.

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.

The hearing date for the German NuCana case has been scheduled for May 2022.

The hearing date for the UK NuCana case has been scheduled for January 2023.

Litigation Related to Axicabtagene Ciloleucel

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A jury trial was held on the ’190 patent, and in December 2019, the jury found that the asserted claims of the ’190 patent were valid, and that we willfully infringed the asserted claims of the ’190 patent.

The jury also awarded Juno damages in amounts of $ 585 million in an up-front payment and a 27.6 % running royalty from October 2017 through the date of the jury’s verdict.

The jury also awarded Juno damages in amounts of $ 585 million in an upfront payment and a 27.6 % running royalty from October 2017 through the date of the jury’s verdict.

The parties filed post-trial motions in the first quarter of 2020, and the trial judge entered a judgment in April 2020.

The trial judge affirmed the jury’s verdict, enhanced the past damages by 50 % and maintained the royalties on future Yescarta sales at 27.6 %.

In April 2020, we filed an appeal seeking to reverse the judgment or obtain a new trial due to errors made by the trial judge.

In assessing whether we should accrue a liability for this litigation in our Consolidated Financial Statements, we considered various factors, including the legal and factual circumstances of the case, the jury’s verdict, the district court’s pre- and post-trial orders, the current status of the proceedings, applicable law, the views of legal counsel and the likelihood that the judgment 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 material loss as a result of this litigation.

If the judgment is reversed on appeal, the loss is expected to be zero .

If the judgment is upheld in its entirety on appeal, we estimate a loss through the fourth quarter of 2020 to be approximately $ 1.4 billion, which consists primarily of (i) approximately $ 811 million, which represents damages on Yescarta revenues through December 12, 2019, and prejudgment interest thereon, (ii) approximately $ 389 million, which represents a 50 % enhancement of past damages and (iii) approximately $ 172 million for royalties on Yescarta revenues from December 13, 2019 to December 31, 2020.

The estimated loss does not include post-judgment interest on the foregoing, which is not estimated to be material as of December 31, 2020.

Although we cannot predict with certainty the ultimate outcome of this litigation on appeal, we believe the jury’s verdict and the judgment to be in error.

In April 2020, we filed an appeal seeking to reverse the judgment or obtain a new trial due to errors made by the trial judge, and in July 2021, the appeals court heard oral arguments.

In August 2021, the Court of Appeals for the Federal Circuit (the “CAFC”) reversed the jury verdict, finding the asserted claims of Juno’s patent invalid.

In October 2021, Juno filed a petition for rehearing with the CAFC.

In January 2022, the CAFC denied Juno’s petition for rehearing.

We believe that the likelihood of a material adverse outcome in this matter is remote.

Litigation Related to Bictegravir

In 2018, ViiV Healthcare Company (“ViiV”) filed a lawsuit against us in the U.S.

District Court of Delaware, alleging that the commercialization of bictegravir, sold commercially in combination with tenofovir alafenamide and emtricitabine as Biktarvy, infringes ViiV’s U.S.

8,129,385 (the “’385 patent”) covering ViiV’s dolutegravir.

Bictegravir is structurally different from dolutegravir, and we believe that bictegravir does not infringe the sole asserted claim of the ’385 patent.

The court has set a trial date of January 2022 for this lawsuit.

ViiV is seeking billions of dollars for alleged damages comprised of ViiV’s lost profits and a royalty on sales of bictegravir from launch through the trial.

ViiV calculates these damages based on the cumulative U.S.

revenues from Biktarvy since launch, which have totaled $ 11.46 billion through December 31, 2020.

In addition, should a court find that we are liable for infringement, we expect ViiV will seek a royalty on sales after the trial.

Although we cannot predict with certainty the ultimate outcome of this litigation, an adverse judgment could result in substantial monetary damages, including ViiV’s lost profits and royalties through trial, and a going-forward royalty stream on future sales.

In 2018, ViiV also filed a lawsuit against us in the Federal Court of Canada, alleging that our activities relating to our bictegravir compound have infringed ViiV’s Canadian Patent No.

In 2018, ViiV Healthcare Company (“VHC”) filed a lawsuit against us in the U.S.

District Court of Delaware, alleging that the commercialization of bictegravir, sold commercially in combination with tenofovir alafenamide and emtricitabine as Biktarvy, infringes VHC’s U.S.

8,129,385 (the “’385 patent”) covering VHC’s dolutegravir.

Bictegravir is structurally different from dolutegravir, and we believe that bictegravir does not infringe the claims of the ’385 patent.

In its lawsuit, VHC was seeking billions of dollars for alleged damages comprised of VHC’s lost profits and a royalty on U.S.

sales of bictegravir from launch through the trial.

In addition, should a court find that we are liable for infringement, we also expected VHC to seek a royalty on U.S.

sales after the trial.

In 2018, VHC also filed a lawsuit against us in the Federal Court of Canada, alleging that our activities relating to our bictegravir compound infringes VHC’s Canadian Patent No.

2,606,282 (the “’282 patent”), which was issued to Shionogi & Co.

The ’282 patent is the compound patent covering ViiV’s dolutegravir.

The ’282 patent is the compound patent covering VHC’s dolutegravir.

We believe that bictegravir does not infringe the claims of the ’282 patent.

In January 2020, the court held a summary trial to assess ViiV’s infringement allegations.

In April 2020, the court determined that bictegravir does not infringe the claims of the ’282 patent and dismissed the case.

ViiV has appealed this decision.

Argument on the appeal is expected to take place later in 2021.

In November and December 2019, ViiV filed lawsuits in France, Germany, Ireland and the UK asserting the relevant national designations of European Patent No.

3 045 206 (“EP ’206”);

In November and December 2019, VHC filed lawsuits in France, Germany, Ireland and the UK asserting the relevant national designations of European Patent No.

in Australia asserting Australian Patent No.

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and in Korea asserting Korean Patent Nos.

1848819 (“KR ’819”) and 1363875.

These patents all relate to molecules which ViiV claims would act as integrase inhibitors.

We believe that bictegravir does not infringe the claims of any of ViiV’s patents.

In 2019, we filed an opposition in the European Patent Office (“EPO”) requesting revocation of EP ’206.

The EPO hearing is scheduled for 2021.

In 2020, we filed a petition in the Korean Intellectual Property Office requesting invalidation of KR ’819.

Following a trial, a tribunal of the Korean Intellectual Property Trial and Appeal Board found KR ’819 to be invalid.

ViiV may appeal this decision.

The court in Germany has scheduled a hearing on the issue of infringement in April 2021.

In all jurisdictions, to the extent that the claims of ViiV’s patents are interpreted to cover bictegravir, we believe that those claims are invalid.

We cannot predict the ultimate outcome of intellectual property claims related to bictegravir.

1848819 and 1363875.

These patents all relate to molecules that VHC claims would act as integrase inhibitors.

We believe that bictegravir does not infringe any valid claims of VHC’s patents and have prevailed in court proceedings to date in Canada and Germany.

On February 1, 2022, Gilead reached an agreement (the “Settlement”) with VHC, ViiV Healthcare UK (No.3) Limited, ViiV Healthcare UK Limited, Shionogi & Co., Ltd.

and GlaxoSmithKline Mercury Limited (collectively, “ViiV”) for a global resolution of all pending or potential claims related to Gilead’s sales of Biktarvy, including the litigation pending in the U.S.

District Court of Delaware and other jurisdictions outside the United States as described above.

In February 2022, the lawsuit pending in the United States was dismissed as well as the lawsuits in Canada, France, Ireland, the UK, Australia, Japan and Korea.

Pursuant to the terms of the Settlement, ViiV grants Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir.

In connection with the Settlement, Gilead (1) made a one-time payment to ViiV of $ 1.25 billion in the first quarter of 2022, and (2) will provide ViiV an ongoing royalty at a rate of 3 % on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the United States until October 5, 2027.

In connection with the Settlement, Gilead recorded a pre-tax charge of $ 1.25 billion to Cost of goods sold on our Consolidated Statements of Income in the fourth quarter of 2021.

Litigation Relating to Pre-Exposure Prophylaxis

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The HHS Patents are assigned 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 emtricitabine and tenofovir or TDF prior to exposure of the host to the immunodeficiency retrovirus, a process commonly known as pre-exposure prophylaxis (“PrEP”).

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 emtricitabine or tenofovir disoproxil fumarate (“TDF”) prior to exposure of the host to the immunodeficiency retrovirus, a process commonly known as pre-exposure prophylaxis (“PrEP”).

In November 2019, the U.S.

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In April 2020, we filed a breach of contract lawsuit against the U.S.

federal government in the Court of Federal Claims, alleging violations of four material transfer agreements (“MTAs”) related to the research underlying the HHS Patents and a clinical trial agreement (“CTA”) by the U.S.

federal government in the U.S.

Court of Federal Claims, alleging violations of four material transfer agreements (“MTAs”) related to the research underlying the HHS Patents and a clinical trial agreement (“CTA”) by the U.S.

Centers for Disease Control and Prevention related to PrEP research.

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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 District Court of Delaware has been set for May 2023.

A trial date for the lawsuit in the Court of Federal Claims has been set for June 2022, and a trial date for the lawsuit in the District Court of Delaware has been set for May 2023.

Litigation with Generic Manufacturers

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Generic manufacturers have sought and may continue to seek FDA approval for a similar or identical drug through an abbreviated new drug application (“ANDA”), the application form typically used by manufacturers seeking approval of a generic drug.

The sale of generic versions of our products earlier than their patent expiration would have a significant negative effect on our revenues and results of operations.

The sale of generic versions of our products prior 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.

Starting in December 2019, we received letters from Lupin Ltd., Apotex Inc., Shilpa Medicare Ltd., Sunshine Lake Pharma Co.

Ltd., Laurus Labs, Natco Pharma Ltd., Macleods Pharma Ltd., Hetero Labs Ltd.

Starting in December 2019, we received letters from Lupin Ltd., Apotex Inc., Shilpa Medicare Ltd.

(“Shilpa”), Sunshine Lake Pharma Co.

(“Sunshine Lake”), Laurus Labs, Natco Pharma Ltd., Macleods Pharma Ltd., Hetero Labs Ltd.

and Cipla Ltd.

(collectively, “generic manufacturers”) indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of certain of our tenofovir alafenamide (“TAF”)-containing products.

(collectively, “Generic Manufacturers”) indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of certain of our TAF-containing products.

Between them, these Generic Manufacturers seek to market generic versions of Odefsey, Descovy and Vemlidy.

Some generic manufacturers have challenged the validity of four patents listed on the Orange Book and associated with TAF, while others have challenged the validity of two of our Orange Book-listed patents associated with TAF.

The Generic Manufacturers have challenged the validity of two to four patents listed on the Orange Book and associated with TAF.

We filed lawsuits against the Generic Manufacturers, and we intend to enforce and defend our intellectual property.

In November 2021, we reached an agreement with Shilpa to resolve the lawsuit against Shilpa.

In addition, in January 2022, we reached an agreement with Sunshine Lake to resolve the lawsuit against Sunshine Lake.

The settlement agreements have been filed with the U.S.

Federal Trade Commission and the U.S.

Department of Justice as required by law.

In October 2021, we received a letter from Lupin Ltd.

(“Lupin”) indicating that it has submitted an ANDA to FDA requesting permission to market and manufacture a generic version of Symtuza, a product commercialized by Janssen and for which Gilead shares in revenues.

In November 2021, we, along with Janssen Products, L.P.

and Janssen, filed a patent infringement lawsuit against Lupin as co-plaintiffs in the U.S.

District Court of Delaware.

We separately filed an additional lawsuit against Lupin asserting infringement of two additional patents in the same court.

European Patent Claims

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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 is scheduled for July 2021.

An appeal hearing originally scheduled for July 2021 has been canceled and a new date has not yet been set by the EPO.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024.

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Three parties have appealed this decision.

The appeal hearing is scheduled for March 2021.

The appeal hearing was held in March 2021, and the validity of all claims were upheld.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032.

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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, TAF hemifumarate and cobicistat in the European Union could be substantially shortened or eliminated entirely.

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, TAF hemifumarate and cobicistat 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 any of these compounds, our revenues and results of operations could be negatively impacted for the years including and succeeding the year in which such exclusivity is lost.

Government Investigations and Related Litigation

In 2011, we received a subpoena from the U.S.

Attorney’s Office for the Northern District of California requesting documents related to the manufacture, quality and distribution practices of Complera, Atripla, Truvada, Viread, Emtriva, Hepsera and Letairis.

We cooperated with the government’s inquiry.

In 2014, the U.S.

Department of Justice informed us that it had declined to intervene in a False Claims Act lawsuit filed by two former employees.

In 2019, the District Court granted the Department of Justice’s motion to dismiss plaintiffs’ federal claims.

In April 2020, plaintiffs refiled their California False Claims Act and California retaliation claims in the Superior Court of California, County of San Mateo.

In July 2020, the California Attorney General declined to intervene in the case, and the state court complaint was unsealed.

In September 2020, we filed a demurrer requesting that the Superior Court dismiss plaintiffs’ claims, which was overruled in November 2020.

We have sought an appeal of the Superior Court’s order overruling our demurrer.

Although we cannot predict the ultimate outcome of this lawsuit, we believe the action is without merit and we intend to vigorously defend against it.

In 2017, we received a voluntary request for information from the U.S.

Attorney’s Office for the Eastern District of Pennsylvania requesting information related to our reimbursement support offerings, clinical education programs and interactions with specialty pharmacies for Sovaldi and Harvoni.

In 2018, we received another voluntary request for information related to our speaker programs and advisory boards for our HCV and HBV products.

In October 2019, the government informed us that, following its investigation, it declined to intervene in two False Claims Act lawsuits against us.

Notwithstanding the government’s declination, relators have continued to pursue the lawsuit relating to HBV speaker programs and advisory boards and served us with the Second Amended Complaint in November 2019.

In December 2020, the lawsuit relating to HCV sales and marketing issues was unsealed.

The relator has indicated that he intends to pursue the case against Gilead.

Although we cannot predict the ultimate outcome of these lawsuits, we believe the actions are without merit and we intend to vigorously defend against them.

In 2017, we also received a subpoena from the U.S.

Attorney’s Office for the Southern District of New York requesting documents related to our promotional speaker programs for HIV.

We are cooperating with this inquiry.

In April 2020, Health Choice Advocates, LLC (“Health Choice Advocates”) filed a qui tam lawsuit against us under seal in New Jersey state court alleging violations of the New Jersey False Claims Act through our clinical education 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 July 2020, the New Jersey Attorney General’s Office declined to intervene in the lawsuit and the complaint was unsealed.

In May 2020, Health Choice Advocates filed a qui tam lawsuit under seal against us in Texas state court making similar allegations under the Texas Medicare Fraud Prevention Act (“TMFPA”).

This lawsuit seeks all available relief under the TMFPA.

In October 2020, the Texas Attorney General’s Office declined to intervene in the lawsuit and the complaint was unsealed.

Health Choice Advocates previously filed a lawsuit making similar allegations under the federal False Claims Act and various state False Claims Acts, including the TMFPA, in federal court in the Eastern District of Texas in June 2017 and the court entered an order dismissing that matter without prejudice in July 2018.

Although we cannot predict the ultimate outcome of these lawsuits, we believe these actions are without merit.

Product Liability

We have been named as a defendant in two class action lawsuits 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, Florida, New Jersey and Missouri, involve more than 21,000 plaintiffs.

Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.

We intend to vigorously defend ourselves in these actions.

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.

Antitrust and Consumer Protection

We (along with Japan Tobacco, 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.

Japan Tobacco was dismissed from the lawsuit after a favorable court ruling on the defendants’ motion to dismiss.

Plaintiffs allege that we (and the other remaining 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 or may be consolidated, are all pending in the U.S.

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 California.

The lawsuits seek to bring claims on behalf of two nationwide classes - one of direct purchasers consisting largely of wholesales, and another of end-payor purchasers, including health insurers and individual patients.

The lawsuits seek to bring claims on behalf of two nationwide classes—one of direct purchasers consisting largely of wholesalers, and another of indirect or end-payor purchasers, including health insurers and individual patients.

Plaintiffs seek damages, permanent injunctive relief and other relief.

In the fall of 2021, several plaintiffs filed separate lawsuits effectively opting out of the class action cases, asserting claims that are substantively the same as the putative classes.

These cases have been coordinated with the class actions.

Trial is set for March 2023.

In September 2020, we, along with generic manufacturers Cipla Ltd.

and Cipla USA Inc.

(“Cipla”) were named as defendants in a class action lawsuit filed in the U.S.

(together, “Cipla”), were named as defendants in a class action lawsuit filed in the U.S.

District Court for the Northern District of California by Jacksonville Police Officers and Fire Fighters Health Insurance Trust (“Jacksonville Trust”) on behalf of end-payor purchasers.

Jacksonville Trust claims that the 2014 settlement agreement between us and Cipla, which settled a patent dispute relating to patents covering our Emtriva, Truvada and Atripla products and permitted generic entry prior to patent expiry, violates certain federal and state antitrust and consumer protection laws.

Plaintiffs seek damages, permanent injunctive relief and other relief.

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 First Judicial District Court for the State of New Mexico, County of Santa Fe by the New Mexico Attorney General.

The New Mexico Attorney General alleges that we (and the other defendants) restrained competition in violation of New Mexico antitrust and consumer protection laws.

The New Mexico Attorney General seeks damages 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 plaintiffs.

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, Maryland, Missouri and New Jersey, involve more than 27,000 plaintiffs.

Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.

We intend to vigorously defend ourselves in these actions.

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.

Government Investigation

In 2017, we received a subpoena from the U.S.

Attorney’s Office for the Southern District of New York requesting documents related to our promotional speaker programs for HIV.

We are cooperating with this inquiry.

Qui Tam Litigation

A former sales employee filed a qui tam lawsuit against Gilead in March 2017 in U.S.

District Court for the Eastern District of Pennsylvania.

Following the government’s decision not to intervene in the 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 relator seeks all available relief under these statutes.

Two former employees filed a qui tam lawsuit against Gilead in April 2020 in California state court.

Following the California Attorney General’s Office’s decision not to intervene, relators served Gilead with their complaint in August 2020.

The complaint alleges violations of the California False Claims Act (“CFCA”) and employment law claims.

Relators seek all available relief under the CFCA.

In December 2021, Gilead and relators executed a settlement agreement to resolve the lawsuit, and in February 2022, the court issued an order dismissing the lawsuit with prejudice.

The settlement does not have a material impact to our Consolidated Financial Statements.

Health Choice Advocates, LLC (“Health Choice”) filed 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 2021, the trial court granted our motion to dismiss with prejudice.

Health Choice has appealed the 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 Texas 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.

In September 2021, the Texas Court of Appeals for the Sixth Court Appeals District granted our request to stay the Texas litigation.

The case is stayed pending final judgment in the Eastern District of Pennsylvania lawsuit filed in March 2017, as discussed above.

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 several of its former officers and directors have been named as defendants in putative class actions filed in 2018 and 2019.

The lawsuits were consolidated in September 2019, and plaintiffs filed a consolidated complaint in November 2019.

Immunomedics and several 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 individual 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 United States District Court for the District of New Jersey.

In January 2020, Immunomedics filed a motion to dismiss the consolidated complaint, which was denied in July 2020.

The consolidated lawsuit is pending in the U.S.

District Court for the District of New Jersey.

While we believe this case is without merit, we cannot predict the ultimate outcome.

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Other Commitments

In the normal course of business, we enter into various firm purchase commitments primarily related to active pharmaceutical ingredients (“API”) and certain inventory related items.

In the normal course of business, we enter into firm purchase commitments related to inventory.

As of December 31, 2021, these commitments for the next five years were approximately $ 1.1 billion in 2022, $ 450 million in 2023, $ 243 million in 2024, $ 60 million in 2025 and $ 31 million in 2026.

The amounts related to API represent minimum purchase commitments.

STOCKHOLDERS’ EQUITY

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Purchases under the 2020 Program may be made in the open market or in privately negotiated transactions.

As of December 31, 2020, the remaining authorized repurchase amount from both programs was $ 6.8 billion.

As of December 31, 2021, the remaining authorized repurchase amount under both programs was $ 6.3 billion.

The following table summarizes our stock repurchases under the 2016 Program:

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Average price per share $ 66.58 $ 70.64 $ 66.36

In addition to repurchases from the 2016 Program and 2020 Program, we repurchased shares of common stock withheld by us from employee restricted stock awards to satisfy our applicable tax withholding obligations, which are immaterial and excluded from the table above.

These shares are excluded from the table above.

We use the par value method of accounting for our stock repurchases.

Under the par value method, common stock is first charged with the par value of the shares involved.

The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital (“APIC”) based on an estimated average sales price per issued share with the excess amounts charged to retained earnings.

The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital based on an estimated average sales price per issued share with the excess amounts charged to retained earnings.

The following table summarizes cash dividends declared on our common stock:

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(in millions) Foreign Currency Translation, Net of Tax Unrealized Gains and Losses on Available-for-Sale Debt Securities, Net of Tax Unrealized Gains and Losses on Cash Flow Hedges, Net of Tax Total

Balance at January 1, 2018 $ 85 $ ( 99 ) $ ( 114 ) $ ( 128 )

Net unrealized gain (loss) ( 38 ) 43 112 117

Balance as of December 31, 2018 $ 47 $ ( 52 ) $ 85 $ 80

Net unrealized gain 6 54 72 132

Reclassifications to net income — ( 1 ) ( 126 ) ( 127 )

Net current period other comprehensive income (loss) 6 53 ( 54 ) 5

Balance at December 31, 2018 $ 47 $ ( 52 ) $ 85 $ 80

Net unrealized gain 6 54 72 132

Balance as of December 31, 2019 $ 53 $ 1 $ 31 $ 85

Net unrealized gain (loss) ( 2 ) 43 ( 103 ) ( 62 )

Reclassifications to net income — ( 42 ) ( 41 ) ( 83 )

Net current period other comprehensive income (loss) ( 2 ) 1 ( 144 ) ( 145 )

Balance at December 31, 2019 $ 53 $ 1 $ 31 $ 85

Balance as of December 31, 2020 $ 51 $ 2 $ ( 113 ) $ ( 60 )

Net unrealized gain (loss) $ ( 38 ) $ ( 6 ) $ 129 $ 85

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Net current period other comprehensive income (loss) ( 38 ) ( 6 ) 187 143

Balance at December 31, 2020 $ 51 $ 2 $ ( 113 ) $ ( 60 )

Balance as of December 31, 2021 $ 13 $ ( 4 ) $ 74 $ 83

The amounts reclassified to net income for gains and losses on cash flow hedges are recorded as part of Product sales on our Consolidated Statements of Income.

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EMPLOYEE BENEFITS

Compensation expense is recognized on the Consolidated Statements of Income based on the estimated fair value of the award on the grant date.

The estimated fair value of RSUs is based on the closing price of our common stock.

For PSUs, estimated fair value is based on either the Monte Carlo valuation methodology or the stock price on the date of grant.

For stock option awards, estimated fair value is based on the Black-Scholes option valuation model.

Equity Incentive Plans

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(in millions)

Outstanding at December 31, 2019 19.5 $ 61.35

Outstanding as of December 31, 2020 16.6 $ 69.40

Granted 3.8 $ 64.77

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Exercised ( 1.6 ) $ 37.46

Outstanding at December 31, 2020 16.6 $ 69.40 5.26 $ 70

Exercisable at December 31, 2020 11.6 $ 68.85 3.84 $ 70

Expected to vest, net of estimated forfeitures at December 31, 2020 4.8 $ 70.70 8.49 $ —

Outstanding as of December 31, 2021 16.8 $ 70.60 5.34 $ 101

Exercisable as of December 31, 2021 11.2 $ 72.43 3.67 $ 68

Expected to vest, net of estimated forfeitures as of December 31, 2021 5.3 $ 67.01 8.61 $ 32

Aggregate intrinsic value represents the value of our closing stock price on the last trading day of the year in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable.

Total intrinsic value of options exercised was $ 179 million for 2020, $ 209 million for 2019 and $ 412 million for 2018.

The weighted-average grant date fair value of the stock options granted was $ 11.69 per share for 2020, $ 12.15 per share for 2019 and $ 17.03 per share for 2018.

Total intrinsic value of options exercised was $ 48 million, $ 179 million and $ 209 million for 2021, 2020 and 2019, respectively.

The weighted-average grant date fair value of the stock options granted was $ 10.05 per share, $ 11.69 per share and $ 12.15 per share for 2021, 2020 and 2019, respectively.

As of December 31, 2021, there was $ 47 million of unrecognized compensation cost related to stock options, which is expected to be recognized over an estimated weighted-average period of 2.3 years.

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Grant Date Fair Value Per Share (1)

Outstanding at December 31, 2019 17.2 $ 70.08 0.7 $ 80.42

Outstanding as of December 31, 2020 19.5 $ 69.80 0.6 $ 84.87

Granted 11.9 $ 65.42 0.3 $ 71.31

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Forfeited ( 3.5 ) $ 67.77 ( 0.1 ) $ 78.37

Outstanding at December 31, 2020 19.5 $ 69.80 0.6 $ 84.87

Outstanding as of December 31, 2021 20.9 $ 67.48 0.7 $ 79.13

________________________________

(1) Weighted-average grant-date fair value per share excludes shares related to grants that currently have no grant date as the performance objectives have not yet been defined.

The weighted-average grant date fair value of RSUs granted was $ 70.94 per share for 2020, $ 64.31 per share for 2019, and $ 77.98 per share for 2018.

The weighted-average grant date fair value of PSUs granted was $ 83.64 per share for 2020, $ 68.30 per share for 2019, and $ 88.76 per share for 2018.

The total grant date fair value of our vested RSUs and PSUs was $ 479 million for 2020, $ 450 million for 2019 and $ 481 million for 2018, and total fair value as of the respective vesting dates was $ 459 million for 2020, $ 372 million for 2019 and $ 446 million for 2018.

The weighted-average grant date fair value of RSUs granted was $ 65.42 per share, $ 70.94 per share and $ 64.31 per share for 2021, 2020 and 2019, respectively.

The weighted-average grant date fair value of PSUs granted was $ 71.31 per share, $ 83.64 per share and $ 68.30 per share for 2021, 2020 and 2019, respectively.

The total grant date fair value of our vested RSUs and PSUs was $ 503 million, $ 479 million and $ 450 million for 2021, 2020 and 2019, respectively, and total fair value as of the respective vesting dates was $ 471 million, $ 459 million and $ 372 million for 2021, 2020 and 2019, respectively.

As of December 31, 2021, there was $ 917 million of unrecognized compensation cost related to unvested RSUs and PSUs, which is expected to be recognized over a weighted-average period of 2.2 years.

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________________________________

(1) Pre-tax stock-based compensation expense for the year ended December 31, 2020 of $ 1,076 million included $ 643 million non-cash stock-based expense and $ 289 million and $ 144 million of accelerated post-acquisition stock-based expense related to the acquisitions of Immunomedics and Forty Seven, respectively.

(1) Pre-tax stock-based compensation expense for the year ended December 31, 2020 of $ 1.1 billion included $ 643 million non-cash stock-based expense and $ 289 million and $ 144 million of accelerated post-acquisition stock-based expense related to the acquisitions of Immunomedics and Forty Seven, respectively.

Acquisitions for additional information.

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Valuation Assumptions

Fair value of options granted under our 2004 Plan and purchases under our ESPP were estimated at grant or purchase dates using a Black-Scholes option valuation model.

Fair value of options granted under our Plans and purchases under our ESPP were estimated at grant or purchase dates using a Black-Scholes option valuation model.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.

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In certain foreign subsidiaries, we maintain defined benefit plans as required by local regulatory requirements.

Our total matching contribution expense under the Gilead Sciences 401k Plan and other defined benefit plans was $ 144 million during 2020, $ 110 million during 2019 and $ 91 million during 2018.

Our total matching contribution expense under the Gilead Sciences 401k Plan and other defined benefit plans was $ 166 million, $ 144 million and $ 110 million during 2021, 2020 and 2019, respectively.

We maintain a deferred compensation plan under which our directors and key employees may defer compensation.

Amounts deferred by participants are deposited into a rabbi trust.

The total assets and liabilities associated with the deferred compensation plan were $ 218 million as of December 31, 2020 and $ 171 million as of December 31, 2019.

The total assets and liabilities associated with the deferred compensation plan were $ 261 million and $ 218 million as of December 31, 2021 and 2020, respectively.

NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS

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Net income per share attributable to Gilead common stockholders - diluted $ 4.93 $ 0.10 $ 4.22

Income (loss) before income taxes consists of the following:

Income before income taxes consists of the following:

Year Ended December 31,

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Deferred ( 185 ) 97 42

( 413 ) ( 101 ) ( 93 )

Current ( 185 ) ( 155 ) ( 124 )

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In the fourth quarter of 2019, we completed an intra-entity asset transfer of certain intangible assets from a foreign subsidiary to Ireland.

The transaction resulted in a step-up of the Irish tax-deductible basis in the transferred assets, and accordingly, created a temporary difference where the tax basis exceeded the book basis of such intangible assets.

As a result, we recognized a deferred tax asset of $ 1.2 billion on our Consolidated Financial Statements.

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The impact of the intangible asset transfer from a foreign subsidiary to the United States was not material.

The 2018 income tax expense included a $ 588 million deferred tax charge related to a transfer of acquired intangible assets from a foreign subsidiary to the United States.

This transaction did not result in a step-up of the U.S.

tax-deductible basis;

and as a result, we recognized a deferred tax liability of $ 588 million for the temporary difference where the book basis exceeded the tax basis of these acquired intangible assets.

The reconciliation between the federal statutory tax rate applied to income before taxes and our effective tax rate is summarized as follows:

The reconciliation between the federal statutory tax rate applied to income before income taxes and our effective tax rate is summarized as follows:

Year Ended December 31,

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US tax on foreign earnings 1.1 % 7.2 % 4.3 %

Foreign-derived intangible income deduction ( 1.6 ) % ( 8.0 ) % ( 3.2 ) %

Deferred tax - intra-entity transfer of intangible assets ( 0.7 ) % 0.6 % ( 24.0 ) %

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Net deferred tax assets (liabilities) $ ( 3,017 ) $ ( 2,612 )

The valuation allowance was $ 398 million and $ 217 million at December 31, 2020 and 2019, respectively.

The increase of our valuation allowance in 2020 was primarily related to acquired attributes related to Forty Seven and Immunomedics acquisitions, and unrealized losses on our equity method investments reflected as acquired IPR&D expenses.

The valuation allowance decreased to $ 217 million at December 31, 2019 from $ 331 million at December 31, 2018, primarily due to a reduction in net operating loss carryforwards under the asset recognition framework and corresponding valuation allowance with respect to certain foreign jurisdictions.

At December 31, 2020, we had U.S.

federal net operating loss and tax credit carryforwards of approximately $ 1.5 billion.

and $ 61 million, respectively, which will start to expire in 2021, if not utilized.

The valuation allowance was $ 520 million and $ 398 million as of December 31, 2021 and 2020, respectively.

The increase of our valuation allowance in 2021 was primarily related to California research and development tax credits.

The valuation allowance was $ 398 million and $ 217 million as of December 31, 2020 and 2019, respectively.

The increase of our valuation allowance in 2020 was primarily related to acquired attributes related to Forty Seven and Immunomedics acquisitions, and capital losses related to our equity method investments.

As of December 31, 2021, we had U.S.

federal net operating loss and tax credit carryforwards of approximately $ 250 million and $ 8 million, respectively, which will start to expire in 2022, if not utilized.

In addition, we had state net operating loss and tax credit carryforwards of approximately $ 2.8 billion and $ 768 million, respectively.

The state net operating loss will start to expire in 2021 if not utilized and state tax credit carryforwards will start to expire in 2022 if not utilized.

The state net operating loss and state tax credit carryforwards will start to expire in 2022 if not utilized.

Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code of 1986, as amended, and similar state provisions.

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Our income tax returns are subject to audit by federal, state and foreign tax authorities.

We are currently under examination by various state and foreign jurisdictions.

We are currently under examination by the Internal Revenue Service and Irish tax authorities for our 2016 to 2018 tax years.

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.

We periodically evaluate our exposures associated with our tax filing positions.

Of the total unrecognized tax benefits, $ 1.2 billion and $ 1.6 billion at December 31, 2020 and 2019, respectively, if recognized, would reduce our effective tax rate in the period of recognition.

Interest and penalties related to unrecognized tax benefits included as part of income tax expense (benefit) on our Consolidated Statements of Income were $( 82 ) million and $ 105 million for the years ended December 31, 2020 and 2019, respectively.

Interest and penalties related to unrecognized tax benefits for the year ended December 31, 2018 was not material.

Accrued interest and penalties related to unrecognized tax benefits were $ 177 million and $ 259 million at December 31, 2020 and 2019, respectively.

As of December 31, 2020, we do not believe that it is reasonably possible that our unrecognized tax benefits will significantly change in the next 12 months.

Of the total unrecognized tax benefits, $ 800 million and $ 1.2 billion as of December 31, 2021 and 2020, respectively, if recognized, would reduce our effective tax rate in the period of recognition.

Interest and penalties related to unrecognized tax benefits included income tax expense of $ 41 million, income tax benefit of $ 82 million and income tax expense of $ 105 million on our Consolidated Statements of Income for the years ended December 31, 2021, 2020 and 2019 respectively.

Accrued interest and penalties related to unrecognized tax benefits were $ 218 million and $ 177 million as of December 31, 2021 and 2020, respectively.

As of December 31, 2021, we believe that it is reasonably possible that our unrecognized tax benefits will decrease by approximately $ 100 million in the next 12 months due to potential settlements with various taxing authorities.

The following is a rollforward of our total gross unrecognized tax benefits:

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Balance, end of period $ 1,713 $ 1,614 $ 2,031

SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

(in millions, except per share amounts)

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Total revenues $ 5,548 $ 5,143 $ 6,577 $ 7,421

Gross profit on product sales $ 4,498 $ 4,003 $ 5,352 $ 5,930

Net income (loss) (1)(2)(3)

$ 1,538 $ ( 3,346 ) $ 353 $ 1,544

Net income (loss) attributable to Gilead (1)(2)(3)

$ 1,551 $ ( 3,339 ) $ 360 $ 1,551

Net income (loss) per share attributable to Gilead common stockholders - basic (1)(2)(3)

$ 1.23 $ ( 2.66 ) $ 0.29 $ 1.24

Net income (loss) per share attributable to Gilead common stockholders - diluted (1)(2)(3)

$ 1.22 $ ( 2.66 ) $ 0.29 $ 1.23

Total revenues $ 5,281 $ 5,685 $ 5,604 $ 5,879

Gross profit on product sales $ 4,243 $ 4,607 $ 4,481 $ 4,113

Net income (loss) (4)(5)

$ 1,968 $ 1,875 $ ( 1,168 ) $ 2,689

Net income (loss) attributable to Gilead (4)(5)

$ 1,975 $ 1,880 $ ( 1,165 ) $ 2,696

Net income (loss) per share attributable to Gilead common stockholders - basic (4)(5)

$ 1.55 $ 1.48 $ ( 0.92 ) $ 2.13

Net income (loss) per share attributable to Gilead common stockholders - diluted (4)(5)

$ 1.54 $ 1.47 $ ( 0.92 ) $ 2.12

________________________________

(1) Amounts for the second quarter of 2020 included an acquired IPR&D expenses of $ 4.5 billion, or $ 3.58 per basic and diluted share, primarily related to our acquisition of Forty Seven.

Acquisitions for additional information.

(2) Amounts for the third quarter of 2020 included acquired IPR&D expenses of $ 1.0 billion, or $ 0.82 per basic and diluted share, related to collaborations and other investments we entered into separately with Arcus, Pionyr, Tango and Tizona and $ 983 million or $ 0.78 per basic and diluted share, of unrealized losses from changes in the fair value of our equity investments largely with Galapagos.

Fair Value Measurements and Note 11.

Collaborations and Other Arrangements for additional information.

(3) Amounts for the fourth quarter of 2020 included $ 628 million, or $ 0.50 per basic and diluted share, of unrealized losses from changes in the fair value of our equity investments largely with Galapagos and $ 615 million, or $ 0.49 per basic and diluted share of acquisition-related expenses primarily from amortization of intangible assets, inventory step-up charges and accelerated stock-based compensation expenses related to our acquisition of Immunomedics.

Fair Value Measurements, Note 6.

Acquisitions and Note 11.

Collaborations and Other Arrangements for additional information.

(4) Amounts for the third quarter of 2019 included upfront collaboration and licensing expenses of $ 3.92 billion, or $ 2.40 per basic and diluted share related to the collaboration with Galapagos.

Collaborations and Other Arrangements for additional information.

(5) Amounts for the fourth quarter of 2019 included a $ 1.2 billion favorable tax effect related to intra-entity intangible asset transfers and $ 929 million of pre-tax net gains from equity securities primarily our equity investment in Galapagos, partially offset by an $ 800 million pre-tax impairment charge related to IPR&D intangible assets acquired in connection with the acquisition of Kite and pre-tax write-down charges of $ 500 million for slow moving and excess raw material and work in process inventory.

The impact of these factors resulted in a net favorable impact of $ 0.83 per basic share and $ 0.81 per diluted share.

Fair Value Measurements, Note 7.

Inventories, Note 9.

Goodwill and Intangible Assets and Note 18.

Income Taxes for additional information .

In connection with the Tax Cuts and Jobs Act, we recorded a federal income tax payable for transition tax on the mandatory deemed repatriation of foreign earnings that is payable over an eight-year period.

As of December 31, 2021 and 2020, we have accrued $ 4.0 billion and $ 4.5 billion, respectively, for transition tax.

Of the amounts accrued as of December 31, 2021, approximately $ 473 million is expected to be paid within one year.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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(the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Immunomedics, Inc., which is included in the 2020 consolidated financial statements of the Company and constituted 3% and 11% of total assets and liabilities, respectively, as of December 31, 2020 and less than 1% of revenues for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Immunomedics, Inc.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and our report dated February 23, 2022 expressed an unqualified opinion thereon.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data