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

The following discussion and analysis is intended to provide material information around events and uncertainties known

to management relevant to an assessment of the financial condition and results of operations of Gilead and should therefore 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) where other material events and uncertainties not otherwise discussed below are disclosed. Certain amounts and percentages herein may not sum or recalculate due to rounding. Additional information related to the comparison of our results of operations between the years 2021 and 2020 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”).

Management Overview

Strategy and Outlook

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.

Since 2019, our strategic ambitions have been 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 for 2023 and beyond, reflecting how we plan to deliver those ambitions, are: (i) maximize near-term revenue growth; (ii) maximize impact of long-active HIV; (iii) expand and deliver on oncology programs; (iv) champion an environment of inclusion and employee growth; and (v) remove barriers to speed in execution.

We plan to provide consistent execution on a portfolio with quality, depth and breadth, including continued growth in our leading HIV portfolio, which is poised to shape the long-acting market following our first lenacapavir approvals, as well as strong commercial performance and clinical momentum for our fast-growing oncology business.

Key Business Updates

During 2022, we continued to advance our portfolio, receiving approvals across various therapeutic areas, indications and geographies. We ended the year with Sunlenca receiving its first approval in the U.S. for heavily-treatment experienced individuals, following the first European market approval by the European Commission (“EC”). This is the first twice-yearly, subcutaneous HIV medicine to be approved. We also continued to broaden therapies available in oncology, receiving approvals for additional indications of Yescarta and Tecartus, and the 2023 approval of Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic hormone receptor-positive, human epidermal growth factor receptor 2-negative (“HR+/HER2-”) breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

In terms of capital resources, we continued to invest in our business and research and development (“R&D”) pipeline through acquisitions and collaborations. We also continued to provide shareholder returns in the form of dividends and share repurchases.

The following highlights are taken from press releases recently issued. Readers are encouraged to review all press releases available on our website at www.gilead.com. The content on the referenced website does not constitute a part of and is not incorporated by reference into this Annual Report on Form 10-K.

Virology

•In December 2022, we announced U.S. Food and Drug Administration (“FDA”) approval of Sunlenca, in combination with other antiretroviral(s), for the treatment of HIV-1 infection in heavily treatment-experienced adults with multi-drug resistant HIV-1 infection.

•In November 2022, we announced the EC authorized an extended indication and line extension for a low-dosage tablet form of Biktarvy for the treatment of HIV in virologically suppressed children who are at least 2 years of age and weigh at least 14 kg.

•In November 2022, we announced FDA approval of Vemlidy for the treatment of chronic hepatitis B virus (“HBV”) infection in pediatric patients 12 years and older with compensated liver disease.

•In October 2022, we announced that Merck & Co., Inc. (“Merck”) and Gilead plan to resume their Phase 2 study under an amended protocol. The study will evaluate an investigational once-weekly oral combination treatment regimen of Merck’s islatravir at a lower weekly dose and Gilead’s lenacapavir.

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•In August 2022, we announced that EC has granted marketing authorization for Sunlenca (lenacapavir) for the treatment of HIV infection, in combination with other antiretroviral(s), in adults with multi-drug resistant HIV infection for whom it is otherwise not possible to construct a suppressive antiviral regimen.

•In July 2022, we received a positive opinion from European Medicines Agency’s (“EMA”) Committee for Medicinal Products for Human Use (“CHMP”) for Veklury to be granted full marketing authorization for the treatment of coronavirus disease 2019 (“COVID-19”) in adults and adolescents with pneumonia requiring supplemental oxygen and adults who do not require supplemental oxygen and are at increased risk of developing severe COVID-19.

•In May 2022, we announced FDA lifted the clinical hold placed on the Investigational New Drug Application to evaluate injectable lenacapavir for HIV treatment and pre-exposure prophylaxis following the agency’s review of the storage and compatibility data of lenacapavir injection with an alternate vial made from aluminosilicate glass.

•In April 2022, FDA approved a supplemental new drug application for Veklury for the treatment of pediatric patients under 12 years of age for the treatment of COVID-19.

Oncology

Cell Therapy

•In December 2022, we entered into an agreement to acquire Tmunity Therapeutics Inc. (“Tmunity”), a clinical stage private biotech company, which will provide us with preclinical and clinical programs, including an “armored” CAR T technology platform that has the potential to be applied to a variety of CAR Ts to enhance anti-tumor activity, as well as rapid manufacturing processes. The transaction closed in February 2023.

•In December 2022, we entered into a strategic collaboration with Arcellx, Inc. (“Arcellx”) to co-develop and co-commercialize CART-ddBCMA, a late-stage clinical asset in development for the treatment of multiple myeloma. The transaction closed in January 2023.

•In December 2022, we announced the transfer of the marketing authorization for Yescarta in Japan from Daiichi Sankyo Co., Ltd. to Gilead K.K. in 2023.

•In December 2022, we received approval from the Ministry of Health, Labour and Welfare in Japan for Yescarta for the initial treatment of relapsed or refractory (“R/R”) large B-cell lymphoma (“LBCL”).

•In October 2022, we received European marketing authorization for Yescarta use in adults with second-line diffuse LBCL. Additionally, EC granted marketing authorization for Tecartus for the treatment of adult R/R B-cell precursor acute lymphoblastic leukemia (“ALL”), and in Canada, we received conditional marketing authorization for Yescarta for R/R follicular lymphoma (“FL”) after two or more lines of systemic therapy.

•In July 2022, we received a positive opinion from EMA’s CHMP for Tecartus for the treatment of adult patients 26 years of age and above with R/R B-cell precursor ALL.

•In June 2022, EC approved Yescarta for the treatment of adult patients with R/R FL after three or more lines of systemic therapy.

•In April 2022, FDA approved commercial production at our new CAR T-cell therapy manufacturing facility in Frederick, Maryland.

•In April 2022, FDA granted approval to Yescarta as initial treatment for adults with LBCL that is refractory to or relapses within 12 months of first-line chemoimmunotherapy.

Other

•In February 2023, we announced that FDA has approved Trodelvy for the treatment of adult patients with unresectable locally advanced or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

•In January 2023, we announced that EMA has validated a Type II variation of the Marketing Authorization Application for Trodelvy for the treatment of adult patients unresectable or metastatic HR+/HER2- breast cancer who have received endocrine-based therapy and at least two additional systemic therapies in the metastatic setting.

•In December 2022, we acquired the remaining rights to GS-1811, an anti-CCR8 antibody developed by Jounce Therapeutics, Inc. (“Jounce”) for the treatment of solid tumors.

•In October 2022, we announced a strategic collaboration with MacroGenics, Inc. (“MacroGenics”) to develop bispecific antibodies to treat various cancers. The agreement includes an upfront payment by us of $60 million to MacroGenics and an exclusive option granted to us on MGD024, an investigational CD123 and CD3 bispecific.

•In August 2022, we announced an agreement with Everest Medicines (“Everest”) to transfer all development and commercialization rights to Gilead for Trodelvy in Greater China, South Korea, and other Asian markets.

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•In April 2022, we entered into a strategic research collaboration agreement with Dragonfly Therapeutics, Inc. (“Dragonfly”) to develop natural killer cell engager-based immunotherapies for oncology and inflammation indications.

•In March 2022, we announced results from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with HR+/HER2- mBC who received prior endocrine therapy, cyclin-dependent kinase (“CDK”) 4/6 inhibitors and two to four lines of chemotherapy.

Inflammation

•In January 2023, we announced a collaboration and licensing agreement with EVOQ Therapeutics, Inc. (“EVOQ”) to advance EVOQ’s proprietary NanoDisc technology for the treatment of rheumatoid arthritis and lupus.

•In September 2022, we completed the acquisition of MiroBio Ltd. (“MiroBio”) for $414 million in cash. MiroBio is a U.K.-based biotechnology company focused on restoring immune balance with agonists targeting immune inhibitory receptors.

Key Financial Results

(in millions, except percentages and per share amounts) 2022 2021 Change

Net income attributable to Gilead $ 4,592 $ 6,225 (26) %

Diluted earnings per share attributable to Gilead $ 3.64 $ 4.93 (26) %

Total revenues were $27.3 billion in 2022 and remained relatively flat compared to 2021, primarily due to increased sales in HIV, cell therapy and Trodelvy, offset by lower sales of Veklury.

Net income attributable to Gilead was $4.6 billion or $3.64 diluted earnings per share attributable to Gilead in 2022, compared to $6.2 billion or $4.93 diluted earnings per share attributable to Gilead in 2021. The decrease was primarily due to the following items net of their related tax effect: a partial in-process research and development (“IPR&D”) impairment charge of $2.7 billion during the three months ended March 31, 2022 related to assets we acquired from Immunomedics, Inc. (“Immunomedics”) in 2020, a $406 million charge related to the termination of the Trodelvy collaboration agreement with Everest and higher R&D expenses, partially offset by a $1.25 billion charge for a settlement related to bictegravir litigation in the fourth quarter of 2021 that did not repeat in 2022.

Results of Operations

Revenues

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

Product sales:

________________________________

See Note 2. Revenues of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for further disaggregation of revenue by product.

HIV

HIV product sales increased by 5% to $17.2 billion in 2022, compared to 2021, primarily due to continued higher demand for Biktarvy worldwide and favorable pricing dynamics, partially offset by the impact of the loss of exclusivity for Truvada in the U.S., channel inventory dynamics and unfavorable foreign currency exchange impact. Part of our favorable pricing dynamics resulted from shifts in channel mix, and we expect channel mix to remain similar in 2023.

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Veklury

Veklury product sales decreased by 30% to $3.9 billion in 2022, compared to 2021, primarily due to lower demand driven by reduced hospitalization rates in the U.S. and Europe, partially offset by higher demand in Other International. Sales of Veklury generally reflect COVID-19 related rates and severity of infections and hospitalizations, as well as the availability, uptake and effectiveness of vaccinations and alternative treatments for COVID-19. As a result, future sales of Veklury are difficult to predict and may vary significantly from one period to the next.

HCV

HCV product sales decreased by 4% to $1.8 billion in 2022, compared to 2021, primarily due to unfavorable foreign currency exchange impact, fewer patient starts and unfavorable pricing dynamics.

HBV / HDV

HBV and HDV product sales increased by 2% to $988 million in 2022, compared to 2021, primarily due to higher demand for Vemlidy and the continued adoption of Hepcludex in Europe.

Cell Therapy

Cell therapy product sales, which include Yescarta and Tecartus, increased by 68% to $1.5 billion in 2022, compared to 2021, primarily due to higher demand for Yescarta in R/R LBCL in the U.S. and Europe, as well as for Tecartus in R/R ALL and mantle cell lymphoma.

Trodelvy

Trodelvy product sales increased by 79% to $680 million in 2022, compared to 2021, primarily due to the continued adoption in metastatic triple-negative breast cancer in the U.S. and Europe.

Other

Other product sales decreased by 8% to $946 million in 2022, as compared to 2021, primarily due to lower demand for AmBisome and loss of exclusivity for Letairis.

Gross-to-Net Deductions

The following table summarizes the period-over-period changes in gross-to-net deductions:

(in millions, except percentages) 2022 2021 Change

Gross-to-net deductions:

Sales returns, discounts and other $ 1,960 $ 1,779 10 %

% of gross product sales 35 % 35 %

Foreign Currency Exchange Impact

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. Of our total product sales, 31% and 29% were generated outside the U.S. in 2022 and 2021, respectively. Foreign currency exchange, net of hedges, had an unfavorable impact on our total product sales of $608 million in 2022, based on a comparison using foreign currency exchange rates from 2021.

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Costs and Expenses

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

(in millions, except percentages) 2022 2021 Change

Research and development expenses $ 4,977 $ 4,601 8 %

Acquired in-process research and development expenses $ 944 $ 939 1 %

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

Selling, general and administrative expenses $ 5,673 $ 5,246 8 %

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NM - Not Meaningful

Product Gross Margin

Product gross margin increased to 79.0% in 2022 as compared to 75.6% in 2021, primarily driven by a $1.25 billion charge for a settlement related to bictegravir litigation in the fourth quarter of 2021 that did not repeat in 2022. The increase was partially offset by higher royalty expenses driven by Biktarvy royalties, the reversal of a $175 million litigation reserve in the third quarter of 2021 that did not repeat in 2022, and changes in product mix.

Research and Development Expenses

Research and development expenses increased by $376 million in 2022 compared to 2021, primarily due to higher clinical development spend related mostly to Trodelvy and the Arcus Biosciences, Inc. (“Arcus”) collaboration, as well as inflationary increases.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses of $944 million in 2022 were primarily related to a $389 million charge associated with our acquisition of MiroBio, a $315 million charge associated with the Dragonfly collaboration, an $82 million charge associated with the Jounce collaboration and acquisition of GS-1811, and a $60 million charge associated with the MacroGenics collaboration. Acquired in-process research and development expenses of $939 million in 2021 were primarily related to a $625 million charge associated with an option exercised under the Arcus collaboration. See Note 6. Acquisitions and Note 10. Collaborations and Other Arrangements of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

In-Process Research and Development Impairment

In connection with our acquisition of Immunomedics in 2020, we allocated a portion of the purchase price to acquired IPR&D intangible assets. Approximately $8.8 billion was assigned to IPR&D intangible assets related to Trodelvy for treatment of patients with HR+/HER2- breast cancer. In March 2022, we received data from the Phase 3 TROPiCS-02 study evaluating Trodelvy in patients with HR+/HER2- mBC who have received prior endocrine therapy, CDK4/6 inhibitors and two to four lines of chemotherapy (“third-line plus patients”). Based on our evaluation of the study results, and in connection with the preparation of the financial statements for the first quarter, we updated our estimate of the fair value of our HR+/HER2- IPR&D intangible asset to $6.1 billion as of March 31, 2022. Our estimate of fair value used a probability weighted income approach that discounts expected future cash flows to the present value. The expected cash flows included cash flows from HR+/HER2- mBC for third-line plus patients and patients in earlier lines of therapy which are the subject of separate clinical studies. Our revised discounted cash flows were lower primarily due to a delay in launch timing for third-line plus patients which caused a decrease in our market share assumptions based on the expected competitive environment. There were no changes in our plans or assumptions related to our estimated cash flows for patients in the earlier lines of therapy. We determined the revised estimated fair value was below the carrying value of the asset and, as a result, we recognized a partial impairment charge of $2.7 billion in In-process research and development impairment on our Consolidated Statements of Income during the three months ended March 31, 2022. The remaining balance of the HR+/HER2- IPR&D intangible asset at the time of the assessment related to cash flows from earlier lines of therapy, where we have Phase 3 pivotal studies in development, in addition to the revised cash flows related to the third-line plus patient setting. If future events result in adverse changes in the key assumptions used in determining fair value, including the timing of product launches, information on the competitive landscape of treatments in this indication, changes to the probability of technical or regulatory success, failure to obtain anticipated regulatory approval or discount rate, among others, additional impairments may be recorded and could be material to our financial statements. No other IPR&D impairment charges were recorded in 2022 or 2021.

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $427 million in 2022 compared to 2021, primarily due to a $406 million charge associated with the termination of the Trodelvy license collaboration agreement with Everest, which had provided Everest with broad commercialization and development rights to Trodelvy in certain Asia territories. We terminated the existing agreement and reacquired the Trodelvy rights in these territories. Other spending increases in 2022 included increased promotional and marketing investing, mostly in Trodelvy and cell therapy, as well as higher corporate activities and inflationary increases, slightly offset by a decrease in donations to the Gilead Foundation in 2022 as compared to 2021.

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) 2022 2021 Change

Other income (expense), net $ (581) $ (639) (9) %

Interest expense decreased by $66 million in 2022 compared to 2021, primarily due to lower outstanding debt balances.

The changes in Other income (expense), net for 2022, compared to 2021, primarily reflects higher interest income due to rising interest rates, partially offset by higher net unrealized losses from equity securities.

Income Taxes

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

(in millions, except percentages) 2022 2021 Change

Our effective tax rate decreased in 2022, compared to 2021, primarily due to a beneficial change in jurisdictional mix of income and lower state taxes.

Liquidity and Capital Resources

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.

Liquidity

Cash, cash equivalents, and marketable debt securities were $7.6 billion and $7.8 billion as of December 31, 2022 and 2021, respectively. Cash and cash equivalents increased by $74 million from December 31, 2021 to December 31, 2022. The following table summarizes our cash flow activities:

Net cash provided by (used in):

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

Operating Activities

Net cash provided by operating activities is derived by adjusting our net income for non-cash items and changes in operating assets and liabilities. Net cash provided by operating activities was $9.1 billion in 2022, compared to $11.4 billion in 2021. The decrease was primarily due to the $1.25 billion payment made in the first quarter of 2022 in connection with the legal settlement related to bictegravir litigation as well as higher income tax payments made and higher operating expenses in 2022.

Investing Activities

Net cash used in investing activities was $2.5 billion in 2022, compared to $3.1 billion in 2021. The decrease was primarily due to lower net purchases of marketable debt and equity securities, partially offset by higher capital expenditures and other acquisitions.

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Financing Activities

Net cash used in financing activities was $6.5 billion in 2022, compared to $8.9 billion in 2021. In 2022, we utilized cash for $1.5 billion of debt repayments, $3.7 billion of dividend payments and $1.4 billion of common stock repurchases. 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.

Capital Resources

We believe our existing capital resources, including cash and cash equivalents, marketable debt securities and our revolving credit facility, supplemented by cash flows generated from our operations, will be adequate to satisfy our capital needs for the foreseeable future.

As of December 31, 2022, our material cash requirements consisted primarily of the repayment of outstanding borrowings, income tax payments, including the remaining obligations for the one-time repatriation transition tax from the Tax Cuts and Jobs Act, purchases of inventory, operating lease obligations, capital expenditures and milestone and other payments related to our collaborative agreements. See Notes 6. Acquisitions, 10. Collaborations and Other Arrangements, 11. Debt and Credit Facilities, 12. Leases, 13. Commitments and Contingencies and 17. 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 enter into certain unconditional purchase obligations, capital expenditure projects and other commitments in the normal course of business. There have been no changes to these commitments during the year that would have a material impact on the company’s ability to meet either short-term or long-term cash requirements.

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;

•future dividends subject to declaration by our Board of Directors;

•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. 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

Critical Accounting Estimates

See Note 1. Organization and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for information about our significant accounting policies and how estimates are involved in the preparation of our financial statements. We believe the following reflect the critical accounting estimates used in the preparation of our Consolidated Financial Statements.

Rebates and Chargebacks

Rebates and chargebacks are determined using a complex estimation process and are subject to uncertainty in part due to the lag between the date of the product sales and the date the related rebates or chargeback claims are settled. In developing our estimates of rebates and chargebacks, we consider the following:

•product sales, including product mix and pricing;

•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;

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•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 rebates and chargebacks accounts, including adjustments made relating to previous years’ sales as a result of changes in estimates:

Our net product sales in 2022 include the impact of $418 million for changes in rebate and chargeback estimates related to sales prior to 2022. Historically, our actual rebates and chargebacks claimed for prior periods have varied by less than 5% from our estimates.

Valuation of Intangible Assets

Determining the fair values of intangible assets, whether as part of a business combination or impairment assessment, involves the use of a probability-weighted income approach that discounts expected future cash flows to present value and requires the use of critical estimated inputs, including:

•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, which, for example, include significant inputs such as addressable patient population, treatment duration and projected market share;

•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;

•an appropriate discount rate based on the estimated weighted-average cost of capital for companies with profiles similar to our profile, representing the rate that market participants would use to value the intangible assets;

•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.

These estimates are subject to uncertainty due to the high rate of failure inherent in the discovery and development of new products; delays that can occur in development, approval and product launch processes; unanticipated decisions made by regulatory agencies; advent of competing products; unexpected changes in U.S. and global financial markets and other unanticipated events and circumstances. If future events result in adverse changes in the critical assumptions used in determining fair value, impairment charges on our intangible assets may be recorded and could be material to our financial statements. For example, in 2022, we recognized a $2.7 billion impairment charge related to our HR+/HER2- IPR&D intangible asset related to an expected delay in launch timing which caused a decrease in our market share assumptions based on the expected competitive environment.

Legal Contingencies

We are a party to various legal actions. Certain significant matters are described in Note 13. Commitments and Contingencies of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

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Critical inputs to the accruals recorded and disclosures provided in relation to these matters include the probability of a certain outcome of the case, the determination as to whether an exposure is reasonably estimable and the amount of potential exposure. These inputs are subject to uncertainty due to changes in the legal facts and circumstances of the case, status of the proceedings, applicable law, the views of legal counsel and the views of any judges or jury involved in the case. 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. For example, in the fourth quarter of 2021, we recorded an accrual of $1.25 billion in Other current liabilities on our Consolidated Balance Sheets for the settlement related to bictegravir litigation.

Income Taxes

We are subject to income taxes in the U.S. and various foreign jurisdictions, including Ireland. Critical inputs in determining our provision for income taxes and related tax balances include forecasts of our future income and expenses, potential tax planning strategies and determination of the probability of certain tax positions being sustained upon examination by tax authorities. These inputs are subject to uncertainty due to potential changes in facts and circumstances, economic and political conditions, changes to existing tax laws and new regulations or interpretations by tax authorities. Changes in these conditions could have a material adverse impact on our results of operations and financial position.

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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 and credit, and equity prices. To reduce certain of these risks, we enter into various types of foreign currency derivative hedging transactions, follow investment guidelines and monitor outstanding receivables as part of our risk management program. We may also enter into other transactions, such as interest rate derivative hedges, as needed.

Foreign Currency Exchange Rate 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 increases. 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 29% of our product sales were denominated in foreign currencies during 2022. To partially mitigate the impact of changes in currency exchange rates on net cash flows from our foreign currency denominated sales, we enter into foreign currency exchange forward 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, 2022 and 2021, we had open foreign currency forward contracts with notional amounts of $3.0 billion and $2.9 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, 2022 and 2021 would have resulted in a reduction in fair value of these contracts of approximately $299 million and $333 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 and Credit Risk

Our portfolio of available-for-sale debt securities and our senior unsecured notes create an exposure to interest rate and credit 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, 2022:

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, 2022. See Note 11. 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.

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Equity 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 $1.2 billion and $1.8 billion as of December 31, 2022 and 2021, 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, 2022 and 2021 by approximately $239 million and $364 million, respectively.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILEAD SCIENCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Years ended December 31, 2022, 2021 and 2020

CONTENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) 46

Audited Consolidated Financial Statements:

Consolidated Balance Sheets 48

Consolidated Statements of Income 49

Consolidated Statements of Comprehensive Income (Loss) 50

Consolidated Statements of Stockholders’ Equity 51

Consolidated Statements of Cash Flows 52

Notes to Consolidated Financial Statements 53

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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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 22, 2023, 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

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Valuation of in-process research and development intangible asset

/s/ Ernst & Young LLP

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

San Jose, California

February 22, 2023

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GILEAD SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

(in millions, except per share amounts) 2022 2021

Assets

Current assets:

Cash and cash equivalents $ 5,412 $ 5,338

Short-term marketable debt securities 973 1,182

Prepaid and other current assets 1,774 2,141

Property, plant and equipment, net 5,475 5,121

Long-term marketable debt securities 1,245 1,309

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of long-term debt and other obligations, net 2,273 1,516

Long-term income taxes payable 3,916 4,767

Other long-term obligations 1,179 976

Commitments and contingencies (Note 13)

Stockholders’ equity:

Accumulated other comprehensive income 2 83

Noncontrolling interest (31) (5)

Total liabilities and stockholders’ equity $ 63,171 $ 67,952

See accompanying notes.

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GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

Revenues:

Royalty, contract and other revenues 299 297 334

Costs and expenses:

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

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

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

Net loss attributable to noncontrolling interest 26 24 34

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

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

See accompanying notes.

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GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,

Other comprehensive income (loss):

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

Available-for-sale debt securities:

Net change (29) (6) 1

Cash flow hedges:

Other comprehensive income (loss) (81) 143 (145)

Comprehensive loss attributable to noncontrolling interest 26 24 34

Comprehensive income (loss) attributable to Gilead $ 4,511 $ 6,368 $ (22)

See accompanying notes.

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GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Shares Amount

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, 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)

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

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

Issuances under equity incentive plans 13 — 211 — — — 211

Stock-based compensation — — 640 — — — 640

Dividends declared ($2.92 per share) — — — — (3,725) — (3,725)

See accompanying notes.

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GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

Operating Activities:

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

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

Changes in operating assets and liabilities:

Prepaid expenses and other 70 (42) (214)

Investing Activities:

Proceeds from sales of marketable debt securities 412 730 23,239

Proceeds from maturities of marketable debt securities 1,590 2,180 9,479

Purchases of equity securities (172) (380) (455)

Financing Activities:

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

Proceeds from issuances of common stock 309 169 256

Repayments of debt and other obligations (1,500) (4,750) (2,500)

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

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

Net change in cash and cash equivalents 74 (659) (5,634)

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

Cash and cash equivalents at end of period $ 5,412 $ 5,338 $ 5,997

Supplemental disclosure of cash flow information:

Interest paid, net of amounts capitalized $ 907 $ 979 $ 951

See accompanying notes.

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GILEAD SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

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®, Hepsera®, Jyseleca®, Letairis®, Odefsey®, Ranexa®, Sovaldi®, Stribild®, Sunlenca®, Tecartus®, Trodelvy®, Truvada®, Truvada for PrEP®, Tybost®, Veklury®, Vemlidy®, Viread®, Vosevi®, Yescarta® and Zydelig®. The approval status of Hepcludex and Jyseleca vary worldwide, and Hepcludex and Jyseleca are not approved in the U.S. We also sell and distribute authorized generic versions of Epclusa and Harvoni in the U.S. through our separate subsidiary, Asegua Therapeutics, LLC. In addition, we sell and distribute certain products through our corporate partners under collaborative agreements.

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, scientific data, probability of technical and regulatory successful development, market potential and other considerations, and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities to best support the long-term growth of our business. See Note 2. Revenues for a summary of disaggregated revenues by product and geographic region.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and include the accounts of Gilead, our wholly-owned subsidiaries and certain variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany transactions have been eliminated. 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.

When we obtain a variable interest in another entity, we assess at the inception of the relationship and upon occurrence of certain significant events whether the entity is a VIE and, if so, whether we are the primary beneficiary of the VIE based on our power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and our obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE.

The preparation of these Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, we evaluate our significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Estimates are assessed each period and updated to reflect current information. Actual results may differ significantly from these estimates. Certain amounts and percentages herein may not sum or recalculate due to rounding.

Beginning in the second quarter of 2022, expenses related to development milestones and other collaboration payments made prior to regulatory approval of a developed product were reclassified from Research and development expenses to Acquired in-process research and development expenses on our Consolidated Statements of Income. Concurrently, we reclassified the cash payments related to these expenses from Other to Acquisitions, including in-process research and development, net of cash acquired within Investing Activities in the Consolidated Statements of Cash Flows. We believe this presentation assists users of the financial statements to better understand the total costs incurred to acquire in-process research and development (“IPR&D”) projects. Prior periods have been revised to reflect this classification, resulting in a reduction of previously-reported Research and development expenses of $762 million and $112 million for the years ended December 31, 2021 and 2020, respectively.

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Revenue Recognition

Product Sales

We recognize revenue from product sales when control of the product transfers to the customer, which is generally upon shipment or delivery, or in certain cases, upon the corresponding sales by our customer to a third party. Revenues are recognized net of estimated rebates and chargebacks, cash discounts for prompt payment, distributor fees, sales return provisions and other related deductions. These deductions to product sales are referred to as gross-to-net deductions and are estimated and recorded in the period in which the related product sales occur. 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. Shipping and handling activities are considered to be fulfillment activities and not a separate performance obligation.

Gross-to-Net Deductions

Rebates and Chargebacks

Rebates and chargebacks are based on contractual arrangements or statutory requirements and include amounts due to payers and healthcare providers under various programs. These amounts may vary by product, payer and individual plans. Providers qualified under certain programs can purchase our products through wholesalers or other distributors at a discount. The wholesalers or distributors then charge the discount back to us.

Rebates and chargebacks are estimated primarily based on product sales, including product mix and pricing, historical and estimated payer mix and discount rates, among other inputs, which require significant estimates and judgment. We assess and update our estimates each reporting period to reflect actual claims and other current information.

Chargebacks that are payable to our direct customers are generally classified as reductions of Accounts receivable on our Consolidated Balance Sheets. Rebates that are payable to third party payers and healthcare providers are recorded in Accrued rebates on our Consolidated Balance Sheets.

Cash Discounts

We estimate cash discounts based on contractual terms, historical customer payment patterns and our expectations regarding future customer payment patterns.

Distributor Fees

Under our inventory management agreements with our significant U.S. wholesalers, we pay the wholesalers a fee primarily for compliance with certain contractually-determined covenants such as the maintenance of agreed-upon inventory levels. These distributor fees are based on a contractually-determined fixed percentage of sales.

Allowance for Sales Returns

Allowances are made for estimated sales returns by our customers and are recorded in the period the related revenue is recognized. We typically permit returns if the product is damaged, defective, or otherwise cannot be used by the customer. In the U.S., we typically permit returns six months prior to and up to one year after the product expiration date. Outside the U.S., returns are only allowed in certain countries on a limited basis.

Our estimates of sales returns are based primarily on analysis of our historical product return patterns, industry information reporting the return rates for similar products and contractual agreement terms. We also take into consideration known or expected changes in the marketplace specific to each product.

Royalty, Contract and Other Revenues

Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur. Contract and other revenues are recognized when the performance obligation is satisfied.

Research and Development Expenses

Research and development expenses are recorded when incurred and consist primarily of clinical studies performed by contract research organizations (“CROs”), materials and supplies, expense reimbursements to the collaboration partners, personnel costs including salaries, benefits and stock-based compensation expense, and overhead allocations consisting of various support and infrastructure costs. From time to time, we enter into development and collaboration agreements in which we share expenses with a collaborative partner. We record payments received from our collaborative partners for their share of the development costs as a reduction of Research and development expenses.

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Clinical study costs are a significant component of Research and development expenses. Most of our clinical studies are performed by third-party CROs. We monitor levels of performance under each significant contract including the extent of patient enrollment and other activities through communications with our CROs. We accrue costs for clinical studies performed by CROs over the service periods specified in the contracts and adjust our estimates, if required, based upon our ongoing review of the level of effort and costs actually incurred by the CROs. All of our material CRO contracts are terminable by us upon written notice and we are generally only liable for actual services completed by the CRO and certain non-cancelable expenses incurred at any point of termination. Payments we make for R&D services prior to the services being rendered are recorded as prepaid assets within Prepaid and other current assets on our Consolidated Balance Sheets and are expensed as the services are provided.

Acquired In-Process Research and Development Expenses

Acquired in-process research and development expenses are recorded when incurred and reflect costs of externally-developed IPR&D projects, acquired directly in a transaction other than a business combination, that do not have an alternative future use, including upfront and milestone payments related to various collaborations and the costs of rights to IPR&D projects.

Selling, General and Administrative Expenses

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

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

Stock-Based Compensation

We provide stock-based compensation in the form of various types of equity-based awards, including restricted stock units (“RSUs”), performance share units (“PSUs”) and stock options, and through our Employee Stock Purchase Plan and the International Employee Stock Purchase Plan (together, as amended, the “ESPP”). Stock-based compensation expense is based on the estimated fair value of the award on the grant date, or the first date of the ESPP purchase period, and recognized over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach, reduced for estimated forfeitures. We estimate forfeitures based on our historical experience. The requisite service period could be shorter than the vesting period if an employee is retirement eligible or if an employee terminates due to death or disability.

The estimated fair value of RSUs is based on the closing price of our common stock on the grant date. For PSUs, depending on the terms of the award, fair value on the date of grant is determined based on either the Monte Carlo valuation methodology or the closing stock price on the date of grant. For stock option and ESPP awards, estimated fair value is based on the Black-Scholes option valuation model. Estimated inputs to that model include (i) expected volatility, based on a blend of historical volatility of our common stock price along with implied volatility for traded options on our common stock, (ii) expected term in years, based on the weighted-average period awards are expected to remain outstanding using historical cancellation and exercise data, contractual terms and vesting terms of the award, (iii) risk-free interest rate, based on observed interest rates appropriate for the term of the stock-based awards, and (iv) expected dividend yield, based on our history and expectation of dividend payments.

Earnings Per Share

Basic earnings per share attributable to Gilead is calculated based on Net income attributable to Gilead on our Consolidated Statements of Income divided by the weighted-average number of shares of our common stock outstanding during the period. Diluted earnings per share attributable to Gilead is calculated based on Net income attributable to Gilead on our Consolidated Statements of Income divided by the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period. The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents are determined under the treasury stock method.

Cash and Cash Equivalents

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

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Marketable Debt Securities

All of our marketable debt securities are classified as available-for-sale and carried at estimated fair values. We determine the appropriate classification of our marketable debt securities at the time of purchase and reevaluate such designation at each balance sheet date. Unrealized gains and losses on available-for-sale debt securities are reported in Accumulated other comprehensive income on our Consolidated Balance Sheets until realized, at which point they are reclassified into Other income (expense), net on our Consolidated Statements of Income. Interest, amortization of purchase premiums and discounts, and expected credit losses, if any, are also recorded in Other income (expense), net on our Consolidated Statements of Income. The cost of securities sold is based on the specific identification method. We regularly review our investments for declines in fair value below their amortized cost basis to determine whether the impairment is due to credit-related factors or noncredit-related factors. Our review includes the creditworthiness of the security issuers, the severity of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that we will be required to sell the securities before the recovery of their amortized cost bases. When we determine that a portion of the unrealized loss is due to an expected credit loss, we recognize the loss amount in Other income (expense), net, with a corresponding allowance against the carrying value of the security we hold. The portion of the unrealized loss related to factors other than credit losses is recognized in Accumulated other comprehensive income.

Accounts Receivable

Trade accounts receivable are recorded net of allowances for wholesaler chargebacks related to government and other programs, cash discounts for prompt payment and estimated credit losses. Estimates of our allowance for credit losses consider a number of factors, including existing contractual payment terms, individual customer circumstances, historical payment patterns of our customers, a review of the local economic environment and its potential impact on expected future customer payment patterns and government funding and reimbursement practices.

Inventories

Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. We periodically review our inventories to identify obsolete, slow-moving, excess or otherwise unsaleable items. If obsolete, slow-moving, excess or unsaleable items are observed and there are no alternate uses for the inventory, we record a write-down to net realizable value through a charge to Cost of goods sold on our Consolidated Statements of Income. The determination of net realizable value requires judgment, including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions and potential product obsolescence, among others.

When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, we capitalize pre-launch inventory costs prior to regulatory approval. A number of factors are considered, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, anticipated R&D initiatives that could impact the indication in which the compound will be used, viability of commercialization and marketplace trends.

EquitySecurities

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

Equity securities without readily determinable fair values are recorded using the measurement alternative of cost less impairment, if any, adjusted for observable price changes in orderly transactions for identical or similar investments of the same issuer. Any impairments or adjustments are recorded in Other income (expense), net on our Consolidated Statements of Income.

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

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

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Property, Plant and Equipment

Property, plant and equipment is stated at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized using the straight-line method. Repairs and maintenance costs are expensed as incurred. Estimated useful lives in years are generally as follows:

Description Estimated Useful Life

Buildings and improvements Shorter of 35 years or useful life

Laboratory and manufacturing equipment 4-10

Office, computer equipment and other 3-15

Leasehold improvements Shorter of useful life or lease term

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

Leases

We determine if an arrangement contains a lease at inception and classify each lease as operating or financing. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the lease payments over the lease term, which is the non-cancelable period stated in the contract adjusted for any options to extend or terminate when it is reasonably certain that we will exercise that option. Right-of-use assets are adjusted for prepaid lease payments, lease incentives and initial direct costs incurred. Operating lease expense for the minimum lease payments is recognized on a straight-line basis over the lease term.

We account for lease and nonlease components in our lease agreements as a single lease component in determining lease assets and liabilities. In addition, we do not recognize the right-of-use assets and liabilities for leases with lease terms of one year or less.

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

Acquisitions, including Goodwill, Intangible Assets and Contingent Consideration

We account for business combinations using the acquisition method of accounting, which generally requires that assets acquired, including IPR&D projects, and liabilities assumed be recorded at their fair values as of the acquisition date on our Consolidated Balance Sheets. Any excess of consideration over the fair value of net assets acquired is recorded as goodwill. The determination of estimated fair value requires us to make significant estimates and assumptions. As a result, we may record adjustments to the fair values of assets acquired and liabilities assumed within the measurement period, which may be up to one year from the acquisition date, with the corresponding offset to goodwill. Transaction costs associated with business combinations are expensed as they are incurred.

Intangible assets related to IPR&D projects are considered to be indefinite-lived until the abandonment or completion of the associated R&D efforts, which generally occurs when regulatory approval is obtained. Goodwill and indefinite-lived intangible assets are not amortized and, instead, are tested for impairment annually or more frequently if events or changes in circumstances indicate that it is more likely than not that the assets are impaired.

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

In determining the initial fair value of an intangible asset, or when quantitative analysis is required to determine any impairment, we use a probability-weighted income approach that discounts expected future cash flows to present value using a discount rate that is based on the estimated weighted-average cost of capital for companies with profiles similar to ours and represents the rate that market participants would use to value the intangible assets. These cash flow models require the use of Level 3 fair value measurements and inputs, including estimated revenues, which, for example, include significant inputs such as addressable patient population, treatment duration, projected market share, assessment of the asset’s life cycle, and competitive trends impacting the asset; costs and probability of technical and regulatory success, among other factors.

In connection with certain acquisitions, we may be required to pay future consideration that is contingent upon the achievement of specified development, regulatory approval or sales-based milestone events. We record contingent consideration resulting from a business combination at its fair value on the acquisition date. Each reporting period thereafter, we revalue these obligations and record increases or decreases in their fair value on our Consolidated Statements of Income until such time that the payment is made. Increases or decreases in fair value of the contingent consideration liabilities can result from updates to assumptions such as the expected timing or probability of achieving the specified milestones, changes in projected revenues or changes in discount rates.

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When we determine net assets acquired do not meet the definition of a business combination under the acquisition method of accounting, the transaction is accounted for as an asset acquisition and, therefore, no goodwill is recorded and contingent consideration generally is not recognized at the acquisition date. In an asset acquisition, upfront payments allocated to IPR&D projects at the acquisition date and subsequent milestone payments are expensed as incurred on our Consolidated Statements of Income unless there is an alternative future use.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant and equipment and finite-lived intangible assets, are reviewed for impairment whenever facts or circumstances either internally or externally may indicate that the carrying value of an asset may not be recoverable. Should there be an indication of impairment, we test for recoverability by comparing the estimated undiscounted future cash flows expected to result from the use of the asset over its useful life to the carrying amount of the asset or asset group. If the asset or asset group is determined to be impaired, any excess of the carrying value of the asset or asset group over its estimated fair value is recognized as an impairment loss.

Derivatives

We recognize all derivative instruments as either assets or liabilities at fair value on our Consolidated Balance Sheets. Unrealized changes in the fair value of derivatives designated as part of a hedge transaction are recorded in Accumulated other comprehensive income. For our hedges related to forecasted product sales, the unrealized gains or losses in Accumulated other comprehensive income are reclassified into Product sales on our Consolidated Statements of Income when the respective hedged transactions affect earnings. Changes in the fair value of derivatives that are not part of a hedge transaction are recorded each period in Other income (expense), net on our Consolidated Statements of Income.

Using regression analysis, we assess, both at inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are effective in offsetting the changes in cash flows or fair values of the hedged items. If we determine that a forecasted transaction is probable of not occurring, we discontinue hedge accounting for the affected portion of the hedge instrument, and any related unrealized gain or loss on the contract is recognized in Other income (expense), net on our Consolidated Statements of Income.

Contingencies

We recognize accruals for loss contingencies to the extent that we conclude that a loss is both probable and reasonably estimable. We accrue the best estimate of loss within a range; 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.

Income Taxes

Our income tax provision is computed under the liability method. Significant estimates are required in determining our provision for income taxes. Some of these estimates are based on interpretations of applicable tax laws or regulations.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance to reduce our deferred tax assets to the amounts that are more likely than not to be realized. We consider future taxable income, ongoing tax planning strategies and our historical financial performance in assessing the need for a valuation allowance. If we expect to realize deferred tax assets for which we have previously recorded a valuation allowance, we will reduce the valuation allowance in the period in which such determination is first made.

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

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

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Foreign Currency Translation and Transactions

Our Consolidated Financial Statements are presented in U.S. dollars. The functional currency for most of our foreign subsidiaries is their local currency. Revenues, expenses, gains and losses for non-U.S. dollar functional currency entities are translated into U.S. dollars using average currency exchange rates for the period. Assets and liabilities for such entities are translated using exchange rates that approximate the rate at the balance sheet date. Foreign currency translation adjustments are recorded as a component of Accumulated other comprehensive income on our Consolidated Balance Sheets. Foreign currency transaction gains and losses on transactions not denominated in functional currency are recorded in Other income (expense), net, on our Consolidated Statements of Income.

Fair Value Measurements

We apply fair value accounting for all financial and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risks.

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

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

•Level 2 inputs include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability; and

•Level 3 inputs include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability. Our Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques and significant management judgment or estimation.

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2. REVENUES

Disaggregation of Revenues

The following table summarizes our Total revenues:

Product sales:

HIV

Hepatitis C virus (“HCV”)

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

Cell therapy

Other

_______________________________

(1) Represents our revenue from cobicistat (“C”), emtricitabine (“FTC”) and tenofovir alafenamide (“TAF”) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen Sciences Ireland Unlimited Company (“Janssen”). See Note 10. Collaborations and Other Arrangements for additional information.

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

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

(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, Jyseleca, Ranexa and Zydelig.

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Revenues from Major Customers

The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our Total revenues:

Year Ended December 31,

AmerisourceBergen Corporation 18 % 23 % 27 %

Cardinal Health, Inc. 25 % 22 % 21 %

McKesson Corporation 20 % 20 % 20 %

Revenues Recognized from Performance Obligations Satisfied in Prior Periods

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

Year Ended December 31,

_______________________________

(1) See Note 10. Collaborations and Other Arrangements for additional information.

Contract Balances

Our contract assets, which consist of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation, totaled $171 million and $174 million as of December 31, 2022 and 2021, respectively. Contract liabilities, which generally result from receipt of advance payment before our performance under the contract, were $102 million and $79 million as of December 31, 2022 and 2021, respectively.

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3.FAIR VALUE MEASUREMENTS

The following table summarizes the types of assets and liabilities measured at fair value on a recurring basis by level within the fair value hierarchy:

(in millions) Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

Assets:

Available-for-sale debt securities:

U.S. treasury securities $ 410 $ — $ — $ 410 $ 407 $ — $ — $ 407

U.S. government agencies securities — 35 — 35 — 4 — 4

Non-U.S. government securities — 34 — 34 — 50 — 50

Residential mortgage and asset-backed securities — 333 — 333 — 424 — 424

Equity securities:

Equity investment in Galapagos NV (“Galapagos”)(1) 736 — — 736 931 — — 931

Other publicly traded equity securities 175 — — 175 331 — — 331

Foreign currency derivative contracts — 60 — 60 — 80 — 80

Liabilities:

Foreign currency derivative contracts — 42 — 42 — 5 — 5

_______________________________

(1) See Note 10. Collaborations and Other Arrangements for additional information.

Level 2 Inputs

Available-for-Sale Debt Securities

For our available-for-sale debt securities, we estimate the fair values by reviewing trading activity and pricing as of the measurement date, and by taking into consideration valuations obtained from third-party pricing services. The pricing services utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs.

Foreign Currency Derivative Contracts

Substantially all of our foreign currency derivative contracts have maturities within an 18-month time horizon and all are with counterparties that have a minimum credit rating of A- or equivalent by S&P Global Ratings, Moody’s Investors Service, Inc. or Fitch Ratings, Inc. We estimate the fair values of these contracts by taking into consideration the valuations obtained from a third-party valuation service that utilizes an income-based industry standard valuation model for which all significant inputs are observable, either directly or indirectly. These inputs include foreign currency exchange rates, Secured Overnight Financing Rate and swap rates. These inputs, where applicable, are observable at commonly quoted intervals.

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Senior Unsecured Notes

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

Level 3 Inputs

Contingent Consideration

In connection with our first quarter 2021 acquisition of MYR, we recorded a liability for contingent consideration, which is revalued each reporting period until the related contingency is resolved. The contingent consideration was estimated using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex.

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

Year Ended December 31,

Beginning balance $ 317 $ —

Changes in valuation assumptions(1) (21) (1)

Effect of foreign exchange remeasurement(2) (21) (23)

________________________________

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

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

Liability Related to Future Royalties

We recorded a liability related to future royalties as part of our fourth quarter 2020 acquisition of Immunomedics, Inc. (“Immunomedics”), which is subsequently amortized using the effective interest method over the remaining estimated life. The fair values of the liability related to future royalties were $1.1 billion and $1.3 billion as of December 31, 2022 and 2021, respectively, and the carrying value was $1.1 billion as of December 31, 2022 and 2021. See Note 11. Debt and Credit Facilities for additional information.

Nonrecurring Fair Value Measurements

During 2022, we recorded a partial impairment charge of $2.7 billion related to certain IPR&D assets. See Note 8. Goodwill and Intangible Assets for additional information. There were no indicators of impairment noted during 2021.

Fair Value Level Transfers

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

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4. AVAILABLE-FOR-SALE DEBT SECURITIES AND EQUITY SECURITIES

Available-for-Sale Debt Securities

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

U.S. government agencies securities 36 — — 35 4 — — 4

Non-U.S. government securities 34 — — 34 50 — — 50

Residential mortgage and asset-backed securities 335 — (3) 333 425 — (1) 424

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

Less Than 12 Months 12 Months or Longer Total

U.S. government agencies securities — 21 — — — 21

Non-U.S. government securities — 31 — 3 — 34

Certificates of deposit — — — — — —

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

Less Than 12 Months 12 Months or Longer Total

U.S. treasury securities $ (1) $ 402 $ — $ — $ (1) $ 402

U.S. government agencies securities — 5 — — — 5

Non-U.S. government securities — 46 — — — 46

Certificates of deposit — — — — — —

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

No allowance for credit losses was recognized for investments with unrealized losses as of December 31, 2022, as we do not currently intend to sell, and it is not more likely than not that we will be required to sell, such investments before recovery of their amortized cost bases. The unrealized losses were primarily driven by broader change in interest rates with no adverse conditions identified that would prevent the issuer from making scheduled principal and interest payments.

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

Cash and cash equivalents $ 75 $ 6

Short-term marketable debt securities 973 1,182

Long-term marketable debt securities 1,245 1,309

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

(in millions) Amortized Cost Fair Value

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

After five years through ten years 3 3

After ten years 6 6

Equity Securities

Equity Securities Measured at Fair Value

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

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

Prepaid and other current assets(1) 473 885

________________________________

(1) Prepaid and other current assets and Other long-term assets include our equity method investments in Arcus and Galapagos, respectively, for which we elected and applied the fair value option as we believe it best reflects the underlying economics of these investments. Our investment in Galapagos is classified in Other long-term assets due to certain lock-up provisions in our amended subscription agreement with them, which extend to August 2024.

Other Equity Securities

Equity method investments and other equity investments without readily determinable fair values were $423 million and $338 million as of December 31, 2022 and 2021, respectively, and were excluded from the table above. These amounts were included in Other long-term assets on our Consolidated Balance Sheets.

Unrealized Gains and Losses

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

Related Party Transaction

During the years ended December 31, 2022 and 2021, Gilead donated certain equity securities at fair value to the Gilead Foundation, a California nonprofit public benefit corporation (the “Foundation”). The Foundation is a related party as certain of our officers also serve as directors of the Foundation. The donation expense of $85 million and $212 million was recorded within Selling, general and administrative expenses on our Consolidated Statements of Income during the for the years ended December 31, 2022 and 2021, respectively.

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5.DERIVATIVE FINANCIAL INSTRUMENTS

Our operations in foreign countries expose us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, primarily the Euro. To manage this risk, we hedge a portion of our foreign currency exposures related to outstanding monetary assets and liabilities as well as forecasted product sales using foreign currency exchange forward contracts. In general, the market risk related to these contracts is offset by corresponding gains and losses on the hedged transactions. The credit risk associated with these contracts is driven by changes in interest and currency exchange rates and, as a result, varies over time. By working only with major banks and closely monitoring current market conditions, we seek to limit the risk that counterparties to these contracts may be unable to perform. We also seek to limit our risk of loss by entering into contracts that permit net settlement at maturity. Therefore, our overall risk of loss in the event of a counterparty default is limited to the amount of any unrealized gains on outstanding contracts (i.e., those contracts that have a positive fair value) at the date of default. We do not enter into derivative contracts for trading purposes.

The derivative instruments we use to hedge our exposures for certain monetary assets and liabilities that are denominated in a non-functional currency are not designated as hedges. The derivative instruments we use to hedge our exposures for forecasted product sales are designated as cash flow hedges and have maturities of 18 months or less.

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

While all our derivative contracts allow us the right to offset assets and liabilities, we have presented amounts in our Consolidated Balance Sheets on a gross basis. The following table summarizes the classification and fair values of derivative instruments, including the potential effect of offsetting:

Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value Classification Fair Value

Derivatives designated as hedges:

Total derivatives designated as hedges 59 35

Derivatives not designated as hedges:

Total derivatives not designated as hedges 1 7

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

Gross amounts not offset on the Consolidated Balance Sheets:

Derivative financial instruments (36) (36)

Cash collateral received / pledged — —

Net amount (legal offset) $ 25 $ 7

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Derivative Assets Derivative Liabilities

(in millions) Classification Fair Value Classification Fair Value

Derivatives designated as hedges:

Total derivatives designated as hedges 80 5

Derivatives not designated as hedges:

Total derivatives not designated as hedges — —

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

Gross amounts not offset on the Consolidated Balance Sheets:

Derivative financial instruments (4) (4)

Cash collateral received / pledged — —

Net amount (legal offset) $ 76 $ 1

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

Year Ended December 31,

Derivatives designated as hedges:

Derivatives not designated as hedges:

Gain (loss) recognized in Other income (expense), net $ 67 $ 21 $ (51)

The majority of gains and losses related to the hedged forecasted transactions reported in Accumulated other comprehensive income as of December 31, 2022 are expected to be reclassified to Product sales within 12 months. There were no discontinuances of cash flow hedges for the years presented.

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

6. ACQUISITIONS

MiroBio

On September 20, 2022, we acquired all of the outstanding share capital of MiroBio Ltd. (“MiroBio”), a privately-held U.K.-based biotechnology company focused on restoring immune balance with agonists targeting immune inhibitory receptors, for $414 million in cash. As a result, MiroBio became our wholly-owned subsidiary.

We accounted for the transaction as an asset acquisition and recorded a $389 million charge to Acquired in-process research and development expenses on our Consolidated Statements of Income during 2022. The remaining purchase price relates to various other assets acquired and liabilities assumed.

MYR

In the first quarter of 2021, we completed the acquisition of MYR, a German biotechnology company. MYR focuses on the development and commercialization of therapeutics for the treatment of HDV. The acquisition provided Gilead with Hepcludex, which was conditionally approved by European Medicines Agency (“EMA”) in July 2020 for the treatment of chronic HDV infection in adults with compensated liver disease. Upon closing, MYR became a wholly-owned subsidiary of Gilead. The financial results of MYR were included in our Consolidated Financial Statements from the date of the acquisition.

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The aggregate consideration for this acquisition of €1.3 billion (or $1.6 billion) primarily consisted of €1.0 billion (or $1.2 billion) paid upon closing and contingent consideration of up to €300 million, subject to customary adjustments, representing a potential future milestone payment upon FDA approval of Hepcludex. The fair value of this contingent liability, estimated using probability-weighted scenarios for FDA approval, was $341 million as of the acquisition date. As of December 31, 2021, the fair value of the liability was $317 million and was included in Other current liabilities on our Consolidated Balance Sheets. As of December 31, 2022, the fair value of the liability was $275 million and was included in Other long-term obligations. See Note 3. Fair Value Measurements for additional information.

The acquisition of MYR was accounted for as a business combination using the acquisition method of accounting. The following table summarizes estimated fair values of assets acquired and liabilities assumed as of the acquisition date:

(in millions) Amount

Intangible assets:

Finite-lived intangible asset $ 845

Deferred income taxes, net (513)

Other assets (and liabilities), net (187)

Total identifiable net assets 1,335

Total consideration $ 1,561

Intangible Assets

The finite-lived intangible asset of $845 million represents the estimated fair value of Hepcludex for HDV in Europe as of the acquisition date. The fair value was determined by applying the income approach using unobservable inputs to estimate probability-weighted net cash flows attributable to Hepcludex for HDV in Europe and a discount rate of 12%. The discount rate used represents the estimated rate that market participants would use to value this intangible asset. This intangible asset is being amortized over an estimated useful life of 10 years.

Acquired IPR&D consists of Hepcludex for HDV in all other regions without regulatory approval, including the United States. The estimated aggregate fair value of $1.19 billion as of the acquisition date was determined by applying the income approach using unobservable inputs (Level 3 under the fair value measurement and disclosure guidance) to estimate probability-weighted net cash flows attributable to this asset and a discount rate of 12%. The discount rate used represents the estimated rate that market participants would use to value this intangible asset.