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 that are 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 related notes thereto and other disclosures included as part of this Annual Report on Form 10-K (including the disclosures under Part I, Item 1A. Risk Factors). Additional information related to the comparison of our results of operations between the years 2022 and 2021 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2022 Form 10-K filed with U.S. Securities and Exchange Commission.

Management Overview

Gilead Sciences, Inc. (including its consolidated subsidiaries, referred to as “Gilead,” the “company,” “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, coronavirus disease 2019 (“COVID-19”) and cancer. We operate in more than 35 countries worldwide, with headquarters in Foster City, California.

During 2023, we continued to advance our portfolio and broaden available therapies while delivering continued growth in our HIV and Oncology product sales. 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 through dividends and share repurchases.

Key Business Updates

The following updates are based on press releases issued since our last annual report. 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

•Announced that the Phase 3 OAKTREE trial of obeldesivir in non-hospitalized participants without risk factors for developing severe COVID-19 did not meet its primary endpoint of improvement in time to symptom alleviation. Obeldesivir was well-tolerated in this large study population.

•Received U.S. Food and Drug Administration (“FDA”) and European Commission (“EC”) approval to extend the use of Veklury to treat COVID-19 in appropriate patients with mild to severe hepatic impairment as well as people with severe renal impairment, including those on dialysis.

•Announced a collaboration with Assembly Biosciences, Inc. (“Assembly”) to advance the research and development of novel antiviral therapies, including for herpesviruses, chronic hepatitis B virus (“HBV”) and chronic hepatitis delta virus (“HDV”).

•Received full marketing authorization from EC for Hepcludex (bulevirtide) for the treatment of adults with HDV and compensated liver disease. Hepcludex was initially granted conditional marketing authorization in July 2020. Bulevirtide remains the only approved treatment for HDV in the European Union (“EU”) and is not approved in the U.S.

Oncology

•Announced a full clinical hold placed by FDA on all magrolimab studies in myelodysplastic syndromes and acute myeloid leukemia, and that we will not pursue further development of magrolimab in hematologic cancers.

•Announced that the Phase 3 EVOKE-01 study of Trodelvy versus docetaxel in previously treated metastatic non-small cell lung cancer did not meet its primary endpoint of overall survival. While not statistically powered, we observed an encouraging trend in a subgroup of patients non-responsive to prior anti-PD-(L)1 immunotherapy, that we may potentially explore further.

•Received FDA approval of Yescarta’s label update to include overall survival data from the Phase 3 ZUMA-7 study, which showed a statistically significant overall survival improvement for Yescarta in second-line relapsed or refractory (“R/R”) large B-cell lymphoma (“LBCL”) versus standard of care.

•Received FDA approval of a manufacturing process change resulting in reduced median turnaround time for Yescarta in the U.S. to an anticipated 14 days (from 16 days previously).

•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 patients with relapsed or refractory multiple myeloma, and later announced expansion of the Arcellx collaboration to include exercising an option for the ARC-SparX ACLX-001 program in multiple myeloma, expanding the scope of the existing anito-cel collaboration to include lymphomas, and a further equity investment.

•Announced an exclusive license agreement with Compugen Ltd. (“Compugen”) for later-stage development and commercialization of novel pre-clinical anti-IL18 binding protein antibodies, including COM503, that have the potential to treat various tumor types.

•Announced a collaboration with Tentarix Biotherapeutics Inc. (“Tentarix”) to discover and develop novel therapies across oncology and inflammation, using Tentarix’s proprietary Tentacles platform.

•Received EC approval for Trodelvy as monotherapy for the treatment of adult patients with unresectable 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 advanced setting.

•Announced, through Fosun Kite Biotechnology Co., Ltd., a joint venture between us and Shanghai Fosun Pharmaceutical (Group) Co., Ltd., the approval of axicabtagene ciloleucel (under the trade name Yikaida®) by the China National Medical Products Administration for the treatment of adult patients with R/R LBCL who failed first-line immunochemotherapy or relapsed within 12 months after first-line immunochemotherapy.

•Completed the transfer of Yescarta’s marketing authorization in Japan from Daiichi Sankyo Co., Ltd. to Gilead Sciences K.K.

•Announced the acquisition of XinThera, Inc. (“XinThera”), adding additional pipeline assets including rights to a portfolio of small molecule inhibitors targeting PARP1 for oncology as well as MK2 for inflammatory diseases.

•Completed the acquisition of Tmunity Therapeutics, Inc. (“Tmunity”), a clinical stage private biotech company, which provides preclinical and clinical programs. This includes 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.

•Received FDA approval of 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.

Inflammation

•Announced that we entered into a definitive agreement to acquire all of the outstanding common stock of CymaBay Therapeutics, Inc. (“CymaBay”) and its lead product candidate, seladelpar, which is an investigational treatment for primary biliary cholangitis.

•Announced an amendment expanding the collaboration agreement with Arcus Biosciences, Inc. (“Arcus”), including research programs in inflammatory diseases, an update to the domvanalimab collaboration program, and an additional equity investment.

•Exercised an option to license investigational targeted protein degrader molecule NX‐0479 (“GS-6791”) from Nurix Therapeutics, Inc. GS-6791 is a potent, selective, oral IRAK4 degrader with potential applications in the treatment of rheumatoid arthritis and other inflammatory diseases.

Other

•Issued $2.0 billion aggregate principal amount of senior unsecured notes in a registered offering, comprised of $1.0 billion principal amount of 5.25% senior notes due in 2033 and $1.0 billion principal amount of 5.55% senior notes due in 2053, and repaid debt of $2.25 billion.

Key Financial Results

Year Ended December 31,

(in millions, except percentages and per share amounts) 2023 2022 Change

Net income attributable to Gilead $ 5,665 $ 4,592 23 %

Diluted earnings per share attributable to Gilead $ 4.50 $ 3.64 24 %

Total revenues decreased 1% to $27.1 billion in 2023, compared to 2022, driven by lower Veklury sales, largely offset by higher HIV and Oncology sales.

Net income attributable to Gilead was $5.7 billion and diluted earnings per share attributable to Gilead was $4.50 in 2023, compared to $4.6 billion and $3.64 diluted earnings per share attributable to Gilead in 2022. The increase was primarily due to lower in-process research and development (“IPR&D”) impairment expenses, lower net unrealized losses on equity investments and higher interest income, partially offset by higher costs of goods sold and operating expenses, and lower revenues.

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.

(1) Chronic hepatitis C virus (“HCV”)

HIV

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

_______________________________

(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 7. 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.

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

HIV product sales increased 6% to $18.2 billion in 2023, compared to 2022, primarily due to higher demand across treatment and prevention, in addition to higher average realized price and favorable channel inventory dynamics. In particular, Biktarvy sales increased primarily reflecting higher demand, including patients switching from other Gilead HIV products, as well as higher average realized price. Also, Descovy sales increased primarily driven by favorable channel inventory dynamics and higher demand.

Oncology

Cell Therapy

Cell Therapy product sales increased 28% to $1.9 billion in 2023, compared to 2022, primarily due to increased Yescarta demand for the treatment of R/R LBCL and increased Tecartus demand for the treatment of R/R adult acute lymphoblastic leukemia and R/R mantle cell lymphoma.

Trodelvy

Trodelvy product sales increased 56% to $1.1 billion in 2023, compared to 2022, primarily due to higher demand in new and existing geographies.

Liver Disease

Liver Disease product sales decreased 1% to $2.8 billion in 2023, compared to 2022, primarily due to unfavorable HCV pricing dynamics and foreign exchange rates, partially offset by higher demand across HCV, HDV and HBV products.

Veklury

Veklury product sales decreased 44% to $2.2 billion in 2023, compared to 2022, primarily due to lower demand driven by lower rates of COVID-19 related hospitalizations in all regions.

Other

Other product sales decreased 9% to $859 million in 2023, compared to 2022, primarily due to loss of exclusivity for Letairis.

Gross-to-Net Deductions

A substantial portion of our product sales is subject to significant discounts from list price, including government and commercial rebates and chargebacks, as well as other deductions, including patient co-pay assistance, cash discounts for prompt payment, distributor fees, and sales return provisions. These deductions to product sales are generally referred to as gross-to-net deductions and are primarily a function of product sales volume, product mix, contractual or statutory discounts and estimated payer mix.

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.

Other gross-to-net deductions include patient co-pay assistance, cash discounts for prompt payment, distributor fees that we pay under our inventory management agreements with our significant U.S. wholesalers and are based on contractually-determined fixed percentage of sales, and sales return provisions.

Our gross-to-net deductions totaled $16.4 billion, or 38% of gross product sales in 2023, compared to $14.6 billion, or 35% of gross product sales in 2022. The increase to 38% was primarily due to changes in product mix, where decreases in Veklury product sales in all regions were offset by increased sales in HIV and oncology products, and changes in payer mix. Of the $16.4 billion in 2023, $14.3 billion or 33% of gross product sales was related to rebates and chargebacks, $2.2 billion or 5% was primarily related to patient co-pay assistance, cash discounts for prompt payment, distributor fees, and sales return provisions. Of the $14.6 billion in 2022, $12.6 billion or 30% of gross product sales was related to rebates and chargebacks, $2.0 billion or 5% was primarily related to patient co-pay assistance, cash discounts for prompt payment, distributor fees, and sales return provisions.

Current year gross-to-net deductions as a percent of gross product sales may not be indicative of future results.

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.

Approximately 26% and 29% of our product sales were denominated in foreign currencies during 2023 and 2022, respectively. Foreign currency exchange, net of hedges, had an unfavorable impact on our total product sales of $224 million in 2023, based on a comparison using foreign currency exchange rates from 2022.

Royalty, Contract and Other Revenues

Royalty, contract and other revenues decreased 39% to $182 million in 2023, compared to 2022, primarily due to higher milestone payments received in 2022 and lower royalty revenues in 2023 due to the impact of generic launches.

Costs and Expenses

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

Year Ended December 31,

(in millions, except percentages) 2023 2022 Change

Research and development expenses $ 5,718 $ 4,977 15 %

Acquired in-process research and development expenses $ 1,155 $ 944 22 %

In-process research and development impairments $ 50 $ 2,700 (98) %

Selling, general and administrative expenses $ 6,090 $ 5,673 7 %

Product Gross Margin

Product gross margin decreased to 75.9% in 2023, compared to 2022, primarily driven by higher intangible asset amortization expenses related to the pretreated HR+/HER2- metastatic breast cancer indication for Trodelvy following its approval in February 2023, restructuring expenses related to changes in our manufacturing strategy, which resulted in write-offs of certain manufacturing facilities, related inventories and other costs totaling $479 million, and product mix, partially offset by higher amortization of inventory step-up charges in 2022.

Research and Development Expenses

Research and development (“R&D”) expenses consist primarily of personnel costs including salaries, benefits and stock-based compensation expense, infrastructure, materials and supplies and other support costs, research and clinical studies performed by contract research organizations and our collaboration partners and other outside services.

We manage our R&D expenses by identifying the R&D activities we expect to be performed during a given period and then prioritizing efforts based on scientific data, probability of successful technical development and regulatory approval, market potential, available human and capital resources and other considerations. We regularly review our R&D activities based on unmet medical need and, as necessary, reallocate resources among our internal R&D portfolio and external opportunities that we believe will best support the long-term growth of our business. We do not track total R&D expenses by product candidate, therapeutic area or development phase.

The following table provides a breakout of expenses by major cost type:

Year Ended December 31,

Personnel, infrastructure and other support costs $ 3,204 $ 2,811

Clinical studies and other costs 2,514 2,166

Research and development expenses increased $741 million in 2023, compared to 2022. Personnel, infrastructure and other support costs as well as Clinical studies and other costs both increased due to clinical activities primarily related to oncology and virology, including progression and acceleration of trials, as well as new study launches.

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.

Acquired in-process research and development expenses were $1.2 billion in 2023, primarily comprised of $313 million associated with the Arcellx collaboration, $269 million associated with the Tmunity acquisition, $218 million associated with the XinThera acquisition, $97 million associated with the Assembly collaboration and $60 million associated with the Compugen licensing agreement. Acquired in-process research and development expenses were $944 million in 2022, primarily comprised of $389 million associated with the acquisition of MiroBio Ltd, $315 million associated with the collaboration with Dragonfly Therapeutics, Inc., $82 million associated with the collaboration with Jounce Therapeutics, Inc. and acquisition of GS-1811, and $60 million associated with the collaboration with MacroGenics, Inc. See Note 6. Acquisitions and Note 7. 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 Impairments

In-process research and development impairments included $50 million in 2023 related to a partial impairment charge on our bulevirtide IPR&D intangible asset due to a change in assumptions primarily around probability and timing of regulatory approval, and $2.7 billion in 2022 related to a partial impairment charge on our HR+/HER2- IPR&D intangible asset.

As of December 31, 2023, approximately $5.9 billion was assigned to an indefinite-lived IPR&D intangible asset related to Trodelvy for metastatic non-small cell lung cancer (“NSCLC”). In addition to NSCLC, Trodelvy is being explored for potential investigational use in a range of tumor types where Trop-2 is highly expressed. Gilead’s clinical development program in metastatic NSCLC includes multiple ongoing registrational Phase 3 studies and several ongoing Phase 2 studies for Trodelvy as a first- or second-line indication.

In January 2024, we announced that our Phase 3 EVOKE-01 study of Trodelvy evaluating sacituzumab govitecan-hziy (“SG”) did not meet its primary endpoint of overall survival (“OS”) in previously treated NSCLC. However, a numerical improvement in OS favoring SG was observed in the study, including in patients with both squamous and non-squamous histology. The safety profile for Trodelvy was consistent with prior studies. In addition, a more than three-month difference in median OS favoring SG was observed in a sub-group of patients non-responsive to last prior anti-PD-(L)1 therapy, representing over 60% of the trial population. This analysis was pre-specified in the protocol, but not alpha-controlled for formal statistical testing and we are continuing to analyze this data. Gilead intends to explore potential pathways to further understand the role SG may have in these patients. We plan to discuss this data with regulators and key opinion leaders to determine the most appropriate next steps.

We believe that this new information represents an indicator of potential impairment in the first quarter of 2024 and, as a result, the fair value of the indefinite-lived IPR&D intangible asset related to Trodelvy may be below its carrying value. We expect to complete an interim impairment assessment of the related IPR&D intangible asset during the first quarter of 2024. To the extent that the estimated fair value is less than the carrying value of the asset, we will be required to record an impairment charge on our Consolidated Statements of Income during the three months ended March 31, 2024. Any such impairment charge, which we are unable to reasonably estimate at this time, could have a material impact on our consolidated results of operations.

Selling, General and Administrative Expenses

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

Selling, general and administrative expenses increased $417 million in 2023, compared to 2022, primarily due to a $525 million litigation expense for settlements with certain plaintiffs in the HIV antitrust litigation in the second quarter of 2023 and increased commercial activities in oncology and HIV, partially offset by a $406 million non-recurring charge in 2022 associated with the termination of the Trodelvy license collaboration agreement with Everest Medicines.

Interest Expense and Other Income (Expense), Net

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

Year Ended December 31,

(in millions, except percentages) 2023 2022 Change

Interest expense $ (944) $ (935) 1 %

Other income (expense), net $ 198 $ (581) NM

_______________________________

NM - Not Meaningful

Interest expense remained relatively flat in 2023 compared to 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.

Other income (expense), net in 2023 included $376 million of interest income, partially offset by $167 million of net unrealized losses on equity investments. Other income (expense), net in 2022 included $657 million of net unrealized losses on equity investments, partially offset by $106 million of interest income.

Income Taxes

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

Year Ended December 31,

(in millions, except percentages) 2023 2022 Change

Our effective tax rate decreased in 2023, compared to 2022, primarily due to a decrease in unrecognized tax benefits as a result of reaching agreement with a tax authority on certain tax positions in 2023.

The Organisation for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar Two), with certain aspects effective January 1, 2024 and other aspects effective January 1, 2025. Certain countries in which we operate have adopted Pillar Two legislation and other countries are in the process of introducing legislation to implement Pillar Two. We do not expect Pillar Two to have a material impact on our results of operations, liquidity or capital resources.

Liquidity and Capital Resources

We regularly 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 $8.4 billion and $7.6 billion as of December 31, 2023 and 2022, respectively. Cash and cash equivalents increased by $673 million from December 31, 2022 to December 31, 2023.

The following table summarizes our cash flow activities:

Year Ended December 31,

Net cash provided by (used in):

Effect of exchange rate changes on cash and cash equivalents $ 57 $ (63)

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 $8.0 billion in 2023, compared to $9.1 billion in 2022. The change was primarily due to higher income tax payments and higher inventory and operating spend, which includes HIV antitrust litigation settlement payments, in 2023, reduced by the effect of a non-recurring payment of a $1.25 billion settlement related to bictegravir litigation in 2022 and higher collections in 2023.

Investing Activities

Net cash used in investing activities was $2.3 billion in 2023, compared to $2.5 billion in 2022. The change was primarily due to a decrease in acquisition spend, including acquired IPR&D, and capital expenditures, partially offset by higher net purchases of marketable debt and equity securities.

Financing Activities

Net cash used in financing activities was $5.1 billion in 2023, compared to $6.5 billion in 2022. In 2023, we utilized cash of $2.3 billion for debt repayments, $3.8 billion for dividend payments and $1.0 billion for common stock repurchases. These were partially offset by $2.0 billion in proceeds from the issuance of senior unsecured notes in September 2023, net of issuance costs. In 2022, we utilized cash of $1.5 billion for debt repayments, $3.7 billion for dividend payments, and $1.4 billion for 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, 2023, 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, 7. Collaborations and Other Arrangements, 11. Debt and Credit Facilities, 12. Leases, 13. Commitments and Contingencies and 16. 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 which requires significant judgment by management in part due to the lag between the date of the product sales and the date the related rebates or chargeback claims are settled. 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. Rebates and chargebacks are estimated primarily based on product sales, and expected payer mix and discount rates, which require significant estimates and judgment. 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;

•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:

We assess and update our estimates each reporting period to reflect actual claims and other current information. Historically, our actual rebates and chargebacks claimed for prior years have varied by less than 5% from our estimates. However, historical results are not indicative of future results.

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.

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 second quarter of 2023, we recorded an accrual of $525 million in Other current liabilities on our Consolidated Balance Sheets for settlements with certain plaintiffs in the HIV antitrust litigation, which we paid in the second half of 2023.

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. See Note 16. Income Taxes of the Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K for additional information.

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 26% of our product sales were denominated in foreign currencies during 2023. 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, 2023 and 2022, we had open foreign currency forward contracts with notional amounts of $2.5 billion and $3.0 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, 2023 and 2022 would have resulted in a reduction in fair value of these contracts of approximately $328 million and $299 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 long-term borrowings are exposed 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 fair value of our available-for-sale debt securities is subject to change as a result of potential changes in market interest rates. The fair value of our portfolio of available-for-sale debt securities would not be significantly affected by either a 10% increase or decrease in interest rates primarily due to the short-term nature of the portfolio. We do not believe that the future market risks related to our securities will have a material adverse impact on our financial position, results of operations, or liquidity.

Our senior unsecured notes have fixed interest rates. As such, there is no financial interest rate exposure. The fair value of these senior unsecured notes and our liability related to future royalties as part of our 2020 acquisition of Immunomedics, Inc. are exposed to fluctuations in interest rates. The current fair value of our debt portfolio and liability related to future royalties are $22.6 billion and $1.2 billion, respectively. The fair value will decrease as interest rates increase. The fair value will increase as interest rates decrease. Additionally, we have a $2.5 billion five-year revolving credit facility that matures in June 2025. Loans under our revolving credit facility bear interest at either (i) the Term Secured Overnight Financing Rate plus the Applicable Percentage, or (ii) the Base Rate plus the Applicable Percentage, each as defined in the revolving credit facility agreement. There were no amounts outstanding under the revolving credit facility as of December 31, 2023. As such, there is currently no financial interest rate exposure.

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 $1.5 billion and $1.2 billion as of December 31, 2023 and 2022, 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, 2023 and 2022 by approximately $292 million and $239 million, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILEAD SCIENCES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Years Ended December 31, 2023, 2022 and 2021

CONTENTS

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

Audited Consolidated Financial Statements:

Consolidated Balance Sheets 52

Consolidated Statements of Income 53

Consolidated Statements of Comprehensive Income 54

Consolidated Statements of Stockholders’ Equity 55

Consolidated Statements of Cash Flows 56

Notes to Consolidated Financial Statements 57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gilead Sciences, Inc. (the Company) as of December 31, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2024 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 Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Government and commercial rebates

/s/ Ernst & Young LLP

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

San Mateo, California

February 23, 2024

GILEAD SCIENCES, INC.

CONSOLIDATED BALANCE SHEETS

December 31,

(in millions, except per share amounts) 2023 2022

Assets

Current assets:

Cash and cash equivalents $ 6,085 $ 5,412

Short-term marketable debt securities 1,179 973

Prepaid and other current assets 2,374 1,774

Property, plant and equipment, net 5,317 5,475

Long-term marketable debt securities 1,163 1,245

Liabilities and Stockholders’ Equity

Current liabilities:

Current portion of long-term debt and other obligations, net 1,798 2,273

Long-term income taxes payable 2,039 3,916

Commitments and contingencies (Note 13)

Stockholders’ equity:

Accumulated other comprehensive income 28 2

Noncontrolling interest (84) (31)

Total liabilities and stockholders’ equity $ 62,125 $ 63,171

See accompanying notes.

GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF INCOME

Year Ended December 31,

Revenues:

Royalty, contract and other revenues 182 299 297

Costs and expenses:

Acquired in-process research and development expenses 1,155 944 939

In-process research and development impairments 50 2,700 —

Selling, general and administrative expenses 6,090 5,673 5,246

Net loss attributable to noncontrolling interest 52 26 24

Basic earnings per share attributable to Gilead $ 4.54 $ 3.66 $ 4.96

Diluted earnings per share attributable to Gilead $ 4.50 $ 3.64 $ 4.93

See accompanying notes.

GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31,

Other comprehensive income (loss), net:

Net foreign currency translation gain (loss) 60 (11) (38)

Available-for-sale debt securities:

Cash flow hedges:

Other comprehensive income (loss), net 26 (81) 143

Comprehensive loss attributable to noncontrolling interest, net 52 26 24

Comprehensive income attributable to Gilead, net $ 5,691 $ 4,511 $ 6,368

See accompanying notes.

GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Shares Amount

Other comprehensive income, net — — — 143 — — 143

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

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

Stock-based compensation — — 640 — — — 640

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

Other comprehensive loss, net — — — (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)

Other comprehensive income, net — — — 26 — — 26

Issuances under employee stock purchase plan 2 — 129 — — — 129

Issuances under equity incentive plans 13 — 99 — — — 99

Stock-based compensation — — 767 — — — 767

Dividends declared ($3.00 per share) — — — — (3,814) — (3,814)

See accompanying notes.

GILEAD SCIENCES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended December 31,

Operating Activities:

Acquired in-process research and development expenses 1,155 944 939

In-process research and development impairment 50 2,700 —

Changes in operating assets and liabilities:

Prepaid expenses and other 39 (134) (45)

Income tax assets and liabilities, net (1,768) (364) (361)

Investing Activities:

Purchases of marketable debt securities (1,930) (1,770) (3,517)

Proceeds from sales of marketable debt securities 510 412 730

Proceeds from maturities of marketable debt securities 1,334 1,590 2,180

Purchases of equity securities (442) (172) (380)

Net cash used in investing activities (2,265) (2,466) (3,131)

Financing Activities:

Proceeds from debt financing, net of issuance costs 1,980 — —

Proceeds from issuances of common stock 232 309 169

Repurchases of common stock under repurchase programs (1,000) (1,396) (546)

Repayments of debt and other obligations (2,250) (1,500) (4,750)

Net cash used in financing activities (5,125) (6,469) (8,877)

Effect of exchange rate changes on cash and cash equivalents 57 (63) (35)

Net change in cash and cash equivalents 673 74 (659)

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

Cash and cash equivalents at end of period $ 6,085 $ 5,412 $ 5,338

Supplemental disclosure of cash flow information:

Interest paid, net of amounts capitalized $ 891 $ 907 $ 979

See accompanying notes.

GILEAD SCIENCES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

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®, 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. See Note 2. Revenues for a summary of disaggregated revenues by product and geographic region.

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.

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 any variable interest entities (“VIEs”) for which we are the primary beneficiary. All intercompany transactions have been eliminated. For any 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 attributable 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.

Beginning in the first quarter of 2023, we reclassified changes in income taxes prepaid and receivable from Prepaid expenses and other to combine them with changes in income taxes payable as Income tax assets and liabilities, net within Operating Activities on our Consolidated Statements of Cash Flows. We believe this presentation assists users of the financial statements to better understand cash flow movements. Prior periods have been revised to reflect this change, resulting in a reclassification of $204 million and $3 million from Prepaid expenses and other for the years ended December 31, 2022 and 2021, respectively.

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

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, patient co-pay assistance, prompt pay discounts, 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 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.

Patient Co-Pay Assistance

Co-pay assistance represents financial assistance to qualified patients, assisting them with prescription drug co-payments required by insurance. Our accrual for copay is based on an estimate of claims and the cost per claim that we expect to receive associated with inventory that exists in the distribution channel at period end.

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 personnel costs including salaries, benefits and stock-based compensation expense, infrastructure, materials and supplies and other support costs, research and clinical studies performed by contract research organizations (“CROs”) and our collaboration partners and other outside services. 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.

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 in-process research and development (“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

Advertising expenses within Selling, general and administrative expenses, including promotional expenses, are recorded when incurred and were $826 million, $778 million and $735 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Stock-Based Compensation

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

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

Earnings Per Share

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

Cash and Cash Equivalents

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

Marketable Debt Securities

All of our marketable debt securities are classified as available-for-sale and recorded 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. 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. Interest and amortization of purchase premiums and discounts 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.

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.

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.

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.

Stock Repurchases

We use the par value method of accounting for our stock repurchases made under repurchase programs. Under the par value method, we record the par value of the shares repurchased to Common stock and the historical issuance cost over par value of the shares repurchased to Additional paid-in capital. The excess of the cost of the shares repurchased over these two amounts is then recorded to Retained earnings.

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.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2023, Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” ASU 2023-07 requires incremental annual and quarterly disclosures about segment measures of profit or loss as well as significant segment expenditures. It also requires public entities with a single reportable segment to provide all segment disclosures required by the amendments in the update and all existing segment disclosures in Topic 280. This guidance will be applied retrospectively, and we plan to adopt it beginning with our 2024 annual report to be filed in early 2025 and all quarterly and annual reports thereafter. As we have a single reportable segment, we expect the adoption of this standard to result in increased disclosures in our Notes to Consolidated Financial Statements.

In December 2023, FASB issued ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires incremental annual disclosures around income tax rate reconciliations, income taxes paid and other related disclosures. This guidance requires prospective application and permits retrospective application to prior periods presented. We plan to adopt it beginning with our 2025 annual report to be filed in early 2026. We expect the adoption of this standard to result in increased disclosures in our Notes to Consolidated Financial Statements.

2. REVENUES

Disaggregation of Revenues

The following table summarizes our Total revenues:

Product sales:

HIV

Oncology

Cell Therapy

Liver Disease

Chronic hepatitis C virus (“HCV”)

Chronic hepatitis B virus (“HBV”) / Chronic hepatitis delta virus (“HDV”)

Other

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(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.

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,

Cardinal Health, Inc. 26 % 25 % 22 %

Cencora, Inc. (formerly known as AmerisourceBergen Corporation) 19 % 18 % 23 %

McKesson Corporation 21 % 20 % 20 %

Revenues Recognized from Performance Obligations Satisfied in Prior Years

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

Year Ended December 31,

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(1) See Note 7. Collaborations and Other Arrangements for additional information.

Contract Balances

The following table summarizes our contract balances:

December 31,

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(1) Consists of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation.

(2) Generally results from receipt of advance payment before our performance under the contract.

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 $ 426 $ — $ — $ 426 $ 410 $ — $ — $ 410

U.S. government agencies securities — 127 — 127 — 35 — 35

Non-U.S. government securities — 10 — 10 — 34 — 34

Certificates of deposit — 45 — 45 — 54 — 54

Residential mortgage and asset-backed securities — 367 — 367 — 333 — 333

Equity securities:

Foreign currency derivative contracts — 7 — 7 — 60 — 60

Liabilities:

Foreign currency derivative contracts — 59 — 59 — 42 — 42

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(1) Publicly traded equity securities include investments in Galapagos NV (“Galapagos”) of $686 million and Arcellx, Inc. (“Arcellx”) of $373 million as of December 31, 2023, which are subject to contractual sale restrictions until August 2024 and June 2025, respectively. See Note 7. 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

Our foreign currency derivative contracts have maturities of 18 months or less 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 utilizing 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 (“SOFR”) and swap rates. These inputs, where applicable, are observable at commonly quoted intervals.

Senior Unsecured Notes

The following table summarizes the total estimated fair value and carrying value of our senior unsecured notes, determined using Level 2 inputs based on their quoted market values:

December 31,

Level 3 Inputs

Contingent Consideration Liability

In connection with our first quarter 2021 acquisition of MYR, we are subject to a potential contingent consideration payment of up to €300 million, subject to customary adjustments, which is revalued each reporting period using probability-weighted scenarios for U.S. Food and Drug Administration (“FDA”) approval of Hepcludex until the related contingency is resolved.

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

Year Ended December 31,

Changes in valuation assumptions(1) (60) (21)

Effect of foreign exchange remeasurement(2) 12 (21)

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(1) Included in Research and development expenses on our Consolidated Statements of Income. The changes primarily related to changes in assumptions around probability and timing of regulatory approval.

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

(3) Included in Other long-term obligations on our Consolidated Balance Sheets as of December 31, 2023 and 2022, respectively.

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. See Note 11. Debt and Credit Facilities for additional information.

The following table summarizes the fair value and carrying value of the liability related to future royalties:

December 31,

Nonrecurring Fair Value Measurements

In 2023, we recorded a $51 million write-off of our finite-lived intangible asset related to filgotinib as discussed in Note 9. Goodwill and Intangible Assets, as well as a $381 million write-off of manufacturing assets related to changes in our manufacturing strategy as discussed in Note 10. Other Financial Information. Both charges were recorded within Cost of goods sold on our Consolidated Statements of Income. In 2023 and 2022, we recorded a partial impairment charge of $50 million and $2.7 billion, respectively, related to certain IPR&D assets as discussed in Note 9. Goodwill and Intangible Assets.

Fair Value Level Transfers

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

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 127 — — 127 36 — — 35

Non-U.S. government securities 10 — — 10 34 — — 34

Certificates of deposit 45 — — 45 54 — — 54

Residential mortgage and asset-backed securities 366 1 — 367 335 — (3) 333

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. treasury securities $ — $ 161 $ (1) $ 48 $ (1) $ 209

U.S. government agencies securities — 106 — 2 — 108

Non-U.S. government securities — 5 — 5 — 10

Residential mortgage and asset-backed securities — 123 — 24 — 147

Less Than 12 Months 12 Months or Longer Total

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

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

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

No allowance for credit losses was recognized for investments with unrealized losses as of December 31, 2023, as 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. 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 following table summarizes the classification of our available-for-sale debt securities in our Consolidated Balance Sheets:

December 31,

Cash and cash equivalents $ 83 $ 75

Short-term marketable debt securities 1,179 973

Long-term marketable debt securities 1,163 1,245

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 1,153 1,153

After five years through ten years 9 9

After ten years 2 2

Equity Securities

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

December 31,

Equity securities measured at fair value:

Cash and cash equivalents $ 4,465 $ 3,831

Prepaid and other current assets 1,086 473

Other long-term assets $ 340 $ 423

For our equity method investments in Galapagos and Arcus Biosciences, Inc. (“Arcus”), 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 subject to certain lock-up provisions until August 2024 and was classified in Prepaid and other current assets and Other long-term assets as of December 31, 2023 and 2022 at $686 million and $736 million, respectively. Our investment in Arcus was classified in Prepaid and other current assets as of December 31, 2023 and 2022 at $283 million and $286 million, respectively.

Unrealized Gains and Losses

The following table summarizes net unrealized gains and losses on equity securities still held as of the respective balance sheet dates, included in Other income (expense), net on our Consolidated Statements of Income:

Year Ended December 31,

Net unrealized losses on equity securities still held $ 60 $ 684 $ 647

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 years ended December 31, 2022 and 2021, respectively.

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.

We held foreign currency exchange contracts with outstanding notional amounts of $2.5 billion and $3.0 billion as of December 31, 2023 and 2022, 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 6 45

Derivatives not designated as hedges:

Total derivatives not designated as hedges 1 15

Total derivatives presented gross on the Consolidated Balance Sheets $ 7 $ 59

Gross amounts not offset on the Consolidated Balance Sheets:

Derivative financial instruments $ (7) $ (7)

Cash collateral received / pledged — —

Net amount (legal offset) $ — $ 52

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 — —

GILD US Equity

GILD · 10-K · period ended 2023-12-31

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

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILD US Equity☆

GILD · 10-K · period ended 2023-12-31

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

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

GILD US Equity