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 business 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 nine months ended September 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 (GAAP) 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 infection; Hepsera® (adefovir dipivoxil) and Viread for the treatment of chronic hepatitis B virus; 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 reimburse up to €71.5 million (approximately $100.0 million) of development costs incurred by Tibotec for TMC278 through December 2011. 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 to be purchased by us from Tibotec for the combination product will approximate the market price of TMC278, less a specified percentage of up to 30%.

In the cardiovascular area, in September 2009, we announced the online publication in The Lancet of data from DAR-311 (DORADO), a Phase 3 clinical trial evaluating our once-daily oral endothelin receptor antagonist darusentan as an add-on treatment for resistant hypertension.

With regard to our respiratory efforts, in October 2009, we announced that the Anti-Infective Drugs Advisory Committee of the U.S. Food and Drug Administration (FDA) is scheduled to review aztreonam for inhalation solution for the treatment of infections due to Pseudomonas aeruginosa (P. aeruginosa) in patients with cystic fibrosis (CF) in December 2009. In September 2009, we announced that the European Commission had granted conditional marketing authorization for Cayston® 75 mg powder and solvent for nebuliser solution for the suppressive therapy of chronic pulmonary infections due to P. aeruginosa in patients with CF aged 18 years and older. Cayston will be made available in certain countries of the European Union, subject to the requirements of national authorities, beginning in early 2010. Also in September 2009, Cayston received conditional marketing approval in Canada.

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 pulmonary and cardiovascular diseases. We believe the acquisition will provide us with an opportunity to further expand into the cardiovascular therapeutic area. We adopted the guidance in the Business Combinations Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 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 and nine months ended September 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 included the consolidation and re-alignment of the cardiovascular research and development (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 $8.4 million and $32.5 million in expenses for the three and nine months ended September 30, 2009, primarily related to employee severance and termination benefits costs. We expect the total amount to be incurred in connection with the significant activities of our restructuring plan to be approximately $34 million for employee severance and termination benefits, $22 million for facilities-related costs and $6 million for employee relocation 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 September 30, 2009 were led by total product sales of $1.65 billion. Antiviral product sales (Truvada, Atripla, Viread, Hepsera and Emtriva) increased 19% to $1.47 billion in the three months ended September 30, 2009 from the three months ended September 30, 2008, and were the key drivers for total product sales growth of 23% for the three months ended September 30, 2009 as compared to the three months ended September 30, 2008. Atripla contributed $605.3 million, or 41%, to our third quarter 2009 antiviral product sales. The growth of Atripla product sales and its increased proportion relative to our overall product sales contributed to the decrease in our product gross margin to 75% for the three months ended September 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 September 30, 2009 comprised $620.6 million, or 42% of our third quarter 2009 antiviral product sales. Truvada product sales for the three months ended September 30, 2009 increased 13% from the three months ended September 30, 2008 due primarily to continued sales volume growth in the United States and Europe, partially offset by an unfavorable foreign currency exchange impact. Foreign currency fluctuations for the three months ended September 30, 2009 had an unfavorable impact of approximately $51.0 million on total revenues and $22.1 million on pre-tax income when compared to the three months ended September 30, 2008.

Royalty, contract and other revenues that we recognized from our collaborations with corporate partners were $152.4 million for the three months ended September 30, 2009, an increase of $119.7 million from the three months ended September 30, 2008. The increase was driven primarily by higher Tamiflu royalties from Roche of $113.5 million for the three months ended September 30, 2009 compared to Tamiflu royalties from Roche of $8.6 million in the same period in 2008 due to increased sales related primarily to pandemic planning initiatives worldwide.

Operating expenses which include R&D and selling, general and administrative (SG&A) expenses increased $120.0 million for the three months ended September 30, 2009, or 32%, compared to the three months ended September 30, 2008, reflecting the R&D expense reimbursement related to the Tibotec TMC278 collaboration, 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 other incremental operating expenses associated with the growth of our business and our acquisition of CV Therapeutics.

Cash, cash equivalents and marketable securities increased by $52.5 million during the nine months ended September 30, 2009, driven primarily by operating cash flows of $2.12 billion partially offset by 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, and $756.5 million used to repurchase approximately 16.5 million shares of our common stock through open market purchases. As of September 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 $241.9 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 business combinations that we have completed, we have 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 guidance under the Business Combinations Topic of the FASB ASC 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 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 the guidance in the Intangibles-Goodwill and Other Topic of the FASB ASC, 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 September 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 the guidance in the Intangibles-Goodwill and Other Topic of the FASB ASC, 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 September 30, 2009, we had $938.0 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 and nine months ended September 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 Guidance

On July 1, 2009, we adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles-a replacement of SFAS No. 162 (SFAS 168), on a prospective basis. This guidance establishes the FASB ASC as the source of authoritative U.S. GAAP recognized by the FASB to be applied by non-governmental entities and is effective for interim periods and fiscal years ending after September 15, 2009. As a result of adopting this guidance, the majority of references to historically issued accounting pronouncements are now superseded by references to the FASB ASC. Certain accounting pronouncements, such as SFAS 168, will remain authoritative until they are integrated into the FASB ASC.

On April 1, 2009, we adopted guidance in the Investments-Debt and Equity Securities Topic of the FASB ASC, which addresses the recognition and presentation of other-than-temporary impairments, provides some new disclosure requirements as well as extends certain annual disclosure requirements to interim periods. This guidance is effective for interim periods and fiscal years ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We adopted the provisions of this guidance on a prospective basis for our available-for-sale securities.

On April 1, 2009, we adopted guidance in the Financial Instruments Topic of the FASB ASC, which extends the disclosure requirements regarding the fair value of financial instruments to interim financial statements. This guidance is effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. We adopted the provisions of this guidance on a prospective basis for our financial instruments, which consist principally of cash and cash equivalents, marketable securities, accounts receivable, foreign currency exchange forward and option contracts, accounts payable and long-term debt.

On January 1, 2009, we adopted guidance in the Business Combinations Topic of the FASB ASC, which establishes principles and requirements for recognizing and measuring assets acquired, liabilities assumed and any noncontrolling interests in the acquiree in a business combination. This guidance also provides clarification 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. This guidance 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. We adopted the provisions of this guidance on a prospective basis and applied it to our acquisition of CV Therapeutics.

On January 1, 2009, we adopted guidance in the Derivatives and Hedging Topic of the FASB ASC that required 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. This guidance is effective for interim periods and fiscal years beginning after November 15, 2008. We adopted the provisions of this guidance on a prospective basis for our derivative instruments.

On January 1, 2009, we adopted guidance in the Debt Topic of the FASB ASC which addresses instruments that require the issuer to settle the principal amount in cash and the conversion spread in cash or net shares at the issuer's option. This guidance requires that issuers of these instruments account for their liability and equity components 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. This guidance is effective for fiscal years beginning after December 15, 2008 and interim periods within those fiscal years and requires retrospective application to all periods presented. We adopted this guidance on a retrospective basis for our convertible senior notes. Accordingly, we reflected additional interest expense of $13.4 million and $39.6 million, respectively, a related benefit from income taxes

of $5.3 million and $15.6 million, respectively, and a decrease in net income per share attributable to Gilead common stockholders on a diluted basis of $0.01 and $0.03, respectively, for the three and nine months ended September 30, 2008 in our Condensed Consolidated Statements of Income, and recorded additional interest expense of $14.2 million and $41.9 million, respectively, a related benefit from income taxes of $5.5 million and $16.3 million, respectively, and a decrease in net income per share attributable to Gilead common stockholders on a diluted basis of $0.01 and $0.03, respectively, for the three and nine months ended September 30, 2009. In addition, the retrospective adoption of this guidance 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 guidance in the Consolidation Topic of the FASB ASC which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income (loss) attributable to the parent and to the noncontrolling interests, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. This guidance also establishes additional reporting requirements that identify and distinguish between the ownership interest of the parent and the interest of the noncontrolling owners. This guidance is effective for interim periods and fiscal years beginning after December 15, 2008 and requires retrospective application to all periods presented. We adopted the provisions of this guidance on a retrospective basis and reclassified the noncontrolling interest (formerly minority interest) from liabilities to stockholders' equity on our Condensed Consolidated Balance Sheets. Our adoption of this guidance also 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 $1.80 billion for the three months ended September 30, 2009 compared to $1.37 billion for the same period in 2008. We had total revenues of $4.98 billion for the nine months ended September 30, 2009 and $3.91 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                        Nine Months Ended
                                       September 30,                            September 30,
                                    2009          2008       Change          2009          2008       Change
Antiviral products:
Truvada                          $   620,564   $   549,101       13 %     $ 1,818,996   $ 1,544,635       18 %
Atripla                              605,299       427,623       42 %       1,684,324     1,106,941       52 %
Viread                               169,711       155,958        9 %         489,241       459,306        7 %
Hepsera                               67,928        91,217      (26 )%        207,716       264,604      (21 )%
Emtriva                                6,729         7,634      (12 )%         21,001        24,111      (13 )%

Total antiviral products           1,470,231     1,231,533       19 %       4,221,278     3,399,597       24 %
AmBisome                              77,064        72,884        6 %         214,645       213,680        0 %
Letairis                              48,073        31,656       52 %         131,781        76,679       72 %
Ranexa                                49,005            -       100 %          85,070            -       100 %
Other                                  4,582         2,429       89 %          12,139         7,068       72 %

Total product sales              $ 1,648,955   $ 1,338,502       23 %     $ 4,664,913   $ 3,697,024       26 %

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