Table of Contents
`
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`FORM 10-K
`
`
`(Mark One)
`xx ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
`1934
`For the fiscal year ended December 31, 2009
`
`or
`¨¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
`OF 1934
`For the transition period from to
`
`Commission File No. 0-19731
`
`GILEAD SCIENCES, INC.
`(Exact name of registrant as specified in its charter)
`
`
`94-3047598
`(I.R.S. Employer Identification No.)
`94404
`(Zip Code)
`
`Delaware
`
`
`(State or other jurisdiction of incorporation or organization)
`333 Lakeside Drive, Foster City, California
`
`
`(Address of principal executive offices)
`Registrant’s telephone number, including area code: 650-574-3000
`
`SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
`
`Name of each exchange on which registered
`Title of each class
`Common Stock, $0.001 par value per share
`The Nasdaq Global Select Market
`
`SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
`
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
`during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
`requirements for the past 90 days. Yes x No ¨
`Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
`required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter
`period that the registrant was required to submit and post such files). Yes x No ¨
`Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be
`contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
`amendment to this Form 10-K. ¨
`Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
`definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
`Smaller reporting company ¨
`Non-Accelerated filer ¨
`Large accelerated filer x
` Accelerated filer ¨
`
` (Do not check if a smaller reporting company)
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
`The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant based upon the closing price of its
`Common Stock on the Nasdaq Global Select Market on June 30, 2009 was $39,885,530,020.*
`The number of shares outstanding of the registrant’s Common Stock on February 19, 2010 was 903,378,986.
`DOCUMENTS INCORPORATED BY REFERENCE
`Specified portions of the registrant’s proxy statement, which will be filed with the Commission pursuant to Regulation 14A in connection with the
`registrant’s 2010 Annual Meeting of Stockholders, to be held on May 11, 2010, are incorporated by reference into Part III of this Report.
`* Based on a closing price of $46.84 per share on June 30, 2009. Excludes 53,682,316 shares of the registrant’s Common Stock held by executive officers,
`directors and any stockholders whose ownership exceeds 5% of registrant’s common stock outstanding at June 30, 2009. Exclusion of such shares should
`not be construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the
`registrant or that such person is controlled by or under common control with the registrant.
`
`
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`Table of Contents
`
`GILEAD SCIENCES, INC.
`2009 Form 10-K Annual Report
`Table of Contents
`
`
` Business
` Risk Factors
` Unresolved Staff Comments
` Properties
` Legal Proceedings
` Reserved
`
`
` Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
` Selected Financial Data
` Management’s Discussion and Analysis of Financial Condition and Results of Operations
` Quantitative and Qualitative Disclosures about Market Risk
` Financial Statements and Supplementary Data
` Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
` Controls and Procedures
` Other Information
`
`
` Directors, Executive Officers and Corporate Governance
` Executive Compensation
` Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
` Certain Relationships and Related Transactions, and Director Independence
` Principal Accountant Fees and Services
`
`
`PART I
`Item 1
`Item 1A
`Item 1B
`Item 2
`Item 3
`Item 4
`
`PART II
`Item 5
`Item 6
`Item 7
`Item 7A
`Item 8
`Item 9
`Item 9A
`Item 9B
`
`PART III
`Item 10
`Item 11
`Item 12
`Item 13
`Item 14
`
`PART IV
`
`Item 15
` Exhibits and Financial Statement Schedules
`SIGNATURES
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`2
`23
`37
`37
`38
`38
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`39
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`42
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`44
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`63
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` 6 6
` 6 6
` 6 6
` 68
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` 68
` 68
` 68
` 68
` 68
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` 6 9
` 129
`
`We own or have rights to various trademarks, copyrights and trade names used in our business, including the following: GILEAD , GILEAD
`®
`SCIENCES , TRUVADA , VIREAD , HEPSERA , AMBISOME , EMTRIVA , VISTIDE , LETAIRIS , VOLIBRIS™, RANEXA and CAYSTON .
`®
`®
`®
`®
`®
`®
`®
`®
`®
`®
`ATRIPLA is a registered trademark belonging to Bristol-Myers Squibb & Gilead Sciences, LLC. LEXISCAN is a registered trademark belonging to
`®
`®
`Astellas U.S. LLC. MACUGEN is a registered trademark belonging to Eyetech Inc. SUSTIVA is a registered trademark of Bristol-Myers Squibb Pharma
`®
`®
`Company. TAMIFLU is a registered trademark belonging to Hoffmann-La Roche Inc. This report also includes other trademarks, service marks and trade
`®
`names of other companies.
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`This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of
`Operations,” contains forward-looking statements regarding future events and our future results that are subject to the safe harbors created under the
`Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934, as amended (the Exchange Act). Words such as
`“expect,” “anticipate,” “target,” “goal,” “project,” “hope,” “intend,” “plan,” “believe,” “seek,” “estimate,” “continue,” “may,” “could,”
`“should,” “might,” variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any
`statements other than statements of historical fact are forward-looking statements, including statements regarding overall trends, operating cost and
`revenue trends, liquidity and capital needs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and
`similar expressions. We have based these forward-looking statements on our current expectations about future events. These statements are not
`guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Our actual results may differ materially
`from those suggested by these forward-looking statements for various reasons, including those identified below under “Risk Factors,” beginning at
`page 18. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. The forward-looking
`statements included in this report are made only as of the date hereof. Except as required under federal securities laws and the rules and regulations
`of the Securities and Exchange Commission (SEC), we do not undertake, and specifically decline, any obligation to update any of these statements or to
`publicly announce the results of any revisions to any forward-looking statements after the distribution of this report, whether as a result of new
`information, future events, changes in assumptions or otherwise.
`
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`PART I
`
`BUSINESS
`
`
`ITEM 1.
`Overview
`Gilead Sciences, Inc. (Gilead, we, us or our), incorporated in Delaware on June 22, 1987, is a biopharmaceutical company that discovers, develops
`and commercializes innovative therapeutics in areas of unmet medical need. Our mission is to advance the care of patients suffering from life threatening
`diseases worldwide. Headquartered in Foster City, California, we have operations in North America, Europe and Australia. To date, we have focused our
`efforts on bringing novel therapeutics for the treatment of life threatening diseases to market. We continue to seek to add to our existing portfolio of products
`through our internal discovery and clinical development programs and through an active product acquisition and in-licensing strategy.
`
`In 2009, we acquired CV Therapeutics, Inc. (CV Therapeutics), a publicly-held biopharmaceutical company based in Palo Alto, California, primarily
`focused on the discovery, development and commercialization of small molecule drugs for the treatment of cardiovascular diseases. CV Therapeutics had two
`marketed products, Ranexa (ranolazine) and Lexiscan (regadenoson), as well as several product candidates in clinical development for the treatment of
`cardiovascular, metabolic and pulmonary diseases.
`
`•
`
`•
`
`•
`
`Our Products
` Truvada (emtricitabine and tenofovir disoproxil fumarate) is an oral formulation dosed once a day as part of combination therapy to treat human
`•
`immunodeficiency virus (HIV) infection in adults. It is a fixed-dose combination of our anti-HIV medications, Viread (tenofovir disoproxil
`fumarate) and Emtriva (emtricitabine).
` Atripla (efavirenz 600 mg/ emtricitabine 200 mg/ tenofovir disoproxil fumarate 300 mg) is an oral formulation dosed once a day for the treatment
`of HIV infection in adults. Atripla is the first once daily single tablet regimen for HIV intended as a stand alone therapy or in combination with
`other antiretrovirals. It is a fixed-dose combination of our anti-HIV medications, Viread and Emtriva, and Bristol Myers-Squibb Company’s non-
`nucleoside reverse transcriptase inhibitor, Sustiva (efavirenz).
` Viread is an oral formulation of a nucleotide analogue reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat HIV
`infection in adults. In 2008, we received marketing approval of Viread for the treatment of chronic hepatitis B. We have licensed to
`GlaxoSmithKline Inc. (GSK) the rights to commercialize Viread for the treatment of chronic hepatitis B in China.
` Emtriva is an oral formulation of a nucleoside analogue reverse transcriptase inhibitor, dosed once a day as part of combination therapy to treat
`HIV infection in adults. In the United States and Europe, Emtriva is also approved as part of combination therapy to treat HIV infection in
`children.
` Hepsera (adefovir dipivoxil) is an oral formulation of a nucleotide analogue polymerase inhibitor, dosed once a day to treat chronic hepatitis B.
`We have licensed to GSK the rights to commercialize Hepsera for the treatment of chronic hepatitis B in Asia, Latin America and certain other
`territories.
` AmBisome (amphotericin B liposome for injection) is a proprietary liposomal formulation of amphotericin B, an antifungal agent to treat serious
`invasive fungal infections caused by various fungal species. Our corporate partner, Astellas Pharma US, Inc., promotes and sells AmBisome in
`the United States and Canada, and we promote and sell AmBisome in Europe, Australia and New Zealand.
` Letairis (ambrisentan) is an endothelin receptor antagonist (ERA) indicated for the treatment of pulmonary arterial hypertension (PAH) (WHO
`Group 1) in patients with WHO Class II or III symptoms to improve exercise capacity and delay clinical worsening. We sublicensed to GSK the
`rights to ambrisentan, marketed by GSK as Volibris (ambrisentan), for PAH in territories outside of the United States.
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`•
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`•
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`•
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`•
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`•
`•
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` Ranexa is indicated for the treatment of chronic angina. We have licensed to Menarini International Operations Luxembourg SA the rights to
`Ranexa in territories outside of the United States.
` Vistide (cidofovir injection) is an antiviral medication for the treatment of cytomegalovirus retinitis in patients with AIDS.
` Cayston (aztreonam for inhalation solution) is an inhaled antibiotic as a treatment to improve respiratory systems in cystic fibrosis (CF) patients
`with Pseudomonas aeruginosa (P. aeruginosa). In September 2009, we received conditional marketing approval of Cayston in Europe and
`Canada. In February 2010, we received marketing approval of Cayston in the United States.
`
`The following table lists aggregate product sales for our major products (in thousands):
`
`
`
`
`
`
`
`
`
`
`
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`Antiviral products:
`Truvada
`Atripla
`Viread
`Hepsera
`Emtriva
`Total antiviral products
`
`AmBisome
`Letairis
`Ranexa
`Other
`
`Total product sales
`
`2009
`
`
`
`
`
` $ 2,489,682
` 2,382,113
`
`
`667,510
`
`
`271,595
`
`
`27,974
`
` 5,838,874
`
`
`298,597
`
`
`183,949
`
`
`131,062
`
`
`16,829
`
` $ 6,469,311
`
`% of
`Total
`Product
`Sales
`
`2008
`
`% of
`Total
`Product
`Sales
`
`% of
`Total
`Product
`Sales
`
`2007
`
`
`
`
`
`
`
`
`
`41% $ 1,589,229
`38% $ 2,106,687
`43%
`
` 1,572,455
`903,381
`24%
`31%
`37%
`16%
`
`613,169
`
`621,187
`12%
`10%
`
`
`302,722
`8%
`7%
`341,023
`4%
`
`
`31,493
`31,080
`1%
`1%
`0%
`92%
`92%
`
`3,439,994
`
`4,672,432
`90%
`6%
`
`262,571
`5%
`
`289,651
`7%
`
`
`112,855
`21,020
`1%
`2%
`3%
`
`— —
`
`— —
`2%
`
`9,858
`
`9,524
`0%
`0%
`0%
`100% $ 5,084,796
`100% $
`3,733,109
`100%
`
`See Item 8, Note 15 to our Consolidated Financial Statements included in this Annual Report on Form 10-K, for our total revenues by geographic area.
`
`Royalties from Other Products
` Tamiflu (oseltamivir phosphate) is an oral antiviral available in capsule form for the treatment and prevention of influenza A and B. Tamiflu is
`•
`approved for the treatment of influenza in children and adults in more than 60 countries, including the United States, Japan and the European
`Union. Tamiflu is also approved for the prevention of influenza in children and adults in the United States, Japan and the European Union. We
`developed Tamiflu with F. Hoffmann-La Roche Ltd (together with Hoffmann-La Roche Inc., Roche). Roche has the exclusive right to manufacture
`and sell Tamiflu worldwide, subject to its obligation to pay us royalties based on a percentage of the net sales of Tamiflu.
` Macugen (pegaptanib sodium injection) is an intravitreal injection of an anti-angiogenic oligonucleotide for the treatment of neovascular age-related
`macular degeneration. Macugen was developed by Eyetech Inc. (Eyetech) using technology licensed from us and is now promoted in the United
`States by Eyetech. Eyetech holds the exclusive rights to manufacture and sell Macugen in the United States, and Pfizer Inc. (Pfizer) holds the
`exclusive right to manufacture and sell Macugen in the rest of the world. We receive royalties from Eyetech based on sales of Macugen worldwide.
` Lexiscan injection is indicated for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging (MPI), a test that detects and
`characterizes coronary artery disease, in patients unable to undergo adequate exercise stress. Astellas US LLC has exclusive rights to manufacture
`and
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`•
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`sell Lexiscan in the United States, subject to its obligations to pay us royalties based on sales of Lexiscan in the United States. In May 2009, our
`marketing authorization application for regadenoson for MPI in the European Union was validated by the European Medicines Agency.
`
`Commercialization and Distribution
`We have U.S. and international commercial sales operations, with marketing subsidiaries in Australia, Austria, Belgium, Canada, Denmark, Finland,
`France, Germany, Greece, Ireland, Italy, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, the United Kingdom and
`the United States.
`
`Our products are marketed through our commercial teams and/or in conjunction with third party distributors and corporate partners. Our commercial
`teams promote our products through direct field contact with physicians, hospitals, clinics and other healthcare providers. We generally grant our third party
`distributors the exclusive right to promote our product in a territory for a specified period of time. Most of our agreements with these distributors provide for
`collaborative efforts between the distributor and Gilead in obtaining and maintaining regulatory approval for the product in the specified territory.
`
`In the United States, our commercial team promotes Truvada, Viread, Emtriva, Hepsera, Letairis and Ranexa. We promote Atripla in the United States
`with our joint venture partner, Bristol Myers-Squibb Company (BMS). We distribute Truvada, Atripla, Viread, Emtriva, Hepsera, Vistide and Ranexa in the
`United States exclusively through the wholesale channel. Our product sales to three large wholesalers, Cardinal Health, Inc., McKesson Corp. and
`AmerisourceBergen Corp., each accounted for more than 10% of total revenues for each of the years ended December 31, 2009, 2008 and 2007. On a
`combined basis, these wholesalers accounted for approximately 85% of our product sales in the United States and approximately 43% of our total revenues.
`Our corporate partner, Astellas, promotes, sells and distributes AmBisome and Lexiscan for us in the United States. Cayston and Letairis are distributed
`exclusively by specialty pharmacies. These specialty pharmacies specialize in the dispensing of medications for complex or chronic conditions that may
`require a high level of patient education and ongoing counseling.
`
`We sell and distribute Truvada, Viread, Emtriva, Hepsera and AmBisome in Asia, Australia, Europe, Latin America, the Middle East and New
`Zealand either through our commercial teams, third party distributors or corporate partners. We promote Atripla jointly with BMS in the majority of countries
`in Europe and are responsible for selling and distributing the product in these countries. In a limited number of Central and Eastern European countries, either
`Gilead, BMS or a third party distributor is the sole promoting, selling and distributing company. Under an agreement with Merck & Co., Inc. (Merck), we
`promote and distribute Atripla in 12 countries in Latin America and Asia-Pacific either through Merck or our existing third party distributors. GSK promotes,
`sells and distributes Hepsera in Asia, Latin America and certain other territories and plans to promote, sell and distribute Viread for the treatment of chronic
`hepatitis B in China. We rely on our corporate partner, Japan Tobacco Inc., to promote and sell Truvada, Viread and Emtriva in Japan. Our corporate partner,
`Astellas, promotes, sells and distributes AmBisome in Canada. Dainippon Sumitomo Pharma Co., Ltd is responsible for promotion and distribution of
`AmBisome in Japan.
`
`Access in the Developing World
`Through the Gilead Access Program, established in 2003, certain of our HIV products are available at substantially reduced prices in 130 countries in
`the developing world. We have developed a system of tiered pricing that reflects economic status (using gross national income—GNI—per capita) and HIV
`prevalence. This approach allows us to price our therapies based on a country’s ability to pay. For example, if a higher HIV prevalence exists in a certain
`country, but the country also has a relatively high GNI, the country would be moved to a lower price tier to accommodate higher burden of disease.
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`We also support many clinical studies through the donation of our products to help define the best treatment strategies in developing world countries. For
`example, in November 2002, we entered into a collaborative agreement with the Medical Research Council (MRC) of the United Kingdom, Boehringer
`Ingelheim GmbH and GSK in connection with a clinical study conducted by the MRC on antiretroviral HIV therapy in Africa. The trial is called the DART
`(Development of AntiRetroviral Therapy) study and is aimed at studying clinical versus laboratory monitoring practices and structured treatment interruptions
`on continuous antiretroviral therapy in adults with HIV infection in sub-Saharan Africa. We provide Viread at no cost for the DART study.
`
`We also work closely with the World Health Organization and with non-governmental organizations to provide AmBisome for the treatment of
`leishmaniasis, a parasitic disease, at a preferential price in resource limited settings. We support numerous clinical studies investigating the role of AmBisome
`to treat visceral and cutaneous leishmaniasis in developing countries through collaborations with organizations such as the Drugs for Neglected Diseases
`initiative and Médecins Sans Frontières.
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`We have also entered into a number of collaborations related to access of our products in the developing world, which include:
` PharmaChem Technologies (Grand Bahama), Ltd (PharmaChem). In 2005, PharmaChem, one of our manufacturing partners, established
`•
`a facility in The Bahamas to manufacture tenofovir disoproxil fumarate, the active pharmaceutical ingredient in Viread and one of the active
`pharmaceutical ingredients in Truvada and Atripla, for resource limited countries through a cooperative effort with PharmaChem and the Grand
`Bahama Port Authority.
` Aspen Pharmacare Holdings Ltd (Aspen). In October 2005, we entered into a non-exclusive manufacturing and distribution agreement with
`Aspen, providing for the manufacture and distribution of Viread and Truvada for the treatment of HIV infection to certain developing world
`countries included in our Gilead Access Program. In November 2007, we amended our agreement with Aspen. Under the amended agreement,
`Aspen retained the right to manufacture and distribute Viread and Truvada for the treatment of HIV infection in these developing world countries.
`Aspen has the right to purchase Viread and Truvada in unlabeled bottles from us for distribution in such countries, and also has the right to
`manufacture Viread and Truvada using active pharmaceutical ingredient that has been purchased by Aspen from suppliers approved by us.
`Aspen was also granted the right to manufacture and distribute generic versions of emtricitabine and tenofovir disoproxil fumarate, including
`versions of tenofovir disoproxil fumarate in combination with emtricitabine for the treatment of HIV infection. Aspen is required to pay us
`royalties on net sales of Viread and Truvada, as well as royalties on net sales of generic versions of tenofovir disoproxil fumarate, including
`versions of tenofovir disoproxil fumarate in combination with generic versions of emtricitabine that are manufactured and distributed by Aspen.
` Generic Licenses. We have entered into non-exclusive license agreements with thirteen Indian generic manufacturers, granting them the rights to
`produce and distribute generic versions of tenofovir disoproxil fumarate for the treatment of HIV infection to 95 low income countries around the
`world, which includes India and many of the low income countries in our Gilead Access Program. The agreements require that the generic
`manufacturers meet certain national and international regulatory standards and include technology transfers to enable expeditious production of
`large volumes of high quality generic versions of tenofovir disoproxil fumarate. In addition, these agreements allow for the manufacture of
`commercial quantities of both active pharmaceutical ingredient and finished product.
` Merck & Co., Inc. (Merck). In August 2006, we entered into an agreement with an affiliate of Merck pursuant to which Gilead and Merck
`provide Atripla at substantially reduced prices to HIV infected patients in developing countries in Africa, the Caribbean, Latin America and
`Southeast Asia. Under the agreement, we manufacture Atripla using efavirenz supplied by Merck, and Merck handles distribution of the product
`in the countries covered by the agreement.
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` International Partnership for Microbicides (IPM) and CONRAD. In December 2006, we entered into an agreement under which we granted
`rights to IPM and CONRAD, a cooperating agency of the U.S. Agency for International Development committed to improving reproductive health
`by expanding the contraceptive choices of women and men, to develop, manufacture and, if proven efficacious, arrange for the distribution in
`resource limited countries certain formulations of tenofovir for use as a topical microbicide to prevent HIV infection.
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`Competition
`Our products and development programs target a number of areas, including viral, fungal, respiratory and cardiovascular diseases. There are many
`commercially available products for the treatment of these diseases. Many companies and institutions are making substantial investments in developing
`additional products to treat these diseases. Our products compete with other available products based primarily on:
` efficacy;
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` safety;
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` tolerability;
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` acceptance by doctors;
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` ease of patient compliance;
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` patent protection;
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` ease of use;
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` price;
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` insurance and other reimbursement coverage;
` distribution; and
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` marketing.
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`Our HIV Products. The HIV landscape is becoming more competitive and complex as treatment trends continue to evolve. A growing number of anti-
`HIV drugs are currently sold or are in advanced stages of clinical development. Of the approximately 32 branded HIV drugs available in the United States, our
`products primarily compete with the fixed-dose combination products in the nucleotide/nucleoside reverse transcriptase inhibitors (NRTI) class, including
`Combivir (lamivudine/zidovudine), Epzicom/Kivexa (abacavir/lamivudine) and Trizivir (abacavir/lamivudine/zidovudine), each sold by a joint venture
`established in November 2009 by GSK and Pfizer focused on HIV therapies. Other HIV products compete directly with products in the same NRTI class sold
`by BMS, although our HIV products also compete broadly with HIV products from Abbott Laboratories, Inc., Boehringer Ingelheim GmbH, Merck, Pfizer,
`Roche and Tibotec Therapeutics.
`
`BMS’s Videx EC (didanosine, ddI) became the first generic HIV product in the United States in 2004. GSK’s Retrovir (zidovudine) also faces generic
`competition in the United States as a result of the launch of generic zidovudine in 2005. BMS’s Zerit (stavudine) also faces generic competition in the United
`States as a result of the launch of generic stavudine in 2008. To date, there has been little impact from generic didanosine, zidovudine or stavudine on the price
`of our HIV products; however, price decreases for all HIV products may result in the longer term.
`
`In May 2010, the compound patent covering Epivir (lamivudine) itself will expire. Lamivudine is marketed by the joint venture established by GSK and
`Pfizer and is competitive with emtricitabine, the active pharmaceutical ingredient of Emtriva and a component of both Truvada and Atripla. Certain third
`party payors or plans may use the entry of generic lamivudine as a reason to exert pricing pressure on our HIV products.
`
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`Table of Contents
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`AmBisome. AmBisome faces strong competition from several current and expected competitors. Competition from these current and expected
`competitors may erode the revenues we receive from sales of AmBisome. AmBisome faces competition from Vfend (voriconazole) developed by Pfizer and
`caspofungin, a product developed by Merck that is marketed as Cancidas in the United States and as Caspofungin elsewhere. AmBisome also competes with
`other lipid-based amphotericin B products, including Abelcet (amphotericin B lipid complex injection), sold by Enzon Pharmaceuticals, Inc. in the United
`States, Canada and Japan and by Zeneus Pharma Ltd. in Europe; Amphotec (amphotericin B cholesteryl sulfate complex for injection), sold by Three Rivers
`Pharmaceuticals, LLC worldwide; and Anfogen (amphotericin B liposomal), sold by Genpharma, S.A. in Argentina. BMS and numerous generic
`manufacturers sell conventional amphotericin B, which also competes with AmBisome.
`
`We are aware of at least two lipid formulations that claim similarity to AmBisome becoming available outside of the United States, including the
`possible entry of one such formulation in Greece. These formulations may reduce market demand for AmBisome. The manufacture of lipid formulations of
`amphotericin B is very complex and if any of these formulations are found to be unsafe, sales of AmBisome may be negatively impacted by association.
`
`Our HBV Products. Our hepatitis B virus (HBV) products, Hepsera and Viread, face significant competition from existing and expected therapies for
`treating patients with chronic hepatitis B. Our HBV products face competition from Baraclude (entecavir), an oral nucleoside analogue developed by BMS and
`launched in the United States in 2005, and Tyzeka/Sebivo (telbivudine), an oral nucleoside analogue developed by Novartis Pharmaceuticals Corporation
`(Novartis) for sale in the United States, the European Union and China.
`
`Our HBV products also compete with Epivir-HBV/Zeffix (lamivudine), developed by GSK in collaboration with Shire Pharmaceuticals Group PLC
`and sold in the major countries throughout North and South America, Europe and Asia.
`
`Hepsera and Viread for the treatment of chronic hepatitis B also compete with established immunomodulatory therapies, including Intron-A (interferon
`alfa-2b), which is sold by Schering Plough Corporation in major countries throughout North and South America, Europe and Asia, and Pegasys (pegylated
`interferon alfa-2a), an injectable drug similar to Intron-A sold by Roche for the treatment of chronic hepatitis B.
`
`Letairis. Letairis competes directly with Tracleer (bosentan) sold by Actelion Pharmaceuticals US, Inc. (Actelion) and indirectly with PAH products
`from United Therapeutics Corporation and Pfizer.
`
`Ranexa. Ranexa competes predominantly with generic compounds from three distinct classes of drugs for the treatment of chronic angina in the United
`States, including generic and/or branded beta-blockers, calcium channel blockers and long-acting nitrates. In addition, surgical treatments and interventions
`such as coronary artery bypass grafting and percutaneous coronary intervention can be another option for angina patients, and may be perceived by healthcare
`practitioners as preferred methods to treat the cardiovascular disease that underlies and causes angina.
`
`Vistide. Vistide competes with a number of drugs that also treat cytomegalovirus retinitis, including Cytovene IV and Cytovene (ganciclovir), sold in
`intravenous and oral formulations by Roche and as an ocular implant by Bausch & Lomb Incorporated; Valcyte (valganciclovir), also marketed by Roche;
`Foscavir (foscarnet), an intravenous drug sold by AstraZeneca PLC; and Vitravene (fomivirsen), a drug injected directly into the eye, sold by CibaVision.
`
`Cayston. Cayston competes primarily with Tobi (tobramycin inhalation solution, USP), an inhaled medication sold by Novartis for the treatment of
`CF patients whose lungs contain P. aeruginosa.
`
`Tamiflu. Tamiflu competes with Relenza (zanamivir), an anti-influenza drug that is sold by GSK. Relenza is a neuraminidase inhibitor that is delivered
`as an orally-inhaled dry powder. Generic competitors include
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`WATSON LABORATORIES, INC. , IPR