ITEM 1A. RISK FACTORS

In evaluating our business, you should carefully consider the following discussion of material risks, events and uncertainties that make an investment in us speculative or risky in addition to the other information in this Annual Report on Form 10-K. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business and operations, growth, reputation (including the commercial or scientific reputation of our products), prospects, product pipeline and sales, operating and financial results, financial condition, cash flows, liquidity and stock price. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors; our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.

Product and Commercialization Risks

Certain of our products subject us to additional or heightened risks.

HIV Products

We receive a substantial portion of our revenue from sales of our products for the treatment and prevention of HIV infection. During 2021, sales of our HIV products accounted for approximately 60% of our total product sales. We may be unable to sustain or increase sales of our HIV products for any number of reasons, including market share gains by competitive products, including generics, or the inability to introduce new HIV medications necessary to remain competitive. In such case, we may need to scale back our operations, including our future drug development and spending on research and development (“R&D”) efforts. For example, many of our HIV products contain tenofovir alafenamide (“TAF”), which belongs to the nucleoside class of antiviral therapeutics, and any changes to the treatment paradigm for HIV may cause nucleoside-based therapeutics to fall out of favor.

Veklury

We face risks related to our supply and distribution of Veklury, which was approved by the U.S. Food and Drug Administration (“FDA”) in October 2020 as a treatment for patients hospitalized with coronavirus disease 2019 (“COVID-19”) and in January 2022 as a treatment for non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death. While the utilization of Veklury has largely tracked rates of COVID-19 hospitalizations, we are unable to accurately predict our revenues or supply needs over the short and long term due to the dynamic nature of the pandemic, including the availability, uptake and effectiveness of vaccines and alternative treatments for COVID-19, fluctuating hospital utilization rates, the emergence of new variants and timing of surges in infection. If we do not accurately forecast demand or manufacture Veklury at levels sufficient to meet demand, then we may experience product shortages or build excess inventory that may be written off. We also remain subject to significant public attention and scrutiny over the complex decisions made regarding clinical data, supply, allocation, distribution and pricing of Veklury, all of which affects our corporate reputation.

Cell Therapy

Advancing a novel and personalized therapy such as Yescarta or Tecartus, which are chimeric antigen receptor (“CAR”) T cell therapies, creates significant challenges, including:

•educating and certifying medical personnel regarding the procedures and the potential side effects, such as cytokine release syndrome and neurologic toxicities, in compliance with the Risk Evaluation and Mitigation Strategy program required by FDA;

•securing sufficient supply of other medications to manage side effects, such as tocilizumab and corticosteroids, which may not be available in sufficient quantities, may not adequately control the side effects and/or may have detrimental impacts on the efficacy of cell therapy;

•developing and maintaining a robust and reliable process for engineering a patient’s T cells in our facilities and infusing them back into the patient; and

•conditioning patients with chemotherapy in advance of administering our therapy, which may increase the risk of adverse side effects.

The use of engineered T cells as a potential cancer treatment is a recent development and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical community. While FDA has approved some cell therapies, including Yescarta and Tecartus, we must continue to demonstrate to the medical community the potential advantages of cell therapy compared to existing and future therapeutics. For challenges related to the reimbursement of Yescarta and Tecartus, see also “Our existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and other discounts on our products and other pricing pressures.”

We rely on third-party sites to collect patients’ white blood cells, known as apheresis centers, as well as shippers, couriers, and hospitals for the logistical collection of patients’ white blood cells and ultimate delivery of Yescarta or Tecartus to patients. These vendors may encounter disruptions or difficulties that could result in product loss and regulatory action. Apheresis centers may also choose not to participate in our quality certification process, or we may be unable to complete such certification in a timely manner or at all, which could delay or constrain our manufacturing and commercialization efforts.

We operate a new automated manufacturing facility in Frederick, Maryland. The facility is pending FDA approval for commercial manufacturing and, even if we obtain such approval, we have not manufactured our products in an automated facility on a commercial scale. As a result, we may not be able to produce or otherwise obtain an amount of supply sufficient to satisfy demand for our products. If we are unable to meet product demand, we will have difficulty meeting sales forecasts for products that we plan to manufacture at this facility.

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

If we are unable to launch commercially successful new products or new indications for existing products, our business will be adversely impacted. The launch of commercially successful products is necessary to grow our business, cover our substantial R&D expenses, and offset revenue losses when existing products lose market share due to factors such as competition and loss of patent exclusivity. There are many difficulties and uncertainties inherent in drug development and the introduction of new products. The product development cycle is characterized by significant investments of resources, long lead times and unpredictable outcomes due to the nature of developing medicines for human use. We expend significant time and resources on our product pipeline without any assurance that we will recoup our investments or that our efforts will be commercially successful. A high rate of failure is inherent in the discovery and development of new products, and failure can occur at any point in the process, including late in the process after substantial investment.

We face challenges in accurately forecasting sales because of the difficulties in predicting demand for our products and fluctuations in purchasing patterns or wholesaler inventories.

We may be unable to accurately predict demand for our products, including the uptake of new products, as demand depends on a number of factors. For example, product demand may be adversely affected if physicians do not see the benefit of our products. Additionally, the non-retail sector in the United States, which includes government institutions, including state AIDS Drug Assistance Programs, the U.S. Department of Veterans Affairs, correctional facilities and large health maintenance organizations, tends to be less consistent in terms of buying patterns and often causes quarter-over-quarter fluctuations that do not necessarily mirror patient demand for our products. Federal and state budget pressures, as well as the annual grant cycles for federal and state funds, may cause purchasing patterns to not reflect patient demand for our products. We expect to continue to experience fluctuations in the purchasing patterns of our non-retail customers. In light of the budget crises faced by many European countries, we have observed variations in purchasing patterns induced by cost containment measures in Europe. We believe these measures have caused some government agencies and other purchasers to reduce inventory of our products in the distribution channels, and we may continue to see this trend in the future.

We sell and distribute most of our products in the United States exclusively through the wholesale channel. For the year ended December 31, 2021, approximately 91% of our product sales in the United States were to three wholesalers, AmerisourceBergen Corporation, Cardinal Health, Inc. and McKesson Corporation. The U.S. wholesalers with whom we have entered into inventory management agreements make estimates to determine end-user demand and may not be completely effective in matching their inventory levels to actual end-user demand. As a result, changes in inventory levels held by those wholesalers can cause our operating results to fluctuate unexpectedly if our sales to these wholesalers do not match end-user demand. In addition, inventory is held at retail pharmacies and other non-wholesaler locations with whom we have no inventory management agreements and no control over buying patterns. Adverse changes in economic conditions, increased competition or other factors may cause retail pharmacies to reduce their inventories of our products, which would reduce their orders from wholesalers and, consequently, the wholesalers’ orders from us, even if end-user demand has not changed. In addition, we have observed that strong wholesaler and sub-wholesaler purchases of our products in the fourth quarter typically results in inventory draw-down by wholesalers and sub-wholesalers in the subsequent first quarter. As inventory in the distribution channel fluctuates from quarter to quarter, we may continue to see fluctuations in our earnings and a mismatch between prescription demand for our products and our revenues.

We face significant competition from global pharmaceutical and biotechnology companies, specialized pharmaceutical firms and generic drug manufacturers.

New branded or generic products entering major markets affects our ability to maintain pricing and market share. Our products compete with other available products based primarily on efficacy, safety, tolerability, acceptance by doctors, ease of patient compliance, ease of use, price, insurance and other reimbursement coverage, distribution and marketing. A number of companies are pursuing the development of technologies which are competitive with our existing products or research programs. These competing companies include large pharmaceutical and biotechnology companies and specialized pharmaceutical firms acting either independently or together with other such companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection or may establish collaborative arrangements for competitive products or programs. We may be adversely impacted if any of these competitors gain market share as a result of new technologies, commercialization strategies or otherwise.

Our existing products are subject to reimbursement pressures from government agencies and other third parties, required rebates and other discounts on our products and other pricing pressures.

Product Reimbursements

Successful commercialization of our products depends, in part, on the availability of third-party payer reimbursement for the cost of such products and related treatments and medical services in the markets where we sell our products. Government health authorities, private health insurers and other organizations generally provide reimbursement. As our products mature, pricing pressures from private insurers and government payers often result in a reduction of the net product prices.

Legislative and regulatory actions affecting government prescription drug procurement and reimbursement programs occur relatively frequently. For example, in September 2020, FDA issued a final rule implementing a pathway for the importation of certain prescription drugs from Canada. This rule is subject to ongoing litigation. We may be adversely impacted by any such legislative and regulatory actions, though it is difficult to predict the impact, if any, on the use and reimbursement of our products.

Product Pricing, Discounts and Rebates

In the United States, the European Union (“EU”) and other significant or potentially significant markets for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services. In the United States, the volume of drug pricing-related bills has dramatically increased in recent years. For example, Congress has enacted laws requiring manufacturer refunds on certain amounts of discarded drug from single-use vials beginning in 2023 and eliminating the existing cap on Medicaid rebate amounts beginning in 2024. Congress has also proposed bills to require the Department of Health and Human Services to negotiate prices for certain drugs, impose an inflation-based rebate on Medicare Part B and D drugs when list prices for drugs grow faster than inflation, and increase manufacturer contributions in some or all of the Medicare Part D benefit phases. In addition, many state legislatures are considering, or have already passed into law, legislation that seeks to indirectly or directly regulate pharmaceutical drug pricing, such as requiring manufacturers to publicly report proprietary pricing information, creating review boards for prices to state agencies, and encouraging the use of generic drugs. Such initiatives and legislation may cause added pricing pressures on our products, and the resulting impact on our business is uncertain. Many countries outside the United States, including the EU Member States, have established complex and lengthy procedures to obtain price approvals and coverage reimbursement and periodically review their pricing and reimbursement decisions. The outcome of this review cannot be predicted and could have an adverse effect on the pricing and reimbursement of our medicinal products in the EU member states. Reductions in the pricing of our medicinal products in one member state could affect the price in other member states and have a negative impact on our financial results.

A substantial portion of our product sales is subject to significant discounts from list price, including rebates that we may be required to pay state Medicaid agencies and discounts provided to 340B covered entities. Changes to the 340B program or the Medicaid program at the federal or state level could have a material adverse effect on our business. For example, in December 2020, Centers for Medicare & Medicaid Services (“CMS”) issued a final rule that will make certain changes to the calculation of rebates under the Medicaid Drug Rebate Program. Among other changes, effective January 1, 2023, the final rule will change the requirements for excluding manufacturer co-pay coupons from the Medicaid “best price.” These changes are subject to ongoing litigation. If these changes go into effect, they could substantially increase our Medicaid rebate obligations and decrease the prices we charge 340B covered entities. The continued growth of the 340B program also limits the prices we may charge on an increasing percentage of sales.

In addition, standard reimbursement structures may not adequately reimburse for innovative therapies. For example, beginning in fiscal year 2021, CMS established a new severity-adjusted diagnosis-related group (“DRG”) 018 for Medicare inpatient reimbursement of CAR T products such as Yescarta and Tecartus. While the new DRG has a significantly higher base payment amount than the prior DRG 016, the payment available may not be sufficient to reimburse some hospitals for their cost of care for patients receiving Yescarta and Tecartus. When reimbursement is not aligned well to account for treatment costs, Medicare beneficiaries may be denied access as this misalignment could impact the willingness of some hospitals to offer the therapy and of doctors to recommend the therapy. Additionally, in the EU, there are barriers to reimbursement in individual countries that could limit the uptake of Yescarta and Tecartus.

In addition, we estimate the rebates we will be required to pay in connection with sales during a particular quarter based on claims data from prior quarters. In the United States, actual rebate claims are typically made by payers one to three quarters in arrears. Actual claims and payments may vary significantly from our estimates.

We may experience adverse impacts resulting from the importation of our products from lower price markets or the distribution of illegally diverted or counterfeit versions of our products.

Prices for our products are based on local market economics and competition and sometimes differ from country to country. Our sales in countries with relatively higher prices may be reduced if products can be imported and resold into those countries from lower price markets. For example, U.S. sales could also be affected if FDA permits importation of drugs from Canada. We have entered into agreements with generic drug manufacturers as well as licensing agreements with the Medicines Patent Pool, a United Nations-backed public health organization, which allows generic drug manufacturers to manufacture generic versions of certain of our products for distribution in certain low- and middle-income countries. We may be adversely affected if any generic versions of our products, whether or not produced and/or distributed under these agreements, are exported to the United States, Europe or markets with higher prices.

In the EU, we are required to permit products purchased in one EU member state to be sold in another member state. Purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high can affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter.

Additionally, diverted products may be used in countries where they have not been approved and patients may source the diverted products outside the legitimate supply chain. These diverted products may be handled, shipped and stored inappropriately, which may affect the efficacy of the products and could harm patients and adversely impact us.

We are also aware of the existence of various suppliers around the world that source our products and generic versions of our products without Gilead’s authorization and sell them for use in countries where those products have not been approved. As a result, patients may be at risk of taking unapproved medications that may not be what they purport to be, may not have the potency they claim to have or may contain harmful substances, which could adversely impact us.

Further, third parties have illegally distributed and sold, and may continue to illegally distribute and sell, illegally diverted and counterfeit versions of our medicines, which do not meet the rigorous quality standards of our manufacturing and supply chain. For example, as part of an ongoing investigation in coordination with the U.S. Marshals and local law enforcement, we recently executed court-ordered seizures at 17 locations across eight U.S. states and seized thousands of bottles of Gilead-labeled medication with counterfeit supply chain documentation, including bottles labeled as Biktarvy and Descovy. Our investigation revealed that pharmaceutical distributors that are not authorized by Gilead to sell Gilead medicine, sold to independent pharmacies nationwide, purported genuine Gilead medicine sourced from an illegal counterfeiting scheme.

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

Product Development and Supply Chain Risks

We face risks in our clinical trials, including the potential for unfavorable results, delays in anticipated timelines and disruption.

We are required to demonstrate the safety and efficacy of product candidates that we develop for each intended use through extensive preclinical studies and clinical trials. The results from preclinical and early clinical studies do not always accurately predict results in later, large-scale clinical trials. Even successfully completed large-scale clinical trials may not result in marketable products.

We face numerous risks and uncertainties with our clinical trials that could result in delays or prevent completion of the development and approval of our product candidates. These risks and uncertainties include challenges in clinical trial protocol design, our ability to enroll patients in clinical trials, and the possibility of unfavorable or inadequate trial results to support further development of our product candidates, including failure to meet a trial’s primary endpoint, safety issues arising from our clinical trials, and the need to modify or delay our clinical trials or to perform additional trials. For example, we recently announced clinical holds placed by FDA on clinical trials evaluating (1) injectable lenacapavir, (2) lenacapavir in combination with islatravir and (3) magrolimab, including in combination with azacitidine.

As a result, we may be unable to successfully complete our clinical trials on our anticipated timelines, or at all. Based on trial results, it is possible that FDA and other regulatory authorities may not approve our product candidates, or that any market approvals may include significant limitations on the products’ use. In addition, clinical trials involving our commercial products could raise new safety issues for our existing products, which could adversely impact our business. Further, we may make a strategic decision to discontinue development of our product candidates if, for example, we believe commercialization will be difficult relative to other opportunities in our pipeline. Therefore, our product candidates may never be successfully commercialized, and we may be unable to recoup the significant R&D and clinical trial expenses incurred. In 2022, we anticipate the continued expansion of our clinical pipeline, which includes multiple planned Phase 3 study initiations in oncology and virology. We expect to expend significant time and resources on our clinical trial activities without any assurance that we will recoup our investments or that our efforts will be commercially successful.

There are also risks associated with the use of third parties in our clinical trial activities. We extensively outsource our clinical trial activities and usually perform only a small portion of the start-up activities in-house. We rely on independent third-party contract research organizations (“CROs”) to perform most of our clinical studies, including document preparation, site identification, screening and preparation, pre-study visits, training, program management, patient enrollment, ongoing monitoring, site management and bioanalytical analysis. Many important aspects of the services performed for us by the CROs are out of our direct control. If there is any dispute or disruption in our relationship with our CROs, our clinical trials may be delayed. Moreover, in our regulatory submissions, we rely on the quality and validity of the clinical work performed by third-party CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals may be adversely affected.

We may face manufacturing difficulties, delays or interruptions, including at our third-party manufacturers and corporate partners.

Our products, which are manufactured at our own facilities or by third-party manufacturers and corporate partners, are the result of complex, highly regulated manufacturing processes. We depend on third-party manufacturers and corporate partners to perform manufacturing activities effectively and on a timely basis for the majority of our active pharmaceutical ingredients and drug products. These third parties are independent entities subject to their own unique operational and financial risks that are out of our control. We and our third-party manufacturers and corporate partners are subject to Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by FDA and the European Medicines Agency (“EMA”), as well as comparable regulations in other jurisdictions. Manufacturing operations are also subject to routine inspections by regulatory agencies.

Any adverse developments affecting or resulting from our manufacturing operations or the operations of our third-party manufacturers and corporate partners may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls or other interruptions in the commercial supply of our products. We may also need to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications and quality standards, undertake costly remediation efforts or seek more costly manufacturing alternatives. Such developments could increase our manufacturing costs, cause us to lose revenues or market share and damage our reputation. In addition, manufacturing issues may cause delays in our clinical trials and applications for regulatory approval. For example, if we are unable to remedy any deficiencies cited by FDA or other regulatory agencies in their inspections, our existing products and the timing of regulatory approval of product candidates in development could be adversely affected. Further, there is risk that regulatory agencies in other countries where marketing applications are pending will undertake similar additional reviews or apply a heightened standard of review, which could delay the regulatory approvals for products in those countries. Our business may be adversely affected if approval of any of our product candidates were delayed or if production of our products were interrupted.

We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell our products, which could limit our ability to generate revenues.

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

Suppliers of key components and materials must be named in the new drug application or marketing authorization application filed with the regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification of a new supplier is required. Even after a manufacturer is qualified by the regulatory authority, the manufacturer must continue to expend time, money and effort in the area of production and quality control to maintain full compliance with GMP. Manufacturers are subject to regular periodic inspections by regulatory authorities following initial approval. If, as a result of these inspections, a regulatory authority determines that the equipment, facilities, laboratories or processes do not comply with applicable regulations and conditions of product approval, the regulatory authority may suspend the manufacturing operations. If the manufacturing operations of any of the single suppliers for our products are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand. In addition, if deliveries of materials from our suppliers are interrupted for any reason, we may be unable to ship certain of our products for commercial supply or to supply our product candidates in development for clinical trials. Also, some of our products and the materials that we utilize in our operations are manufactured by only one supplier or at only one facility, which we may not be able to replace in a timely manner and on commercially reasonable terms, or at all. Problems with any of the single suppliers or facilities we depend on, including in the event of a disaster, such as an earthquake, equipment failure or other difficulty, may negatively impact our development and commercialization efforts.

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

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

Regulatory and Other Legal Risks

Our operations depend on compliance with complex FDA and comparable international regulations. Failure to obtain broad approvals on a timely basis or to maintain compliance could delay or halt commercialization of our products.

The products we develop must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by FDA, EMA and comparable regulatory agencies in other countries. We have filed, and anticipate that we will file, for marketing approval in additional countries and for additional indications and products over the next several years. These and any future marketing applications we file may not be approved by the regulatory authorities on a timely basis, or at all. Even if marketing approval is granted for these products, there may be significant limitations on their use. We cannot state with certainty when or whether any of our product candidates under development will be approved or launched; whether we will be able to develop, license or acquire additional product candidates or products; or whether any products, once launched, will be commercially successful.

Further, how we manufacture and sell our products is subject to extensive regulation and review. For example, under FDA rules, we are often required to conduct post-approval clinical studies to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk. In certain circumstances, we may be required to implement a Risk Evaluation and Mitigation Strategy program for our products, which could include a medication guide, patient package insert, a communication plan to healthcare providers, restrictions on distribution or use of a product and other elements FDA deems necessary to assure safe use of the drug. Discovery of previously unknown problems with our marketed products or product candidates, including serious safety, resistance or drug interaction issues, or problems with our manufacturing, safety reporting or promotional activities may result in regulatory approvals being delayed, denied or granted with significant restrictions on our products, including limitations on or the withdrawal of the products from the market.

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

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

The health care industry is subject to various federal, state and international laws and regulations pertaining to drug reimbursement, rebates, price reporting, health care fraud and abuse, and data privacy and security. In the United States, these laws include anti-kickback and false claims laws, laws and regulations relating to the Medicare and Medicaid programs and other federal and state programs, the Medicaid Rebate Statute, laws that regulate written and verbal communications about our products, individual state laws relating to pricing and sales and marketing practices, the Health Insurance Portability and Accountability Act and other federal and state laws relating to the privacy and security of health information. Actual or alleged violations of these laws or any related regulations may be punishable by criminal and/or civil sanctions, including, in some instances, substantial fines, civil monetary penalties, exclusion from participation in federal and state health care programs, including Medicare, Medicaid and Department of Veterans Affairs and Department of Defense health programs, actions against executives overseeing our business and significant remediation measures, negative publicity or other consequences. These laws and regulations are broad in scope and subject to changing and evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our sales or marketing practices. The resulting impact on our business is uncertain and could be material.

In addition, government price reporting and payment regulations are complex, and we are continually assessing the methods by which we calculate and report pricing in accordance with these obligations. Our methodologies for calculations are inherently subjective and may be subject to review and challenge by various government agencies, which may disagree with our interpretation. If the government disagrees with our reported calculations, we may need to restate previously reported data and could be subject to additional financial and legal liability.

There also continues to be enhanced scrutiny of company-sponsored patient assistance programs, including co-pay assistance programs, and manufacturer donations to third-party charities that provide such assistance. There has also been enhanced scrutiny by governments on reimbursement and other patient support offerings, clinical education programs and promotional speaker programs. If we, or our agents and vendors, are deemed to have failed to comply with laws, regulations or government guidance in any of these areas, we could be subject to criminal or civil sanctions. Any similar violations by our competitors could also negatively impact our industry reputation and increase scrutiny over our business and our products.

For a description of our government investigations and related litigation, see Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

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

As additional studies are conducted subsequent to obtaining marketing approval for our products, and as our products are used over longer periods of time by many patients, including patients with underlying health problems or patients taking other medicines, we expect to continue finding new issues related to safety, resistance or drug interactions. Any such issues may require changes to our product labels, such as additional warnings, contraindications or even narrowed indications, or to halt sales of a product.

Regulatory authorities have been moving towards more active and transparent pharmacovigilance and are making greater amounts of stand-alone safety information and clinical trial data directly available to the public through websites and other means, such as periodic safety update report summaries, risk management plan summaries and various adverse event data. Safety information, without the appropriate context and expertise, may be misinterpreted and lead to misperception or legal action.

Our success depends to a significant degree on our ability to obtain and defend our patents and other intellectual property rights both domestically and internationally, and to operate without infringing upon the patents or other proprietary rights of third parties.

Patents and other proprietary rights are very important to our business. As part of our business strategy, we actively seek patent protection both in the United States and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology. Our success depends to a significant degree on our ability to:

•obtain patents and licenses to patent rights;

•preserve trade secrets and internal know-how;

•defend against infringement of our patents and efforts to invalidate them; and

•operate without infringing on the intellectual property of others.

Because patent applications are confidential for a period of time before a patent is issued, we may not know if our competitors have filed patent applications for technology covered by our pending applications or if we were the first to invent or first to file an application directed toward the technology that is the subject of our patent applications. If competitors file patent applications covering our technology, we may have to participate in litigation, post-grant proceedings before the U.S. Patent and Trademark Office or other proceedings to determine the right to a patent or validity of any patent granted. Such litigation and proceedings are unpredictable and expensive, and could divert management attention from other operations, such that, even if we are ultimately successful, we may be adversely impacted.

Generic manufacturers have sought, and may continue to seek, FDA approval to market generic versions of our products through an abbreviated new drug application (“ANDA”), the application process typically used by manufacturers seeking approval of a generic drug. For a description of our ANDA litigation, see Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The entry of generic versions of our products has, and may in the future, lead to market share and price erosion.

If we are found to infringe the valid patents of third parties, we may be required to pay significant monetary damages or we may be prevented from commercializing products or may be required to obtain licenses from these third parties. We may not be able to obtain alternative technologies or any required license on commercially reasonable terms or at all. If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our products. For example, we are aware of patents and patent applications owned by third parties that such parties may claim cover the use of sofosbuvir, axicabtagene ciloleucel or bictegravir, as well as certain uses of combinations of emtricitabine (“FTC”) and tenofovir disoproxil fumarate (“TDF”) or TAF. For a description of our pending patent litigation, see Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

Furthermore, we also rely on unpatented trade secrets and improvements, unpatented internal know-how and technological innovation. For example, a great deal of our liposomal manufacturing expertise, which is a key component of our liposomal technology, is not covered by patents but is instead protected as a trade secret. We protect these rights mainly through confidentiality agreements with our corporate partners, employees, consultants and vendors. We cannot be certain that these parties will comply with these confidentiality agreements, that we have adequate remedies for any breach or that our trade secrets, internal know-how or technological innovation will not otherwise become known or be independently discovered by our competitors. Under some of our R&D agreements, inventions become jointly owned by us and our corporate partner and in other cases become the exclusive property of one party. In certain circumstances, it can be difficult to determine who owns a particular invention and disputes could arise regarding those inventions. We could be adversely affected if our trade secrets, internal know-how, technological innovation or confidential information become known or independently discovered by competitors or if we enter into disputes over ownership of inventions.

We face potentially significant liability and increased expenses from litigation and government investigations relating to our products and operations.

We are involved in a number of litigation, investigation and other dispute-related matters that require us to expend substantial internal and financial resources. These matters could require us to pay significant monetary amounts, including royalty payments for past and future sales. For example, on February 1, 2022, we reached an agreement with ViiV Healthcare Company and related parties (collectively, “ViiV”) for a global resolution of all pending or potential claims related to our sales of Biktarvy, pursuant to which (1) ViiV granted Gilead a broad worldwide license and covenant not to sue relating to any past, present or future development or commercialization of bictegravir, and (2) Gilead agreed to make a one-time payment of $1.25 billion and an ongoing royalty at a rate of 3% on future sales of Biktarvy and the bictegravir component of bictegravir-containing products in the United States until October 5, 2027.

We expect these matters will continue to require a high level of internal and financial resources for the foreseeable future. These matters have reduced, and are expected to continue to reduce, our earnings and require significant management attention.

In addition, the testing, manufacturing, marketing and use of our commercial products, as well as product candidates in development, involve substantial risk of product liability claims. These claims may be made directly by consumers, healthcare providers, pharmaceutical companies or others. We have limited insurance for product liabilities that may arise and claims may exceed our coverage.

For a description of our litigation, investigation and other dispute-related matters, see Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K. The outcome of such legal proceedings or any other legal proceedings that may be brought against us, the investigations or any other investigations that may be initiated and any other dispute-related matters, are inherently uncertain, and adverse developments or outcomes can result in significant expenses, monetary damages, penalties or injunctive relief against us.

Operational Risks

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

Actual or threatened outbreaks of epidemic, pandemic or contagious diseases, such as COVID-19, may significantly disrupt our global operations and adversely affect our business, financial condition and results of operations. For example, the COVID-19 pandemic has caused significant volatility and uncertainty in U.S. and international markets and has resulted in increased risks and adverse impacts to our operations, including as described below. In addition to the developments discussed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” we are monitoring a number of risks related to the pandemic, including the following:

•Supply Chain: The pandemic could result in disruptions to our global supply chain and distribution in the future. For example, quarantines, shelter-in-place and other governmental orders and policies, travel restrictions, airline capacity and route reductions, safety guidelines and health impacts of the pandemic could impact the availability or productivity of products and personnel at manufacturers, distributors, freight carriers and other necessary components of our supply chain. In addition, there may be unfavorable changes in the availability or cost of raw materials, intermediates and other materials necessary for production, which may result in higher costs, disruptions in our supply chain and interruptions in our distribution capabilities.

•Clinical Trials: The pandemic has adversely affected and may continue to adversely affect certain of our clinical trials, including our ability to initiate and complete our clinical trials within the anticipated timelines. For ongoing trials, clinical trial sites have imposed restrictions on patient visits to limit risks of possible COVID-19 exposure, and we may experience issues with participant compliance with clinical trial protocols as a result of quarantines, travel restrictions and interruptions to healthcare services. There is also a risk that closures at clinical sites may be necessary as the pandemic and related guidance and restrictions continue to evolve. For the foregoing reasons, we have experienced delays with new subject enrollment for most clinical trials during the course of the pandemic, and may continue to experience overall delays in our clinical trials. There is also the risk of biased data collection if only certain clinical trial sites remain open. As a result of these challenges, our anticipated filing and marketing timelines for certain products may be adversely impacted.

•Regulatory Reviews: The operations of FDA, EMA or other regulatory agencies may be adversely affected. We may also experience delays in necessary interactions with regulatory authorities around the world, including with respect to any anticipated filing, which, together with other factors resulting from the pandemic, may adversely impact our ability to launch new commercial products.

•Access to Healthcare Providers: The pandemic has limited patients’ ability or willingness to access and seek care from healthcare providers and initiate or continue therapies, which has resulted in lower demand for our products during the course of the pandemic, particularly with respect to hepatitis C virus (“HCV”) treatment and HIV treatment and prevention. For example, we have observed lower levels of patient visits and testing volumes in HCV, resulting in fewer patient starts. In addition, at times during the pandemic, we have seen lower levels of screening and diagnosis for HIV, resulting in fewer treatment initiations, as well as higher levels of discontinuations, resulting in a reduction in prescription refills. With increased levels of unemployment at times during the pandemic, we have also experienced shifts in payer mix towards more government-funded coverage and the uninsured segment. Our field personnel have also had reduced access to healthcare personnel during the pandemic, including fewer in-person interactions, which has adversely impacted and may continue to adversely impact our commercial activities.

•Employees: We face risks related to the health, safety, morale and productivity of our employees, including the safe occupancy of our sites during the pandemic. In the fourth quarter of 2021, we transitioned to a return-to-site phase for our U.S. flexible location employees. Our job site enhancements and risk protocols, which include health screenings and COVID-19 testing and vaccine requirements, do not guarantee that we can maintain the continued safe occupancy of our sites and may adversely impact employee recruitment and retention. On-site employees testing positive for COVID-19 could lead to mandatory quarantines and potential site shutdowns.

•Financial: The pandemic has had, and may continue to have, an adverse financial impact in the short term and potentially beyond. In particular, our HCV and HIV businesses have been and continue to be adversely impacted. For example, we have observed reductions in the overall U.S. HCV treatment, HIV treatment and HIV pre-exposure prophylaxis (“PrEP”) volumes at times during the pandemic, and it is uncertain when these volumes will all return to pre-pandemic levels. We may continue to experience fluctuating revenues as infection rates rise and fall and as pandemic restrictions are periodically tightened and eased. We have also experienced, and may continue to experience, volatility in our short-term revenues due to fluctuations in inventory channel purchases during the pandemic. We could also have additional unexpected expenses related to the pandemic, which could negatively affect our results of operations. These factors together with the overall uncertainty and disruption caused by the pandemic could result in increased volatility and decreased predictability in our results of operations and volatility in our stock price.

The pandemic has also amplified many of the other risks described throughout the “Risk Factors” section of this Annual Report on Form 10-K. The extent to which the pandemic impacts our business and results will depend on future developments, which are uncertain and cannot be predicted with confidence, including any potential future waves of the pandemic, new variants of the virus that impact the severity and duration of the pandemic, the development, distribution, effectiveness and public acceptance of vaccines, and any other ongoing and future actions taken to contain the pandemic.

We face risks associated with our global operations.

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

•Foreign Currency Exchange: For the year ended December 31, 2021, approximately 29% of our product sales were outside the United States. Because a significant percentage of our product sales is denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates. Overall, we are a net receiver of foreign currencies, and therefore, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar. Our hedging program does not eliminate our exposure to currency fluctuations. We may be adversely impacted if the U.S. dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation.

•Interest Rates and Inflation: We hold interest-generating assets and interest-bearing liabilities, including our available-for-sale debt securities and our senior unsecured notes and credit facilities. Fluctuations in the interest rate could expose us to increased financial risk. In addition, changes in the inflation rate could also adversely impact our business and financial results.

•Anti-Bribery: We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws that govern our international operations with respect to payments to government officials. Our international operations are heavily regulated and require significant interaction with foreign officials. We operate in parts of the world that have experienced governmental corruption to some degree. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state-controlled, in a manner that is different than local custom. It is possible that certain of our practices may be challenged under these laws. In addition, our internal control policies and procedures may not protect us from reckless or criminal acts committed by our employees and agents. Enforcement activities under anti-bribery laws could subject us to administrative and legal proceedings and actions, which could result in civil and criminal sanctions, including monetary penalties and exclusion from healthcare programs.

Other risks inherent in conducting a global business include:

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

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

•Business interruptions stemming from natural or man-made disasters, such as climate change, earthquakes, hurricanes, flooding, fires, extreme heat, drought or actual or threatened public health emergencies, or efforts taken by third parties to prevent or mitigate such disasters, such as public safety power shutoffs and facility shutdowns, for which we may be uninsured or inadequately insured. For example, our corporate headquarters in Foster City and certain R&D and manufacturing facilities are located in California, a seismically active region. In the event of a major earthquake, we may not carry adequate earthquake insurance and significant recovery time could be required to resume operations.

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

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

Institutional and individual investors are increasingly using ESG screening criteria to determine whether Gilead qualifies for inclusion in their investment portfolios. We are frequently asked by investors and other stakeholders to set ambitious ESG goals and provide new and more robust disclosure on goals, progress toward goals and other matters of interest to ESG stakeholders. In response, we have adapted the tracking and reporting of our corporate responsibility program to various evolving ESG frameworks, and we have established and announced goals and other objectives related to ESG matters. These goal statements reflect our current plans and aspirations and are not guarantees that we will be able to achieve them. Our efforts to accomplish and accurately report on these goals and objectives present numerous operational, reputational, financial, legal and other risks, any of which could have a material negative impact, including on our reputation and stock price.

Our ability to achieve any goal or objective, including with respect to environmental and diversity initiatives, is subject to numerous risks, many of which are outside of our control. Examples of such risks include: (1) the availability and cost of low- or non-carbon-based energy sources and technologies, (2) evolving regulatory requirements affecting ESG standards or disclosures, (3) the availability of suppliers that can meet our sustainability, diversity and other standards, (4) our ability to recruit, develop and retain diverse talent in our labor markets, and (5) the impact of our organic growth and acquisitions or dispositions of businesses or operations.

The standards for tracking and reporting on ESG matters are relatively new, have not been harmonized and continue to evolve. Our selection of disclosure frameworks that seek to align with various reporting standards may change from time to time and may result in a lack of consistent or meaningful comparative data from period to period. In addition, our processes and controls may not always comply with evolving standards for identifying, measuring and reporting ESG metrics, our interpretation of reporting standards may differ from those of others and such standards may change over time, any of which could result in significant revisions to our goals or reported progress in achieving such goals.

If our ESG practices do not meet evolving investor or other stakeholder expectations and standards, then our reputation, our ability to attract or retain employees and our attractiveness as an investment, business partner or acquiror could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets and objectives or to satisfy various reporting standards within the timelines we announce, or at all, could also have similar negative impacts and expose us to government enforcement actions and private litigation.

We depend on relationships with third parties for sales and marketing performance, technology, development, logistics and commercialization of products. Failure to maintain these relationships, poor performance by these companies or disputes with these third parties could negatively impact our business.

We rely on a number of collaborative relationships with third parties for our sales and marketing performance in certain territories. For example, we have collaboration arrangements with Janssen Sciences Ireland UC for Odefsey, Complera/Eviplera and Symtuza. In some countries, we rely on international distributors for sales of certain of our products. Some of these relationships also involve the clinical development of these products by our partners. Reliance on collaborative relationships poses a number of risks, including the risk that:

•we are unable to control the resources our corporate partners devote to our programs or products;

•disputes may arise with respect to the ownership of rights to technology developed with our corporate partners;

•disagreements with our corporate partners could cause delays in, or termination of, the research, development or commercialization of product candidates or result in litigation or arbitration;

•contracts with our corporate partners may fail to provide significant protection or may fail to be effectively enforced if one of these partners fails to perform;

•our corporate partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue alternative technologies or products either on their own or in collaboration with our competitors;

•our corporate partners with marketing rights may choose to pursue competing technologies or to devote fewer resources to the marketing of our products than they do to products of their own development; and

•our distributors and our corporate partners may be unable to pay us.

Given these risks, there is a great deal of uncertainty regarding the success of our current and future collaborative efforts. If these efforts fail, our product development or commercialization of new products could be delayed or revenues from products could decline.

Due to the specialized and technical nature of our business, the failure to attract, develop and retain highly qualified personnel could adversely impact us.

Our future success will depend in large part on our continued ability to attract, develop and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, governmental regulation and commercialization. Our ability to do so also depends in part on how well we maintain a strong workplace culture that is attractive to employees. In addition, competition for qualified personnel in the biopharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. Additionally, changes to U.S. immigration and work authorization laws and regulations could make it more difficult for employees to work in or transfer to one of the jurisdictions in which we operate.

Significant cybersecurity incidents could give rise to legal liability and regulatory action under data protection and privacy laws and adversely affect our business and operations.

We are dependent upon information technology systems, infrastructure and data, including our Kite Konnect platform, which is critical to maintain chain of identity and chain of custody of Yescarta and Tecartus. The multitude and complexity of our computer systems make them inherently vulnerable to service interruption or destruction, malicious intrusion and ransomware attack. Likewise, data privacy or security breaches by employees or others can result in the exposure of sensitive data, including our intellectual property or trade secrets or the personal information of our employees, patients, customers or other business partners to unauthorized persons or to the public. Cybersecurity incidents are increasing in their frequency, sophistication and intensity, including during the COVID-19 pandemic. Cybersecurity incidents include, for example, the deployment of harmful malware, ransomware, denial-of-service, social engineering and other means to affect service reliability and threaten data confidentiality, integrity and availability. Our business and technology partners face similar risks and any security breach of their systems could adversely affect our security posture.

Like many companies, we have experienced cybersecurity incidents, including data breaches and service interruptions. When cybersecurity incidents occur, we respond and address them in accordance with applicable governmental regulations and other legal requirements, including our cybersecurity protocols. There can be no assurance that our efforts in response to cybersecurity incidents, as well as our investments to protect our information technology infrastructure and data, will shield us from significant losses and potential liability or prevent any future interruption or breach of our systems. Such cybersecurity incidents can cause the loss of critical or sensitive information, including personal information, and could give rise to legal liability and regulatory action under data protection and privacy laws.

Regulators globally are also imposing new data privacy and security requirements, including new and greater monetary fines for privacy violations. For example, the General Data Protection Regulation (“GDPR”) established regulations regarding the handling of personal data, and non-compliance with the GDPR may result in monetary penalties of up to four percent of worldwide revenue. In addition, new domestic data privacy and security laws, such as the California Consumer Privacy Act and the California Privacy Rights Act and other laws that have been or may be passed, similarly introduce requirements with respect to personal information, and non-compliance with such laws may result in liability through private actions (subject to statutorily defined damages in the event of certain data breaches) and enforcement. Other changes or new laws or regulations associated with the enhanced protection of personal information, including, in some cases, healthcare data or other personal information, could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.

Strategic and Financial Risks

We are subject to risks associated with engaging in business acquisitions, licensing arrangements, collaborations, options, equity investments, asset divestitures and other strategic transactions.

We have engaged in, and may in the future engage in, such transactions as part of our business strategy. We may not identify suitable transactions in the future and, if we do, we may not complete such transactions in a timely manner, on a cost-effective basis, or at all, and may not realize the expected benefits. If we are successful in making an acquisition or closing a licensing arrangement or collaboration, the products, intellectual property and technologies that are acquired or licensed may not be successful or may require significantly greater resources and investments than anticipated. As part of our annual impairment testing of our goodwill and other indefinite-lived intangible assets in the fourth quarter, and earlier if impairment indicators exist, as required under U.S. generally accepted accounting principles, we may need to recognize impairment charges if the products, intellectual property and technologies that are acquired or licensed are not successful. For option structured deals, there is no assurance that we will elect to exercise our option right, and it is possible that disagreements, uncertainties or other circumstances may arise, including with respect to whether our option rights have been appropriately triggered, which may hinder our ability to realize the expected benefits. For equity investments in our strategic transactions, such as in connection with our collaborations with Arcus Biosciences, Inc. and Galapagos NV, the value of our equity investments may fluctuate and decline in value. If we are not successful in the execution or implementation of these transactions, our financial condition, cash flows and results of operations may be adversely affected, and our stock price could decline.

We have paid substantial amounts of cash and incurred additional debt to finance our strategic transactions. Additional indebtedness and a lower cash balance could result in a downgrade of our credit ratings, limit our ability to borrow additional funds or refinance existing debt on favorable terms, increase our vulnerability to adverse economic or industry conditions, and reduce our financial flexibility to continue with our capital investments, stock repurchases and dividend payments. For example, as a result of the cash used and the debt issued in connection with our acquisition of Immunomedics, Inc. in 2020, S&P Global Ratings downgraded our credit rating. We may be adversely impacted by any failure to overcome these additional risks.

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

We are subject to income taxes in the United States and various foreign jurisdictions. Due to economic and political conditions, various countries are actively considering and have made changes to existing tax laws, and we cannot predict the form or timing of such changes. Our effective tax rates are affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, the introduction of new taxes, and changes in tax laws, regulations, administrative practices and interpretations, including in the United States, Germany and Ireland.

We are also subject to the examination of our tax returns and other tax matters by the U.S. Internal Revenue Service and tax authorities in various foreign jurisdictions. There are differing interpretations of tax laws and regulations and, as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We may be adversely affected by the resolution of one or more of these exposures in any reporting period.

ITEM 1B.UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.PROPERTIES

Our corporate headquarters are located in Foster City, California, where we house our administrative, manufacturing and R&D activities. We also have R&D facilities in Emeryville, Oceanside and Santa Monica, California; Seattle, Washington; Morris Plains, New Jersey; Frederick, Maryland; Edmonton, Canada; and Dublin, Ireland. Our principal manufacturing facilities are in El Segundo, La Verne, Oceanside and San Dimas, California; Edmonton, Canada; Cork, Ireland and Hoofddorp, Netherlands. For more information about our manufacturing facilities, see Item 1. Business “Our Manufacturing Facilities.” Our global operations include offices in Europe, North America, Asia, South America, Africa, Australia and the Middle East.

We believe that our existing properties, including both owned and leased sites, are adequate and suitable for the conduct of our business. We believe our capital resources are sufficient to purchase, lease or construct any additional facilities required to meet our expected long-term growth needs.

ITEM 3.LEGAL PROCEEDINGS

For a description of our significant pending legal proceedings, see Note 14. Commitments and Contingencies - Legal Proceedings of the Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is traded on the Nasdaq Global Select Market under the symbol “GILD.”

As of February 18, 2022, we had approximately 1,456 stockholders of record of our common stock.

Performance Graph(1)

The following graph compares our cumulative total stockholder return for the past five years to two indices: the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and the Nasdaq Biotechnology Index (“NBI Index”). The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns.

Comparison of Cumulative Total Return on Investment for the Past Five Years (2)

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(1) This section is not “soliciting material,” is not deemed “filed” with the Securities and Exchange Commission (“SEC”) and is not to be incorporated by reference in any of our filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934 (“Exchange Act”) whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

(2) Shows the cumulative return on investment assuming an investment of $100 in our common stock, the NBI Index and the S&P 500 Index on December 31, 2016, and assuming that all dividends were reinvested.

Equity Compensation Plan Information

The following table provides certain information with respect to our equity compensation plans in effect as of December 31, 2021:

Plan Category (a) (b) (c)

Equity compensation plans approved by security holders:

Employee Stock Purchase Plan(3) 5.1

Total equity compensation plans approved by security holders 15.2 $ 70.95 80.0

Equity compensation plans not approved by security holders(4) 1.6 $ 67.28 6.7

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(1) Does not take into account 22 million restricted stock units, performance share awards or units and phantom shares, which have no exercise price and were granted under our 2004 and 2018 Equity Incentive Plans.

(2) Includes awards and shares previously issuable under The Immunomedics, Inc. Amended and Restated 2014 Long-Term Incentive Plan (the “Immunomedics Plan”), which was assumed in connection with our acquisition of Immunomedics, Inc. and subsequently merged into the 2004 Equity Incentive Plan.

(3) Under our Employee Stock Purchase Plan, participants are permitted to purchase our common stock at a discount on certain dates through payroll deductions within a pre-determined purchase period. Accordingly, these numbers are not determinable.

(4) Includes awards and shares issuable under the Forty Seven, Inc. 2018 Equity Incentive Plan, which was assumed in connection with our acquisition of Forty Seven, Inc. (“Forty Seven”) and subsequently amended and restated as our 2018 Equity Incentive Plan.

Material Features of the Gilead Sciences, Inc. 2018 Equity Incentive Plan

The Forty Seven, Inc. 2018 Equity Incentive Plan was originally established by Forty Seven in June 2018. In connection with Gilead’s acquisition of Forty Seven in April 2020, Gilead assumed the Forty Seven, Inc. 2018 Equity Incentive Plan, and amended and restated it as the Gilead Sciences, Inc. 2018 Equity Incentive Plan (the “2018 Plan”). The 2018 Plan is intended to help the Gilead secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of Gilead and any affiliate, and provide a means by which the eligible recipients may benefit from increases in value of Gilead common stock. From and after April 7, 2020, only employees and consultants of Forty Seven as of immediately prior to such date and employees and consultants of Gilead hired on or following such date are eligible to receive grants of new awards under the 2018 Plan.

The 2018 Plan provides for the award of incentive stock options and non-qualified stock options, each of which must generally have an exercise price equal to at least the fair market value of our common stock on the date of grant; stock appreciation rights; restricted stock awards; restricted stock unit awards; performance stock awards; other stock awards; and performance cash awards.

As of April 7, 2020, the aggregate number of shares of common stock issuable under the 2018 Plan (from and after such date) was 12,069,378. From and after April 7, 2020, Gilead has granted restricted stock units, performance share awards or units and stock options under the 2018 Plan, and these are the only types of equity awards outstanding under the plan. As of December 31, 2021, 6.7 million shares of Gilead common stock remained available for issuance under the 2018 Plan.

Issuer Purchases of Equity Securities

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

In the first quarter of 2020, our Board of Directors authorized a new $5.0 billion stock repurchase program (the “2020 Program”), which will commence upon the completion of the 2016 Program. Purchases under the 2020 Program may be made in the open market or in privately negotiated transactions.

During 2021, we repurchased and retired 8 million shares of our common stock for $546 million through open market transactions under the 2016 Program.

As of December 31, 2021, the remaining authorized repurchase amount from both programs was $6.3 billion.

The table below summarizes our stock repurchase activity for the three months ended December 31, 2021:

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(1) The difference between the total number of shares purchased and the total number of shares purchased as part of a publicly announced program is due to shares of common stock withheld by us from employee restricted stock awards in order to satisfy applicable tax withholding obligations.

Dividends

For the years ended December 31, 2021 and 2020, we paid quarterly dividends. We expect to continue to pay quarterly dividends, although the amount and timing of any future dividends are subject to declaration by our Board of Directors. Additional information is included in Item 7Management’s Discussion and Analysis of Financial Condition and Results of Operations to the Consolidated Financial Statements.

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. MD&A is provided as a supplement to, and should be read in conjunction with, our audited Consolidated Financial Statements and the accompanying Notes to Consolidated Financial Statements and other disclosures included in this Annual Report on Form 10-K (including the disclosures under Part I, Item 1A. Risk Factors). Additional information related to the comparison of our results of operations between the years 2020 and 2019 is included in Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2020 Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”). Our Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars.

MANAGEMENT OVERVIEW

Gilead Sciences, Inc. (“Gilead,” “we,” “our” or “us”) is a biopharmaceutical company that has pursued and achieved breakthroughs in medicine for more than three decades, with the goal of creating a healthier world for all people. We are committed to advancing innovative medicines to prevent and treat life-threatening diseases, including HIV, viral hepatitis and cancer. We operate in more than 35 countries worldwide, with headquarters in Foster City, California.

Our portfolio of marketed products includes AmBisome®, Atripla®, Biktarvy®, Cayston®, Complera®, Descovy®, Descovy for PrEP®, Emtriva®, Epclusa®, Eviplera®, Genvoya®, Harvoni®, Hepcludex® (bulevirtide), Hepsera®, Jyseleca® (filgotinib), Letairis®, Odefsey®, Ranexa®, Sovaldi®, Stribild®, Tecartus®, Trodelvy®, Truvada®, Truvada for PrEP®, Tybost®, Veklury®, Vemlidy®, Viread®, Vosevi®, Yescarta® and Zydelig®. The approval status of Hepcludex and Jyseleca vary worldwide, and Hepcludex and Jyseleca are not approved in the United States. We also sell and distribute authorized generic versions of Epclusa and Harvoni in the United States through our separate subsidiary, Asegua Therapeutics, LLC. In addition, we sell and distribute certain products through our corporate partners under collaborative agreements.

Business Highlights(1)

We delivered strong financial performance in 2021. Veklury continued to play a critical role in addressing the coronavirus disease 2019 (“COVID-19”) pandemic. Veklury’s performance helped mitigate the impacts of COVID-19 on other parts of the business, including on our HIV and chronichepatitis C virus (“HCV”) franchises, and the impacts of the October 2020 loss of exclusivity of Truvada and Atripla in the United States. Despite these transitory headwinds, underlying demand for our virology portfolio remained strong, led by the continued growth of our Biktarvy franchise. We also received increased contributions from our oncology franchise, experiencing growth in Trodelvy, as well as our Cell Therapy franchise.

We continued to expand and strengthen both our commercial portfolio and clinical pipeline across therapeutic focus areas to drive future growth potential. During 2021, we announced an additional six filings for regulatory approval. In addition to investing in our internal pipeline programs, we also continued to enter into and leverage our existing strategic collaborations and partnerships, including opting into four additional pipeline assets from our collaboration with Arcus Biosciences, Inc. (“Arcus”) to further develop the foundation for a more sustainable and diversified business.

Viral Diseases

•In October 2021, U.S. Food and Drug Administration (“FDA”) approved a new low-dose tablet dosage form of Biktarvy for pediatric patients weighing at least 14 kg to less than 25 kg who are virologically suppressed or new to antiretroviral therapy.

•In August 2021, our Marketing Authorization Application for lenacapavir, an investigational, long-acting HIV-1 capsid inhibitor, was fully validated and is now under evaluation with the European Medicines Agency (“EMA”).

•In June 2021, FDA granted approval of a new oral pellet formulation of Epclusa, expanding the pediatric indication to treat children as young as 3 years of age with chronic HCV.

•In June 2021, we submitted a New Drug Application to FDA for lenacapavir, an investigational, long-acting agent in development for the treatment of HIV-1 in people with limited therapy options.

•In March 2021, we entered into an agreement with Merck Sharp & Dohme Corp. (“Merck”), a subsidiary of Merck & Co., Inc., 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.

•In March 2021, we completed the acquisition of MYR GmbH (“MYR”). The acquisition provides us with Hepcludex, which is conditionally approved by EMA for the treatment of chronic hepatitis delta virus (“HDV”) in adults with compensated liver disease.

COVID-19

•In January 2022, FDA granted expedited approval for Veklury for the treatment of non-hospitalized adult and adolescent patients who are at high risk of progression to severe COVID-19, including hospitalization or death.

•In December 2021, the European Commission granted approval to expand the indication for Veklury for use in the earlier stages of the disease in adult patients who do not require supplemental oxygen and are at increased risk of progressing to severe COVID-19.

•In April 2021, we announced that we will (i) provide assistance and support for expansion of local manufacturing capacity of remdesivir in India and will donate the active pharmaceutical ingredient and (ii) donate a minimum of 450,000 vials of Veklury (remdesivir) to the government of India.

Oncology

Cell Therapy

•In January 2022, FDA approved an update to the prescribing information for Yescarta to include the use of prophylactic corticosteroids across all approved indications. Yescarta is now the first and only chimeric antigen receptor (“CAR”) T-cell therapy with information in the label to help physicians manage, and potentially prevent, treatment side effects.

•In October 2021, FDA approved Tecartus for the treatment of adult patients with relapsed or refractory B-cell precursor acute lymphoblastic leukemia (“ALL”). Tecartus is the first and only CAR T cell therapy approved for adults with ALL.

•In September 2021, Kite, a Gilead company (“Kite”) submitted a supplemental Biologics License Application to FDA for Yescarta to expand its current indication to include the treatment of adults with relapsed or refractory large B-cell lymphoma (“LBCL”) in the second-line setting.

•In August 2021, Kite and Appia Bio, Inc. entered into a collaboration and license agreement to research and develop hematopoietic stem cell derived cell therapies directed toward hematological malignancies.

•In June 2021, Kite entered into a research collaboration and license agreement with Shoreline Biosciences, Inc. to develop novel allogeneic cell therapies across a variety of cancer targets.

•In June 2021, Fosun Kite Biotechnology Co. Ltd, a joint venture between Kite and Shanghai Fosun Pharmaceutical (Group) Co., Ltd, received approval from the China National Medical Products Administration for axicabtagene ciloleucel for the treatment of adult patients with relapsed or refractory LBCL in China.

•In March 2021, FDA granted accelerated approval of Yescarta for the treatment of adult patients with relapsed or refractory follicular lymphoma (“FL”).

Other

•In January 2022, we entered into a clinical trial collaboration agreement with Merck to evaluate Trodelvy in combination with Merck’s anti-programmed death receptor-1 (“PD-1”) therapy, Keytruda, in a first-line setting for patients with non-small cell lung cancer (“NSCLC”).

•In November 2021, the European Commission granted marketing authorization for Trodelvy for treatment of metastatic triple-negative breast cancer (“TNBC”) in adult patients with unresectable or metastatic TNBC who have received two or more prior systemic therapies, at least one of them for advanced disease.

•In November 2021, we exercised options to three programs in the clinical-stage portfolio of Arcus, including anti-TIGIT molecules domvanalimab and AB308, as well as clinical candidates etrumadenant (dual adenosine A2a/A2b receptor antagonist) and quemliclustat (small molecule CD73 inhibitor). The transaction closed in December 2021.

•In October 2021, we entered into a clinical trial collaboration and supply agreement with Merck to evaluate the efficacy of Trodelvy in combination with Keytruda as a first-line treatment for patients with locally advanced or metastatic TNBC.

•In September 2021, Health Canada approved Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic TNBC who have received two or more therapies, at least one of them for metastatic disease. Canada joined Australia, Great Britain, Switzerland and the United States among the countries that have approved Trodelvy for use under Project Orbis, a global collaborative review program for high impact oncology marketing applications across participating countries.

•In April 2021, FDA granted accelerated approval of Trodelvy for use in adult patients with locally advanced or metastatic urothelial cancer (“UC”), a new indication.

•In April 2021, FDA granted full approval of Trodelvy for adult patients with unresectable locally advanced or metastatic TNBC.

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(1) We announced and discussed these updates in further detail in press releases available on our website at www.gilead.com. Readers are also encouraged to review all other press releases available on our website mentioned above. The content on the referenced websites does not constitute a part of and is not incorporated by reference into this Annual Report on Form 10-K.

2021 Financial Highlights

(in millions, except percentages and per share amounts) 2021 2020 Change

Net income attributable to Gilead $ 6,225 $ 123 NM

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NM - Not Meaningful

Total revenues increased by 11% to $27.3 billion in 2021, compared to $24.7 billion in 2020, primarily due to increased sales of Veklury, our FDA-approved treatment for hospitalized patients with COVID-19. The increase also reflects the continued growth of Biktarvy in all geographies and the continued uptake of Trodelvy, Cell Therapy and chronic hepatitis B virus (“HBV”) and HDV products. The increases were partially offset by the decrease in Truvada and Atripla sales in the United States, as expected, primarily due to the continued generic competition following the October 2020 loss of exclusivity in the United States.

Net income attributable to Gilead was $6.2 billion or $4.93 diluted earnings per share in 2021, compared to $123 million or $0.10 diluted earnings per share in 2020. The increase was primarily due to lower acquired in-process research and development (“IPR&D”) charges, revenue growth and lower unrealized losses from our equity investments, partially offset by a $1.25 billion charge for a settlement related to bictegravir litigation, and a charge of $625 million related to the Arcus collaboration opt-in. Our acquired IPR&D expenses in 2020 were $5.9 billion primarily related to our acquisition of Forty Seven as well as collaborations and other investments that we entered into during the year with Arcus, Pionyr Immunotherapeutics, Inc. (“Pionyr”), Tango Therapeutics, Inc. (“Tango”), Tizona Therapeutics, Inc. (“Tizona”) and Jounce Therapeutics, Inc. (“Jounce”).

Strategy and Outlook 2022

Our purpose is to deliver life-changing medications to patients in need through scientific breakthroughs, innovation and strong operational execution. Our strategic ambitions are to (i) bring 10+ transformative therapies to patients by 2030; (ii) be the biotech employer and partner of choice; and (iii) deliver shareholder value in a sustainable and responsible manner. Our strategic priorities reflect how we will deliver those ambitions: (i) expand internal and external innovation; (ii) strengthen portfolio strategy and decision making; (iii) increase patient benefit and access; and (iv) continue to evolve our culture.

In 2022, we will continue to focus on executing our strategy to expand and diversify our commercial portfolio and clinical pipelines across our three therapeutic focus areas: virology, oncology and inflammation. Specifically, we plan to significantly increase clinical development studies across our novel oncology portfolio while maintaining our leadership in antiviral medications through our work in HIV, hepatitis, the COVID-19 pandemic and emerging viruses. Our collaboration with Arcus provides additional opportunities for us to further develop the foundation for a more sustainable and diversified business. Beyond expanding our products and pipeline, we also continue to focus on our employees, the evolution of our culture and our efforts to promote racial equity and social justice. Additionally, we expect to maintain a rigorous focus on disciplined expense management.

While, the COVID-19 pandemic continues to impact our business and broader market dynamics, we expect revenue growth of between 2 – 4% in 2022 product sales, excluding Veklury, as compared to 2021. Our HIV product sales will continue to recover from the COVID-19 pandemic and demonstrate year-over-year growth, as the financial impact of the Truvada and Atripla loss of exclusivity will be largely behind us starting in the second quarter of 2022. We also expect our oncology businesses, including Cell Therapy and Trodelvy, to contribute to our growth.

Veklury sales are generated in a highly dynamic and complex global environment, which continues to evolve. As a result, Veklury sales are subject to significant volatility and uncertainty. Future product demand will depend on the nature of the COVID-19 pandemic, including duration, infection rates, hospitalizations, and availability and adoption of alternative therapies and vaccines. While we anticipate a year-over-year decline in Veklury product sales, we expect Veklury to continue to play a key role in the pandemic and contribute meaningfully to our revenue in 2022, more heavily weighted towards the beginning of the year.

Our ability to deliver on our strategy is subject to a number of uncertainties, including, but not limited to, the effects of the COVID-19 pandemic, which remains unpredictable; the uncertainty regarding the amount and timing of future Veklury sales; the continuation of an uncertain global macroeconomic environment; our ability to realize the potential benefits of our acquisitions, collaborations or licensing arrangements; our ability to initiate, progress or complete clinical trials within currently anticipated timeframes, including as a result of any current or future holds on clinical trials; the possibility of unfavorable results from new and ongoing clinical trials; our ability to submit new drug applications for new product candidates or expanded indications in the currently anticipated timelines; our ability to receive regulatory approvals in a timely manner or at all; market share and price erosion caused by the introduction of generics; loss of exclusivity of our products; higher than anticipated effects of the loss of exclusivity from Truvada and Atripla; slower than anticipated growth in Biktarvy, Trodelvy, Vemlidy and Cell Therapy products; inaccuracies in our patient start estimates; additional pricing pressures from payers and competitors; an increase in discounts, chargebacks and rebates due to ongoing contracts and future negotiations with commercial and government payers; potential government actions that could have the effect of lowering prices; a larger-than anticipated shift in payer mix to a more highly discounted payer segment; and volatility in foreign currency exchange rates.

RESULTS OF OPERATIONS

Revenues

The following table summarizes the period-over-period changes in our revenues:

Product sales:

________________________________

NM - Not Meaningful

Product Sales

HIV

HIV product sales decreased by 4% to $16.3 billion in 2021, compared to $16.9 billion in 2020, due to the anticipated decline in sales volume of our Truvada (emtricitabine (“FTC”) and tenofovir disoproxil fumarate (“TDF”))-based products driven by the continued generic competition following the October 2020 loss of exclusivity of Truvada and Atripla in the United States. Truvada and Atripla product sales were $1.3 billion lower in 2021, compared to 2020. The decrease was also impacted by lower sales of Genvoya driven by decrease in volume worldwide primarily due to patients switching to Biktarvy. These declines were partially offset by an increase in Biktarvy product sales worldwide driven by higher demand, higher net average selling price driven by favorable changes in estimates of government rebates and discounts in the United States. We expect that our HIV business will continue to recover from the COVID-19 pandemic in 2022. We also expect the impact of the Truvada and Atripla loss of exclusivity will be largely behind us starting in the second quarter of 2022.

Veklury

Veklury product sales were $5.6 billion in 2021, compared to $2.8 billion in 2020. Veklury became commercially available in the third quarter of 2020, resulting in a partial year of sales in 2020. The increase was also attributable to higher hospital demand worldwide. Sales of Veklury are generally affected by COVID-19 related rates of infections, hospitalizations and vaccinations as well as the availability, uptake and effectiveness of alternative treatments for COVID-19. As a result, future sales of Veklury are difficult to predict.

HCV

HCV product sales decreased by 9% to $1.9 billion in 2021, compared to $2.1 billion in 2020, primarily due to lower demand driven by fewer patient starts worldwide due to the impact of the COVID-19 pandemic. The slight increase in HCV sales in Europe in 2021 was due to a favorable change in estimate of government rebates, which offset the revenue decrease associated with lower demand.

HBV / HDV

HBV and HDV product sales increased by 13% to $969 million in 2021, compared to $860 million in 2020, primarily due to higher Vemlidy product sales due to higher demand in all geographies, partially offset by lower Viread product sales in Other international locations. Hepcludex sales in 2021 were $37 million as launch activities continued across Europe following our first quarter 2021 acquisition of MYR.

Cell Therapy

Cell Therapy product sales, which include Yescarta and Tecartus, increased by 43% to $871 million in 2021, compared to $607 million in 2020. The growth was primarily due to the July 2020 launch of Tecartus in the United States for the treatment of adult patients with relapsed or refractory mantle cell lymphoma (“MCL”) and the December 2020 launch of Tecartus for MCL in Europe, resulting in partial year of sales in 2020. The increase was also driven by continued higher demand for Yescarta worldwide for LBCL and volume growth related to approval of Yescarta for FL in the United States in 2021.

Trodelvy

Trodelvy product sales increased to $380 million in 2021, compared to $49 million in 2020. We obtained Trodelvy through the fourth quarter 2020 acquisition of Immunomedics, resulting in a partial year of sales in 2020. In addition, 2021 revenues include continued uptake of Trodelvy following the full regulatory approval for metastatic TNBC in the United States and Europe and accelerated approval for metastatic UC in the United States.

Other Product Sales

Other product sales, which include AmBisome, Cayston, Jyseleca, Letairis, Ranexa and Zydelig, were $1.0 billion in 2021 and remained flat as compared to 2020. AmBisome sales volume increased due to higher demand in geographies outside the United States. The increase was mostly offset by lower Letairis sales in the United States, as anticipated, due to continued generic competition following the loss of exclusivity in 2019.

Gross-to-Net Deductions

We record product sales net of estimated government and other rebates and chargebacks, cash discounts for prompt payment, distributor fees, sales returns and other related costs. These deductions totaled $14.4 billion, or 35% of gross product sales in 2021, compared to $15.3 billion, or 39% of gross product sales in 2020. The reduction is driven by changes in product mix, primarily due to higher Veklury sales in 2021. Of the $14.4 billion in 2021, $12.6 billion, or 30% of gross product sales, was related to government and other rebates and chargebacks and $1.8 billion was related to cash discounts for prompt payment, distributor fees, sales returns and other related costs.

Foreign Currency Exchange Impact

Of our total product sales, 29% and 26% were generated outside the United States in 2021 and 2020, respectively. We generally face exposure to movements in foreign currency exchange rates, primarily in the Euro. We use foreign currency exchange contracts to hedge a portion of our foreign currency exposures. Foreign currency exchange, net of hedges, had a favorable impact on our total product sales of $141 million in 2021, based on a comparison using foreign currency exchange rates from 2020, largely driven by Euro-based product sales.

The following table summarizes the period-over-period changes in our product sales:

HIV Products

Descovy (FTC/TAF) Based Products

Truvada (FTC/TDF) Based Products

HCV Products

HBV/HDV Products

Cell Therapy Products

Other Products

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NM - Not Meaningful

(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.

(2) Includes Emtriva and Tybost.

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

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

(5) Includes Vosevi and Sovaldi.

(6) Includes Hepcludex and Hepsera.

(7) Includes Cayston and Jyseleca.

Costs and Expenses

The following table summarizes the period-over-period changes in our costs and expenses:

(In millions, except percentages) 2021 2020 Change

Research and development (“R&D”) expenses $ 5,363 $ 5,039 6 %

Selling, general and administrative (“SG&A”) expenses $ 5,246 $ 5,151 2 %

Product Gross Margin

In 2021, product gross margin decreased to 75.6% as compared to 81.2% in 2020, primarily due to a $1.25 billion charge for a settlement related to bictegravir litigation as well as an increase of $848 million in acquisition-related expenses from amortization of finite-lived intangible assets and recognition of inventory step-up charges primarily driven by our acquisitions of Immunomedics and MYR. Product gross margin was also impacted by higher inventory write-down charges and changes in product mix. The increases were partially offset by lower royalty expenses due to lower sales of products containing emtricitabine and elvitegravir and the reversal of a previously recorded $175 million litigation accrual following a favorable court decision related to axicabtagene ciloleucel.

Research and Development Expenses

R&D expenses consist primarily of clinical studies performed by contract research organizations, 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.

We manage our R&D expenses by identifying the R&D activities we anticipate will be performed during a given period and then prioritizing efforts based on scientific data, probability of technical and regulatory successful development, market potential, available human and capital resources and other considerations. We continually review our R&D projects based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities that we believe will best support the long-term growth of our business.

In 2021, R&D expenses increased by $324 million compared to 2020, primarily due to the Arcus collaboration opt-in charge of $625 million, as well as higher investments in Trodelvy and magrolimab clinical activities. These increases were partially offset by (i) a decline of approximately $200 million in external expenses related to wind-down or completion of certain remdesivir clinical studies, (ii) $190 million (€160 million) charge recorded in 2020 in connection with the agreement to amend the existing arrangement with Galapagos for the commercialization and development of Jyseleca, and (iii) lower stock-based compensation expense. R&D expenses for 2020 included accelerated stock-based compensation expenses of $166 million related to our acquisitions of Immunomedics and Forty Seven.

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.

Acquired IPR&D expenses of $177 million in 2021 were related to licensing, collaboration, investment and other arrangements we entered into during the year. Acquired IPR&D expenses of $5.9 billion in 2020 were primarily related to our acquisition of Forty Seven as well as collaborations and other investments we entered into during the year with Arcus, Pionyr, Tango, Tizona and Jounce.

Selling, General and Administrative Expenses

SG&A expenses relate to sales and marketing, finance, human resources, legal and other administrative activities, including information technology investments. 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.

In 2021, SG&A expenses increased by $95 million compared to 2020, primarily due to an expense of $212 million related to the donation of certain equity securities at fair value to the Gilead Foundation, a California nonprofit organization (the “Foundation”), and increased commercial activities, including higher promotional and marketing activities primarily driven by Trodelvy. SG&A expenses for 2020 included accelerated stock-based compensation expense of $204 million related to our acquisitions of Immunomedics and Forty Seven, and a charge of $97 million related to a U.S. Department of Justice investigation, which was settled in the third quarter of 2020.

Interest Expense and Other Income (Expense), Net

The following table summarizes the period-over-period changes in our Interest expense and Other income (expense), net:

(in millions, except percentages) 2021 2020 Change

Other income (expense), net $ (639) $ (1,418) (55) %

Interest expense for 2021 increased by $17 million, or 2%, compared to 2020, primarily due to an increase in borrowing related to the fourth quarter 2020 acquisition of Immunomedics, partially offset by lower interest expense due to debt maturities and repayments.

The changes in Other income (expense), net for 2021, compared to 2020, primarily reflects lower unrealized losses from fair value adjustments of our investments in equity securities largely driven by our investment in Galapagos, partially offset by lower interest income. Changes in the fair value of equity securities resulted in net unrealized losses of $610 million and $1.7 billion for the years ended December 31, 2021 and 2020, respectively.

Income Taxes

The following table summarizes the period-over-period changes in our Income tax (expense) benefit:

(in millions, except percentages) 2021 2020

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

Effective tax rate 25.1 % 94.7 %

Our effective tax rate decreased in 2021, compared to 2020, primarily due to a $4.5 billion acquired IPR&D charge recorded in connection with our acquisition of Forty Seven and $511 million of certain other acquired IPR&D charges in 2020 that were non-deductible for tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

Our cash, cash equivalents, and marketable debt securities were $7.8 billion and $7.9 billion as of December 31, 2021 and 2020, respectively.

Cash Flows

The following table summarizes our cash flow activities:

Net cash provided by (used in):

Financing activities $ (8,877) $ 770

Operating Activities

Cash provided by operating activities represents the cash receipts and disbursements related to all of our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net income for non-cash items and changes in operating assets and liabilities. Cash provided by operating activities increased by $3.2 billion to $11.4 billion in 2021 compared to 2020. The increase was primarily due to revenue growth from sales of Veklury as well as higher collection of receivables in 2021.

Investing Activities

Cash used in investing activities primarily consists of purchases, sales and maturities of our marketable debt securities, capital expenditures, acquisitions, including IPR&D, net of cash acquired, purchases of equity securities and other investments. Cash used in investing activities was $3.1 billion in 2021 compared to $14.6 billion in 2020. The decrease in cash used in investing activities was primarily due to a decrease in cash outflows related to acquisitions, including IPR&D, net of cash acquired. We made a $1.2 billion payment in the first quarter of 2021 for our acquisition of MYR as compared to the $4.7 billion and $20.6 billion payments made in 2020 related to our acquisitions of Forty Seven and Immunomedics, respectively. The decrease was partially offset by net cash generated by investing activities in 2020 related to proceeds from sales and maturities of marketable debt securities used to partially fund these acquisitions.

Financing Activities

Cash used in financing activities for the year ended December 31, 2021 was $8.9 billion, compared to cash provided by financing activities of $770 million in 2020. In 2021, we utilized cash for $4.75 billion of debt repayments, $3.6 billion of dividend payments and $546 million of common stock repurchases. In 2020, we obtained $8.2 billion in proceeds from debt financing, net of issuance costs, to fund our fourth quarter 2020 acquisition of Immunomedics, partially offset by cash utilized for $3.4 billion of dividend payments, $2.5 billion of debt repayments and $1.6 billion of common stock repurchases.

Debt and Credit Facilities

A summary of our borrowings under various financing arrangements is included in Note 12. Debt and Credit Facilities of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. We may choose to repay certain of our long-term debt obligations prior to maturity dates based on our assessment of current and long-term liquidity and capital requirements.

Senior Unsecured Notes and Term Loan

In 2021, we repaid $4.75 billion of debt, consisting of $3.75 billion senior unsecured notes and $1.0 billion on 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 notes due upon maturity in September 2021. In October 2021, we exercised our option to call $500 million of senior unsecured floating rate notes and $500 million of 0.75% senior unsecured notes, both having a final maturity date of September 2023. These two early repayments totaling $1.0 billion principal amount were made in the fourth quarter of 2021. In December 2021, we exercised our option to call $500 million of senior unsecured notes having a final maturity of March 2022. The notes were repaid in February 2022. No new debt was issued in 2021. We are required to comply with certain covenants under our note indentures governing our senior unsecured notes. As of December 31, 2021 and 2020, we were not in violation of any covenants.

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 Finance Trust prior to our acquisition of Immunomedics. The liability related to future royalties was primarily included in Long-term debt, net on our Consolidated Balance Sheets. See Note 6. Acquisitions of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

Credit Facility

In June 2020, we terminated our $2.5 billion five-year revolving credit facility maturing in May 2021 (the “2016 Revolving Credit Facility”) and entered into a new $2.5 billion five-year revolving credit facility maturing in June 2025 (the “2020 Revolving Credit Facility”). The 2020 Revolving Credit Facility can be used for working capital requirements and for general corporate purposes, including, without limitation, acquisitions. As of December 31, 2021 and 2020, there were no amounts outstanding under the 2020 Revolving Credit Facility. The 2020 Revolving Credit Facility contains customary representations, warranties, affirmative and negative covenants and events of default. As of December 31, 2021, we were in compliance with all covenants.

Capital Return Program

The details of our Stock Repurchase Programs and Dividends are included in Note 15. Stockholders’ Equity of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Stock Repurchase Programs

In the first quarter of 2016, our Board of Directors authorized a $12.0 billion stock repurchase program (the “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.

We purchased 8 million and 22 million shares of our common stock under the 2016 Program for $546 million and $1.6 billion in 2021 and 2020, respectively.

As of December 31, 2021, the remaining authorized repurchase amount from both programs was $6.3 billion.

Dividends

We declared and paid quarterly cash dividends for an aggregate amount of $3.6 billion or $2.84 per share of our common stock and $3.4 billion or $2.72 per share of our common stock in 2021 and 2020, respectively.

On February 1, 2022, we announced that our Board of Directors declared a quarterly cash dividend increase of 2.8% from $0.71 to $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. Future dividends are subject to declaration by our Board of Directors.

Capital Resources

We believe our existing capital resources, supplemented by cash flows generated from our operations, will be adequate to satisfy our capital needs for the foreseeable future. Our future capital requirements will depend on many factors, including but not limited to the following:

•the commercial performance of our current and future products;

•the progress and scope of our R&D efforts, including preclinical studies and clinical trials;

•the cost, timing and outcome of regulatory reviews;

•the expansion of our sales and marketing capabilities;

•the possibility of acquiring additional manufacturing capabilities or office facilities;

•the possibility of acquiring other companies or new products;

•debt service requirements;

•the establishment of additional collaborative relationships with other companies; and

•costs associated with the defense, settlement and adverse results of government investigations and litigation.

We may in the future require additional funding, which could be in the form of proceeds from equity or debt financings. If such funding is required, we cannot guarantee that it will be available to us on favorable terms, if at all.

Material Cash Requirements

We continually evaluate our liquidity and capital resources, including our access to external capital to ensure that we can adequately and efficiently finance our operations. As of December 31, 2021, our material cash requirements consisted primarily of the repayment of outstanding borrowings, the remaining obligations for the one-time repatriation transition tax from the Tax Cuts and Jobs Act, our settlement related to bictegravir litigation, purchases of inventory, operating leases obligations, capital expenditures and milestone and other payments related to our collaborative agreements. See Notes 11. Collaborations and Other Arrangements, 12. Debt and Credit Facilities, 13. Leases, 14. Commitments and Contingencies and 18. Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. We anticipate our cash requirements related to capital expenditures will increase in 2022 as compared to the prior year as we work to expand our site infrastructure and capabilities.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

The discussion and analysis of our financial condition and results of operations is based on our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these 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 and base our estimates on historical experience and on various other 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. Actual results may differ significantly from these estimates.

We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.

Government and Other Rebates and Chargebacks

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

Government and other rebates and chargebacks are subject to a complex estimation process, which requires significant judgment by management in part due to the lag between the date of the product sales and the date the related rebates or chargeback claims are settled. 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 by 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 of government and other rebates and chargebacks, we consider the following:

•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. wholesalers; and

•other pertinent internal or external information.

The following table summarizes the consolidated activities and ending balances in our government and other rebates and chargebacks accounts:

Product sales in 2021 include the impact of $617 million for changes in estimates related to our 2020 product sales, primarily in the United States. In 2020, we had assumed higher rebate claims from government payer segments resulting in part from the COVID-19 pandemic and its anticipated impacts, which did not materialize.

We assess and update our estimates each reporting period to reflect actual claims and other current information. We believe the methodology that we use to estimate our government and other rebates and chargebacks is reasonable and appropriate given the current facts and circumstances. However, actual results may differ significantly from our estimates. Historically, our actual government and other rebates and chargebacks claimed for prior periods have varied by less than 5% from our estimates.

Government and other chargebacks that are payable to our direct customers are classified as reductions of Accounts receivable in our Consolidated Balance Sheets and totaled $671 million and $552 million as of December 31, 2021 and 2020, respectively. See Note 10. Other Financial Information of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information. Government and other rebates that are payable to third party payers and healthcare providers are generally recorded in Accrued government and other rebates on our Consolidated Balance Sheets and totaled $3.2 billion and $3.5 billion as of December 31, 2021 and 2020, respectively.

Acquisitions and Valuation of Intangibles

We make certain judgments to determine whether transactions should be accounted for as acquisitions of assets or as business combinations. If it is determined that substantially all of the fair value of gross assets acquired in a transaction is concentrated in a single asset (or a group of similar assets), the transaction is treated as an acquisition of assets. We evaluate the inputs, processes, and outputs associated with the acquired set of activities and assets. If the assets in a transaction include an input and a substantive process that together significantly contribute to the ability to create outputs, the transaction is treated as an acquisition of a business.

We account for business combinations using the acquisition method of accounting, which requires that assets acquired and liabilities assumed generally be recorded at their fair values as of the acquisition date. Excess of consideration over the fair value of net assets acquired is recorded as goodwill. Estimating fair value requires us to make significant judgments and assumptions. We perform impairment testing of goodwill annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

In transactions accounted for as acquisitions of assets, no goodwill is recorded and contingent consideration, such as payments upon achievement of various developmental, regulatory and commercial milestones, generally is not recognized at the acquisition date. In an asset acquisition, upfront payments allocated to IPR&D projects at the acquisition date are expensed unless there is an alternative future use. In addition, product development milestones are expensed upon achievement.

Valuation of Intangible Assets

We have acquired, and expect to continue to acquire, intangible assets through asset acquisitions or business combinations. The identifiable intangible assets are measured at their respective fair values as of the acquisition date. Intangible assets acquired through business combinations are subject to potential adjustments within the measurement period, which may be up to one year from the acquisition date. The fair values of the intangible assets are generally determined using a probability-weighted income approach that discounts expected future cash flows to present value. The estimated net cash flows are discounted using a discount rate that is based on the estimated weighted-average cost of capital for companies with profiles similar to our profile and represents the rate that market participants would use to value the intangible assets. The discounted cash flow models used in valuing these intangible assets require the use of significant estimates and assumptions including but not limited to:

•identification of product candidates with sufficient substance requiring separate recognition;

•estimates of projected future cash flows including revenues and operating profits related to the products or product candidates;

•the probability of technical and regulatory success for unapproved product candidates considering their stages of development;

•the time and resources needed to complete the development and approval of product candidates;

•appropriate discount rate;

•the life of the potential commercialized products and associated risks, including the inherent difficulties and uncertainties in developing a product candidate such as obtaining FDA and other regulatory approvals; and

•risks related to the viability of and potential alternative treatments in any future target markets.

We believe the fair values used to record intangible assets acquired are based upon reasonable estimates and assumptions given the facts and circumstances as of the related valuation dates.

Impairment and Amortization of Intangible Assets

Intangible assets related to IPR&D projects acquired in a business combination are capitalized as indefinite-lived intangible assets until the completion or abandonment of the associated R&D efforts. During the period the assets are considered indefinite-lived, they are not amortized. 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 primarily on a straight-line basis.

Indefinite-lived intangible assets, composed of IPR&D projects acquired in a business combination that lack regulatory approval at the time of acquisition, are tested for impairment annually, whenever events or changes in circumstances indicate that it is more likely than not that the assets are impaired and upon regulatory approval. Estimates of fair value result from a complex series of judgments about future events and uncertainties and make assumptions at a point in time (acquisition date or subsequent impairment assessment date). Changes in estimates and assumptions, including the timing of product launch, pricing reductions, failure to obtain anticipated regulatory approval, deterioration in U.S. and global financial markets or other unanticipated events and circumstances, may decrease the projected cash flows or increase the discount rate and could potentially result in an impairment charge.

The eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition. If the carrying value of an intangible asset exceeds its estimated fair value, an impairment charge is recorded to write down the intangible asset to its estimated fair value. For example, in 2019, we recognized an $800 million impairment charge related to IPR&D projects primarily for the treatment of indolent B-cell non-Hodgkin lymphoma due to changes in estimated market opportunities. A high rate of failure is inherent in the discovery and development of new products.

Intangible assets 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 Note 9. Goodwill and Intangible Assets of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

Legal Contingencies

We are a party to various legal actions. The most significant of these are described in Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. It is not possible to determine the outcome of these matters. We recognize accruals for such actions to the extent that we conclude that a loss is both probable and reasonably estimable. We accrue for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, then we accrue the minimum amount in the range. If we determine that a material loss is reasonably possible, we disclose the possible loss or range of loss, or that the amount of loss cannot be estimated at this time.

Significant judgment is required in both the determination of probability and the determination as to whether an exposure is reasonably estimable. Because of the inherent uncertainty and unpredictability related to these matters, accruals are based on what we believe to be the best information available at the time of our assessment, including the legal facts and circumstances of the case, status of the proceedings, applicable law and the views of legal counsel. Upon the final resolution of such matters, it is possible that there may be a loss in excess of the amount recorded, and such amounts could have a material adverse effect on our results of operations, cash flows or financial position. We periodically reassess these matters when additional information becomes available and adjust our estimates and assumptions when facts and circumstances indicate the need for any changes. 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. See Note 14. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

Income Taxes

We estimate our income tax provision, including deferred tax assets and liabilities, based on significant management judgment. We evaluate the realization of our deferred tax assets each reporting period. 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 are subject to income taxes in the United States and various foreign jurisdictions, including Ireland. Due to economic and political conditions, various countries are actively considering or have made changes to existing tax laws. We cannot predict the form or timing of potential legislative changes that could have a material adverse impact on our results of operations. In addition, significant judgment is required in determining our worldwide provision for income taxes.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by tax authorities based on the technical merits of the position. The tax benefit recognized in the Consolidated Financial Statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The amount of unrecognized tax benefits (“UTB”) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing tax law, new regulations or interpretations by tax authorities, new information obtained during a tax examination or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to UTB in Income tax (expense) benefit on our Consolidated Statements of Income.

RECENT ACCOUNTING PRONOUNCEMENTS

There have been no new accounting pronouncements issued nor adopted during the year ended December 31, 2021 that are of significance to us.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks that may result from changes in foreign currency exchange rates, interest rates, credit risks and market prices. To reduce certain of these risks, we enter into various types of foreign currency or interest rate derivative hedging transactions, follow investment guidelines and monitor outstanding receivables as part of our risk management program.

Foreign Currency Exchange Risk

We have operations in more than 35 countries worldwide. As a result, our financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we distribute our products. Our operating results are exposed to changes in foreign currency exchange rates between the U.S. dollar and various foreign currencies, the most significant of which is the Euro. When the U.S. dollar strengthens against these currencies, the relative value of sales made in the respective foreign currency decreases. Conversely, when the U.S. dollar weakens against these currencies, the relative value of such sales increase. Overall, we are a net receiver of foreign currencies and, therefore, we benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar.

Approximately 26% of our product sales were denominated in foreign currencies during 2021. To partially mitigate the impact of changes in currency exchange rates on net cash flows from our foreign currency denominated sales, we may enter into foreign currency exchange forward or option contracts. We also hedge certain monetary assets and liabilities denominated in foreign currencies, which reduces but does not eliminate our exposure to currency fluctuations between the date a transaction is recorded and the date that cash is collected or paid. In general, the market risks of these contracts are offset by corresponding gains and losses on the transactions being hedged.

As of December 31, 2021 and 2020, we had open foreign currency forward contracts with notional amounts of $2.9 billion and $2.4 billion, respectively. A hypothetical 10% adverse movement in foreign currency exchange rates compared with the U.S. dollar relative to exchange rates as of December 31, 2021 and 2020 would have resulted in a reduction in fair value of these contracts of approximately $333 million and $249 million, respectively, and if realized, would have negatively affected earnings over the remaining life of the contracts. The analysis does not consider the impact that hypothetical changes in foreign currency exchange rates would have on anticipated transactions that these foreign currency sensitive instruments were designed to offset.

Interest Rate Risk

Our portfolio of available-for-sale debt securities and our senior unsecured notes create an exposure to interest rate risk. With respect to our investment portfolio, we adhere to an investment policy that requires us to limit amounts invested in securities based on credit rating, maturity, industry group and investment type and issuer, except for securities issued by the U.S. government. 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.

The following table summarizes the expected maturities and average interest rates of our interest-generating assets and interest-bearing liabilities as of December 31, 2021:

Expected Maturity Total Fair Value

Assets

Liabilities

_______________________________

(1) Amounts represent principal balances. In addition to the senior unsecured fixed rate notes, we have a $2.5 billion five-year revolving credit facility that matures in June 2025. There were no amounts outstanding under the five-year revolving credit facility as of December 31, 2021. See Note 12. Debt and Credit Facilities of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

Market Price Risk

We hold shares of common stock of certain publicly traded biotechnology companies primarily in connection with license and collaboration agreements. These equity securities are measured at fair value with any changes in fair value recognized in earnings.

The fair value of these equity securities was approximately $1.8 billion and $2.4 billion as of December 31, 2021 and 2020, respectively. Changes in fair value of these equity securities are impacted by the volatility of the stock market and changes in general economic conditions, among other factors. A hypothetical 20% increase or decrease in the stock prices of these equity securities would have increased or decreased their fair value as of December 31, 2021 and 2020 by approximately $364 million and $478 million, respectively.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILEAD SCIENCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Years ended December 31, 2021, 2020 and 2019

CONTENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 50

Audited Consolidated Financial Statements:

Consolidated Balance Sheets 52

Consolidated Statements of Income 53

Consolidated Statements of Comprehensive Income (Loss) 54

Consolidated Statements of Stockholders’ Equity 55

Consolidated Statements of Cash Flows 56

Notes to Consolidated Financial Statements 57

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Gilead Sciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gilead Sciences, Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 23, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Government and commercial rebates

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 1988.

San Jose, California

February 23, 2022

GILEAD SCIENCES, INC.

Consolidated Balance Sheets

December 31,

(in millions, except per share amounts) 2021 2020

Assets

Current assets:

Cash and cash equivalents $ 5,338 $ 5,997

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

Prepaid and other current assets 2,141 2,013

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

Long-term marketable debt securities 1,309 502

Liabilities and Stockholders’ Equity

Current liabilities:

Accrued government and other rebates 3,244 3,460

Accrued and other current liabilities 6,145 4,336

Current portion of long-term debt and other obligations, net 1,516 2,757

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

Other long-term obligations 976 1,214

Commitments and contingencies (Note 14)

Stockholders’ equity:

Accumulated other comprehensive income (loss) 83 (60)

Noncontrolling interest (5) 19

Total liabilities and stockholders’ equity $ 67,952 $ 68,407

See accompanying notes.

GILEAD SCIENCES, INC.

Consolidated Statements of Income

Year Ended December 31,

Revenues:

Royalty, contract and other revenues 297 334 330

Costs and expenses:

Acquired in-process research and development expenses 177 5,856 5,051

Selling, general and administrative expenses 5,246 5,151 4,381

Net loss attributable to noncontrolling interest 24 34 22

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

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

See accompanying notes.

GILEAD SCIENCES, INC.

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,

Other comprehensive income (loss):

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

Available-for-sale debt securities:

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

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

Cash flow hedges:

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

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

Other comprehensive income (loss) 143 (145) 5

Comprehensive loss attributable to noncontrolling interest 24 34 22

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

See accompanying notes.

GILEAD SCIENCES, INC.

Consolidated Statements of Stockholders’ Equity

Shares Amount

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

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

Issuances under employee stock purchase plan 2 — 90 — — — 90

Issuances under equity incentive plans 10 — 118 — — — 118

Stock-based compensation — — 638 — — — 638

Dividends declared ($2.52 per share) — — — — (3,239) — (3,239)

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 (loss), net of tax — — 1 (145) (1) — (145)

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

Issuances under equity incentive plans 11 — 156 — — — 156

Stock-based compensation — — 642 — — — 642

Dividends declared ($2.72 per share) — — — — (3,464) — (3,464)

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

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

Issuances under equity incentive plans 9 — 58 — — — 58

Stock-based compensation — — 640 — — — 640

Repurchases of common stock (11) — (28) — (664) — (692)

Dividends declared ($2.84 per share) — — — — (3,618) — (3,618)

See accompanying notes.

GILEAD SCIENCES, INC.

Consolidated Statements of Cash Flows

Year Ended December 31,

Operating Activities:

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

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

In-process research and development impairment — — 800

Changes in operating assets and liabilities:

Prepaid expenses and other (42) (214) (307)

Investing Activities:

Proceeds from sales of marketable debt securities 730 23,239 7,523

Proceeds from maturities of marketable debt securities 2,180 9,479 22,398

Financing Activities:

Proceeds from debt financing, net of issuance costs — 8,184 —

Proceeds from issuances of common stock 169 256 209

Repayments of debt and other obligations (4,750) (2,500) (2,750)

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

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

Net change in cash and cash equivalents (659) (5,634) (6,309)

Cash and cash equivalents at end of period $ 5,338 $ 5,997 $ 11,631

Supplemental disclosure of cash flow information:

Interest paid, net of amounts capitalized $ 979 $ 951 $ 982

See accompanying notes.

GILEAD SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview

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. See Note 2. 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. 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. Actual results may differ significantly from these estimates.

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. 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. Our payment terms to customers generally range from 30 to 90 days; however, payment terms differ by jurisdiction, by customer and, in some instances, by type of product. Revenues from product sales, net of gross-to-net deductions, are recorded only to the extent a significant reversal in the amount of cumulative revenue recognized is not probable of occurring when the uncertainty associated with gross-to-net deductions is subsequently resolved. Taxes assessed by governmental authorities and collected from customers are excluded from product sales. 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.

Gross-to-Net Deductions

GILD US Equity

GILD · 10-K · period ended 2021-12-31

ITEM 1A. RISK FACTORS

ITEM 1B.UNRESOLVED STAFF COMMENTS

ITEM 2.PROPERTIES

ITEM 3.LEGAL PROCEEDINGS

ITEM 4.MINE SAFETY DISCLOSURES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILD US Equity☆

GILD · 10-K · period ended 2021-12-31

ITEM 1A. RISK FACTORS

ITEM 1B.UNRESOLVED STAFF COMMENTS

ITEM 2.PROPERTIES

ITEM 3.LEGAL PROCEEDINGS

ITEM 4.MINE SAFETY DISCLOSURES

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

ITEM 6. [RESERVED]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILD US Equity