What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-22 compared with 2022-02-23 · 623 added, 703 removed, 1092 unchanged (55% of the section changed)

43 unchanged sentences

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.

Valuation of in-process research and development intangible asset

Description of the Matter During 2022, the Company recognized a $2.7 billion impairment charge related to its in-process research and development (IPR&D) intangible asset related to Trodelvy for treatment of patients with hormone receptor-positive, human epidermal growth factor receptor 2-negative (HR+/HER2-) breast cancer.

At December 31, 2022, this intangible asset had a remaining carrying value of $6.1 billion.

As discussed in Note 1, intangible assets with indefinite useful lives related to IPR&D projects acquired in a business combination 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 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.

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 acquired from Immunomedics.

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

An impairment charge is recognized to the degree the carrying value exceeds the fair value.

As discussed in Note 8, the Company estimated the fair value of the IPR&D intangible asset related to Trodelvy for patients with HR+/HER2- breast cancer in connection with both an interim impairment assessment as of March 31, 2022, and an annual impairment assessment as of October 1, 2022.

Auditing the fair values of this IPR&D intangible asset was complex due to the significant judgment required in estimating the fair values.

In particular, the fair value estimates required the use of a valuation methodology that was 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 methodology 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 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.

To test the estimated fair value of this asset at both the interim and annual assessment dates, our audit procedures, among others, included evaluating the Company's use of an appropriate valuation methodology with assistance from a valuation specialist, evaluating sensitivity analyses to determine which assumptions had the greatest impact on the fair value determination, 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.

24 unchanged sentences

Accounts payable

Accrued government and other rebates

Accrued and other current liabilities 6,145 4,336

Accrued rebates 3,479 3,244

Other current liabilities 4,580 6,145

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

11 unchanged sentences

5,600 authorized;

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

1,247 and 1,254 shares issued and outstanding, respectively

Additional paid-in capital 5,550 4,661

Accumulated other comprehensive income (loss) 83 ( 60 )

Accumulated other comprehensive income 2 83

Retained earnings

17 unchanged sentences

Acquired in-process research and development expenses 944 939 5,968

In-process research and development impairment 2,700 — —

Selling, general and administrative expenses 5,673 5,246 5,151

Total costs and expenses 19,951 17,387 20,618

Income from operations 9,918 4,071 4,287

Operating income 7,330 9,918 4,071

Interest expense ( 935 ) ( 1,001 ) ( 984 )

1 unchanged sentence

Income before income taxes 5,814 8,278 1,669

Income tax (expense) benefit ( 2,077 ) ( 1,580 ) 204

Income tax expense ( 1,248 ) ( 2,077 ) ( 1,580 )

Net income 4,566 6,201 89

1 unchanged sentence

Net income attributable to Gilead $ 4,592 $ 6,225 $ 123

Net income per share attributable to Gilead common stockholders - basic $ 4.96 $ 0.10 $ 4.24

Shares used in per share calculation - basic 1,256 1,257 1,270

Net income per share attributable to Gilead common stockholders - diluted $ 4.93 $ 0.10 $ 4.22

Shares used in per share calculation - diluted 1,262 1,263 1,277

Basic earnings per share attributable to Gilead $ 3.66 $ 4.96 $ 0.10

Shares used in basic earnings per share attributable to Gilead calculation 1,255 1,256 1,257

Diluted earnings per share attributable to Gilead $ 3.64 $ 4.93 $ 0.10

Shares used in diluted earnings per share attributable to Gilead calculation 1,262 1,262 1,263

See accompanying notes.

5 unchanged sentences

Other comprehensive income (loss):

Net foreign currency translation gain (loss), net of tax ( 38 ) ( 2 ) 6

Net foreign currency translation loss ( 11 ) ( 38 ) ( 2 )

Available-for-sale debt securities:

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

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

Net unrealized gain (loss), net of tax impact of $ 0 , $( 1 ) and $ 12 , respectively

( 30 ) ( 6 ) 43

Reclassifications to net income, net of tax impact of $ 0 , $ 0 and $ 12 , respectively

Net change ( 29 ) ( 6 ) 1

Cash flow hedges:

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

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

Net unrealized gain (loss), net of tax impact of $ 20 , $ 18 and $( 15 ), respectively

130 129 ( 103 )

Reclassifications to net income, net of tax impact of $ 25 , $( 9 ) and $ 6 , respectively

( 171 ) 58 ( 41 )

Net change ( 41 ) 187 ( 144 )

14 unchanged sentences

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 standards — — — — 8 — 8

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

5 unchanged sentences

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

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

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

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

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

Other comprehensive income, net of tax — — — 143 — — 143

Issuances under employee stock purchase plan 2 — 111 — — — 111

6 unchanged sentences

Net income (loss) — — — — 4,592 ( 26 ) 4,566

Other comprehensive income (loss), net of tax — — — 143 — — 143

Other comprehensive loss, net of tax — — — ( 81 ) — — ( 81 )

Issuances under employee stock purchase plan 2 — 103 — — — 103

17 unchanged sentences

Deferred income taxes ( 1,552 ) ( 116 ) ( 214 )

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

Net loss from equity securities 657 610 1,662

Acquired in-process research and development expenses 944 939 5,968

In-process research and development impairment 2,700 — —

Write-downs for slow-moving and excess raw material and work in process inventory 121 40 547

Other 780 576 178

15 unchanged sentences

Other ( 1 ) 19 7

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

Net cash used in investing activities ( 2,466 ) ( 3,131 ) ( 14,615 )

Financing Activities:

5 unchanged sentences

Other ( 173 ) ( 145 ) ( 138 )

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

Net cash provided by (used in) financing activities ( 6,469 ) ( 8,877 ) 770

Effect of exchange rate changes on cash and cash equivalents ( 63 ) ( 35 ) 43

13 unchanged sentences

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.

Our portfolio of marketed products includes AmBisome ® , Atripla ® , Biktarvy ® , Cayston ® , Complera ® , Descovy ® , Descovy for PrEP ® , Emtriva ® , Epclusa ® , Eviplera ® , Genvoya ® , Harvoni ® , Hepcludex ® , Hepsera ® , Jyseleca ® , Letairis ® , Odefsey ® , Ranexa ® , Sovaldi ® , Stribild ® , Sunlenca ® , 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 U.S.

We also sell and distribute authorized generic versions of Epclusa and Harvoni in the U.S.

through our separate subsidiary, Asegua Therapeutics, LLC.

In addition, we sell and distribute certain products through our corporate partners under collaborative agreements.

Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities for which we are the primary beneficiary.

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 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, 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.

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, scientific data, probability of technical and regulatory successful development, market potential and other considerations, 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 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.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S.

generally accepted accounting principles and include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities (“VIEs”) for which we are the primary beneficiary.

All intercompany transactions have been eliminated.

When we obtain a variable interest in another entity, we assess at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE and, if so, whether we are the primary beneficiary of the VIE 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.

The preparation of these Consolidated Financial Statements 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 coronavirus disease (“COVID-19”) could have on our significant accounting estimates.

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

Actual results may differ significantly from these estimates.

Certain amounts and percentages herein may not sum or recalculate due to rounding.

Beginning in the second quarter of 2022, expenses related to development milestones and other collaboration payments made prior to regulatory approval of a developed product were reclassified from Research and development expenses to Acquired in-process research and development expenses on our Consolidated Statements of Income.

Concurrently, we reclassified the cash payments related to these expenses from Other to Acquisitions, including in-process research and development, net of cash acquired within Investing Activities in the Consolidated Statements of Cash Flows.

We believe this presentation assists users of the financial statements to better understand the total costs incurred to acquire in-process research and development (“IPR&D”) projects.

Prior periods have been revised to reflect this classification, resulting in a reduction of previously-reported Research and development expenses of $ 762 million and $ 112 million for the years ended December 31, 2021 and 2020, respectively.

Revenue Recognition

Product Sales

We recognize revenue from product sales when control of the product transfers, generally upon shipment or delivery, to the customer, or in certain cases, upon the corresponding sales by our customer to a third party.

The revenues are recognized net of estimated government and other rebates and chargebacks, cash discounts for prompt payment, distributor fees, sales return provisions and other related deductions.

We recognize revenue from product sales when control of the product transfers to the customer, which is generally upon shipment or delivery, or in certain cases, upon the corresponding sales by our customer to a third party.

Revenues are recognized net of estimated rebates and chargebacks, cash discounts for prompt payment, distributor fees, sales return provisions and other related deductions.

These deductions to product sales are referred to as gross-to-net deductions and are estimated and recorded in the period in which the related product sales occur.

4 unchanged sentences

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 financing component.

Shipping and handling activities are considered to be fulfillment activities and not a separate performance obligation.

Gross-to-Net Deductions

Rebates and Chargebacks

Government and other rebates and chargebacks include amounts payable to payers and healthcare providers under various programs, and may vary by product, by payer and individual payer plans.

Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payer and individual payer plans.

For qualified programs that can purchase our products through wholesalers or other distributors at a lower contractual price, the wholesalers or distributors charge back to us the difference between their acquisition cost and the lower contractual price.

Rebates and chargebacks are estimated primarily based on product sales, and expected payer mix and discount rates, which require significant estimates and judgment.

Additionally, in developing our estimates, we consider:

historical and estimated payer mix;

statutory discount requirements and contractual terms;

historical claims experience and processing time lags;

estimated patient population;

known market events or trends;

market research;

channel inventory data obtained from our major U.S.

and other pertinent internal or external information.

Rebates and chargebacks are based on contractual arrangements or statutory requirements and include amounts due to payers and healthcare providers under various programs.

These amounts may vary by product, payer and individual plans.

Providers qualified under certain programs can purchase our products through wholesalers or other distributors at a discount.

The wholesalers or distributors then charge the discount back to us.

Rebates and chargebacks are estimated primarily based on product sales, including product mix and pricing, historical and estimated payer mix and discount rates, among other inputs, which require significant estimates and judgment.

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.

Government and other rebates that are payable to third party payers and healthcare providers are recorded in Accrued government and other rebates on our Consolidated Balance Sheets.

Chargebacks that are payable to our direct customers are generally classified as reductions of Accounts receivable on our Consolidated Balance Sheets.

Rebates that are payable to third party payers and healthcare providers are recorded in Accrued rebates on our Consolidated Balance Sheets.

Cash Discounts

7 unchanged sentences

We typically permit returns if the product is damaged, defective, or otherwise cannot be used by the customer.

In the United States, we typically permit returns six months prior to and up to one year after the product expiration date.

Outside the United States, returns are only allowed in certain countries on a limited basis.

In the U.S., we typically permit returns six months prior to and up to one year after the product expiration date.

Outside the U.S., returns are only allowed in certain countries on a limited basis.

Our estimates of sales returns are based primarily on analysis of our historical product return patterns, industry information reporting the return rates for similar products and contractual agreement terms.

We also take into consideration known or expected changes in the marketplace specific to each product.

Shipping and Handling

Shipping and handling activities are considered to be fulfillment activities and not considered to be a separate performance obligation.

Royalty, Contract and Other Revenues

Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur.

Contract and other revenues are recognized when the performance obligation is satisfied.

Research and Development Expenses

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.

Research and development expenses are recorded when incurred and consist primarily of clinical studies performed by contract research organizations (“CROs”), materials and supplies, 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.

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 R&D expenses.

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

Clinical study costs are a significant component of R&D expenses.

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

Clinical study costs are a significant component of Research and development expenses.

Most of our clinical studies are performed by third-party CROs.

2 unchanged sentences

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 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.

Payments we make for R&D services prior to the services being rendered are recorded as prepaid assets within Prepaid and other current assets on 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.

Acquired in-process research and development expenses are recorded when incurred and reflect 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 and milestone payments related to various collaborations and the costs of rights to IPR&D projects.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses relate to sales and marketing, finance, human resources, legal and other administrative activities.

SG&A expenses consist primarily of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses, and other general and administrative costs.

SG&A expenses also include the Branded Prescription Drug (“BPD”) fee.

In the United States, we, along with other pharmaceutical manufacturers of branded drug products, are required to pay a portion of the BPD fee, which is estimated based on select government sales during the prior year as a percentage of total industry government sales.

We expense the costs of advertising, including promotional expenses, as incurred.

Advertising expenses were $ 735 million, $ 795 million and $ 784 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Selling, general and administrative expenses are recorded when incurred and consist primarily of personnel costs, facilities and overhead costs, outside marketing, advertising and legal expenses, and other general and administrative costs related to sales and marketing, finance, human resources, legal and other administrative activities.

Advertising expenses within Selling, general and administrative expenses, including promotional expenses, are recorded when incurred and were $ 778 million, $ 735 million and $ 795 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Stock-Based Compensation

We provide stock-based compensation in the form of various types of equity-based awards, including restricted stock units (“RSUs”), performance share units (“PSUs”) and stock options, and through our Employee Stock Purchase Plan and the International Employee Stock Purchase Plan (together, as amended, the “ESPP”).

Stock-based compensation expense is based on the estimated fair value of the award on the grant date, or the first date of the ESPP purchase period, and recognized over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach, reduced for estimated forfeitures.

We estimate forfeitures based on our historical experience.

The requisite service period could be shorter than the vesting period if an employee is retirement eligible or if an employee terminates due to death or disability.

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

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

Estimated inputs to that model include (i) expected volatility, based on a blend of historical volatility of our common stock price along with implied volatility for traded options on our common stock, (ii) expected term in years, based on the weighted-average period awards are expected to remain outstanding using historical cancellation and exercise data, contractual terms and vesting terms of the award, (iii) risk-free interest rate, based on observed interest rates appropriate for the term of the stock-based awards, and (iv) expected dividend yield, based on our history and expectation of dividend payments.

Earnings Per Share

Basic earnings per share attributable to Gilead is calculated based on Net income attributable to Gilead on our Consolidated Statements of Income divided by the weighted-average number of shares of our common stock outstanding during the period.

Diluted earnings per share attributable to Gilead is calculated based on Net income attributable to Gilead on our Consolidated Statements of Income divided by the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period.

The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents are determined under the treasury stock method.

Cash and Cash Equivalents

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 Non-Marketable Securities

Marketable Debt Securities

All of our marketable debt securities are classified as available-for-sale and carried at estimated fair values.

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 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.

Other income (expense), net, includes interest, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and expected credit losses, if any.

Unrealized gains and losses on available-for-sale debt securities are reported in Accumulated other comprehensive income on our Consolidated Balance Sheets until realized, at which point they are reclassified into Other income (expense), net on our Consolidated Statements of Income.

Interest, amortization of purchase premiums and discounts, and expected credit losses, if any, are also recorded in Other income (expense), net on our Consolidated Statements of Income.

The cost of securities sold is based on the specific identification method.

2 unchanged sentences

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.

The portion of the unrealized loss related to factors other than credit losses is recognized in AOCI.

Marketable and Non-Marketable Equity Securities

Investments in equity securities, other than equity method investments, are recorded at fair market value if fair value is readily determinable, and unrealized gains and losses are included in Other income (expense), net on our Consolidated Statements of Income.

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 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.

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.

Certain investments in equity securities of non-public companies are accounted for using the equity method based on our ownership percentage and other factors that indicate we have significant influence over the investee.

Collaborations and Other Arrangements for additional information.

Our investments in equity securities are recorded in Prepaid and other current assets or Other long-term assets on our Consolidated Balance Sheets.

We regularly review our securities for indicators of impairment.

Concentrations of Risk

We are subject to credit risk from our portfolio of cash equivalents and marketable securities.

Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S.

We are not exposed to any significant concentrations of credit risk from these financial instruments.

The goals of our investment policy, in order of priority, are as follows:

safety and preservation of principal and diversification of risk;

liquidity of investments sufficient to meet cash flow requirements;

and a competitive after-tax rate of return.

We are also subject to credit risk from our accounts receivable related to our product sales.

Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and credit losses.

The portion of the unrealized loss related to factors other than credit losses is recognized in Accumulated other comprehensive income.

Accounts Receivable

Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and estimated credit losses.

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 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.

4 unchanged sentences

A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, anticipated R&D initiatives that could impact the indication in which the compound will be used, viability of commercialization and marketplace trends.

Equity Securities

Equity securities with readily determinable fair values, including those for which we have elected the fair value option, are recorded at fair market value, and unrealized gains and losses are included in Other income (expense), net on our Consolidated Statements of Income.

Any impairments or adjustments are recorded in Other income (expense), net on our Consolidated Statements of Income.

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.

Our investments in equity securities are classified in Prepaid and other current assets or Other long-term assets on our Consolidated Balance Sheets, generally depending on marketability and whether the securities are subject to lock-up provisions.

We regularly review our securities for indicators of impairment.

Property, Plant and Equipment

8 unchanged sentences

Leasehold improvements Shorter of useful life or lease term

We determine if an arrangement contains a lease at inception.

See “Impairment of Long-Lived Assets” for additional information.

We determine if an arrangement contains a lease at inception and classify each lease as operating or financing.

Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate when it is reasonably certain that we will exercise that option.

4 unchanged sentences

As most of our operating leases do not provide an implicit interest rate, we generally utilize a collateralized incremental borrowing rate, applied in a portfolio approach when relevant, based on the information available at the commencement date to determine the lease liability.

Acquisitions, including Goodwill, Intangible Assets and Contingent Consideration

We account for business combinations using the acquisition method of accounting, which generally requires that assets acquired, including IPR&D projects, and liabilities assumed be recorded at their fair values as of the acquisition date on our Consolidated Balance Sheets.

3 unchanged sentences

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.

Intangible assets related to IPR&D projects are considered to be indefinite-lived until the abandonment or completion of the associated R&D efforts, which generally occurs when regulatory approval is obtained.

Goodwill and indefinite-lived intangible assets are not amortized and, instead, are tested for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and, are also periodically reviewed for changes in facts or circumstances resulting in a reduction to the estimated useful life of the asset, requiring the acceleration of amortization.

See “Impairment of Long-Lived Assets” for additional information.

In determining the initial fair value of an intangible asset, or when quantitative analysis is required to determine any impairment, we use a probability-weighted income approach that discounts expected future cash flows to present value using a discount rate that is based on the estimated weighted-average cost of capital for companies with profiles similar to ours and represents the rate that market participants would use to value the intangible assets.

These cash flow models require the use of Level 3 fair value measurements and inputs, including estimated revenues, which, for example, include significant inputs such as addressable patient population, treatment duration, projected market share, assessment of the asset’s life cycle, and competitive trends impacting the asset;

costs and probability of technical and regulatory success, among other factors.

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events.

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

Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value on our Consolidated Statements of Income until such time that the payment is made.

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.

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 asset acquisition and, therefore, no goodwill is recorded and contingent consideration 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 expensed as incurred on our Consolidated Statements of Income unless there is an alternative future use.

Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination.

Intangible assets are measured at their respective fair values as of the acquisition date and may be subject to adjustment within the measurement period, which may be up to one year from the acquisition date.

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

We do not amortize goodwill and intangible assets with indefinite useful lives.

Goodwill and indefinite-lived intangible assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

When development is successfully completed, which generally occurs when regulatory approval is obtained, the associated assets are deemed finite-lived and amortized over their respective estimated useful lives beginning at that point in time.

Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and are reviewed for impairment when facts or circumstances indicate that the carrying value of these assets may not be recoverable.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable.

Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset to the carrying amount of the asset or asset group.

Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset over its useful life to the carrying amount of the asset or asset group.

If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

Valuation of Contingent Consideration Resulting from a Business Combination

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

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.

Significant judgment is employed in determining these assumptions as of the acquisition date and for each subsequent period.

Updates to assumptions could have a significant impact on our results of operations in any given period.

Actual results may differ from estimates.

Foreign Currency Translation, Transaction Gains and Losses, and Hedging Contracts

entity operations are recorded in the functional currency of each entity.

Results of operations for non-U.S.

dollar functional currency entities are translated into U.S.

dollars using average currency rates.

Assets and liabilities are translated using currency rates at period end.

Foreign currency translation adjustments are recorded as a component of AOCI within stockholders’ equity.

Foreign currency transaction gains and losses are recorded in Other income (expense), net, on our Consolidated Statements of Income.

Net foreign currency transaction gains and losses were not material for the years ended December 31, 2021, 2020 and 2019.

We hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts.

In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions.

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.

Fair Value of Financial Instruments

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.

When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks.

Derivative Financial Instruments

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

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.

Unrealized changes in the fair value of derivatives designated as part of a hedge transaction are recorded in Accumulated other comprehensive income.

For our hedges related to forecasted product sales, the unrealized gains or losses in Accumulated other comprehensive income 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.

Using regression analysis, 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 recognize accruals for loss contingencies 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;

2 unchanged sentences

Our income tax provision is computed under the liability method.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

Significant estimates are required in determining our provision for income taxes.

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

We record a valuation allowance to reduce our deferred tax assets to the amounts that are more likely than not to be realized.

We consider future taxable income, ongoing tax planning strategies and our historical financial performance in assessing the need for a valuation allowance.

If we expect to realize deferred tax assets for which we have previously recorded a valuation allowance, we will reduce the valuation allowance in the period in which such determination is first made.

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.

1 unchanged sentence

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 recognize both accrued interest and penalties, where appropriate, related to UTB in Income tax expense 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.

Foreign Currency Translation and Transactions

Our Consolidated Financial Statements are presented in U.S.

The functional currency for most of our foreign subsidiaries is their local currency.

Revenues, expenses, gains and losses for non-U.S.

dollar functional currency entities are translated into U.S.

dollars using average currency exchange rates for the period.

Assets and liabilities for such entities are translated using exchange rates that approximate the rate at the balance sheet date.

Foreign currency translation adjustments are recorded as a component of Accumulated other comprehensive income on our Consolidated Balance Sheets.

Foreign currency transaction gains and losses on transactions not denominated in functional currency are recorded in Other income (expense), net, on our Consolidated Statements of Income.

Fair Value Measurements

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.

We determine the fair value using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

• Level 1 inputs include quoted prices in active markets for identical assets or liabilities;

• Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability;

• 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.

Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

Disaggregation of Revenues

Revenues were as follows:

The following table summarizes our Total revenues:

Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

4 unchanged sentences

Product sales:

Atripla $ 121 $ 12 $ 12 $ 145 $ 307 $ 21 $ 21 $ 349 $ 501 $ 60 $ 39 $ 600

Biktarvy 8,510 1,103 777 10,390 7,049 969 606 8,624 6,095 735 429 7,259

31 unchanged sentences

Letairis 196 — — 196 206 — — 206 314 — — 314

Ranexa 10 — — 10 9 — — 9 216 — — 216

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

135 65 53 253 136 115 30 281 176 84 16 276

5 unchanged sentences

(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.

Collaborations and Other Arrangements for additional information.

(2) Includes Atripla, Emtriva, Sunlenca and Tybost.

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

2 unchanged sentences

(6) Includes Hepcludex and Hepsera.

(7) Includes Cayston and Jyseleca.

(7) Includes Cayston, Jyseleca, Ranexa and Zydelig.

Revenues from Major Customers

7 unchanged sentences

Revenues Recognized from Performance Obligations Satisfied in Prior Periods

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.

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.

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

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.

The following table summarizes revenues recognized from performance obligations satisfied in prior periods:

Year Ended December 31,

(in millions) 2022 2021 2020

Revenue share with Janssen (1) and royalties for licenses of intellectual property

$ 783 $ 851 $ 841

Changes in estimates $ 582 $ 856 $ 101

_______________________________

(1) See Note 10.

Collaborations and Other Arrangements for additional information.

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 $ 171 million and $ 174 million as of December 31, 2022 and 2021, respectively.

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.

Contract liabilities, which generally result from receipt of advance payment before our performance under the contract, were $ 102 million and $ 79 million as of December 31, 2022 and 2021, respectively.

FAIR VALUE MEASUREMENTS

We determine the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

• Level 1 inputs include quoted prices in active markets for identical assets or liabilities;

• Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities;

quoted prices for identical or similar assets or liabilities in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability;

• 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.

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 on our Consolidated Balance Sheets.

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:

10 unchanged sentences

Money market funds 3,831 — — 3,831 3,661 — — 3,661

Equity investment in Galapagos (1)

Equity investment in Galapagos NV (“Galapagos”) (1)

736 — — 736 931 — — 931

Equity investment in Arcus (1)

Equity investment in Arcus Biosciences, Inc.

(“Arcus”) (1)

286 — — 286 559 — — 559

10 unchanged sentences

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

Cash and cash equivalents $ 3,661 $ 4,361

Prepaid and other current assets 885 853

Other long-term assets 1,197 1,756

Total $ 5,743 $ 6,970

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 investments by taking into consideration valuations obtained from third-party pricing services.

Available-for-Sale Debt Securities

For our available-for-sale debt securities, we estimate the fair values by reviewing trading activity and pricing as of the measurement date, and 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.

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.

Foreign Currency Derivative Contracts

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.

1 unchanged sentence

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 (“LIBOR”) and swap rates.

These inputs include foreign currency exchange rates, Secured Overnight Financing Rate 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 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.

Senior Unsecured Notes

The total estimated fair values of our senior unsecured notes, determined using Level 2 inputs based on their quoted market values, were approximately $ 21.9 billion and $ 28.6 billion as of December 31, 2022 and 2021, respectively, and the carrying values were $ 24.1 billion and $ 25.6 billion as of December 31, 2022 and 2021, respectively.

Level 3 Inputs

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.

Contingent Consideration

In connection with our first quarter 2021 acquisition of MYR, we recorded a liability for contingent consideration, which is revalued each reporting period until the related contingency is resolved.

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 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.

The following table summarizes the change in fair value of our contingent consideration:

Year Ended December 31,

(in millions) 2022 2021

Beginning balance $ 317 $ —

Additions — 341

Changes in valuation assumptions (1)

Effect of foreign exchange remeasurement (2)

( 21 ) ( 23 )

Ending balance

________________________________

(1) Included in Research and development expenses on our Consolidated Statements of Income and primarily related to increasing discount rates and updated probability rate estimates.

(2) Included in Other income (expense), net on our Consolidated Statements of Income.

Liability Related to Future Royalties

We recorded a liability related to future royalties as part of our fourth quarter 2020 acquisition of Immunomedics, Inc.

(“Immunomedics”), which is subsequently amortized using the effective interest method over the remaining estimated life.

The fair values of the liability related to future royalties were $ 1.1 billion and $ 1.3 billion as of December 31, 2022 and 2021, respectively, and the carrying value was $ 1.1 billion as of December 31, 2022 and 2021.

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.

(“Tizona”), we also measured fair values of our exclusive options to acquire the remaining outstanding capital stock of Pionyr and Tizona on a nonrecurring basis.

Collaborations and Other Arrangements for additional information.

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.

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

Nonrecurring Fair Value Measurements

During 2022, we recorded a partial impairment charge of $ 2.7 billion related to certain IPR&D assets.

Goodwill and Intangible Assets for additional information.

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.

There were no indicators of impairment noted during 2021.

Fair Value Level Transfers

There were no transfers between Level 1, Level 2 and Level 3 in the periods presented.

AVAILABLE-FOR-SALE DEBT SECURITIES AND EQUITY SECURITIES

Available-for-Sale Debt Securities

1 unchanged sentence

December 31, 2022 December 31, 2021

(in millions) Amortized

Losses Estimated

Fair Value Amortized

Losses Estimated

(in millions) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

treasury securities $ 415 $ — $ ( 5 ) $ 410 $ 408 $ — $ ( 1 ) $ 407

5 unchanged sentences

Total $ 2,325 $ 1 $ ( 34 ) $ 2,293 $ 2,501 $ — $ ( 4 ) $ 2,497

The following table summarizes information related to available-for-sale debt securities that have been in a continuous unrealized loss position, classified by length of time:

December 31, 2022

Less Than 12 Months 12 Months or Longer Total

(in millions) Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value

treasury securities $ ( 2 ) $ 174 $ ( 3 ) $ 206 $ ( 5 ) $ 379

government agencies securities — 21 — — — 21

government securities — 31 — 3 — 34

Certificates of deposit — — — — — —

Corporate debt securities ( 17 ) 774 ( 8 ) 439 ( 26 ) 1,213

Residential mortgage and asset-backed securities ( 2 ) 205 ( 1 ) 56 ( 3 ) 261

Total $ ( 22 ) $ 1,204 $ ( 12 ) $ 705 $ ( 34 ) $ 1,908

December 31, 2021

Less Than 12 Months 12 Months or Longer Total

(in millions) Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value

treasury securities $ ( 1 ) $ 402 $ — $ — $ ( 1 ) $ 402

government agencies securities — 5 — — — 5

government securities — 46 — — — 46

Certificates of deposit — — — — — —

Corporate debt securities ( 2 ) 1,159 — — ( 2 ) 1,159

Residential mortgage and asset-backed securities ( 1 ) 410 — 10 ( 1 ) 420

Total $ ( 4 ) $ 2,022 $ — $ 10 $ ( 4 ) $ 2,032

No allowance for credit losses was recognized for investments with unrealized losses as of December 31, 2022, as we do not currently intend to sell, and it is not more likely than not that we will be required to sell, such investments before recovery of their amortized cost bases.

The unrealized losses were primarily driven by broader change in interest rates with no adverse conditions identified that would prevent the issuer from making scheduled principal and interest payments.

The following table summarizes the classification of our available-for-sale debt securities in our Consolidated Balance Sheets:

9 unchanged sentences

After one year through five years 1,260 1,236

After five years 24 23

After five years through ten years 3 3

After ten years 6 6

Total $ 2,325 $ 2,293

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.

Equity Securities

Equity Securities Measured at Fair Value

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, 2022 December 31, 2021

Cash and cash equivalents $ 3,831 $ 3,661

Prepaid and other current assets (1)

Other long-term assets (1)

Total $ 5,248 $ 5,743

________________________________

(1) Prepaid and other current assets and Other long-term assets include our equity method investments in Arcus and Galapagos, respectively, for which we elected and applied the fair value option as we believe it best reflects the underlying economics of these investments.

Our investment in Galapagos is classified in Other long-term assets due to certain lock-up provisions in our amended subscription agreement with them, which extend to August 2024.

Other Equity Securities

Equity method investments and other equity investments without readily determinable fair values were $ 423 million and $ 338 million as of December 31, 2022 and 2021, respectively, and were excluded from the table above.

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

Unrealized Gains and Losses

Net unrealized losses recognized on equity securities were $ 657 million, $ 610 million and $ 1.7 billion for the years ended December 31, 2022, 2021 and 2020, respectively, and were included in Other income (expense), net on our Consolidated Statements of Income.

Related Party Transaction

During the years ended December 31, 2022 and 2021, Gilead donated certain equity securities at fair value to the Gilead Foundation, a California nonprofit public benefit corporation (the “Foundation”).

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

The donation expense of $ 85 million and $ 212 million was recorded within Selling, general and administrative expenses on our Consolidated Statements of Income during the for the years ended December 31, 2022 and 2021, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

1 unchanged sentence

dollar and various foreign currencies, primarily the Euro.

To manage this risk, we may hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward or option contracts.

To manage this risk, we hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts.

In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions.

4 unchanged sentences

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.

The derivative instruments we use to hedge this exposure are not designated as hedges, and as a result, changes in their fair value are recorded in Other income (expense), net, on our Consolidated Statements of Income.

We hedge our exposure to foreign currency exchange rate fluctuations for forecasted product sales that are denominated in a non-functional currency.

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 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.

The following table summarizes the classification and fair values of derivative instruments in our Consolidated Balance Sheets:

The derivative instruments we use to hedge our exposures for certain monetary assets and liabilities that are denominated in a non-functional currency are not designated as hedges.

The derivative instruments we use to hedge our exposures for forecasted product sales are designated as cash flow hedges and have maturities of 18 months or less.

As of December 31, 2022 and 2021, we held foreign currency exchange contracts with outstanding notional amounts of $ 3.0 billion and $ 2.9 billion, respectively.

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

The following table summarizes the classification and fair values of derivative instruments, including the potential effect of offsetting:

December 31, 2022

Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value

Classification Fair

(in millions) Classification Fair Value Classification Fair Value

Derivatives designated as hedges:

Foreign currency exchange contracts

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

Foreign currency exchange contracts

Other long-term assets 5 Other long-term obligations 1

Foreign currency exchange contracts Prepaid and other current assets $ 59 Other current liabilities $ 26

Foreign currency exchange contracts Other long-term assets 1 Other long-term obligations 9

Total derivatives designated as hedges 59 35

Derivatives not designated as hedges:

Foreign currency exchange contracts

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

Foreign currency exchange contracts Prepaid and other current assets 1 Other current liabilities 7

Total derivatives not designated as hedges 1 7

Total derivatives $ 80 $ 5

Total derivatives presented gross on the Consolidated Balance Sheets $ 60 $ 42

Gross amounts not offset on the Consolidated Balance Sheets:

Derivative financial instruments ( 36 ) ( 36 )

Cash collateral received / pledged — —

Net amount (legal offset) $ 25 $ 7

December 31, 2021

Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value

Classification Fair

(in millions) Classification Fair Value Classification Fair Value

Derivatives designated as hedges:

Foreign currency exchange contracts

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

Foreign currency exchange contracts

Other long-term assets — Other long-term obligations 7

Foreign currency exchange contracts Prepaid and other current assets $ 75 Other current liabilities $ 4

Foreign currency exchange contracts Other long-term assets 5 Other long-term obligations 1

Total derivatives designated as hedges 80 5

Derivatives not designated as hedges:

Foreign currency exchange contracts

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

Foreign currency exchange contracts Prepaid and other current assets — Other current liabilities —

Total derivatives not designated as hedges — —

Total derivatives $ 12 $ 121

The following table summarizes the effect of our foreign currency exchange contracts on our Consolidated Financial Statements:

Total derivatives presented gross on the Consolidated Balance Sheets $ 80 $ 5

Gross amounts not offset on the Consolidated Balance Sheets:

Derivative financial instruments ( 4 ) ( 4 )

Cash collateral received / pledged — —

Net amount (legal offset) $ 76 $ 1

The following table summarizes the effect of our derivative contracts on our Consolidated Financial Statements:

Year Ended December 31,

1 unchanged sentence

Derivatives designated as hedges:

Gain (loss) recognized in AOCI $ 147 $ ( 118 ) $ 76

Gain (loss) reclassified from AOCI into Product sales

Gain (loss) recognized in Accumulated other comprehensive income

$ 150 $ 147 $ ( 118 )

Gain (loss) reclassified from Accumulated other comprehensive income to Product sales

$ 196 $ ( 67 ) $ 47

Derivatives not designated as hedges:

Gain (loss) recognized in Other income (expense), net

From time to time, we may discontinue cash flow hedges and, as a result, record related amounts in Other income (expense), net on our Consolidated Statements of Income.

$ 67 $ 21 $ ( 51 )

The majority of gains and losses related to the hedged forecasted transactions reported in Accumulated other comprehensive income as of December 31, 2022 are expected to be reclassified to Product sales within 12 months.

There were no discontinuances of cash flow hedges for the years presented.

As of December 31, 2021 and 2020, we only held foreign currency exchange contracts.

The following table summarizes the potential effect of offsetting our foreign currency exchange contracts on our Consolidated Balance Sheets:

Gross Amounts Not Offset on the Consolidated Balance Sheets

(in millions) Gross Amounts of Recognized Assets/Liabilities Gross Amounts Offset on the Consolidated Balance Sheets Amounts of Assets/Liabilities Presented on the Consolidated Balance Sheets Derivative Financial Instruments Cash Collateral Received/Pledged Net Amount (Legal Offset)

As of December 31, 2021

Derivative assets $ 80 $ — $ 80 $ ( 4 ) $ — $ 76

Derivative liabilities $ 5 $ — $ 5 $ ( 4 ) $ — $ 1

As of December 31, 2020

Derivative assets $ 12 $ — $ 12 $ ( 12 ) $ — $ —

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

The cash flow effects of our derivative contracts for the years ended December 31, 2022, 2021 and 2020 were included within Net cash provided by operating activities on our Consolidated Statements of Cash Flows.

On September 20, 2022, we acquired all of the outstanding share capital of MiroBio Ltd.

(“MiroBio”), a privately-held U.K.-based biotechnology company focused on restoring immune balance with agonists targeting immune inhibitory receptors, for $ 414 million in cash.

As a result, MiroBio became our wholly-owned subsidiary.

We accounted for the transaction as an asset acquisition and recorded a $ 389 million charge to Acquired in-process research and development expenses on our Consolidated Statements of Income during 2022.

The remaining purchase price relates to various other assets acquired and liabilities assumed.

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.

The acquisition provided Gilead with Hepcludex, which was conditionally approved by 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 fair value of this contingent liability, estimated using probability-weighted scenarios for FDA approval, was $ 341 million as of the acquisition date.

As of December 31, 2021, the fair value of the liability was $ 317 million and was included in Other current liabilities on our Consolidated Balance Sheets.

As of December 31, 2022, the fair value of the liability was $ 275 million and was included in Other long-term obligations.

Fair Value Measurements for additional information.

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.

The fair value estimates for the assets acquired and liabilities assumed were based upon valuations using information known and knowable as of the date of this filing.

Changes to these assumptions and estimates could cause an impact to the valuation of assets acquired, including intangible assets, goodwill and the related tax impacts of the acquisition, as well as legal and other contingencies.

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.

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

13 unchanged sentences

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 estimated aggregate fair value of $ 1.19 billion as of the acquisition date was determined by applying the income approach using unobservable inputs (Level 3 under the fair value measurement and disclosure guidance) 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

2 unchanged sentences

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.

The one-year measurement period was completed in the first quarter of 2022, with adjustments recorded to the fair values of assets acquired and liabilities assumed of $ 18 million.

Goodwill and Intangible Assets for additional information.

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.

2 unchanged sentences

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.

1 unchanged sentence

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:

13 unchanged sentences

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.

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

Intangible Assets

3 unchanged sentences

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

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 %.

Acquired IPR&D assets consist of Trodelvy for hormone receptor-positive, human epidermal growth factor receptor 2-negative (“HR+/HER2-”) 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 (Level 3 under the fair value measurement and disclosure guidance) 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.

Trodelvy for HR+/HER2- breast cancer was partially impaired in the first quarter of 2022, but was subsequently granted approval by FDA in February 2023 and $ 6.1 billion will be reclassified to finite-lived intangibles from IPR&D in the first quarter of 2023.

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, and sales and marketing expenses);

probability of success;

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.

Under the agreement, the third party was granted an exclusive license to develop and commercialize Trodelvy in certain territories in Asia and make certain sales milestones and royalty payments to us.

We also recorded an intangible asset related to a license and supply agreement with Everest Medicines (“Everest”), which was entered into by Immunomedics prior to the acquisition.

Under the agreement, Everest was granted an exclusive license to develop and commercialize Trodelvy in certain territories in Asia and make certain sales milestones and royalty payments to us.

The acquisition date fair value of $ 175 million was determined by estimating the probability-weighted net cash flows attributable to the outlicense and a discount rate of 7.0 %.

The discount rate 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 15 years on a straight-line basis.

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

This intangible asset was being amortized over an estimated useful life of 15 years on a straight-line basis up until we reacquired the rights from Everest in the fourth quarter of 2022.

Collaborations and Other Arrangements for additional information.

Deferred Income Taxes

4 unchanged sentences

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 an 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.

The estimated timing and amount of future expected royalty payments over the estimated term will be re-assessed each reporting period.

The impact from changes in estimates will be recognized in the liability and the related interest expense prospectively.

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.

Fair Value Measurements and 11.

Debt and Credit Facilities for additional information.

7 unchanged sentences

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:

(in millions) 2021 2020

Raw materials $ 1,112 $ 1,080

Work in process 590 976

Finished goods 1,032 958

Total $ 2,734 $ 3,014

Inventories $ 1,618 $ 1,683

Other long-term assets 1,116 1,331

Total $ 2,734 $ 3,014

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

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

9 unchanged sentences

Total $ 5,475 $ 5,121

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, net on our Consolidated Balance Sheets.

Interest capitalized in 2021 and 2020 was not material.

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.

________________________________

(1) Includes $ 104 million and $ 131 million of unamortized capitalized software costs as of December 31, 2022 and 2021, respectively.

The net book value of our property, plant and equipment in the U.S.

was $ 4.5 billion and $ 4.1 billion as of December 31, 2022 and 2021, respectively.

The corresponding amount in international locations was $ 973 million and $ 963 million as of December 31, 2022 and 2021, respectively.

4 unchanged sentences

Beginning balance

$ 8,332 $ 8,108

Goodwill resulting from acquisitions — 226

1 unchanged sentence

Ending balance $ 8,314 $ 8,332

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

In 2022, goodwill decreased by $ 18 million as a result of finalizing the amount of acquired net operating losses of MYR, which resulted in a decrease to the net deferred tax liability acquired.

As of December 31, 2022, there were no accumulated goodwill impairment losses.

12 unchanged sentences

Intangible asset – Trodelvy 5,630 ( 973 ) — 4,657 5,630 ( 507 ) — 5,123

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

Intangible asset – Hepcludex

845 ( 158 ) — 687 845 ( 72 ) — 773

Other 1,489 ( 733 ) 1 758 1,610 ( 650 ) 1 961

Total finite-lived assets 25,794 ( 10,121 ) 1 15,674 25,915 ( 8,381 ) 1 17,535

3 unchanged sentences

_______________________________

(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.

(1) In February 2023, FDA granted approval of Trodelvy for use in adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

Accordingly, the related IPR&D intangible asset of $ 6.1 billion will be reclassified to finite-lived assets in the first quarter of 2023.

Amortization Expense

Aggregate amortization expense related to finite-lived intangible assets was $ 1.8 billion, $ 1.7 billion and $ 1.2 billion for the years ended December 31, 2022, 2021 and 2020, 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 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.

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, 2022:

2 unchanged sentences

Total $ 15,674

Impairment Assessments

No indicators of impairment were noted for the years ended December 31, 2022, 2021 and 2020, except as described under “2022 IPR&D Impairment” below.

The weighted-average discount rates used in our quantitative assessments for IPR&D intangible assets during those years, other than for the assessment described below, were 7.5 %, 6.5 % and 8.0 %, respectively.

2022 IPR&D Impairment

In connection with our acquisition of Immunomedics in 2020, we allocated a portion of the purchase price to acquired IPR&D intangible assets.

Approximately $ 8.8 billion was assigned to IPR&D intangible assets related to Trodelvy for treatment of patients with HR+/HER2- breast cancer.

In March 2022, we received data from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with HR+/HER2- metastatic breast cancer who have received prior endocrine therapy, cyclin-dependent kinase 4/6 inhibitors and two to four lines of chemotherapy (“third-line plus patients”).

Based on our evaluation of the study results, and in connection with the preparation of the financial statements for the first quarter, we updated our estimate of the fair value of our HR+/HER2- IPR&D intangible asset to $ 6.1 billion as of March 31, 2022.

Our estimate of fair value used a probability-weighted income approach that discounts expected future cash flows to the present value, which requires the use of Level 3 fair value measurements and inputs, including estimated revenues, costs, and probability of technical and regulatory success.

The expected cash flows included cash flows from HR+/HER2- metastatic breast cancer for third-line plus patients and patients in earlier lines of therapy which are the subject of separate clinical studies.

Our revised discounted cash flows were lower primarily due to a delay in launch timing for third-line plus patients which caused a decrease in our market share assumptions based on the expected competitive environment.

As of March 2022, there were no changes in our plans or assumptions related to our estimated cash flows for patients in the earlier lines of therapy.

We used a discount rate of 6.75 % which is based on the estimated weighted-average cost of capital for companies with profiles similar to ours and represents the rate that market participants would use to value the intangible assets.

We determined the revised estimated fair value was below the carrying value of the asset and, as a result, we recognized a partial impairment charge of $ 2.7 billion in In-process research and development impairment on our Consolidated Statements of Income during the three months ended March 31, 2022.

OTHER FINANCIAL INFORMATION

3 unchanged sentences

Accounts receivable $ 5,464 $ 5,278

chargebacks 671 552

cash discounts and other 67 72

allowances for chargebacks 549 671

allowances for cash discounts and other 83 67

allowances for credit losses 55 47

Accounts receivable, net $ 4,777 $ 4,493

Accrued and other current liabilities

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

The majority of our trade accounts receivable arises from product sales in the U.S.

The following table summarizes our Inventories:

(in millions) 2022 2021

Raw materials $ 1,177 $ 1,112

Work in process 577 590

Finished goods 1,066 1,032

Total $ 2,820 $ 2,734

Inventories $ 1,507 $ 1,618

Other long-term assets (1)

Total $ 2,820 $ 2,734

_______________________________

(1) Amounts primarily consist of raw materials.

Total inventories as of December 31, 2021 included $ 294 million of fair value adjustments resulting from the Immunomedics acquisition.

There were no fair value adjustments in total inventories as of December 31, 2022.

Other current liabilities

The following table summarizes the components of Other current liabilities:

(in millions) 2022 2021

Compensation and employee benefits $ 1,018 $ 927

3 unchanged sentences

Other accrued liabilities 2,182 2,930

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

Other current liabilities $ 4,580 $ 6,145

_______________________________

4 unchanged sentences

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.

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

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 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.

In April 2022, we entered into a strategic research collaboration agreement (the “Dragonfly Collaboration Agreement”) with Dragonfly Therapeutics, Inc.

(“Dragonfly”) to develop natural killer (“NK”) cell engager-based immunotherapies for oncology and inflammation indications.

Under the terms of the Dragonfly Collaboration Agreement, we received an exclusive, worldwide license from Dragonfly for the 5T4-targeting investigational immunotherapy program, DF7001, as well as options, after the completion of certain preclinical activities, to license exclusive, worldwide rights to develop and commercialize additional NK cell engager programs using the Dragonfly Tri-specific NK Engager platform.

Upon the closing of the Dragonfly Collaboration Agreement, we made a $ 300 million upfront payment to Dragonfly, and we made an additional $ 15 million payment related to a target selection in connection with an August 2022 amendment to the agreement, which were recorded in Acquired in-process research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2022.

These payments were classified as Acquisitions, including in-process research and development, net of cash acquired in Investing Activities on our Consolidated Statements of Cash Flows for the year ended December 31, 2022.

In addition, Dragonfly is eligible to receive performance-based development and regulatory milestone payments of up to $ 630 million related to the DF7001 program with further commercial milestone payments and royalties on worldwide net sales if successful.

If we exercise our options on additional NK cell engager programs, Dragonfly would be eligible to receive opt-in payments and performance-based development, regulatory and commercial milestone payments and royalties on worldwide net sales on these optioned programs as well.

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.

The collaboration is initially focused on long-acting oral and injectable formulations.

Under the terms of the agreement, Gilead and Merck 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 U.S., 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 U.S.

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 U.S.

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.

1 unchanged sentence

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.

Reimbursements of R&D 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 years ended December 31, 2022 and 2021.

No revenues have been recognized under the agreement for the years ended December 31, 2022 and 2021.

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

3 unchanged sentences

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.

In September 2022, Merck announced that the study would resume under an amended protocol with a lower dose 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”).

3 unchanged sentences

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.

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 Stock Purchase Agreements without the prior consent of Arcus, subject to certain exceptions.

Under the Stock Purchase Agreements, we have the right to purchase from Arcus additional shares up to a maximum of 35 % of the outstanding voting stock of Arcus over a five-year period ending in the third quarter of 2025.

We are also subject to a three-year standstill ending in the second quarter of 2023, restricting certain other activity on our part.

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.

4 unchanged sentences

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.

The net option charge of $ 625 million is included within Acquired in-process 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 Other current liabilities on our Consolidated Balance Sheets as of December 31, 2021 and paid to Arcus in January 2022.

Our payments to Arcus were included within Net cash used in investing activities on our Consolidated Statements of Cash Flows in the first quarter of 2022.

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

We recorded $ 187 million of such costs in Research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2022.

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.

1 unchanged sentence

Our investment in Pionyr, consisting of the transaction price noted above and transaction costs, exceeded our pro-rata portion of Pionyr's net assets at transaction closing.

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.

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 accounting standards.

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, 2022 and 2021.

3 unchanged sentences

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.

Under the research and development service agreement, we made an initial cash funding of $ 80 million and recorded a charge in Acquired in-process research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2020.

Under the R&D service agreement, we made an initial cash funding of $ 80 million and recorded a charge in Acquired in-process research and development expenses on our Consolidated Statements of Income during the year ended December 31, 2020.

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 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.

We accrued $ 70 million in milestone payments, related to the initiation of two Phase 1 studies, with a charge to Acquired in-process 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.

2 unchanged sentences

Our investment in Tizona, consisting of the transaction price noted above and transaction costs, exceeded our pro-rata portion of Tizona’s net assets at transaction closing.

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.

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 accounting standards.

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, 2022 and 2021.

9 unchanged sentences

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.

Tango became a publicly traded company in 2021, and accordingly our equity investment has since been recorded in Prepaid and other current assets on our Consolidated Balance Sheets at fair market value.

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.

6 unchanged sentences

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.

In December 2022, we amended our existing license agreement with Jounce enabling us to buy out the remaining contingent payments potentially due under the license agreement for $ 67 million, which was expensed to Acquired in-process research and development expenses on our Consolidated Statements of Income and was paid in 2022.

Going forward, we will be solely responsible for all further research, development and commercialization of the immunotherapy specified in the license agreement.

Filgotinib Collaboration

In 2016, we closed a license and collaboration agreement with Galapagos, a clinical-stage biotechnology company based in Belgium, for the development and commercialization of filgotinib, a JAK1-selective inhibitor being evaluated for inflammatory disease indications (the “filgotinib agreement”).

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.

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.

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 $ 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.

In December 2020, Gilead and Galapagos amended their agreement to allow Galapagos to assume development, manufacturing, commercialization and certain other rights for filgotinib in Europe.

In connection with the amendments to the 2019 Agreement, Gilead agreed to irrevocably pay Galapagos € 160 million (or approximately $ 190 million ) .

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

2 unchanged sentences

In August 2019, we closed an option, license and collaboration agreement (the “Galapagos Collaboration Agreement”) and a subscription agreement (the “Galapagos Subscription Agreement”), each with Galapagos, pursuant to which the parties entered into a global collaboration that covers Galapagos’ current and future product portfolio (other than filgotinib).

Upon closing, we paid $ 5.05 billion for the license and option rights and for 6.8 million new ordinary shares of Galapagos at a subscription price of € 140.59 per share with a fair value of $ 1.13 billion, which included an issuance discount of $ 63 million calculated based on Galapagos’ closing stock price on the date of closing of the Galapagos Subscription Agreement.

The remaining $ 3.92 billion of the payment was recorded within Acquired in-process research and development expenses on our Consolidated Statements of Income for the year ended December 31, 2019.

Pursuant to the Galapagos Subscription Agreement, we were issued warrants that confer the right to subscribe, from time to time, for a number of new shares to be issued by Galapagos sufficient to bring the number of shares owned by us to 29.9 % of the issued and outstanding shares at the time of our exercises.

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.

Pursuant to the Galapagos Subscription Agreement, we purchased 6.8 million new ordinary shares of Galapagos and were issued warrants that confer the right to subscribe, from time to time, for a number of new shares to be issued by Galapagos sufficient to bring the number of shares owned by us to 29.9 % of the issued and outstanding shares at the time of our exercises.

We currently own 16.7 million shares or approximately 25.8 % of the shares issued and outstanding at the time of last purchase in 2019.

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.

1 unchanged sentence

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.

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 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.

With respect to 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.

1 unchanged sentence

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.

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

Complera/Eviplera and Odefsey

In 2009, we entered into a license and collaboration agreement with Janssen, formerly Tibotec Pharmaceuticals, to develop and commercialize a fixed-dose combination of our Truvada and Janssen’s non-nucleoside reverse transcriptase inhibitor, rilpivirine.

This combination was approved in the U.S.

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

40 unchanged sentences

We may also terminate the entire agreement without cause.

In July 2018, we entered into a collaboration arrangement with Gadeta and made a purchase of equity in Gadeta from Gadeta’s shareholders.

We determined that Gadeta was a VIE, and we were its primary beneficiary because we had the power to direct the activities of Gadeta that most significantly impact its economic performance.

Upon the initial consolidation of Gadeta, we recorded $ 82 million to Noncontrolling interest, primarily reflecting acquired intangible assets related to IPR&D, on our Consolidated Balance Sheets.

During the year ended December 31, 2020, we effectively terminated the agreement with Gadeta.

Upon the effective termination, we ceased to have a controlling interest and deconsolidated this VIE by removing the related net assets and noncontrolling interest of $ 82 million from our Consolidated Balance Sheets.

The net loss from the deconsolidation was not material.

In April 2019, Everest and Immunomedics entered into an agreement granting Everest an exclusive license to develop and commercialize Trodelvy in Greater China, South Korea, Singapore, Indonesia, Philippines, Vietnam, Thailand, Malaysia and Mongolia (the “Territories”).

Gilead subsequently acquired Immunomedics in October 2020 and assumed the Everest license and supply agreement, which provided for certain sales milestones and royalties payments to be made to Gilead and was recorded as a $ 175 million finite-lived asset as part of the purchase accounting.

In the fourth quarter of 2022, we reacquired all development and commercialization rights for Trodelvy from Everest and terminated the previous agreement.

Under the terms of the new agreement, Gilead will make $ 280 million in upfront termination payments to Everest, of which $ 84 million was made in 2022, with the remaining amounts included in Other current liabilities on our Consolidated Balance Sheets as of December 31, 2022.

In addition, Everest is eligible to receive up to $ 175 million in potential additional payments upon achievement of certain regulatory and commercial milestones.

We accounted for the new agreement as a contract termination, which includes the reacquisition of commercial rights and the settlement of our pre-existing relationship with Everest.

As a result, we recorded an expense of $ 406 million in Selling, general and administrative expenses on our Consolidated Statements of Income, which primarily represents the upfront costs and write-off of the remaining value of the pre-existing asset related to the prior agreement.

In addition, we recorded an acquired finite-lived asset with a fair value of $ 50 million for the commercial rights reacquired for products approved in the Territories.

Other Collaboration Arrangements That Are Not Individually Significant

1 unchanged sentence

We recorded upfront collaboration expenses related to these arrangements of $ 86 million, $ 177 million and $ 129 million for the years ended December 31, 2022, 2021 and 2020, respectively, within Acquired in-process research and development expenses on our Consolidated Statements of Income.

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 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.

DEBT AND CREDIT FACILITIES

The following table summarizes the carrying amount of our borrowings under various financing arrangements:

(in millions) December 31,

Type of Borrowing Issue Date Due Date Interest Rate 2021 2020

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

Senior Unsecured September 2020 September 2021 3-month LIBOR + 0.15 %

Senior Unsecured December 2011 December 2021 4.40 % — 1,249

(in millions) Carrying Amount

Type of Borrowing Issue Date Maturity Date Interest Rate December 31, 2022 December 31, 2021

Senior Unsecured September 2016 March 2022 1.95 % $ — $ 500

1 unchanged sentence

Senior Unsecured September 2016 September 2023 2.50 % 749 748

Senior Unsecured September 2020 September 2023 3-month LIBOR + 0.52 %

Senior Unsecured September 2020 September 2023 0.75 % 1,498 1,496

Term Loan October 2020 October 2023 variable — 998

Senior Unsecured March 2014 April 2024 3.70 % 1,748 1,747

13 unchanged sentences

Senior Unsecured September 2020 October 2050 2.80 % 1,477 1,476

Total senior unsecured notes and term loan facility 25,571 30,295

Total senior unsecured notes 24,088 25,571

Liability related to future royalties 1,141 1,124

2 unchanged sentences

Total Long-term debt, net $ 22,957 $ 25,179

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.

Senior Unsecured Notes

In February 2022, we repaid $ 500 million of senior unsecured notes prior to the March 2022 maturity by exercising a par call option.

Additionally, in July 2022, we repaid $ 1.0 billion of senior unsecured notes prior to the September 2022 maturity by exercising a par call option.

No new debt was issued in 2022.

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.

The senior unsecured fixed rate notes also have a call feature, exercisable at our option, to redeem the notes at par in whole, or in part, on dates ranging from one month to two years prior to maturity.

The senior unsecured fixed rate notes also have a par call feature, exercisable at our option, to redeem the notes at par in whole, or in part, on dates ranging from two to six months prior to maturity.

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

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.

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

In the event 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.

1 unchanged sentence

As of December 31, 2022 and 2021, 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.

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 our acquisition of Immunomedics.

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

The estimated timing and amount of future expected royalty payments over the estimated term will be re-assessed each reporting period.

The impact from changes in estimates will be recognized in the liability and the related interest expense prospectively.

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

Acquisitions for additional information.

Revolving Credit Facilities

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”).

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”).

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

2 unchanged sentences

As of December 31, 2022, 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.

Loans under the 2020 Revolving Credit Facility bear interest at either (i) the Term Secured Overnight Financing Rate (“SOFR”) 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 credit facility in whole or in part at any time without premium or penalty.

5 unchanged sentences

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 $ 1.0 billion in 2021, 2020 and 2019.

Interest expense on our debt and credit facilities related to the contractual coupon rates and amortization of the debt discount and issuance costs was $ 940 million in 2022 and $ 1.0 billion in 2021 and 2020.

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

5 unchanged sentences

Right-of-use assets, net Other long-term assets $ 505 $ 542

Lease liabilities - current Accrued and other current liabilities $ 101 $ 107

Lease liabilities - noncurrent Other long-term obligations $ 489 $ 608

Lease liabilities – current

Other accrued liabilities $ 111 $ 101

Lease liabilities – noncurrent

Other long-term obligations $ 467 $ 489

Weighted average remaining lease term 8.1 years 8.5 years

14 unchanged sentences

We are a party to various legal actions.

The most significant of these are described below.

Certain significant matters are described below.

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

3 unchanged sentences

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.

We did no t have any material accruals for the matters described below as of December 31, 2022.

As of December 31, 2021, we recorded an accrual of $ 1.25 billion in Accrued and other current liabilities on our Consolidated Balance Sheets for the previously disclosed legal settlement related to the bictegravir litigation, which we paid in February 2022.

Litigation Related to Sofosbuvir

1 unchanged sentence

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.

In 2013, we received approval from FDA for sofosbuvir, sold under the brand name Sovaldi.

Sofosbuvir is also included in all of our marketed HCV products.

16 unchanged sentences

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.

District Court for the Northern District of California stayed the litigation until after the PTAB concluded the inter partes review that it had 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.

In July 2021, the University appealed this decision, and oral arguments before the Court of Appeals for the Federal Circuit were held in January 2023.

The litigation in the U.S.

4 unchanged sentences

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.

The EPO has now scheduled the appeal hearing for March 2023.

We continue to believe that the amended EP ’190 patent claims are invalid.

Subsequent to the EPO opposition decision, we initiated proceedings to invalidate the U.K.

counterparts of the EP ’190 patent and a related patent, European Patent No.

3,904,365 (the EP ‘365 patent) in the High Court of England & Wales.

NuCana has also filed counterclaims against us in the High Court of England & Wales alleging patent infringement of the U.K.

counterparts and seeking damages and other relief.

case was heard in January and early February 2023.

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.

In April 2022, we filed an action for grant of a compulsory license before the Federal Patent Court in Germany.

In July 2022, the Düsseldorf court determined that NuCana’s German counterpart of the EP ’190 patent is infringed and granted an injunction.

In August 2022, Gilead filed a notice of appeal regarding the Düsseldorf court’s decision, and a hearing is scheduled for August 2023.

Litigation Related to Axicabtagene Ciloleucel

1 unchanged sentence

and Sloan Kettering Cancer Center (collectively, “Juno”) filed a lawsuit against us in the U.S.

District Court for the Central District of California, alleging that the commercialization of axicabtagene ciloleucel, sold commercially as Yescarta, infringes on U.S.

District Court for the Central District of California, alleging that the commercialization of axicabtagene ciloleucel, sold commercially as Yescarta, infringes U.S.

7,446,190 (the “’190 patent”).

7 unchanged sentences

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 (“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 VHC’s dolutegravir.

We believe that bictegravir does not infringe the claims of the ’282 patent.

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.

in Japan asserting Japanese Patent No.

and in Korea asserting Korean Patent Nos.

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.

In June 2022, Juno filed a petition for certiorari seeking a review by the Supreme Court.

The Supreme Court rejected Juno’s petition in January 2023, making the CAFC judgment final.

Litigation Relating to Pre-Exposure Prophylaxis

2 unchanged sentences

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 or tenofovir disoproxil fumarate (“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 FTC and tenofovir disoproxil fumarate (“TDF”) or TAF 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.

4 unchanged sentences

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.

Court of Federal Claims, alleging violations of three material transfer agreements (“MTAs”) related to the research underlying the HHS Patents and two clinical trial agreements (“CTAs”) by the U.S.

Centers for Disease Control and Prevention related to PrEP research.

Although we cannot predict with certainty the ultimate outcome of these litigation matters, we believe that the U.S.

Although we cannot predict with certainty the ultimate outcome of each of these litigation matters, we believe that the U.S.

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 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.

A trial for the bifurcated portion of the lawsuit in the Court of Federal Claims was held in June 2022, and in November 2022, the Court determined that the government breached the three MTAs.

The Court also made findings of fact relating to the CTAs but declined to issue a decision on breach of the CTAs until after trial in the Delaware District Court.

A trial date for the lawsuit in the Delaware District Court has been set for May 2023.

A separate trial at the Court of Federal Claims to determine the damages Gilead is owed based on the government’s breach has yet to be set.

Litigation with Generic Manufacturers

As part of the approval process for some of our products, FDA granted us a New Chemical Entity (“NCE”) exclusivity period during which other manufacturers’ applications for approval of generic versions of our product will not be approved.

Generic manufacturers may challenge the patents protecting products that have been granted NCE exclusivity one year prior to the end of the NCE exclusivity period.

2 unchanged sentences

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.

(“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 TAF-containing products.

Between them, these Generic Manufacturers seek to market generic versions of Odefsey, Descovy and Vemlidy.

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.

1 unchanged sentence

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.

and Janssen (“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.

This second case has been stayed.

Trial has been scheduled for October 2023.

In September 2022, we received a letter from Apotex Inc.

and Apotex Corp.

(“Apotex”) stating that they have submitted an ANDA for a generic version of Symtuza.

In October 2022, we, along with Janssen, filed a patent infringement lawsuit against Apotex as co-plaintiffs in the U.S.

District Court of Delaware.

We separately filed an additional lawsuit against Apotex asserting infringement of two additional patents in the same court.

Starting in March 2022, we received letters from Lupin, Laurus Labs (“Laurus”) and Cipla Ltd.

(“Cipla”), indicating that they have submitted ANDAs to FDA requesting permission to market and manufacture generic versions of Biktarvy.

Lupin, Laurus, and Cipla have challenged the validity of three of the five patents listed in the Orange Book as associated with Biktarvy.

We filed a lawsuit against Lupin, Laurus and Cipla in May 2022 in the U.S.

District Court of Delaware, and intend to enforce and defend our intellectual property.

Trial has been scheduled for December 2024.

European Patent Claims

2 unchanged sentences

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.

An appeal hearing originally scheduled for July 2021 has been canceled and a new date has not yet been set by the EPO.

The appeal hearing was held in November 2022, but a final decision regarding the validity of the claims has not yet been announced.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to sofosbuvir that expires in 2024.

The EPO conducted an oral hearing for this opposition in 2018 and upheld the claims.

Two of the original opposing parties have appealed, requesting full revocation.

In 2016, several parties filed oppositions in the EPO requesting revocation of our granted European patent covering TAF that expires in 2026.

In 2017, the EPO upheld the validity of the claims of our TAF patent.

Three parties have appealed this decision.

The appeal hearing was held in March 2021, and the validity of all claims were upheld.

The original opposing parties have appealed, requesting full revocation.

The hearing for the appeal has been scheduled for September 2023.

In 2017, several parties filed oppositions in the EPO requesting revocation of our granted European patent relating to TAF hemifumarate that expires in 2032.

1 unchanged sentence

Three parties have appealed this decision.

In 2016, three parties filed oppositions in the EPO requesting revocation of our granted European patent covering cobicistat that expires in 2027.

In 2017, the EPO upheld the validity of the claims of our cobicistat patent.

Two parties have appealed this decision.

The hearing for the appeal has been scheduled for March 2023.

The appeal process may take several years for all EPO opposition proceedings.

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 EU 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 and TAF hemifumarate 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.

5 unchanged sentences

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 wholesalers, and another of indirect or end-payor purchasers, including health insurers and individual patients.

The lawsuits seek to bring claims on behalf of direct purchasers consisting largely of wholesalers and 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.

In the second half of 2021 and first half of 2022, 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.

(together, “Cipla”), were named as defendants in a class action lawsuit filed in the U.S.

Trial has been set for May 2023.

In January 2022, we, along with BMS and Janssen Products, L.P., were named as defendants in a lawsuit filed in the Superior Court of the State of California, County of San Mateo, by Aetna, Inc.

on behalf of itself and its affiliates and subsidiaries that effectively opts the Aetna plaintiffs out of the above class actions.

The allegations are substantively the same as those in the class actions.

The Aetna plaintiffs seek damages, permanent injunctive relief and other relief.

In September 2020, we, along with generic manufacturers Cipla and Cipla USA Inc.

(together, “Cipla Defendants”), 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.

Jacksonville Trust claims that the 2014 settlement agreement between us and the Cipla Defendants, 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.

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.

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.

The New Mexico Attorney General seeks damages, permanent injunctive relief and other relief.

While we believe these cases are without merit, we cannot predict the ultimate outcome.

3 unchanged sentences

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.

The lawsuits, which are pending in state or federal court in California, Delaware, Florida, Missouri and New York, involve more than 26,000 plaintiffs.

Plaintiffs in these cases seek damages and other relief on various grounds for alleged personal injury and economic loss.

The first bellwether trial in California state court was scheduled to begin in October 2022, but is currently stayed while the California First District Court of Appeal considers the merits of plaintiffs’ theories of liability.

The first bellwether trial in California federal court is scheduled to begin in January 2024.

We intend to vigorously defend ourselves in these actions.

11 unchanged sentences

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.

8 unchanged sentences

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.

In September 2021, the Texas Court of Appeals for the Sixth Court Appeals District granted our request to stay the Texas litigation 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.

7 unchanged sentences

District Court for the District of New Jersey.

While we believe this case is without merit, we cannot predict the ultimate outcome.

If plaintiffs are successful in their claims, we could be required to pay significant monetary damages.

In June 2022, plaintiffs filed their Motion for Class Certification, and Immunomedics submitted its Opposition in July 2022.

The parties have agreed to settle this litigation.

A motion seeking preliminary approval of the settlement was granted in February 2023.

The court has not yet entered a final order approving the settlement.

Other Matters

We are a party to various legal actions that arose in the ordinary course of our business.

We do not believe that these other legal actions will have a material adverse impact on our consolidated business, financial position or results of operations.

Other Commitments

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.

We do not believe that these other legal actions will have a material adverse impact on our consolidated financial position, results of operations or cash flows.

STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

In the first quarter of 2016, our Board of Directors authorized a $ 12.0 billion stock repurchase program (“2016 Program”) under which repurchases may be made in the open market or in privately negotiated transactions.

We started repurchases under the 2016 Program in April 2016.

In the first quarter of 2020, our Board of Directors authorized a new $ 5.0 billion stock repurchase program (“2020 Program”), which will commence upon the completion of the 2016 Program.

In the first quarter of 2020, our Board of Directors authorized a $ 5.0 billion stock repurchase program (“2020 Program”).

Purchases under the 2020 Program may be made in the open market or in privately negotiated transactions.

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:

The $ 12.0 billion stock repurchase program authorized by our Board of Directors in the first quarter of 2016 was completed in the fourth quarter of 2022.

We started repurchases under the 2020 Program in December 2022.

As of December 31, 2022, the remaining authorized repurchase amount under the 2020 Program was $ 4.9 billion.

The following table summarizes our stock repurchases through open market transactions under these programs:

Year Ended December 31,

3 unchanged sentences

Average price per share $ 73.77 $ 66.58 $ 70.64

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.

In addition to repurchases from the stock repurchase programs, we repurchased shares of common stock withheld by us from employee restricted stock awards to satisfy our applicable tax withholding obligations.

These shares are excluded from the table above.

9 unchanged sentences

Total $ 2.92 $ 3,725 $ 2.84 $ 3,618

Our restricted stock and performance share awards or units have dividend equivalent rights entitling holders to dividend equivalents to be paid upon vesting for each share of the underlying unit.

On February 1, 2022, we announced that our Board of Directors declared a quarterly cash dividend of $ 0.73 per share of our common stock, with a payment date of March 30, 2022 to all stockholders of record as of the close of business on March 15, 2022.

Our RSUs and PSUs have dividend equivalent rights entitling holders to dividend equivalents to be paid upon vesting for each share of the underlying unit.

On February 2, 2023, we announced that our Board of Directors declared a quarterly cash dividend increase of 2.7 % from $ 0.73 to $ 0.75 per share of our common stock, with a payment date of March 30, 2023 to all stockholders of record as of the close of business on March 15, 2023.

Future dividends are subject to declaration by our Board of Directors.

4 unchanged sentences

Accumulated Other Comprehensive Income

The following table summarizes the changes in AOCI by component, net of tax:

(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

The following table summarizes the changes in Accumulated other comprehensive income by component, net of tax:

(in millions) Foreign Currency Translation 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 as of December 31, 2019 $ 53 $ 1 $ 31 $ 85

Net unrealized gain 6 54 72 132

Net unrealized gain (loss) ( 2 ) 43 ( 103 ) ( 62 )

Reclassifications to net income — ( 42 ) ( 41 ) ( 83 )

9 unchanged sentences

Balance as of December 31, 2022 $ 2 $ ( 33 ) $ 33 $ 2

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.

Derivative Financial Instruments for additional information.

The amounts reclassified to net income for gains and losses on available-for-sale debt securities are recorded as part of Other income (expense), net, on our Consolidated Statements of Income.

The income tax impact allocated to each component of other comprehensive income was not material for the periods presented.

EMPLOYEE BENEFITS

Equity Incentive Plans

Stock-Based Compensation

Equity Incentive Plans Summary

In May 2004, our stockholders approved and we adopted the Gilead Sciences, Inc.

2004 Equity Incentive Plan (as amended, the “2004 Plan”).

The 2004 Plan authorized the issuance of a total of 309 million shares of common stock.

As part of the Forty Seven acquisition, we assumed the Forty Seven, Inc.

As part of our acquisition of Forty Seven in 2020, we assumed the Forty Seven, Inc.

2018 Equity Incentive Plan, which we subsequently amended and restated as the Gilead Sciences, Inc.

2018 Equity Incentive Plan (as amended and restated, the “2018 Plan”).

The aggregate amount of shares that may be issued under the 2018 Plan on or after the assumption date will not exceed 12 million shares.

As part of the Immunomedics acquisition, we assumed the Immunomedics Amended and Restated 2014 Long-Term Incentive Plan (the “Immunomedics Plan” and referred together with the 2004 Plan and 2018 Plan as the “Plans”), which we subsequently merged into the 2004 Plan.

The aggregate amount of shares that may be issued under the Immunomedics Plan on or after the assumption date will not exceed 26 million shares.

Acquisitions for additional information on the settlement of stock awards.

The Plans are broad based incentive plans that provide for the grant of equity-based awards, including stock options, restricted stock units, restricted stock awards and performance share awards, to employees, directors and consultants.

As of December 31, 2021, a total of 82 million shares remain available for future grant under the Plans.

As part of the Immunomedics acquisition, we assumed the Immunomedics Amended and Restated 2014 Long-Term Incentive Plan, which we subsequently merged into the 2004 Plan.

In May 2022, our stockholders approved and we adopted the Gilead Sciences, Inc.

2022 Equity Incentive Plan (the “2022 Plan”).

The 2022 Plan authorized the issuance of a total of 132 million shares of common stock.

No awards may be granted under the 2004 Plan or the 2018 Plan since the approval of the 2022 Plan.

These are broad-based incentive plans that provide for the grant of equity-based awards, including RSUs, PSUs, stock options and other restricted stock and performance awards, to employees, directors and consultants.

As of December 31, 2022, a total of 101 million shares remain available for future grant under the 2022 Plan.

We grant time-based RSUs to certain employees as part of our annual employee equity compensation review program as well as to new hire employees and to non-employee members of our Board.

RSUs are share-based awards that entitle the holder to receive freely tradable shares of our common stock upon vesting.

RSUs generally vest over three or four years from the date of grant.

We grant PSUs that vest upon the achievement of specified market or performance goals, which could include achieving a total shareholder return compared to a pre-determined peer group or achieving revenue targets.

The actual number of common shares ultimately issued is calculated by multiplying the number of PSUs by a payout percentage ranging from 0 % to 200 %, and these awards generally vest only when a committee (or subcommittee) of our Board has determined that the specified market and performance goals have been achieved.

Stock Options

The Plans provide for option grants designated as either non-qualified or incentive stock options.

All stock options granted after January 1, 2006 have been non-qualified stock options.

Option grants are designated as either non-statutory or incentive stock options.

The exercise price of stock options may not be less than the fair market value of our common stock on the grant date and no stock option may have a term in excess of 10 years.

Employee stock options generally vest over three or four years .

All options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options are issued and are granted at prices not less than the fair market value of our common stock on the grant date.

Stock option exercises are settled with common stock from the Plans’ previously authorized and available pool of shares.

The following table summarizes activity and related information under our stock option plans.

All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:

Stock options may be settled in cash or in shares of our common stock, including a net issuance using shares otherwise purchasable under the option to pay the exercise price.

Under our ESPP, employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits.

The purchase price per share is equal to the lower of 85 % of the fair market value of our common stock on the offering date or the purchase date.

The ESPP offers a six-month look-back feature.

ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares.

A total of 79 million shares of common stock have been authorized for issuance under the ESPP, and there were 3 million shares available for issuance under the ESPP as of December 31, 2022.

Stock-Based Compensation Expense

The following tables summarize total stock-based compensation expense included on our Consolidated Statements of Income as broken down by award type and by expense type:

Year Ended December 31,

(in millions) 2022 2021 2020

RSUs $ 557 $ 558 $ 546

PSUs 25 17 25

Stock options 28 29 44

ESPP 26 31 28

Acquisition-related expense (1)

Stock-based compensation expense included in total costs and expenses $ 645 $ 635 $ 1,076

________________________________

(1) Accelerated post-acquisition stock-based compensation expense of $ 8 million related to the MiroBio acquisition in 2022, and $ 289 million and $ 144 million related to the acquisitions of Immunomedics and Forty Seven, respectively, in 2020.

Year Ended December 31,

(in millions) 2022 2021 2020

Cost of goods sold $ 46 $ 40 $ 109

Research and development expenses 285 287 462

Selling, general and administrative expenses 313 308 505

Stock-based compensation expense included in total costs and expenses 645 635 1,076

Income tax effect ( 91 ) ( 100 ) ( 222 )

Stock-based compensation expense, net of tax $ 553 $ 535 $ 854

The following tables summarize our RSU activity:

(in millions, except per share amounts) Shares Weighted-

Grant Date Fair Value Per Share

Outstanding as of December 31, 2021 20.9 $ 67.48

Granted 13.7 $ 60.36

Vested ( 8.9 ) $ 67.63

Forfeited ( 2.2 ) $ 63.76

Outstanding as of December 31, 2022 23.6 $ 63.62

Year Ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Weighted-average grant date fair value of RSUs granted $ 60.36 $ 65.42 $ 70.94

Total fair value of RSUs as of the respective vesting dates

$ 554 $ 463 $ 444

As of December 31, 2022, there was $ 948 million of unrecognized compensation cost related to unvested RSUs, which is expected to be recognized over a weighted-average period of 2.3 years.

The following tables summarize our PSU activity:

(in millions, except per share amounts) Shares Weighted-

Grant Date Fair Value Per Share

Outstanding as of December 31, 2021 0.7 $ 79.13

Granted 0.6 $ 60.04

Vested ( 0.2 ) $ 68.24

Forfeited ( 0.1 ) $ 59.04

Outstanding as of December 31, 2022 1.0 $ 64.28

Year Ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Weighted-average grant date fair value of PSUs granted $ 60.04 $ 71.31 $ 83.64

Total fair value of PSUs as of the respective vesting dates $ 14 $ 8 $ 15

As of December 31, 2022, there was $ 29 million of unrecognized compensation cost related to unvested PSUs, which is expected to be recognized over a weighted-average period of 1.4 years.

Stock Options

The following tables summarize activity and other information related to our stock options:

(in millions) Weighted-

12 unchanged sentences

Expected to vest, net of estimated forfeitures as of December 31, 2022 6.2 $ 62.16 8.55 $ 146

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 $ 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.

Restricted Stock and Performance Share Awards

We grant time-based RSUs to certain employees as part of our annual employee equity compensation review program as well as to new hire employees and to non-employee members of our Board.

RSUs are share-based awards that entitle the holder to receive freely tradable shares of our common stock upon vesting.

RSUs generally vest over three or four years from the date of grant.

The fair value of an RSU is equal to the closing price of our common stock on the grant date.

We grant PSUs which vest upon the achievement of specified market or performance goals, which could include achieving a total shareholder return compared to a pre-determined peer group or achieving revenue targets.

The fair value of each PSU is estimated at the date of grant or when performance objectives are defined for the grants.

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.

In addition, we have also granted other PSUs to certain of our employees under the 2004 Plan.

The vesting of these awards is subject to the achievement of specified individual performance goals, typically within a one to two year period.

The fair value of such an award is equal to the closing price of our common stock on the grant date.

The following table summarizes our RSU and PSU activity and related information:

(in millions, except per share amounts) Shares Weighted-

Grant Date Fair Value Per Share Shares (1)

Grant Date Fair Value Per Share (1)

Outstanding as of December 31, 2020 19.5 $ 69.80 0.6 $ 84.87

Granted 11.9 $ 65.42 0.3 $ 71.31

Vested ( 7.0 ) $ 70.30 ( 0.1 ) $ 88.36

Forfeited ( 3.5 ) $ 67.77 ( 0.1 ) $ 78.37

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 $ 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.

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan and the International Employee Stock Purchase Plan (together, as amended, the “ESPP”), employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits.

The purchase price per share is equal to the lower of 85 % of the fair market value of our common stock on the offering date or the purchase date.

The ESPP offers a six-month look-back feature as well as an automatic reset feature that provides for an offering period to be reset to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period.

ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares.

During 2021, 2 million shares were issued under the ESPP for $ 111 million.

A total of 79 million shares of common stock have been authorized for issuance under the ESPP, and there were 5 million shares available for issuance under the ESPP as of December 31, 2021.

Stock-Based Compensation

The following table summarizes total stock-based compensation expenses included on our Consolidated Statements of Income:

(1) 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 .

Year Ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Weighted-average grant date fair value of stock options granted $ 9.08 $ 10.05 $ 11.69

Total intrinsic value of options exercised $ 59 $ 48 $ 179

We used the following weighted-average assumptions in the Black-Scholes model to calculate the estimated fair value of the stock option awards:

Year Ended December 31,

(in millions) 2022 2021 2020

Cost of goods sold $ 40 $ 109 $ 48

Research and development expenses 287 462 289

Selling, general and administrative expenses 308 505 299

Stock-based compensation expense included in total costs and expenses (1)

635 1,076 636

Income tax effect (2)

( 100 ) ( 222 ) 2

Stock-based compensation expense, net of tax $ 535 $ 854 $ 638

Expected volatility 27 % 29 % 29 %

Expected terms in years 5 5 5

Risk-free interest rate 1.9 % 0.8 % 0.8 %

Expected dividend yield 4.3 % 4.4 % 4.0 %

As of December 31, 2022, there was $ 48 million of unrecognized compensation cost related to stock options, which is expected to be recognized over an estimated weighted-average period of 2.4 years.

The following table summarizes our ESPP activity:

Year Ended December 31,

(in millions, except per share amounts) 2022 2021 2020

Shares issued 2 2 2

Amount paid by employees for shares $ 103 $ 111 $ 100

Weighted-average grant date fair value of ESPP shares granted $ 13.40 $ 14.58 $ 15.09

Total fair value of ESPP shares as of the respective vesting dates

$ 21 $ 23 $ 24

(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.

(2) Income tax effect for the year ended December 31, 2019 included a $ 114 million income tax expense following the U.S.

Court of Appeals decision in Altera Corp v.

Commissioner , which requires related parties in an intercompany cost sharing arrangement to share expenses related to stock-based compensation.

Stock-based compensation is recognized as expense over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach, reduced for estimated forfeitures.

We estimate forfeitures based on our historical experience.

The requisite service period could be shorter than the vesting period if an employee is retirement eligible.

Valuation Assumptions

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.

In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility and expected award life.

We used the following assumptions to calculate the estimated fair value of the awards:

We used the following weighted-average assumptions in the Black-Scholes model to calculate the estimated fair value of the ESPP awards:

Year Ended December 31,

1 unchanged sentence

Expected volatility 23 % 25 % 28 %

Stock options 29 % 29 % 27 %

ESPP 25 % 28 % 27 %

Expected term in years:

Stock options 5.0 5.0 5.5

ESPP 0.5 0.5 0.5

Expected terms in years 0.5 0.5 0.5

Risk-free interest rate 1.8 % 0.1 % 0.6 %

Stock options 0.8 % 0.8 % 2.3 %

ESPP 0.1 % 0.6 % 1.8 %

Expected dividend yield 4.5 % 4.4 % 4.0 %

The fair value of stock options granted was calculated using the single option approach.

We use a blend of historical volatility along with implied volatility for traded options on our common stock to determine our expected volatility.

The expected term of stock-based awards represents the weighted-average period the awards are expected to remain outstanding.

We estimate the weighted-average expected term based on historical cancellation and historical exercise data related to our stock options as well as the contractual term and vesting terms of the awards.

The risk-free interest rate is based upon observed interest rates appropriate for the term of the stock-based awards.

The dividend yield is based on our history and expectation of dividend payouts.

Deferred Compensation

6 unchanged sentences

The total assets and liabilities associated with the deferred compensation plan were $ 220 million and $ 261 million as of December 31, 2022 and 2021, respectively.

NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERS

Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period.

Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period.

The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents were determined under the treasury stock method.

Potential shares of common stock excluded from the computation of diluted net income per share attributable to Gilead common shareholders because their effect would have been antidilutive were 15 million, 13 million and 14 million during 2021, 2020 and 2019, respectively.

The following table shows the calculation of basic and diluted net income per share attributable to Gilead common stockholders:

EARNINGS PER SHARE

The following table shows the calculation of basic and diluted earnings per share attributable to Gilead:

Year Ended December 31,

1 unchanged sentence

Net income attributable to Gilead $ 4,592 $ 6,225 $ 123

Shares used in per share calculation - basic 1,256 1,257 1,270

Shares used in basic earnings per share attributable to Gilead calculation 1,255 1,256 1,257

Dilutive effect of stock options and equivalents 7 6 6

Shares used in per share calculation - diluted 1,262 1,263 1,277

Net income per share attributable to Gilead common stockholders - basic $ 4.96 $ 0.10 $ 4.24

Net income per share attributable to Gilead common stockholders - diluted $ 4.93 $ 0.10 $ 4.22

Shares used in diluted earnings per share attributable to Gilead calculation 1,262 1,262 1,263

Basic earnings per share attributable to Gilead $ 3.66 $ 4.96 $ 0.10

Diluted earnings per share attributable to Gilead $ 3.64 $ 4.93 $ 0.10

Potential shares of common stock excluded from the computation of Diluted earnings per share attributable to Gilead because their effect would have been antidilutive were 12 million, 15 million and 13 million during 2022, 2021 and 2020, respectively.

Income before income taxes consists of the following:

4 unchanged sentences

Income before income taxes $ 5,814 $ 8,278 $ 1,669

The Income tax (expense) benefit consists of the following:

Income tax expense consists of the following:

Year Ended December 31,

9 unchanged sentences

( 333 ) ( 138 ) ( 193 )

Income tax (expense) benefit $ ( 2,077 ) $ ( 1,580 ) $ 204

The 2019 income tax benefit included a $ 1.2 billion deferred tax benefit related to intangible asset transfers from a foreign subsidiary to Ireland and the United States.

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 financial statement basis of such intangible assets.

As a result, we recognized a deferred tax asset of $ 1.2 billion on our Consolidated Financial Statements.

We expect to be able to realize the deferred tax asset resulting from this intra-entity asset transfer.

The impact of the intangible asset transfer from a foreign subsidiary to the United States was not material.

Income tax expense $ ( 1,248 ) $ ( 2,077 ) $ ( 1,580 )

The reconciliation between the federal statutory tax rate applied to Income before income taxes and our effective tax rate is summarized as follows:

7 unchanged sentences

Foreign-derived intangible income deduction ( 3.8 ) % ( 1.6 ) % ( 8.0 ) %

Deferred tax - intra-entity transfer of intangible assets ( 0.7 ) % 0.6 % ( 24.0 ) %

Settlement of tax examinations ( 0.2 ) % ( 0.7 ) % ( 10.2 ) %

Acquired IPR&D and related charges — % 56.2 % — %

Acquired IPR&D & related charges 1.4 % — % 56.2 %

Changes in valuation allowance 1.2 % 1.5 % 6.7 %

Non-taxable unrealized (gain) loss on investment 1.8 % 23.0 % ( 5.0 ) %

Non-taxable unrealized loss on investment 0.7 % 1.8 % 23.0 %

Other 3.8 % 1.4 % 11.5 %

Effective tax rate 21.5 % 25.1 % 94.7 %

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of our deferred tax assets and liabilities are as follows:

8 unchanged sentences

Equity investments 196 129

Liability related to future royalties 274 247

Liability related to sale of future royalties 278 274

Capitalized R&D expenditures 784 —

Other, net 263 292

8 unchanged sentences

Net deferred tax assets (liabilities) $ ( 1,432 ) $ ( 3,017 )

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.

The valuation allowance increased from $ 520 million as of December 31, 2021 to $ 599 million as of December 31, 2022, primarily due to unrealized losses on our equity investments which are subject to a full valuation allowance, and increased from $ 398 million as of December 31, 2020 to $ 520 million as of December 31, 2021, primarily due to California research and development tax credits.

As of December 31, 2022, we had U.S.

federal net operating loss and tax credit carryforwards of approximately $ 199 million and $ 7 million, respectively, which will start to expire in 2023, 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 and state tax credit carryforwards will start to expire in 2022 if not utilized.

In addition, we had state net operating loss and tax credit carryforwards of approximately $ 2.7 billion and $ 879 million, respectively, which will start to expire in 2024 and 2023, respectively, 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.

This annual limitation may result in the expiration of the net operating losses and credits before utilization.

We file federal, state and foreign income tax returns in the United States and in many foreign jurisdictions.

We file federal, state and foreign income tax returns in the U.S.

and in many foreign jurisdictions.

For federal income tax purposes, the statute of limitations is open for 2016 and onwards and 2013 and onwards for California income tax purposes.

4 unchanged sentences

We periodically evaluate our exposures associated with our tax filing positions.

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.

Of the total unrecognized tax benefits, $ 946 million and $ 800 million as of December 31, 2022 and 2021, 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 benefit of $ 3 million, income tax expense of $ 41 million and income tax benefit of $ 82 million on our Consolidated Statements of Income for the years ended December 31, 2022, 2021 and 2020 respectively.

Accrued interest and penalties related to unrecognized tax benefits were $ 215 million and $ 218 million as of December 31, 2022 and 2021, 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.

As of December 31, 2022, we do not believe that it is reasonably possible that our unrecognized tax benefits will significantly change in the next 12 months.

The following is a rollforward of our total gross unrecognized tax benefits:

1 unchanged sentence

(in millions) 2022 2021 2020

Balance, beginning of period $ 1,614 $ 2,031 $ 1,595

Beginning balance $ 1,713 $ 1,614 $ 2,031

Tax positions related to current year:

6 unchanged sentences

Lapse of statute of limitations ( 68 ) ( 2 ) ( 1 )

Balance, end of period $ 1,713 $ 1,614 $ 2,031

Ending balance $ 1,959 $ 1,713 $ 1,614

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.

Federal income tax payable for transition tax was $ 3.5 billion and $ 4.0 billion as of December 31, 2022 and 2021, respectively.

The following table summarizes the anticipated timing of payments associated with this transition tax as of December 31, 2022:

(in millions) Amount

Total $ 3,546

SUBSEQUENT EVENTS

In January 2023, we closed an agreement to enter into a global strategic collaboration with Arcellx, Inc.

(“Arcellx”) to co-develop and co-commercialize Arcellx’s lead late-stage product candidate, CART-ddBCMA, for the treatment of patients with relapsed or refractory multiple myeloma.

Under the terms of the agreement, Arcellx will receive an upfront cash payment of $ 225 million and $ 100 million equity investment as well as other potential contingent payments.

The companies will share development, clinical trial, and commercialization costs for CART-ddBCMA and will jointly commercialize the product and split U.S.

profits 50 / 50 .

Outside the U.S., we will commercialize the product and Arcellx will receive royalties on sales.

In February 2023, we closed an agreement to acquire Tmunity Therapeutics (“Tmunity”), a clinical-stage, private biotech company focused on next-generation CAR T-therapies and technologies.

Under the terms of the agreement, we acquired all outstanding shares of Tmunity other than those already owned by Gilead for approximately $ 300 million in cash consideration.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

27 unchanged sentences

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