What changed in this filing

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Item 1A. Risk Factors

2023-02-22 compared with 2022-02-23 · 132 added, 133 removed, 259 unchanged (51% of the section changed)

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We receive a substantial portion of our revenue from sales of our products for the treatment and prevention of HIV infection.

During 2021, sales of our HIV products accounted for approximately 60% of our total product sales.

During the year ended December 31, 2022, sales of our HIV products accounted for approximately 64% of our total product sales.

We may be unable to sustain or increase sales of our HIV products for any number of reasons, including market share gains by competitive products, including generics, or the inability to introduce new HIV medications necessary to remain competitive.

In such case, we may need to scale back our operations, including our future drug development and spending on research and development (“R&D”) efforts.

For example, many of our HIV products contain tenofovir alafenamide (“TAF”), which belongs to the nucleoside class of antiviral therapeutics, and any changes to the treatment paradigm for HIV may cause nucleoside-based therapeutics to fall out of favor.

We face risks related to our supply and distribution of Veklury, which was approved by the U.S.

Food and Drug Administration (“FDA”) in October 2020 as a treatment for patients hospitalized with coronavirus disease 2019 (“COVID-19”) and in January 2022 as a treatment for non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death.

While the utilization of Veklury has largely tracked rates of COVID-19 hospitalizations, we are unable to accurately predict our revenues or supply needs over the short and long term due to the dynamic nature of the pandemic, including the availability, uptake and effectiveness of vaccines and alternative treatments for COVID-19, fluctuating hospital utilization rates, the emergence of new variants and timing of surges in infection.

If we do not accurately forecast demand or manufacture Veklury at levels sufficient to meet demand, then we may experience product shortages or build excess inventory that may be written off.

For example, many of our HIV products contain tenofovir alafenamide (“TAF”), which belongs to the nucleoside class of antiviral therapeutics.

If there are any changes to the treatment or prevention paradigm for HIV that cause nucleoside-based therapeutics to fall out of favor, our HIV product sales would be adversely impacted.

We face risks related to our supply and distribution of Veklury, which was approved by U.S.

Food and Drug Administration (“FDA”) in October 2020 as a treatment for patients hospitalized with coronavirus disease 2019 (“COVID-19”), in Janua ry 2022 as a treatment for non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death, and in April 2022 as a treatment for pediatric patients who are 28 days of age (and older), weighing at least 3 kg, and are either hospitalized with COVID-19 or have mild-to-moderate COVID-19 and are considered at high risk for progression to severe COVID-19, including hospitalization or death.

While Veklury sales generally reflect COVID-19 related rates and severity of infections and hospitalizations, as well as the availability, uptake and effectiveness of vaccines and alternative treatments for COVID-19, we are unable to accurately predict our revenues or supply needs over the short- and long-term due to the dynamic nature of the COVID-19 pandemic.

If we do not accurately forecast demand or manufacture Veklury at levels to align with actual demand, then we may experience product shortages or build excess inventory that may need to be written off.

We also remain subject to significant public attention and scrutiny over the complex decisions made regarding clinical data, supply, allocation, distribution and pricing of Veklury, all of which affects our corporate reputation.

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For challenges related to the reimbursement of Yescarta and Tecartus, see also “Our existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and other discounts on our products and other pricing pressures.”

We rely on third-party sites to collect patients’ white blood cells, known as apheresis centers, as well as shippers, couriers, and hospitals for the logistical collection of patients’ white blood cells and ultimate delivery of Yescarta or Tecartus to patients.

These vendors may encounter disruptions or difficulties that could result in product loss and regulatory action.

Apheresis centers may also choose not to participate in our quality certification process, or we may be unable to complete such certification in a timely manner or at all, which could delay or constrain our manufacturing and commercialization efforts.

We operate a new automated manufacturing facility in Frederick, Maryland.

The facility is pending FDA approval for commercial manufacturing and, even if we obtain such approval, we have not manufactured our products in an automated facility on a commercial scale.

As a result, we may not be able to produce or otherwise obtain an amount of supply sufficient to satisfy demand for our products.

If we are unable to meet product demand, we will have difficulty meeting sales forecasts for products that we plan to manufacture at this facility.

We operate a new automated CAR T-cell therapy manufacturing facility in Frederick, Maryland, which received FDA approval for commercial production in April 2022.

We have not previously manufactured our products in an automated facility on a commercial scale, and as a result, we may require additional time and resources in order to effectively increase manufacturing capacity.

We also operate a new retroviral vector manufacturing facility in Oceanside, California, which received FDA approval for commercial production in October 2022.

We also have not previously manufactured viral vectors on a commercial scale, and as a result, we may require additional time and resources in order to effectively increase manufacturing capacity.

In addition, we may not be able to produce or otherwise obtain an amount of viral vector supply sufficient to satisfy demand for our finished products.

If we are unable to meet product demand, we will have difficulty meeting sales forecasts for our finished products.

Our success depends on developing and commercializing new products or expanding the indications for existing products.

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For example, product demand may be adversely affected if physicians do not see the benefit of our products.

Additionally, the non-retail sector in the United States, which includes government institutions, including state AIDS Drug Assistance Programs, the U.S.

Department of Veterans Affairs, correctional facilities and large health maintenance organizations, tends to be less consistent in terms of buying patterns and often causes quarter-over-quarter fluctuations that do not necessarily mirror patient demand for our products.

Additionally, the non-retail sector in the U.S., which includes government institutions, including state AIDS Drug Assistance Programs, the U.S.

Federal and state budget pressures, as well as the annual grant cycles for federal and state funds, may cause purchasing patterns to not reflect patient demand for our products.

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We believe these measures have caused some government agencies and other purchasers to reduce inventory of our products in the distribution channels, and we may continue to see this trend in the future.

We sell and distribute most of our products in the United States exclusively through the wholesale channel.

For the year ended December 31, 2021, approximately 91% of our product sales in the United States were to three wholesalers, AmerisourceBergen Corporation, Cardinal Health, Inc.

We sell and distribute most of our products in the U.S.

exclusively through the wholesale channel.

For the year ended December 31, 2022, approximately 89% of our product sales in the U.S.

were to three wholesalers, AmerisourceBergen Corporation, Cardinal Health, Inc.

and McKesson Corporation.

wholesalers with whom we have entered into inventory management agreements make estimates to determine end-user demand and may not be completely effective in matching their inventory levels to actual end-user demand.

wholesalers with whom we have entered into inventory management agreements make estimates to determine end-user demand and may not be accurate in matching their inventory levels to actual end-user demand.

As a result, changes in inventory levels held by those wholesalers can cause our operating results to fluctuate unexpectedly if our sales to these wholesalers do not match end-user demand.

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Our products compete with other available products based primarily on efficacy, safety, tolerability, acceptance by doctors, ease of patient compliance, ease of use, price, insurance and other reimbursement coverage, distribution and marketing.

A number of companies are pursuing the development of technologies which are competitive with our existing products or research programs.

A number of companies are pursuing the development of products and technologies that may be competitive with our existing products or research programs.

These competing companies include large pharmaceutical and biotechnology companies and specialized pharmaceutical firms acting either independently or together with other such companies.

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Product Reimbursements

Successful commercialization of our products depends, in part, on the availability of third-party payer reimbursement for the cost of such products and related treatments and medical services in the markets where we sell our products.

Government health authorities, private health insurers and other organizations generally provide reimbursement.

Successful commercialization of our products depends, in part, on the availability and amount of third-party payer reimbursement for our products and related treatments and medical services in the markets where we sell our products.

As our products mature, pricing pressures from private insurers and government payers often result in a reduction of the net product prices.

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Product Pricing, Discounts and Rebates

In the United States, the European Union (“EU”) and other significant or potentially significant markets for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services.

In the United States, the volume of drug pricing-related bills has dramatically increased in recent years.

For example, Congress has enacted laws requiring manufacturer refunds on certain amounts of discarded drug from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024.

Congress has also proposed bills to require the Department of Health and Human Services to negotiate prices for certain drugs, impose an inflation-based rebate on Medicare Part B and D drugs when list prices for drugs grow faster than inflation, and increase manufacturer contributions in some or all of the Medicare Part D benefit phases.

In addition, many state legislatures are considering, or have already passed into law, legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as requiring manufacturers to publicly report proprietary pricing information, creating review boards for prices to state agencies, and encouraging the use of generic drugs.

Such initiatives and legislation may cause added pricing pressures on our products, and the resulting impact on our business is uncertain.

Many countries outside the United States, including the EU Member States, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions.

The outcome of this review cannot be predicted and could have an adverse effect on the pricing and reimbursement of our medicinal products in the EU member states.

Reductions in the pricing of our medicinal products in one member state could affect the price in other member states and have a negative impact on our financial results.

A substantial portion of our product sales is subject to significant discounts from list price, including rebates that we may be required to pay state Medicaid agencies and discounts provided to 340B covered entities.

In the U.S., the European Union (“EU”) and other significant or potentially significant markets for our products and pro duct candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services.

The volume of drug pricing-related legislation has dramatically increased in recent years, including:

Congress has enacted laws requiring manufacturer refunds on certain amounts of discarded drug from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024.

Congress has enacted the Inflation Reduction Act of 2022 (the “Act”), which, among other changes, (1) requires the Department of Health and Human Services to “negotiate” Medicare prices for certain drugs (starting with 10 drugs in 2026, adding 15 drugs in 2027 and 2028, and adding 20 drugs in 2029 and subsequent years), (2) imposes an inflation-based rebate on Medicare Part B utilization starting in 2023 and Part D utilization beginning October 1, 2022, and (3) restructures the Medicare Part D benefit to cap out-of-pocket expenses for Part D beneficiaries beginning in 2024 and, effective January 1, 2025, increases Part D plans’ contributions in the catastrophic coverage phase and increase manufacturers’ discount contributions across coverage phases such that manufacturers must pay a 10% discount in the initial coverage phase and a 20% discount in the catastrophic phase on drugs utilized by all Part D beneficiaries, including low income subsidy patients.

We continue to evaluate the impact of the Act on our business but expect the Act will increase our payment obligations under the redesigned Part D discount program, limit the prices we can charge, and increase the rebates we must provide government programs for our products, thereby reducing our profitability and negatively impacting our financial results.

In addition, it is unclear how certain provisions of the Act will be implemented, there may be additional legislation or rulemaking related to the Act and select provisions may become subject to legal challenges in the future.

Therefore, the full impact of the Act on the profitability of our business and the pharmaceutical industry as a whole remains uncertain at this time.

• Many state legislatures are considering, or have already passed into law, legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as requiring manufacturers to publicly report proprietary pricing information, creating review boards for prices, and encouraging the use of generic drugs.

These initiatives and such other legislation may cause added pricing pressures on our products, and the resulting impact on our business is uncertain.

• Many countries outside the U.S., including the EU member states, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions.

The outcome of these reviews cannot be predicted and could have an adverse effect on the pricing and reimbursement of our medical products in the EU member states.

Reductions in the pricing of our medical products in one member state could affect the price in other member states and have a negative impact on our financial results.

Changes to the 340B program or the Medicaid program at the federal or state level could have a material adverse effect on our business.

For example, in December 2020, Centers for Medicare & Medicaid Services (“CMS”) issued a final rule that will make certain changes to the calculation of rebates under the Medicaid Drug Rebate Program.

Among other changes, effective January 1, 2023, the final rule will change the requirements for excluding manufacturer co-pay coupons from the Medicaid “best price.” These changes are subject to ongoing litigation.

If these changes go into effect, they could substantially increase our Medicaid rebate obligations and decrease the prices we charge 340B covered entities.

The continued growth of the 340B program also limits the prices we may charge on an increasing percentage of sales.

For example, the continued growth of the 340B program limits the prices we may charge on an increasing percentage of sales.

Changes to the calculation of rebates under the Medicaid program could substantially increase our Medicaid rebate obligations and decrease the prices we charge 340B-covered entities.

We recently implemented a contract pharmacy integrity initiative for our branded hepatitis C virus (“HCV”) products.

This integrity initiative will not involve any products from Asegua Therapeutics LLC.

Our integrity initiative requires covered entities that enter into 340B bill to/ship to arrangements with contract pharmacies for our branded HCV products to provide claims level data for units dispensed from such contract pharmacies;

covered entities without an in-house pharmacy that choose not to participate in the initiative can designate a single contract pharmacy for shipment.

Certain manufacturers that have implemented other contract pharmacy integrity programs have received enforcement letters from the U.S.

Department of Health and Human Services (“HHS”) asserting that those programs violate the 340B statute, have been referred to the HHS Office of Inspector General for assessment of civil monetary penalties, and have been subject to administrative dispute resolution proceedings brought on behalf of covered entities.

These manufacturers are currently challenging HHS’ position in ongoing litigation.

Although we believe that our integrity initiative complies with the requirements of the 340B statute, additional legal or legislative developments with respect to the 340B program, including potential litigation with HHS, may negatively impact our ability to implement or continue our integrity initiative.

In addition, standard reimbursement structures may not adequately reimburse for innovative therapies.

For example, beginning in fiscal year 2021, CMS established a new severity-adjusted diagnosis-related group (“DRG”) 018 for Medicare inpatient reimbursement of CAR T products such as Yescarta and Tecartus.

For example, beginning in fiscal year 2021, CMS established a new severity-adjusted diagnosis-related group (“DRG”) 018 for Medicare inpatient reimbursement of CAR T-cell products such as Yescarta and Tecartus.

While the new DRG has a significantly higher base payment amount than the prior DRG 016, the payment available may not be sufficient to reimburse some hospitals for their cost of care for patients receiving Yescarta and Tecartus.

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Additionally, in the EU, there are barriers to reimbursement in individual countries that could limit the uptake of Yescarta and Tecartus.

In addition, we estimate the rebates we will be required to pay in connection with sales during a particular quarter based on claims data from prior quarters.

In the United States, actual rebate claims are typically made by payers one to three quarters in arrears.

Moreover, we estimate the rebates we will be required to pay in connection with sales during a particular quarter based on claims data from prior quarters.

In the U.S., actual rebate claims are typically made by payers one to three quarters in arrears.

Actual claims and payments may vary significantly from our estimates.

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sales could also be affected if FDA permits importation of drugs from Canada.

We have entered into agreements with generic drug manufacturers as well as licensing agreements with the Medicines Patent Pool, a United Nations-backed public health organization, which allows generic drug manufacturers to manufacture generic versions of certain of our products for distribution in certain low- and middle-income countries.

We may be adversely affected if any generic versions of our products, whether or not produced and/or distributed under these agreements, are exported to the United States, Europe or markets with higher prices.

We have entered into agreements with generic drug manufacturers as well as licensing agreements with the Medicines Patent Pool, a United Nations-backed public health organization, which allow generic drug manufacturers to manufacture generic versions of certain of our products for distribution in certain low- and middle-income countries.

We may be adversely affected if any generic versions of our products, whether or not produced and/or distributed under these agreements, are exported to the U.S., the EU or markets with higher prices.

In the EU, we are required to permit products purchased in one EU member state to be sold in another member state.

Purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high can affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter.

Purchases of our products in member states where our selling prices are relatively low for resale in member states in which our selling prices are relatively high can affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter.

Additionally, diverted products may be used in countries where they have not been approved and patients may source the diverted products outside the legitimate supply chain.

These diverted products may be handled, shipped and stored inappropriately, which may affect the efficacy of the products and could harm patients and adversely impact us.

We are also aware of the existence of various suppliers around the world that source our products and generic versions of our products without Gilead’s authorization and sell them for use in countries where those products have not been approved.

As a result, patients may be at risk of taking unapproved medications that may not be what they purport to be, may not have the potency they claim to have or may contain harmful substances, which could adversely impact us.

We are also aware of the existence of various suppliers around the world that, without Gilead’s authorization, purport to source our products and generic versions of our products and sell them for use in countries where those products have not been approved.

Further, third parties have illegally distributed and sold, and may continue to illegally distribute and sell, illegally diverted and counterfeit versions of our medicines, which do not meet the rigorous quality standards of our manufacturing and supply chain.

For example, as part of an ongoing investigation in coordination with the U.S.

Marshals and local law enforcement, we recently executed court-ordered seizures at 17 locations across eight U.S.

states and seized thousands of bottles of Gilead-labeled medication with counterfeit supply chain documentation, including bottles labeled as Biktarvy and Descovy.

Our investigation revealed that pharmaceutical distributors that are not authorized by Gilead to sell Gilead medicine, sold to independent pharmacies nationwide, purported genuine Gilead medicine sourced from an illegal counterfeiting scheme.

Illegally diverted and counterfeit medicines pose a serious risk to patient health and safety.

Our actions to stop or prevent the distribution and sale of illegally diverted and counterfeit versions of our medicines around the world may be costly and unsuccessful, which may adversely affect our reputation and business, including our product revenues and financial results.

For example, as part of a U.S.

civil enforcement lawsuit in coordination with law enforcement, and pursuant to court order, we seized thousands of bottles of Gilead-labeled medication with counterfeit supply chain documentation.

Our investigation revealed that pharmaceutical distributors that are not authorized by Gilead to sell Gilead medicine sold purportedly genuine Gilead medicine sourced from an illegal counterfeiting scheme to independent pharmacies nationwide.

Illegally diverted and counterfeit versions of Gilead-branded medicines exist and may pose a serious risk to patient health and safety.

Our actions to stop or prevent the distribution and sale of illegally diverted and counterfeit versions of our medicines around the world may be costly and unsuccessful, which may adversely affect patients and our reputation and business, including our product revenues and financial results.

Product Development and Supply Chain Risks

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We are required to demonstrate the safety and efficacy of product candidates that we develop for each intended use through extensive preclinical studies and clinical trials.

The results from preclinical and early clinical studies do not always accurately predict results in later, large-scale clinical trials.

The results from these studies do not always accurately predict results in later, large-scale clinical trials.

Even successfully completed large-scale clinical trials may not result in marketable products.

We face numerous risks and uncertainties with our clinical trials that could result in delays or prevent completion of the development and approval of our product candidates.

These risks and uncertainties include challenges in clinical trial protocol design, our ability to enroll patients in clinical trials, and the possibility of unfavorable or inadequate trial results to support further development of our product candidates, including failure to meet a trial’s primary endpoint, safety issues arising from our clinical trials, and the need to modify or delay our clinical trials or to perform additional trials.

For example, we recently announced clinical holds placed by FDA on clinical trials evaluating (1) injectable lenacapavir, (2) lenacapavir in combination with islatravir and (3) magrolimab, including in combination with azacitidine.

We face numerous risks and uncertainties with our clinical trials that could result in delays or prevent completion of the development and approval of our product candidates, including challenges in clinical trial protocol design, our ability to enroll patients in clinical trials, the possibility of unfavorable or inadequate trial results to support further development of our product candidates, including failure to meet a trial’s primary endpoint, safety issues arising from our clinical trials, and the need to modify or delay our clinical trials or to perform additional trials.

For example, in October 2022, we announced that FDA issued a complete response letter for our Biologics License Application for bulevirtide for the treatment of adults with hepatitis delta virus infection.

In addition, see Note 8.

Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a discussion of the partial in-process research and development impairment charge that we recognized during the three months ended March 31, 2022 related to assets we acquired from Immunomedics, Inc.

(“Immunomedics”) in 2020.

As a result, we may be unable to successfully complete our clinical trials on our anticipated timelines, or at all.

Based on trial results, it is possible that FDA and other regulatory authorities may not approve our product candidates, or that any market approvals may include significant limitations on the products’ use.

In addition, clinical trials involving our commercial products could raise new safety issues for our existing products, which could adversely impact our business.

Based on trial results, it is possible that FDA and other regulatory authorities do not approve our product candidates, or that any market approvals include significant limitations on the products’ use.

In addition, clinical trials involving our commercial products can raise new safety issues for our existing products, which could adversely impact our business.

Further, we may make a strategic decision to discontinue development of our product candidates if, for example, we believe commercialization will be difficult relative to other opportunities in our pipeline.

Therefore, our product candidates may never be successfully commercialized, and we may be unable to recoup the significant R&D and clinical trial expenses incurred.

In 2022, we anticipate the continued expansion of our clinical pipeline, which includes multiple planned Phase 3 study initiations in oncology and virology.

We expect to expend significant time and resources on our clinical trial activities without any assurance that we will recoup our investments or that our efforts will be commercially successful.

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These third parties are independent entities subject to their own unique operational and financial risks that are out of our control.

We and our third-party manufacturers and corporate partners are subject to Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and the European Medicines Agency (“EMA”), as well as comparable regulations in other jurisdictions.

We and our third-party manufacturers and corporate partners are subject to Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and European Medicines Agency (“EMA”), as well as comparable regulations in other jurisdictions.

Manufacturing operations are also subject to routine inspections by regulatory agencies.

Any adverse developments affecting or resulting from our manufacturing operations or the operations of our third-party manufacturers and corporate partners may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the commercial supply of our products.

We may also need to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications and quality standards, undertake costly remediation efforts or seek more costly manufacturing alternatives.

We have incurred, and will continue to incur, inventory write-off charges and other expenses for products that fail to meet specifications and quality standards, and we may need to undertake costly remediation efforts or seek more costly manufacturing alternatives.

Such developments could increase our manufacturing costs, cause us to lose revenues or market share and damage our reputation.

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We need access to certain supplies and products to conduct our clinical trials and to manufacture and sell our products.

If we are unable to purchase sufficient quantities of these materials or find suitable alternative materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture and sell our products could be limited.

If we are unable to purchase enough of these materials or find suitable alternative materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture and sell our products could be limited.

Suppliers of key components and materials must be named in the new drug application or marketing authorization application filed with the regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification of a new supplier is required.

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Problems with any of the single suppliers or facilities we depend on, including in the event of a disaster, such as an earthquake, equipment failure or other difficulty, may negatively impact our development and commercialization efforts.

A significant portion of the raw materials and intermediates used to manufacture our antiviral products are supplied by third-party manufacturers and corporate partners outside of the United States.

As a result, any political or economic factors in a specific country or region, including any changes in or interpretations of trade regulations, compliance requirements or tax legislation, that would limit or prevent third parties outside of the United States from supplying these materials could adversely affect our ability to manufacture and supply our antiviral products to meet market needs and have a material and adverse effect on our operating results.

A significant portion of the raw materials and intermediates used to manufacture our antiviral products are supplied by third-party manufacturers and corporate partners outside of the U.S.

from supplying these materials could adversely affect our ability to manufacture and supply our antiviral products to meet market needs and have a material and adverse effect on our operating results.

If we were to encounter any of these difficulties, our ability to conduct clinical trials on product candidates and to manufacture and sell our products could be impaired.

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The products we develop must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by FDA, EMA and comparable regulatory agencies in other countries.

We have filed, and anticipate that we will file, for marketing approval in additional countries and for additional indications and products over the next several years.

We have filed, and anticipate that we will continue to file, for marketing approval in additional countries and for additional indications and products.

These and any future marketing applications we file may not be approved by the regulatory authorities on a timely basis, or at all.

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Failure to comply with these or other requirements imposed by FDA could result in significant civil monetary penalties, fines, suspensions of regulatory approvals, product recalls, seizure of products and criminal prosecutions.

We are impacted by evolving laws, regulations and legislative or regulatory actions applicable to the health care industry.

The health care industry is subject to various federal, state and international laws and regulations pertaining to drug reimbursement, rebates, price reporting, health care fraud and abuse, and data privacy and security.

In the United States, these laws include anti-kickback and false claims laws, laws and regulations relating to the Medicare and Medicaid programs and other federal and state programs, the Medicaid Rebate Statute, laws that regulate written and verbal communications about our products, individual state laws relating to pricing and sales and marketing practices, the Health Insurance Portability and Accountability Act and other federal and state laws relating to the privacy and security of health information.

Actual or alleged violations of these laws or any related regulations may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, civil monetary penalties, exclusion from participation in federal and state health care programs, including Medicare, Medicaid and Department of Veterans Affairs and Department of Defense health programs, actions against executives overseeing our business and significant remediation measures, negative publicity or other consequences.

We are impacted by evolving laws, regulations and legislative or regulatory actions applicable to the healthcare industry.

The healthcare industry is subject to various federal, state and international laws and regulations pertaining to drug reimbursement, rebates, price reporting, healthcare fraud and abuse, and data privacy and security.

In the U.S., these laws include anti-kickback and false claims laws, laws and regulations relating to the Medicare and Medicaid programs and other federal and state programs, such as the Medicaid Rebate Statute and the 340B statute, laws that regulate written and verbal communications about our products, individual state laws relating to pricing and sales and marketing practices, the Health Insurance Portability and Accountability Act and other federal and state laws relating to the privacy and security of health information.

Department of Veterans Affairs and U.S.

Department of Defense health programs, actions against executives overseeing our business and significant remediation measures, negative publicity or other consequences.

These laws and regulations are broad in scope and subject to changing and evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our sales or marketing practices.

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We are subject to risks if significant safety issues arise for our marketed products or our product candidates.

As additional studies are conducted subsequent to obtaining marketing approval for our products, and as our products are used over longer periods of time by many patients, including patients with underlying health problems or patients taking other medicines, we expect to continue finding new issues related to safety, resistance or drug interactions.

As additional studies are conducted after obtaining marketing approval for our products, and as our products are used over longer periods of time by many patients, including patients with underlying health problems or those taking other medicines, we expect to continue finding new issues related to safety, resistance or drug interactions.

Any such issues may require changes to our product labels, such as additional warnings, contraindications or even narrowed indications, or to halt sales of a product.

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Patents and other proprietary rights are very important to our business.

As part of our business strategy, we actively seek patent protection both in the United States and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology.

As part of our business strategy, we actively seek patent protection both in the U.S.

and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology.

Our success depends to a significant degree on our ability to:

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• operate without infringing on the intellectual property of others.

Because patent applications are confidential for a period of time before a patent is issued, we may not know if our competitors have filed patent applications for technology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our patent applications.

Because patent applications are confidential for a period of time after filing, we may not know if our competitors have filed applications for technology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our patent applications.

If competitors file patent applications covering our technology, we may have to participate in litigation, post-grant proceedings before the U.S.

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Such litigation and proceedings are unpredictable and expensive, and could divert management attention from other operations, such that, even if we are ultimately successful, we may be adversely impacted.

Patents covering our existing compounds, products and processes, and those that we will likely file in the future, may not provide complete or adequate protection.

Filing patent applications is a fact-intensive and complex process.

We may file patent applications that ultimately do not result in patents or have patents that do not provide adequate protection for the related product.

Future litigation or other proceedings regarding the enforcement or validity of our existing patents or any future patents could result in the invalidation of our patents or substantially reduce their protection.

In addition, we may face criticism as a result of our legitimate use of the patent systems to protect our investments in new and useful innovations in medicine.

Generic manufacturers have sought, and may continue to seek, FDA approval to market generic versions of our products through an abbreviated new drug application (“ANDA”), the application process typically used by manufacturers seeking approval of a generic drug.

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Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

ANDA litigation and related settlement and license agreements, in some cases, may result in a loss of exclusivity for our patents sooner than we would otherwise expect.

In addition, loss of exclusivity may be earlier than expected under these settlement and license agreements under certain circumstances.

For example, settlement and license agreements with generic manufacturers typically include acceleration clauses that permit generic entry before the agreed-upon entry date in certain circumstances, and generic manufacturers may continue to challenge the patents protecting our products.

The entry of generic versions of our products has, and may in the future, lead to market share and price erosion.

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If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our products.

For example, we are aware of patents and patent applications owned by third parties that such parties may claim cover the use of sofosbuvir, axicabtagene ciloleucel or bictegravir, as well as certain uses of combinations of emtricitabine (“FTC”) and tenofovir disoproxil fumarate (“TDF”) or TAF.

For example, we are aware of patents and patent applications owned by other parties that such parties may claim to cover the use of our products and research activities.

For a description of our pending patent litigation, see Note 13.

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Furthermore, we also rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation.

For example, a great deal of our liposomal manufacturing expertise, which is a key component of our liposomal technology, is not covered by patents but is instead protected as a trade secret.

We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and vendors.

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These matters could require us to pay significant monetary amounts, including royalty payments for past and future sales.

For example, on February 1, 2022, we reached an agreement with ViiV Healthcare Company and related parties (collectively, “ViiV”) for a global resolution of all pending or potential claims related to our sales of Biktarvy, pursuant to which (1) ViiV granted Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir, and (2) Gilead agreed to make a one-time payment of $1.25 billion and an ongoing royalty at a rate of 3% on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the United States until October 5, 2027.

For example, on February 1, 2022, we reached an agreement with ViiV Healthcare Company and related parties (collectively, “ViiV”) for a global resolution of all claims related to our sales of Biktarvy, pursuant to which (1) Gilead agreed to make a one-time payment of $1.25 billion and an ongoing royalty at a rate of 3% on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the U.S.

until October 5, 2027, and (2) ViiV granted Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir.

We expect these matters will continue to require a high level of internal and financial resources for the foreseeable future.

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Operational Risks

Our business has been, and may in the future be, adversely affected by outbreaks of epidemic, pandemic or contagious diseases, including the ongoing COVID-19 outbreak.

Actual or threatened outbreaks of epidemic, pandemic or contagious diseases, such as COVID-19, may significantly disrupt our global operations and adversely affect our business, financial condition and results of operations.

For example, the COVID-19 pandemic has caused significant volatility and uncertainty in U.S.

and international markets and has resulted in increased risks and adverse impacts to our operations, including as described below.

In addition to the developments discussed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we are monitoring a number of risks related to the pandemic, including the following:

• Supply Chain:

The pandemic could result in disruptions to our global supply chain and distribution in the future.

For example, quarantines, shelter-in-place and other governmental orders and policies, travel restrictions, airline capacity and route reductions, safety guidelines and health impacts of the pandemic could impact the availability or productivity of products and personnel at manufacturers, distributors, freight carriers and other necessary components of our supply chain.

In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in higher costs, disruptions in our supply chain and interruptions in our distribution capabilities.

• Clinical Trials:

The pandemic has adversely affected and may continue to adversely affect certain of our clinical trials, including our ability to initiate and complete our clinical trials within the anticipated timelines.

For ongoing trials, clinical trial sites have imposed restrictions on patient visits to limit risks of possible COVID-19 exposure, and we may experience issues with participant compliance with clinical trial protocols as a result of quarantines, travel restrictions and interruptions to healthcare services.

There is also a risk that closures at clinical sites may be necessary as the pandemic and related guidance and restrictions continue to evolve.

For the foregoing reasons, we have experienced delays with new subject enrollment for most clinical trials during the course of the pandemic, and may continue to experience overall delays in our clinical trials.

There is also the risk of biased data collection if only certain clinical trial sites remain open.

As a result of these challenges, our anticipated filing and marketing timelines for certain products may be adversely impacted.

• Regulatory Reviews:

The operations of FDA, EMA or other regulatory agencies may be adversely affected.

We may also experience delays in necessary interactions with regulatory authorities around the world, including with respect to any anticipated filing, which, together with other factors resulting from the pandemic, may adversely impact our ability to launch new commercial products.

• Access to Healthcare Providers:

The pandemic has limited patients’ ability or willingness to access and seek care from healthcare providers and initiate or continue therapies, which has resulted in lower demand for our products during the course of the pandemic, particularly with respect to hepatitis C virus (“HCV”) treatment and HIV treatment and prevention.

For example, we have observed lower levels of patient visits and testing volumes in HCV, resulting in fewer patient starts.

In addition, at times during the pandemic, we have seen lower levels of screening and diagnosis for HIV, resulting in fewer treatment initiations, as well as higher levels of discontinuations, resulting in a reduction in prescription refills.

With increased levels of unemployment at times during the pandemic, we have also experienced shifts in payer mix towards more government-funded coverage and the uninsured segment.

Our field personnel have also had reduced access to healthcare personnel during the pandemic, including fewer in-person interactions, which has adversely impacted and may continue to adversely impact our commercial activities.

We face risks related to the health, safety, morale and productivity of our employees, including the safe occupancy of our sites during the pandemic.

In the fourth quarter of 2021, we transitioned to a return-to-site phase for our U.S.

flexible location employees.

Our job site enhancements and risk protocols, which include health screenings and COVID-19 testing and vaccine requirements, do not guarantee that we can maintain the continued safe occupancy of our sites and may adversely impact employee recruitment and retention.

On-site employees testing positive for COVID-19 could lead to mandatory quarantines and potential site shutdowns.

The pandemic has had, and may continue to have, an adverse financial impact in the short term and potentially beyond.

In particular, our HCV and HIV businesses have been and continue to be adversely impacted.

For example, we have observed reductions in the overall U.S.

HCV treatment, HIV treatment and HIV pre-exposure prophylaxis (“PrEP”) volumes at times during the pandemic, and it is uncertain when these volumes will all return to pre-pandemic levels.

We may continue to experience fluctuating revenues as infection rates rise and fall and as pandemic restrictions are periodically tightened and eased.

We have also experienced, and may continue to experience, volatility in our short-term revenues due to fluctuations in inventory channel purchases during the pandemic.

We could also have additional unexpected expenses related to the pandemic, which could negatively affect our results of operations.

These factors together with the overall uncertainty and disruption caused by the pandemic could result in increased volatility and decreased predictability in our results of operations and volatility in our stock price.

The pandemic has also amplified many of the other risks described throughout the “Risk Factors” section of this Annual Report on Form 10-K.

The extent to which the pandemic impacts our business and results will depend on future developments, which are uncertain and cannot be predicted with confidence, including any potential future waves of the pandemic, new variants of the virus that impact the severity and duration of the pandemic, the development, distribution, effectiveness and public acceptance of vaccines, and any other ongoing and future actions taken to contain the pandemic.

Our business has been, and may in the future be, adversely affected by outbreaks of epidemic, pandemic or contagious diseases, including the ongoing COVID-19 pandemic.

Actual or threatened outbreaks of epidemic, pandemic or contagious diseases, or other public health emergencies, may significantly disrupt our global operations and adversely affect our business, financial condition and results of operations.

As we have seen with the COVID-19 pandemic, outbreaks can result in global supply chain and logistics disruptions and distribution constraints.

The impact of an outbreak or other public health crisis on our results of operations and financial condition would depend on numerous evolving factors, but could involve higher operating expenses, lower demand for our products as a result of governmental, business and individuals’ actions taken in response to such an event (including quarantines, travel restrictions and interruptions to healthcare services, which can impact enrollment in or operation of our clinical trials or limit patients’ ability or willingness to access and seek care), challenges associated with the safety of our employees and safe occupancy of our job sites, and financial market volatility and significant macroeconomic uncertainty in global markets.

An outbreak or public health emergency also could amplify many of the other risks described throughout the “Risk Factors” section of this Annual Report on Form 10-K.

We face risks associated with our global operations.

Our global operations are accompanied by certain financial, political, economic and other risks, including those listed below:

• Foreign Currency Exchange:

For the year ended December 31, 2021, approximately 29% of our product sales were outside the United States.

• Foreign C urrency Exchange:

For the year ended December 31, 2022, approximately 31% of our product sales were outside the U.S.

Because a significant percentage of our product sales is denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates.

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dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation.

For example, see Part II, Item 7 of this Annual Report on Form 10-K for a discussion of our exposure to movements in foreign currency exchange rates, primarily in the Euro, and the impacts from foreign currency exchange, net of hedges, for the year ended December 31, 2022.

• Interest Rates and Inflation:

We hold interest-generating assets and interest-bearing liabilities, including our available-for-sale debt securities and our senior unsecured notes and credit facilities.

Fluctuations in the interest rate could expose us to increased financial risk.

In addition, changes in the inflation rate could also adversely impact our business and financial results.

Fluctuations in interest rates, including the U.S.

Federal Reserve’s recent increases in interest rates, could expose us to increased financial risk.

In addition, high inflation, such as what we are seeing in the current economic environment, has adversely impacted and may continue to adversely impact our business and financial results.

• Anti-Bribery:

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• Restrictive government actions against our intellectual property and other foreign assets such as nationalization, expropriation, the imposition of compulsory licenses or similar actions, including waiver of intellectual property protections.

• Protective economic policies taken by foreign governments, such as trade protection measures and import and export licensing requirements, which may result in the imposition of trade sanctions or similar restrictions by the United States or other governments.

• Business interruptions stemming from natural or man-made disasters, such as climate change, earthquakes, hurricanes, flooding, fires, extreme heat, drought or actual or threatened public health emergencies, or efforts taken by third parties to prevent or mitigate such disasters, such as public safety power shutoffs and facility shutdowns, for which we may be uninsured or inadequately insured.

or other governments.

For example, our corporate headquarters in Foster City and certain R&D and manufacturing facilities are located in California, a seismically active region.

In the event of a major earthquake, we may not carry adequate earthquake insurance and significant recovery time could be required to resume operations.

• Political instability or disruption in a geographic region where we operate, regardless of cause, including war, terrorism, social unrest and political changes.

In the event of a major earthquake, we may not carry sufficient earthquake insurance, and significant recovery time could be required to resume operations.

• Political instability or disruption in a geographic region where we operate, regardless of cause, including war, terrorism, social unrest and political changes, including in China, Russia and Ukraine.

Our aspirations, goals and disclosures related to environmental, social and governance (“ESG”) matters expose us to numerous risks, including risks to our reputation and stock price.

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Our selection of disclosure frameworks that seek to align with various reporting standards may change from time to time and may result in a lack of consistent or meaningful comparative data from period to period.

In addition, our processes and controls may not always comply with evolving standards for identifying, measuring and reporting ESG metrics, our interpretation of reporting standards may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.

In addition, regulatory authorities may impose mandatory disclosure requirements with respect to ESG matters.

For example, in March 2022, U.S.

Securities and Exchange Commission (“SEC”) proposed rule changes that would require companies to make certain climate-related disclosures, including information about climate-related risks, greenhouse gas emissions and certain climate-related financial statement metrics.

Our processes and controls may not reflect evolving standards for identifying, measuring and reporting ESG matters, immediately or at all, our interpretation of reporting standards may differ from those of others, and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.

In addition, enhancements to our processes and controls to reflect evolving reporting standards may be costly and require additional resources.

If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, business partner or acquiror could be negatively impacted.

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We rely on a number of collaborative relationships with third parties for our sales and marketing performance in certain territories.

For example, we have collaboration arrangements with Janssen Sciences Ireland UC for Odefsey, Complera/Eviplera and Symtuza.

In some countries, we rely on international distributors for sales of certain of our products.

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The multitude and complexity of our computer systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and ransomware attack.

Likewise, data privacy or security breaches by employees or others can result in the exposure of sensitive data, including our intellectual property or trade secrets or the personal information of our employees, patients, customers or other business partners to unauthorized persons or to the public.

Cybersecurity incidents are increasing in their frequency, sophistication and intensity, including during the COVID-19 pandemic.

Cybersecurity incidents include, for example, the deployment of harmful malware, ransomware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability.

Likewise, data privacy or cybersecurity incidents or breaches by employees or others can result in the exposure of sensitive data, including our intellectual property or trade secrets or the personal information of our employees, patients, customers or other business partners to unauthorized persons or to the public.

Cybersecurity attacks and incidents are increasing in their frequency, sophistication and intensity.

Malicious actors seek to steal money, gain unauthorized access to, destroy or manipulate data, and disrupt operations, and some of their attacks may not be recognized or discovered until launched or after initial entry into the environment, such as novel or zero-day attacks that are launched before patches are available and defenses can be readied.

Malicious actors are also increasingly developing methods to avoid prevention, detection and alerting capabilities, including employing counter-forensic tactics making response activities more difficult.

Such attacks and incidents include, for example, the deployment of harmful malware, ransomware, denial-of-service, social engineering and other means to affect service reliability and operatio ns and threaten data confidentiality, integrity and availability.

Our business and technology partners face similar risks and any security breach of their systems could adversely affect our security posture.

Like many companies, we have experienced cybersecurity incidents, including data breaches and service interruptions.

When cybersecurity incidents occur, we respond and address them in accordance with applicable governmental regulations and other legal requirements, including our cybersecurity protocols.

There can be no assurance that our efforts in response to cybersecurity incidents, as well as our investments to protect our information technology infrastructure and data, will shield us from significant losses and potential liability or prevent any future interruption or breach of our systems.

When cybersecurity incidents occur, our policy is to respond and address them in accordance with applicable governmental regulations and other legal requirements, including our cybersecurity protocols.

There can be no assurance that our efforts in response to cybersecurity incidents, as well as our investments to protect our information technology infrastructure and data, will shield us from significant losses, brand and reputational harm and potential liability or prevent any future interruption or breach of our systems.

Such cybersecurity incidents can cause the loss of critical or sensitive information, including personal information, and could give rise to legal liability and regulatory action under data protection and privacy laws.

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In addition, new domestic data privacy and security laws, such as the California Consumer Privacy Act and the California Privacy Rights Act and other laws that have been or may be passed, similarly introduce requirements with respect to personal information, and non-compliance with such laws may result in liability through private actions (subject to statutorily defined damages in the event of certain data breaches) and enforcement.

Other changes or new laws or regulations associated with the enhanced protection of personal information, including, in some cases, healthcare data or other personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.

Other changes or new laws or regulations associated with the enhanced protection of personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.

Strategic and Financial Risks

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We have engaged in, and may in the future engage in, such transactions as part of our business strategy.

We may not identify suitable transactions in the future and, if we do, we may not complete such transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits.

We may not identify suitable transactions in the future and, if we do, we may not complete such transactions in a timely manner, on a cost-effective basis, or at all, including the possibility that a governmental entity or regulatory body may delay or refuse to grant approval for the consummation of the transaction.

If we are successful in making an acquisition or closing a licensing arrangement or collaboration, the products, intellectual property and technologies that are acquired or licensed may not be successful or may require significantly greater resources and investments than anticipated.

As part of our annual impairment testing of our goodwill and other indefinite-lived intangible assets in the fourth quarter, and earlier if impairment indicators exist, as required under U.S.

generally accepted accounting principles, we may need to recognize impairment charges if the products, intellectual property and technologies that are acquired or licensed are not successful.

generally accepted accounting principles, we may need to recognize impairment charges related to the products, intellectual property and technologies that are acquired or licensed.

For example, as a result of an impairment analysis we conducted following our receipt of data in March 2022 from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with hormone receptor-positive, human epidermal growth receptor 2-negative metastatic breast cancer, we recognized a partial in-process research and development impairment charge on our Consolidated Statements of Income during 2022.

For option structured deals, there is no assurance that we will elect to exercise our option right, and it is possible that disagreements, uncertainties or other circumstances may arise, including with respect to whether our option rights have been appropriately triggered, which may hinder our ability to realize the expected benefits.

For equity investments in our strategic transactions, such as in connection with our collaborations with Arcus Biosciences, Inc.

For equity investments in our strategic partners, such as in connection with our collaborations with Arcus Biosciences, Inc.

and Galapagos NV, the value of our equity investments may fluctuate and decline in value.

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Additional indebtedness and a lower cash balance could result in a downgrade of our credit ratings, limit our ability to borrow additional funds or refinance existing debt on favorable terms, increase our vulnerability to adverse economic or industry conditions, and reduce our financial flexibility to continue with our capital investments, stock repurchases and dividend payments.

For example, as a result of the cash used and the debt issued in connection with our acquisition of Immunomedics, Inc.

in 2020, S&P Global Ratings downgraded our credit rating.

For example, as a result of the cash used and the debt issued in connection with our acquisition of Immunomedics in 2020, S&P Global Ratings downgraded our credit rating.

We may be adversely impacted by any failure to overcome these additional risks.

Changes in our effective income tax rate could reduce our earnings.

We are subject to income taxes in the United States and various foreign jurisdictions.

We are subject to income taxes in the U.S.

and various foreign jurisdictions.

Due to economic and political conditions, various countries are actively considering and have made changes to existing tax laws, and we cannot predict the form or timing of such changes.

Our effective tax rates are affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of new taxes, and changes in tax laws, regulations, administrative practices and interpretations, including in the United States, Germany and Ireland.

We are also subject to the examination of our tax returns and other tax matters by the U.S.

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What changed 10-K

Item 1A. Risk Factors