This Quarterly Report on Form 10-Q contains forward-looking statements based on our current expectations. The forward-looking statements are contained principally in this section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors." Words such as "expect," "anticipate," "target," "goal," "project," "intend," "plan," "could," "should," "might," "believe," "seek," "estimate," "continue," "may," variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, any statements that refer to projections of our future financial performance, our anticipated trends in our businesses and other characterizations of future events or circumstances are forward-looking statements. 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." 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, we do not undertake any obligation to update publicly any forward-looking statements after the distribution of this report, whether as a result of new information, future events, changes in assumptions or otherwise. In evaluating our business, you should carefully consider the risks described in the section entitled "Risk Factors" under Part II, Item 1A below, in addition to the other information in this Quarterly Report on Form 10-Q. Any of the risks contained herein could materially and adversely affect our business, results of operations and financial condition.

You should read the following management's discussion and analysis of our financial condition and results of operations in conjunction with our audited Consolidated Financial Statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2008 and our unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30, 2009 and other disclosures (including the disclosures under "Part II. Item 1A. Risk Factors") included in this Quarterly Report on Form 10-Q. Our Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles and are presented in U.S. dollars.

Management Overview

We are 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. We market Truvada® (emtricitabine/tenofovir disoproxil fumarate), Atripla® (efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg), Viread ® (tenofovir disoproxil fumarate) and Emtriva®
(emtricitabine) for the treatment of human immunodeficiency virus (HIV)
infection; Hepsera® (adefovir dipivoxil) and Viread for the treatment of chronic hepatitis B virus (HBV); AmBisome® (amphotericin B) liposome for injection for the treatment of severe fungal infections; Letairis® (ambrisentan) for the treatment of pulmonary arterial hypertension (PAH); Ranexa® (ranolazine) for the treatment of chronic angina; and Vistide® (cidofovir injection) for the treatment of cytomegalovirus infection. F. Hoffmann-La Roche Ltd (together with Hoffmann-La Roche Inc., Roche) markets Tamiflu ® (oseltamivir phosphate) for the treatment and prevention of influenza under a royalty-paying collaborative agreement with us. OSI Pharmaceuticals, Inc. markets Macugen® (pegaptanib sodium injection) in the United States and Europe for the treatment of neovascular age-related macular degeneration under a royalty-paying collaborative agreement with us. GlaxoSmithKline Inc. (GSK) markets Volibris™ (ambrisentan) outside of the United States for the treatment of PAH under a royalty-paying collaborative agreement with us. Menarini International Operations Luxembourg SA markets Ranexa outside of the United States under a royalty-paying collaborative agreement with us. Astellas Pharma US, Inc. markets Lexiscan® (regadenoson) injection in the United States for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging under a royalty-paying collaborative agreement with us.

Business Highlights

In July 2009, we entered into a collaboration and license agreement with Tibotec Pharmaceuticals (Tibotec), a wholly-owned subsidiary of Johnson & Johnson, to develop and commercialize a new once-daily fixed-dose combination containing our Truvada and Tibotec's investigational non-nucleoside reverse transcriptase inhibitor, TMC278 (25 mg rilpivirine hydrochloride), which is currently in Phase 3 clinical trials. We will pay up to €71.5 million (approximately $100.0 million) of Tibotec's development costs for TMC278. We expect to recognize product sales revenue from future sales of this new combination product if and when it is approved. The cost of TMC278 purchased by us from Tibotec for the combination product will approximate the market price of TMC278, less a specified percentage of up to 30%.

With regard to our antiviral research and development (R&D) efforts, in April 2009, we initiated a Phase 2 study of a complete single-tablet fixed-dose regimen containing elvitegravir, GS 9350 and Truvada in treatment-naïve patients. In April 2009, we also initiated a Phase 2 study of GS 9350-boosted atazanavir compared to ritonavir-boosted atazanavir, each in combination with Truvada. Both studies were fully enrolled during the second quarter of 2009.

In the cardiovascular area, in April 2009, we announced preliminary data from DAR-311 (DORADO), a Phase 3 clinical study for darusentan for the treatment of resistant hypertension. In May 2009, we announced results from ARIES-3, an open-label, single-arm, Phase 3 clinical study of ambrisentan in patients with pulmonary hypertension. In May 2009, our marketing authorisation application (MAA) for regadenoson, an investigational pharmacologic stress agent for radionuclide myocardial perfusion imaging, was validated by the European Medicines Agency (EMEA) and is being formally reviewed by members of the Committee for Medicinal Products for Human Use (CHMP), the scientific committee of the EMEA.

With regard to our respiratory efforts, in June 2009, the CHMP adopted a positive opinion on our MAA for aztreonam lysine 75 mg powder and solvent for nebulizer solution for the suppressive therapy of chronic pulmonary infections due to Pseudomonas aeruginosa in patients with cystic fibrosis (CF) aged 18 years and older. The CHMP's positive recommendation will be reviewed by the European Commission, and we anticipate that the European Commission will issue its decision later in 2009.

Acquisition of CV Therapeutics, Inc. and Restructuring

In April 2009, we completed the acquisition of CV Therapeutics, Inc. (CV Therapeutics), a publicly held biopharmaceutical company based in Palo Alto, California, primarily focused on applying molecular cardiology to the discovery, development and commercialization of small molecule drugs for the treatment of cardiovascular diseases. CV Therapeutics had two marketed products as well as several product candidates in clinical development for the treatment of atrial fibrillation, pulmonary diseases and diabetes. We believe the acquisition will provide us with an opportunity to further expand into the cardiovascular therapeutic area. We adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business Combinations (SFAS 141R), in recognizing the consideration transferred of $1.39 billion and recorded $951.2 million and $180.1 million in intangible assets relating to marketed products and in-process research and development (IPR&D) projects, respectively, which constituted a significant portion of the assets acquired from CV Therapeutics. The results of operations of CV Therapeutics beginning on April 15, 2009, the acquisition date, were included in our Condensed Consolidated Financial Statements for the three months ended June 30, 2009.

During the three months ended June 30, 2009, we also approved a plan to realize certain synergies between us and CV Therapeutics, re-align our cardiovascular operations and eliminate certain redundancies. The restructuring plan includes the consolidation and re-alignment of the cardiovascular R&D organization, the exit from certain of our facilities and the termination of certain contractual obligations. As a result of this restructuring plan, we recorded an aggregate of $24.1 million in expenses for the three months ended June 30, 2009, primarily related to employee severance and termination benefits costs in accordance with SFAS No. 146,

Accounting for Costs Associated with Exit or Disposal Activities. We expect the total amount to be incurred in connection with the significant activities of our restructuring plan to be approximately $30 million for employee severance and termination benefits and $25 million for facilities-related costs. These costs are expected to be incurred through 2010 with the majority of the expenses to be incurred by the end of 2009.

Financial Highlights

Our operating results for the three months ended June 30, 2009 were led by total product sales of $1.57 billion. Antiviral product sales (Truvada, Atripla, Viread, Hepsera and Emtriva) increased 26% to $1.41 billion in the three months ended June 30, 2009 from the three months ended June 30, 2008, and were the key drivers for total product sales growth of 29% for the three months ended June 30, 2009 as compared to the three months ended June 30, 2008. Atripla contributed $569.1 million, or 40%, to our second quarter 2009 antiviral product sales, which included the launch of the product in France. The growth of Atripla product sales and its increased proportion relative to our overall product sales caused our product gross margin to decrease to 76% for the three months ended June 30, 2009 from 78% in the same period of 2008, due primarily to the efavirenz component of Atripla sales which is recorded at zero gross margin. Truvada product sales for the three months ended June 30, 2009 comprised $608.1 million, or 43% of our second quarter 2009 antiviral product sales. Truvada product sales for the three months ended June 30, 2009 increased 18% from the three months ended June 30, 2008 primarily due to continued sales volume growth in the United States and Europe. Foreign currency fluctuations for the three months ended June 30, 2009 had an unfavorable impact of approximately $50.0 million on total revenues and $18.4 million on pre-tax income when compared to the three months ended June 30, 2008.

Royalty, contract and other revenues that we recognized from our collaborations with corporate partners were $78.8 million for the three months ended June 30, 2009, an increase of 29% from the three months ended June 30, 2008. The increase was driven primarily by higher Tamiflu royalties from Roche of $51.9 million for the three months ended June 30, 2009 compared to Tamiflu royalties of $37.5 million in the same period in 2008 due to increased sales related to pandemic planning initiatives worldwide.

Operating expenses which include R&D and selling, general and administrative (SG&A) expenses increased $107.0 million for the three months ended June 30, 2009, or 27%, compared to the three months ended June 30, 2008, reflecting the incremental operating expenses associated with our acquisition of CV Therapeutics, higher headcount required to support the continued growth of our business, severance and termination benefits costs incurred as a result of our restructuring activities as well as the increased clinical study activity related to product candidates in our pipeline.

Cash, cash equivalents and marketable securities decreased by $341.2 million during the six months ended June 30, 2009, driven primarily by the cash used to acquire CV Therapeutics of $1.13 billion, net of cash, cash equivalents and marketable securities assumed from CV Therapeutics of $245.4 million, partially offset by operating cash flows of $1.26 billion. During the six months ended June 30, 2009, we repurchased a total of $468.0 million of our common stock through open market purchases, or approximately 10.3 million shares. As of June 30, 2009, the remaining authorized amount of stock repurchases that may be made under our $3.00 billion Board-authorized stock repurchase program which expires in December 2010 was $530.0 million.

Critical Accounting Policies, Estimates and Judgments

Reference is made to "Critical Accounting Policies, Estimates and Judgments" included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Intangible Assets

In conjunction with the business combinations that we have completed, we recorded intangible assets primarily related to marketed products, IPR&D projects and goodwill as part of our recognition and measurement of assets acquired and liabilities assumed in a business combination. Identifiable intangible assets such as those

related to marketed products or IPR&D projects, are measured at their respective fair values as of the acquisition date. We have adopted the provisions of SFAS 141R for measuring and recognizing intangible assets that were acquired after January 1, 2009. We believe the fair values assigned to our acquired intangible assets are based on reasonable estimates and assumptions given the available facts and circumstances as of the acquisition dates. Discounted cash flow models are used in valuing these intangible assets, and these models require the use of significant estimates and assumptions including but not limited to:

• estimates of revenues and operating profits related to the products or product candidates;

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

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

• the life of the potential commercialized products and associated risks, including the inherent difficulties and uncertainties in developing a product candidate such as obtaining U.S. Food and Drug Administration (FDA) and other regulatory approvals; and

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

Goodwill represents the excess of the consideration transferred over the estimated fair values of assets acquired and liabilities assumed in a business combination. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), goodwill and intangible assets determined to have indefinite useful lives are not amortized, but are required to be tested for impairment at least annually. We test goodwill and other indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the assets below their carrying amounts. As of June 30, 2009, we had $617.6 million of indefinite-lived intangible assets consisting of $437.5 million of goodwill resulting from various business combinations and $180.1 million of intangible assets related to the IPR&D projects that we acquired from CV Therapeutics.

In accordance with SFAS 142, intangible assets with finite useful lives are amortized over their estimated useful lives and are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable. With respect to intangible assets related to the marketed products that we acquired from CV Therapeutics, we are amortizing the intangible asset related to Ranexa over its estimated useful life using an amortization rate derived from our forecasted future product sales for Ranexa. Our product sales forecasts are prepared annually and determined using our best estimates of future activity upon considering such factors as historical and expected future patient usage or uptake of our products, the introduction of complimentary or combination therapies or products and future product launch plans. If a previously unanticipated and significant change occurs to our sales forecasts, we will prospectively update the rate used to amortize our intangible asset related to Ranexa which may increase future cost of goods sold, as that is where we record the amortization expense. We are amortizing the intangible asset related to Lexiscan over its estimated useful life on a straight-line basis. Given that current Lexiscan revenues consist of royalties received from a collaboration partner and we will have limited ongoing access and visibility into that partner's future sales forecasts, we cannot make a reasonable estimate of the amortization rate utilizing a forecasted product sales approach. As of June 30, 2009, we had $953.2 million of net unamortized finite-lived intangible assets consisting primarily of intangible assets related to the marketed products that we acquired from CV Therapeutics.

Our judgment regarding the existence of impairment indicators is based on our historical and projected future operating results, our extent or manner of use of the acquired assets, legal and regulatory factors and events, our overall business strategy and market and economic trends. If events occur in the future that cause us to conclude that impairment indicators exist and that certain intangible assets are impaired, our financial condition and results of operations may be adversely impacted.

Other than as set forth herein, there have been no other material changes in our critical accounting policies, estimates and judgments during the three months ended June 30, 2009 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2008.

Adoption of New Accounting Pronouncements

On April 1, 2009, we adopted the provisions of Financial Accounting Standards Board Staff Position (FSP) No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (FSP FAS 157-4) on a prospective basis. FSP FAS 157-4 provides additional guidance on estimating fair value when the volume and level of activity for an asset or liability have significantly decreased in relation to normal market activity for the asset or liability. FSP FAS 157-4 supersedes FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active, and is applicable to the valuation of auction rate securities held by us for which there was no active market as of June 30, 2009.

On April 1, 2009, we adopted the provisions of FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments (FSP FAS 115-2) on a prospective basis for available-for-sale securities. FSP FAS 115-2 provides new guidance on the recognition and presentation of an other-than-temporary impairment, provides some new disclosure requirements as well as extends certain annual disclosure requirements to interim periods. FSP FAS 115-2 is effective for interim periods and fiscal years ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009.

On April 1, 2009, we adopted the provisions of FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1) on a prospectus basis for our financial instruments. FSP 107-1 extends the disclosure requirements regarding the fair value of financial instruments under FAS No. 107, Disclosure about Fair Value of Financial Instruments, to interim financial statements of publicly traded companies. FSP FAS 107-1 is effective for interim reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009

In December 2007, the FASB issued SFAS 141R. SFAS 141R establishes principles and requirements for recognizing and measuring assets acquired, liabilities assumed and any noncontrolling interests in the acquiree in a business combination. SFAS 141R also provides guidance for recognizing and measuring goodwill acquired in a business combination; requires purchased IPR&D to be capitalized at fair value as intangible assets at the time of acquisition; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; expands the definition of what constitutes a business; and requires the acquirer to disclose information that users may need to evaluate and understand the financial effect of the business combination. SFAS 141R is effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. On January 1, 2009, we adopted the provisions of SFAS 141R on a prospective basis and applied it to the acquisition of CV Therapeutics.

On January 1, 2009, we adopted the provisions of SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 161) on a prospective basis for our derivative instruments. SFAS 161 is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced qualitative and quantitative disclosures to enable financial statement users to better understand the effects of derivatives and hedging on an entity's financial position, financial performance and cash flows in the context of an entity's risk exposures. SFAS 161 is effective for interim periods and fiscal years beginning after November 15, 2008.

On January 1, 2009, we adopted the provisions of FSP Accounting Principles Board Opinion No. 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) on a retrospective basis for our convertible senior notes. FSP APB 14-1 requires us to account for the liability and equity components of our convertible senior notes separately by bifurcating the conversion option from the debt instrument, classifying the conversion option in equity and then accreting the resulting discount on the debt as additional interest expense over the expected life of the debt. Accordingly, we reflected additional interest expense of $13.3 million and $26.2 million, respectively, a related benefit from income taxes of $5.2 million and $10.3 million, respectively, and net income per share attributable to Gilead common stockholders on a diluted basis of $0.01 and $0.02, respectively, for the three and six months

ended June 30, 2008 in our Condensed Consolidated Statement of Income, and recorded additional interest expense of $14.0 million and $27.6 million, respectively, a related benefit from income taxes of $5.5 million and $10.9 million, respectively, and net income per share attributable to Gilead common stockholders on a diluted basis of $0.01 and $0.02, respectively, for the three and six months ended June 30, 2009. In addition, the retrospective adoption of FSP APB 14-1 decreased deferred tax assets and debt issuance costs included in other assets by an aggregate of $81.7 million, decreased convertible senior notes, net included in long-term liabilities by $201.8 million and increased total stockholders' equity by $120.1 million after a charge of $82.6 million to retained earnings in our Condensed Consolidated Balance Sheet as of December 31, 2008.

On January 1, 2009, we adopted the provisions of SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51, Consolidated Financial Statements (SFAS 160). Accordingly, we reclassified the noncontrolling interest (formerly minority interest) from liabilities to stockholders' equity on our Condensed Consolidated Balance Sheets on a retrospective basis, which resulted in the reclassification of the change in noncontrolling interest from net cash provided by operating activities to net cash used in financing activities on our Condensed Consolidated Statements of Cash Flows. We also presented the noncontrolling interest on our Condensed Consolidated Statements of Income as net loss attributable to noncontrolling interest, a component of consolidated net income, on a retrospective basis.

Results of Operations

Total Revenues

We had total revenues of $1.65 billion for the three months ended June 30, 2009 compared to $1.28 billion for the same period in 2008. We had total revenues of $3.18 billion for the six months ended June 30, 2009 and $2.54 billion for the same period in 2008. Included in total revenues were product sales, royalty revenues and contract and other revenues.

Product Sales

The following table summarizes the period over period changes in our product
sales (in thousands, except percentages):



                                  Three Months Ended                           Six Months Ended
                                       June 30,                                    June 30,
                                 2009           2008        Change           2009           2008        Change
Antiviral products:
Truvada                       $   608,079    $   516,149        18 %      $ 1,198,432    $   995,534        20 %
Atripla                           569,142        355,101        60 %        1,079,025        679,318        59 %
Viread                            158,925        150,681         5 %          319,530        303,348         5 %
Hepsera                            67,074         90,365       (26 )%         139,788        173,387       (19 )%
Emtriva                             7,096          8,088       (12 )%          14,272         16,477       (13 )%

Total antiviral products        1,410,316      1,120,384        26 %        2,751,047      2,168,064        27 %
AmBisome                           73,310         69,768         5 %          137,581        140,796        (2 )%
Letairis                           44,128         24,686        79 %           83,708         45,023        86 %
Ranexa                             36,065             -        100 %           36,065             -        100 %
Other                               4,559          2,378        92 %            7,557          4,639        63 %

Total product sales           $ 1,568,378    $ 1,217,216        29 %      $ 3,015,958    $ 2,358,522        28 %

Total product sales increased by 29% and 28% for the three and six months ended June 30, 2009, respectively, compared to the same periods in 2008, due primarily to an overall increase in our antiviral product sales, including the strong growth in sales of Atripla and Truvada. A significant percentage of our product sales continued to be denominated in foreign currencies. We used foreign currency exchange forward and option

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