GILEAD SCIENCES INC (Form: 10-Q, Received: 05/09/2011 16:36:18)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

¨	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)


Delaware		94-3047598
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

333 Lakeside Drive, Foster City, California		94404
(Address of principal executive offices)		(Zip Code)

650-574-3000

Registrant’s Telephone Number, Including Area Code

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 whether the 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.


Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
		(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

Number of shares outstanding of the issuer’s common stock, par value $0.001 per share, as of April 29, 2011: 787,054,365

GILEAD SCIENCES, INC.

INDEX



PART I.	FINANCIAL INFORMATION		3

	Item 1.	Condensed Consolidated Financial Statements	3

		Condensed Consolidated Balance Sheets at March 31, 2011 and December 31, 2010	3

		Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010	4

		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

	Item 4.	Controls and Procedures	33

PART II.	OTHER INFORMATION		33

	Item 1.	Legal Proceedings	33

	Item 1A.	Risk Factors	34

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

	Item 3.	Defaults Upon Senior Securities	52

	Item 4.	Removed and Reserved	52

	Item 5.	Other Information	52

	Item 6.	Exhibits	53

SIGNATURES			63

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 ^® , CAYSTON ^® and RAPISCAN ^® . 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.

PART I.

FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)


	March 31, 2011			December 31, 2010
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,835,978		$	907,879
Short-term marketable securities		1,175,321			1,190,789
Accounts receivable, net		1,801,212			1,621,966
Inventories		1,304,457			1,203,809
Deferred tax assets		277,835			279,339
Prepaid taxes		284,918			320,424
Prepaid expenses		75,330			67,632
Other current assets		96,081			116,244

Total current assets		6,851,132			5,708,082
Property, plant and equipment, net		703,794			701,235
Noncurrent portion of prepaid royalties		196,998			203,790
Noncurrent deferred tax assets		134,865			153,379
Long-term marketable securities		3,344,999			3,219,403
Intangible assets		1,629,971			1,425,592
Other noncurrent assets		125,595			181,149

Total assets	$	12,987,354		$	11,592,630

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	981,631		$	803,025
Accrued government rebates		348,151			325,018
Accrued compensation and employee benefits		119,487			147,632
Income taxes payable		2,457			1,862
Other accrued liabilities		566,573			437,893
Deferred revenues		97,373			103,175
Current portion of long-term debt and other obligations, net		653,093			646,345

Total current liabilities		2,768,765			2,464,950
Long-term deferred revenues		30,275			32,844
Long-term debt, net		3,850,130			2,838,573
Long-term income taxes payable		113,025			107,025
Other long-term obligations		49,798			27,401
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock, par value $0.001 per share; 5,000 shares authorized; none outstanding		—			—
Common stock, par value $0.001 per share; 2,800,000 shares authorized; 791,470 and 801,998 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively		791			802
Additional paid-in capital		4,726,309			4,648,286
Accumulated other comprehensive income (loss)		(101,182	)		30,911
Retained earnings		1,320,335			1,183,730

Total Gilead stockholders’ equity		5,946,253			5,863,729
Noncontrolling interest		229,108			258,108

Total stockholders’ equity		6,175,361			6,121,837

Total liabilities and stockholders’ equity	$	12,987,354		$	11,592,630

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended March 31,
	2011			2010
Revenues:
Product sales	$	1,863,578		$	1,788,063
Royalty revenues		58,665			293,681
Contract and other revenues		3,851			4,109

Total revenues		1,926,094			2,085,853

Costs and expenses:
Cost of goods sold		474,111			440,430
Research and development		254,446			218,664
Selling, general and administrative		295,568			265,618

Total costs and expenses		1,024,125			924,712

Income from operations		901,969			1,161,141
Interest and other income, net		13,832			15,645
Interest expense		(41,216	)		(16,955	)

Income before provision for income taxes		874,585			1,159,831
Provision for income taxes		227,282			307,737

Net income		647,303			852,094
Net loss attributable to noncontrolling interest		3,838			2,807

Net income attributable to Gilead	$	651,141		$	854,901

Net income per share attributable to Gilead common stockholders—basic	$	0.82		$	0.95

Shares used in per share calculation—basic		796,115			901,606

Net income per share attributable to Gilead common stockholders- diluted	$	0.80		$	0.92

Shares used in per share calculation—diluted		811,857			928,368

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Three Months Ended March 31,
	2011			2010
Operating Activities:
Net income	$	647,303		$	852,094
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		18,285			17,478
Amortization expense		62,629			42,628
Stock-based compensation expenses		49,470			46,841
Excess tax benefits from stock-based compensation		(14,255	)		(49,819	)
Tax benefits from employee stock plans		12,136			51,665
Deferred income taxes		20,546			31,060
Other non-cash transactions		(7,249	)		2,460
Changes in operating assets and liabilities:
Accounts receivable, net		(107,876	)		(163,914	)
Inventories		(97,174	)		(174,985	)
Prepaid expenses and other assets		(23,903	)		6,305
Accounts payable		176,114			141,727
Income taxes payable		31,473			(149,719	)
Accrued liabilities		61,414			18,766
Deferred revenues		(8,371	)		(2,018	)

Net cash provided by operating activities		820,542			670,569

Investing Activities:
Purchases of marketable securities		(1,519,142	)		(1,502,775	)
Proceeds from sales of marketable securities		1,285,547			273,912
Proceeds from maturities of marketable securities		169,189			171,751
Acquisitions, net of cash acquired		(221,105	)		—
Capital expenditures and other		(14,870	)		(11,666	)

Net cash used in investing activities		(300,381	)		(1,068,778	)

Financing Activities:
Proceeds from issuances of senior notes, net of issuance costs		987,370			—
Proceeds from issuances of common stock		58,879			103,362
Repurchases of common stock		(548,699	)		(162,520	)
Repayments of other long-term obligations		(1,533	)		(19	)
Excess tax benefits from stock-based compensation		14,255			49,819
Distributions (to) from noncontrolling interest		(25,162	)		25,390

Net cash provided by financing activities		485,110			16,032

Effect of exchange rate changes on cash		(77,172	)		46,099

Net change in cash and cash equivalents		928,099			(336,078	)
Cash and cash equivalents at beginning of period		907,879			1,272,958

Cash and cash equivalents at end of period	$	1,835,978		$	936,880

See accompanying notes.

GILEAD SCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of Gilead Sciences, Inc. (Gilead, we or us) believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period.

The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to revenue recognition, intangible assets, allowance for doubtful accounts, prepaid royalties, clinical trial accruals, its tax provision and stock-based compensation. We base our estimates on historical experience and on various other 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. Actual results may differ significantly from these estimates.

The accompanying Condensed Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and our joint ventures with Bristol-Myers Squibb Company (BMS), for which we are the primary beneficiary. We record a noncontrolling interest in our Condensed Consolidated Financial Statements to reflect BMS’s interest in the joint ventures. All intercompany transactions have been eliminated. The Condensed Consolidated Financial Statements include the results of companies acquired by us from the date of each acquisition for the applicable reporting periods.

The accompanying Condensed Consolidated Financial Statements and related financial information should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2010, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC).

Net Income Per Share Attributable to Gilead Common Stockholders

Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding and other dilutive securities outstanding during the period. The potential dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options, restricted stock units, performance shares and warrants relating to the convertible senior notes due in 2011 (2011 Notes), 2013 (2013 Notes), 2014 (2014 Notes) and 2016 (2016 Notes) (collectively, the Convertible Notes) are determined under the treasury stock method.

Because the principal amount of the Convertible Notes will be settled in cash, only the conversion spread relating to the Convertible Notes is included in our calculation of diluted net income per share attributable to Gilead common stockholders. Our common stock resulting from the assumed settlement of the conversion spread of the Convertible Notes has a dilutive effect when the average market price of our common stock during the period exceeds the conversion prices of approximately $38.75, $38.10, $45.08 and $45.41 for the 2011 Notes, 2013 Notes, 2014 Notes and 2016 Notes, respectively. During the three months ended March 31, 2011 and 2010, the average market prices of our common stock exceeded the conversion prices of the 2011 Notes and the 2013

Notes and the dilutive effects are included in the accompanying table. During the three months ended March 31, 2011 and 2010, the average market prices of our common stock did not exceed the conversion prices of the 2014 Notes and 2016 Notes and therefore did not have a dilutive effect on our net income per share for those periods.

Warrants relating to the 2011 Notes, 2013 Notes, 2014 Notes and 2016 Notes have a dilutive effect when the average market price of our common stock during the period exceeds the warrants’ exercise prices of $50.80, $53.90, $56.76 and $60.10, respectively. The average market prices of our common stock during each of the three months ended March 31, 2011 and 2010 did not exceed the warrants’ exercise prices relating to any of the Convertible Notes; therefore, these warrants did not have a dilutive effect on our net income per share for those periods.

Stock options to purchase approximately 22.1 million and 18.0 million weighted-average shares of our common stock were outstanding during the three months ended March 31, 2011 and 2010, respectively, but were not included in the computation of diluted net income per share attributable to Gilead common stockholders because their effect was antidilutive.

The following table is a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share attributable to Gilead common stockholders (in thousands):


	Three Months Ended March 31,
	2011		2010
Numerator:
Net income attributable to Gilead	$	651,141	$	854,901

Denominator:
Weighted-average shares of common stock outstanding used in the calculation of basic net income per share attributable to Gilead common stockholders		796,115		901,606
Effect of dilutive securities:
Stock options and equivalents		15,007		20,766
Conversion spread related to the 2011 Notes		224		2,855
Conversion spread related to the 2013 Notes		511		3,141

Weighted-average shares of common stock outstanding used in the calculation of diluted net income per share attributable to Gilead common stockholders		811,857		928,368

Concentrations of Risk

We are subject to credit risk from our portfolio of cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. 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.

We are also subject to credit risk from our accounts receivable related to our product sales. The majority of our trade accounts receivable arises from product sales in the United States and Europe. To date, we have not experienced significant losses with respect to the collection of our accounts receivable. We believe that our allowance for doubtful accounts was adequate at March 31, 2011.

Recent Accounting Pronouncements

There have been no new accounting pronouncements during the three months ended March 31, 2011 that are of significance to us.

2. FAIR VALUE MEASUREMENTS

Our financial instruments consist principally of cash and cash equivalents, marketable securities, accounts receivable, foreign currency exchange forward and option contracts, accounts payable, and short-term and long-term debt. Cash and cash equivalents, marketable securities and foreign currency exchange contracts that hedge accounts receivable and forecasted sales are reported at their respective fair values on our Condensed Consolidated Balance Sheets. The carrying value and fair value of the Convertible Notes were $3.51 billion and $4.36 billion, respectively, as of March 31, 2011. The carrying value and fair value of the Convertible Notes were $3.48 billion and $3.97 billion, respectively, as of December 31, 2010. The fair value of the Convertible Notes was based on their quoted market values.

In March 2011, we issued senior unsecured notes due in 2021 (the 2021 Notes) in a registered offering for an aggregate principal amount of $1.00 billion. The carrying value and fair value of the 2021 Notes were $991.4 million and $988.0 million, respectively, as of March 31, 2011. The fair value of the 2021 Notes was based on their quoted market values.

The remaining financial instruments are reported on our Condensed Consolidated Balance Sheets at amounts that approximate current fair values.

We determine the fair value of financial and non-financial assets and liabilities using the following fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows:

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

Level 2 inputs which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; 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 which 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. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation.

The following table summarizes, for assets or liabilities recorded at fair value, the respective fair value and classification by level of input within the fair value hierarchy defined above (in thousands):


	March 31, 2011								December 31, 2010
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Debt securities:
U.S. treasury securities	$	1,358,688	$	—	$	—	$	1,358,688	$	1,355,437	$	—	$	—	$	1,355,437
Money market funds		1,786,435		—		—		1,786,435		520,063		—		—		520,063
U.S. government agencies and FDIC guaranteed securities		—		1,095,117		—		1,095,117		—		1,296,110		—		1,296,110
Municipal debt securities		—		14,697		—		14,697		—		17,625		—		17,625
Non-U.S. government securities		—		231,925		52,195		284,120		—		278,610		9,594		288,204
Corporate debt securities		—		1,400,323		—		1,400,323		—		1,119,254		—		1,119,254
Residential mortgage and asset-backed securities		—		329,063		—		329,063		—		277,043		—		277,043
Student loan-backed securities		—		—		64,628		64,628		—		—		70,771		70,771

Total debt securities		3,145,123		3,071,125		116,823		6,333,071		1,875,500		2,988,642		80,365		4,944,507
Equity securities		7,978		—		—		7,978		4,631		—		—		4,631
Derivatives		—		8,022		—		8,022		—		64,461		—		64,461

	$	3,153,101	$	3,079,147	$	116,823	$	6,349,071	$	1,880,131	$	3,053,103	$	80,365	$	5,013,599

Liabilities:
Contingent consideration	$	—	$	—	$	11,100	$	11,100	$	—	$	—	$	11,100	$	11,100
Derivatives		—		118,084		—		118,084		—		38,553		—		38,553

	$	—	$	118,084	$	11,100	$	129,184	$	—	$	38,553	$	11,100	$	49,653

Marketable securities, measured at fair value using Level 2 inputs, are primarily comprised of U.S. government sponsored entity and corporate debt securities. We review trading activity and pricing for these investments as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third party data providers. These inputs represent quoted prices for similar assets in active markets or these inputs have been derived from observable market data. This approach results in the classification of these securities as Level 2 of the fair value hierarchy.

The following table is a reconciliation of marketable securities measured at fair value using significant unobservable inputs (Level 3) (in thousands):


	Three Months Ended March 31,
	2011			2010
Balance, beginning of period	$	80,365		$	105,662
Total realized and unrealized gains (losses) included in:
Interest and other income, net		1,246			—
Other comprehensive income, net		2,160			860
Sales of marketable securities		(20,830	)		(935	)
Transfers into Level 3		53,882			—

Balance, end of period	$	116,823		$	105,587

Total losses included in interest and other income, net attributable to the change in unrealized losses relating to assets still held at the reporting date	$	—		$	—

Our policy is to recognize transfers into or out of Level 3 classification as of the actual date of the event or change in circumstances that caused the transfer. Marketable securities, measured at fair value using Level 3 inputs, are comprised of auction rate securities and Greek government issued bonds within our available-for-sale investment portfolio.

The underlying assets of our auction rate securities consist of student loans. Although auction rate securities would typically be measured using Level 2 inputs, the failure of auctions and the lack of market activity and liquidity experienced since the beginning of 2008 required that these securities be measured using Level 3 inputs. The fair value of our auction rate securities was determined using a discounted cash flow model that considered projected cash flows for the issuing trusts, underlying collateral and expected yields. Projected cash flows were estimated based on the underlying loan principal, bonds outstanding and payout formulas. The weighted-average life over which the cash flows were projected considered the collateral composition of the securities and related historical and projected prepayments. The underlying student loans have a weighted-average expected life of three to seven years. The discount rates used in our discounted cash flow model were based on market conditions for comparable or similar term asset-backed and other fixed income securities, adjusted for an illiquidity discount. This resulted in an annual discount rate of 2.09%. Our auction rate securities reset every seven to 14 days with maturity dates ranging from 2025 through 2040 and have annual interest rates ranging from 0.23% to 1.11%. As of March 31, 2011, our auction rate securities continued to earn interest. Although there continued to be failed auctions as well as lack of market activity and liquidity, we believe we had no other-than-temporary impairments on these securities as of March 31, 2011 because we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost basis.

In 2010, the Greek government offered to settle the majority of its aged outstanding accounts receivable with zero-coupon bonds, which were expected to trade at a discount to face value. During 2010, we agreed to the terms of the settlement, and as of December 31, 2010, we had received a portion of the bonds. As of March 31, 2011, we have received substantially all of the bonds which comprise the balance of transfers into Level 3 during the first quarter of 2011. We have measured the fair value of the Greek zero coupon bonds using Level 3 inputs due to the current lack of market activity and liquidity. The discount rates used in our fair value model for these bonds were based on credit default swap rates. We have the ability and intent to hold these bonds until maturity. Therefore, we believe we had no other-than-temporary impairments on these investments as of March 31, 2011.

As of March 31, 2011, our auction rate securities and Greek government issued bonds were recorded in long-term marketable securities on our Condensed Consolidated Balance Sheet. As of December 31, 2010, our auction rate securities and substantially all of our Greek government issued bonds were recorded in long-term marketable securities on our Consolidated Balance Sheet.

3. AVAILABLE-FOR-SALE SECURITIES

The following table is a summary of available-for-sale debt and equity securities recorded in cash equivalents or marketable securities in our Condensed Consolidated Balance Sheets. Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services (in thousands):


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
March 31, 2011
Debt securities:
U.S. treasury securities	$	1,354,581	$	5,420	$	(1,313	)	$	1,358,688
Money market funds		1,786,435		—		—			1,786,435
U.S. government agencies and FDIC guaranteed securities		1,086,940		8,732		(555	)		1,095,117
Municipal debt securities		14,647		91		(41	)		14,697
Non-U.S. government securities		284,826		1,626		(2,332	)		284,120
Corporate debt securities		1,394,936		7,227		(1,840	)		1,400,323
Residential mortgage and asset-backed securities		330,042		704		(1,683	)		329,063
Student loan-backed securities		69,100		—		(4,472	)		64,628

Total debt securities		6,321,507		23,800		(12,236	)		6,333,071
Equity securities		1,451		6,527		—			7,978

Total	$	6,322,958	$	30,327	$	(12,236	)	$	6,341,049

December 31, 2010
Debt securities:
U.S. treasury securities	$	1,349,348	$	7,109	$	(1,020	)	$	1,355,437
Money market funds		520,063		—		—			520,063
U.S. government agencies and FDIC guaranteed securities		1,284,654		11,919		(463	)		1,296,110
Municipal debt securities		17,543		103		(21	)		17,625
Non-U.S. government securities		286,410		1,880		(86	)		288,204
Corporate debt securities		1,112,976		8,040		(1,762	)		1,119,254
Residential mortgage and asset-backed securities		277,359		923		(1,239	)		277,043
Student loan-backed securities		75,900		—		(5,129	)		70,771

Total debt securities		4,924,253		29,974		(9,720	)		4,944,507
Equity securities		1,451		3,180		—			4,631

Total	$	4,925,704	$	33,154	$	(9,720	)	$	4,949,138

The following table summarizes the classification of the available-for-sale debt and equity securities on our Condensed Consolidated Balance Sheets (in thousands):


	March 31, 2011		December 31, 2010
Cash and cash equivalents	$	1,820,729	$	538,946
Short-term marketable securities		1,175,321		1,190,789
Long-term marketable securities		3,344,999		3,219,403

Total	$	6,341,049	$	4,949,138

The following table summarizes our portfolio of available-for-sale debt securities by contractual maturity (in thousands):


	March 31, 2011				December 31, 2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	2,966,234	$	2,970,819	$	1,726,095	$	1,729,735
Greater than one year but less than five years		3,190,179		3,201,659		3,022,744		3,044,114
Greater than five years but less than ten years		41,345		41,763		33,076		33,580
Greater than ten years		123,749		118,830		142,338		137,078

Total	$	6,321,507	$	6,333,071	$	4,924,253	$	4,944,507

The following table summarizes the gross realized gains and losses related to sales of marketable securities (in thousands):


	Three Months Ended March 31,
	2011			2010
Gross realized gains on sales	$	3,697		$	1,834
Gross realized losses on sales	$	(1,362	)	$	(274	)

The cost of securities sold was determined based on the specific identification method.

The following table summarizes our available-for-sale debt securities that were in a continuous unrealized loss position, but were not deemed to be other-than-temporarily impaired (in thousands):


	Less Than 12 Months					12 Months or Greater					Total
	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
March 31, 2011
Debt securities:
U.S. treasury securities	$	(1,313	)	$	321,780	$	—		$	—	$	(1,313	)	$	321,780
U.S. government agencies and FDIC guaranteed securities		(555	)		116,397		—			—		(555	)		116,397
Municipal debt securities		(41	)		6,834		—			—		(41	)		6,834
Non-U.S. government securities		(2,332	)		59,326		—			—		(2,332	)		59,326
Corporate debt securities		(1,840	)		644,865		—			—		(1,840	)		644,865
Residential mortgage and asset-backed securities		(1,515	)		202,609		(168	)		6,245		(1,683	)		208,854
Student loan-backed securities		—			—		(4,472	)		64,628		(4,472	)		64,628

Total	$	(7,596	)	$	1,351,811	$	(4,640	)	$	70,873	$	(12,236	)	$	1,422,684

December 31, 2010
Debt securities:
U.S. treasury securities	$	(1,020	)	$	531,184	$	—		$	—	$	(1,020	)	$	531,184
U.S. government agencies and FDIC guaranteed securities		(463	)		226,176		—			—		(463	)		226,176
Municipal debt securities		(21	)		4,688		—			—		(21	)		4,688
Non-U.S. government securities		(86	)		44,317		—			—		(86	)		44,317
Corporate debt securities		(1,762	)		459,412		—			—		(1,762	)		459,412
Residential mortgage and asset-backed securities		(1,239	)		197,330		—			—		(1,239	)		197,330
Student loan-backed securities		—			—		(5,129	)		70,771		(5,129	)		70,771

Total	$	(4,591	)	$	1,463,107	$	(5,129	)	$	70,771	$	(9,720	)	$	1,533,878

As of March 31, 2011 and December 31, 2010, approximately 36% and 34%, respectively, of the total number of securities were in an unrealized loss position. The gross unrealized losses for auction rate securities were caused by a higher discount rate used in the valuation of these securities as compared to the coupon rates of these securities. The gross unrealized losses for the other securities were primarily the result of an increase in the yield-to-maturity of the underlying securities. No significant facts or circumstances have arisen to indicate that there has been any deterioration in the creditworthiness of the issuers of these securities. Based on our review of these securities, we believe we had no other-than-temporary impairments on these securities as of March 31, 2011 and December 31, 2010 because we do not intend to sell these securities and it is not more likely than not that we will be required to sell these securities before the recovery of their amortized cost basis.

During the three months ended March 31, 2011, we recorded net unrealized losses on available-for-sale securities of $1.7 million in accumulated other comprehensive income (OCI) and gains of $1.4 million were reclassified out of accumulated OCI into interest and other income, net. Comparatively, during the three months ended March 31, 2010, we recorded net unrealized gains on available-for-sale securities of $1.8 million in accumulated OCI and reclassified gains of $0.9 million out of accumulated OCI into interest and other income, net.

4. DERIVATIVE FINANCIAL INSTRUMENTS

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations between the U.S. dollar and various foreign currencies, the most significant of which is the Euro. In order 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 and option 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 limit the risk that counterparties to these contracts may be unable to perform. We also 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 unrecognized 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, nor do we hedge our net investment in any of our foreign subsidiaries.

We hedge our exposure to foreign currency exchange rate fluctuations for certain monetary assets and liabilities of our foreign subsidiaries that are denominated in a non-functional currency. The derivative instruments we use to hedge this exposure are not designated as hedges, and as a result, changes in their fair value are recorded in interest and other income, net on our Condensed Consolidated Statements of Income.

We hedge our exposure to foreign currency exchange rate fluctuations for forecasted product sales that are denominated in a non-functional currency. The derivative instruments we use to hedge this exposure are designated as cash flow hedges and have maturity dates of 18 months or less. Upon executing a hedging contract and quarterly thereafter, we assess prospective hedge effectiveness using a regression analysis which calculates the change in cash flow as a result of the hedge instrument. On a monthly basis, we assess retrospective hedge effectiveness using a dollar offset approach. We exclude time value from our effectiveness testing and recognize changes in the time value of the hedge in interest and other income, net. The effective component of our hedge is recorded as an unrealized gain or loss on the hedging instrument in accumulated OCI within stockholders’ equity. When the hedged forecasted transaction occurs, the hedge is de-designated and the unrealized gains or losses are reclassified into product sales. The majority of gains and losses related to the hedged forecasted transactions reported in accumulated OCI at March 31, 2011 will be reclassified to product sales within 12 months.

We had notional amounts on foreign currency exchange contracts outstanding of $3.71 billion and $3.55 billion at March 31, 2011 and December 31, 2010, respectively.

The following table summarizes information about the fair values of derivative instruments on our Condensed Consolidated Balance Sheets (in thousands):


	March 31, 2011
	Asset Derivatives				Liability Derivatives
	Location		Fair Value		Location		Fair Value
Derivatives designated as hedges:
Foreign currency exchange contracts		Other current assets	$	7,161		Other accrued liabilities	$	101,545
Foreign currency exchange contracts		Other noncurrent assets		860		Other long-term obligations		16,414

Total derivatives designated as hedges				8,021				117,959

Derivatives not designated as hedges:
Foreign currency exchange contracts		Other current assets		1		Other accrued liabilities		125

Total derivatives not designated as hedges				1				125

Total derivatives			$	8,022			$	118,084


	December 31, 2010
	Asset Derivatives				Liability Derivatives
	Location		Fair Value		Location		Fair Value
Derivatives designated as hedges:
Foreign currency exchange contracts		Other current assets	$	59,276		Other accrued liabilities	$	36,493
Foreign currency exchange contracts		Other noncurrent assets		5,089		Other long-term obligations		2,022

Total derivatives designated as hedges				64,365				38,515

Derivatives not designated as hedges:
Foreign currency exchange contracts		Other current assets		96		Other accrued liabilities		38

Total derivatives not designated as hedges				96				38

Total derivatives			$	64,461			$	38,553

The following table summarizes the effect of our foreign currency exchange contracts on our Condensed Consolidated Statements of Income (in thousands):


	Three Months Ended March 31,
	2011			2010
Derivatives designated as hedges:
Net gains (losses) recognized in OCI (effective portion)	$	(127,499	)	$	107,270
Net gains reclassified from accumulated OCI into product sales (effective portion)	$	9,929		$	5,525
Net gains recognized in interest and other income, net (ineffective portion and amounts excluded from effectiveness testing)	$	995		$	227

Derivatives not designated as hedges:
Net gains (losses) recognized in interest and other income, net	$	(85,846	)	$	54,891

The net unrealized losses related to our cash flow hedges included in accumulated OCI, net of taxes, were $114.6 million at March 31, 2011. Net unrealized gains related to our cash flow hedges included in accumulated OCI, net of taxes, were $21.6 million at December 31, 2010.

5. ACQUISITION OF ARRESTO BIOSCIENCES, INC.

In December 2010, we entered into an agreement to acquire Arresto Biosciences, Inc. (Arresto) for $225 million plus potential future payments based on the achievement of certain sales levels. This transaction closed on January 14, 2011, at which time Arresto became a wholly-owned subsidiary. Arresto was a privately-held, development-stage biotechnology company based in Palo Alto, California, focused on developing antibodies for the potential treatment of fibrotic diseases and cancer. The lead product from the acquisition of Arresto is GS 6224 (formerly AB0024), a humanized monoclonal antibody (mAb) targeting the human lysyl oxidase-like-2 (LOXL2) protein. In addition to an ongoing Phase 1 study of GS 6224 in patients with advanced solid tumors, a Phase 1 study had also been initiated to evaluate GS 6224 in patients with idiopathic pulmonary fibrosis. We believe that Arresto’s pipeline and research and development expertise are well aligned with Gilead’s areas of focus.

The acquisition was accounted for as a business combination. Arresto’s results of operations since January 14, 2011 have been included in our Condensed Consolidated Statement of Income and were not significant.

We are currently in the process of valuing our contingent consideration liability and the in-process research and development (IPR&D) intangible assets acquired in the business combination, in addition to finalizing the resulting goodwill and deferred tax assets and liabilities. These valuations are based on financial forecasts related to each IPR&D project, which are currently being developed by the Company. As a result, as of March 31, 2011, our accounting for the acquisition was preliminary and we recorded substantially all of the consideration transferred as goodwill. We expect to finalize the purchase accounting for Arresto during the second quarter of 2011.

We do not consider the Arresto acquisition to be a material business combination and therefore have not disclosed the pro forma results of operations as required for material business combinations.

6. INVENTORIES

Inventories are summarized as follows (in thousands):


	March 31, 2011		December 31, 2010
Raw materials	$	559,155	$	408,015
Work in process		296,872		454,652
Finished goods		448,430		341,142

Total	$	1,304,457	$	1,203,809

As of March 31, 2011 and December 31, 2010, the joint ventures formed by Gilead and BMS, which are included in our Condensed Consolidated Financial Statements, held $934.2 million and $811.9 million in inventory, respectively, of efavirenz active pharmaceutical ingredient purchased from BMS at BMS’s estimated net selling price of efavirenz.

7. INTANGIBLE ASSETS

The following table summarizes the carrying amount of our intangible assets (in thousands):


	March 31, 2011		December 31, 2010
Goodwill	$	754,456	$	532,669
Finite lived intangible assets		848,885		863,393
Indefinite lived intangible assets		26,630		29,530

Total	$	1,629,971	$	1,425,592

The following table summarizes the changes in the carrying amount of goodwill (in thousands):


Balance at December 31, 2010	$	532,669
Goodwill (preliminary) resulting from the acquisition of Arresto		221,787

Balance at March 31, 2011	$	754,456

The following table summarizes our finite-lived intangible assets (in thousands):


	March 31, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible asset—Ranexa	$	688,400	$	65,372	$	688,400	$	54,795
Intangible asset—Lexiscan		262,800		50,415		262,800		43,979
Other		24,995		11,523		22,095		11,128

Total	$	976,195	$	127,310	$	973,295	$	109,902

Amortization expense related to intangible assets was $17.4 million and $15.0 million for the three months ended March 31, 2011 and 2010, respectively, and was recorded in cost of goods sold in our Condensed Consolidated Statements of Income.

As of March 31, 2011, the estimated future amortization expense associated with our intangible assets for the remaining nine months of 2011 and each of the five succeeding fiscal years are as follows (in thousands):


Fiscal Year	Amount
2011 (remaining nine months)	$	52,222
2012		76,081
2013		82,391
2014		91,246
2015		100,952
2016		113,053

Total	$	515,945

As of December 31, 2010, we had indefinite-lived intangible assets of $29.5 million, which consisted of $26.6 million and $2.9 million of purchased IPR&D from our acquisitions of CGI Pharmaceuticals, Inc. (CGI) and CV Therapeutics, Inc. (CV Therapeutics), respectively. In the first quarter of 2011, the $2.9 million purchased IPR&D project from CV Therapeutics was completed and reclassified as a finite-lived intangible asset, and is currently being amortized over its estimated useful life. As of March 31, 2011, we had indefinite-lived intangible assets of $26.6 million related to purchased IPR&D from our acquisition of CGI.

8. COLLABORATIVE ARRANGEMENTS

From time to time, as a result of entering into strategic collaborations, we may hold investments in non-public companies. We review our interests in investee companies for consolidation and/or appropriate disclosure based on applicable guidance. Contractual terms which provide us control over an entity may require us to consolidate the entity. Entities consolidated because they are controlled by means other than a majority voting interest are referred to as variable interest entities (VIE). We assess whether we are the primary beneficiary of a 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. As of March 31, 2011, we determined that certain of our investee companies are VIEs; however, other than with respect to our joint ventures with BMS, we are not the primary beneficiary and therefore do not consolidate these investees.

Bristol-Myers Squibb Company

North America

In December 2004, we entered into a collaboration arrangement with BMS in the United States to develop and commercialize a single-tablet regimen containing our Truvada and BMS’s Sustiva (efavirenz), which we sell as Atripla. The collaboration is structured as a joint venture and operates as a limited liability company named Bristol-Myers Squibb & Gilead Sciences, LLC, which we consolidate. The ownership interests of the joint venture and thus the sharing of product revenue and costs reflect the respective economic interests of BMS and Gilead and are based on the proportions of the net selling price of Atripla attributable to efavirenz and Truvada. Since the net selling price for Truvada may change over time relative to the net selling price of efavirenz, both BMS’s and our respective economic interests in the joint venture may vary annually.

We share marketing and sales efforts with BMS and both parties are obligated to provide equivalent sales force efforts for a minimum number of years. Under the terms of the agreement, after the first quarter of 2011, the parties will only share in a limited number of activities in the United States that will be jointly managed. The parties will continue to collaborate on activities such as manufacturing, regulatory, compliance and pharmacovigilance. We are responsible for accounting, financial reporting, tax reporting, manufacturing and product distribution for the joint venture. Both parties provide their respective bulk active pharmaceutical ingredients to the joint venture at their approximate market values. In July 2006, the joint venture received approval from the FDA to sell Atripla in the United States. In September 2006, we and BMS amended the joint venture’s collaboration agreement to allow the joint venture to sell Atripla into Canada and in October 2007, the joint venture received approval from Health Canada to sell Atripla in Canada. As of March 31, 2011 and December 31, 2010, the joint venture held efavirenz active pharmaceutical ingredient which it purchased from BMS at BMS’s estimated net selling price of efavirenz in the U.S. market. These amounts are included in inventories on our Condensed Consolidated Balance Sheets. As of March 31, 2011 and December 31, 2010, total assets held by the joint venture were $1.56 billion and $1.45 billion, respectively, and consisted primarily of cash and cash equivalents, accounts receivable (including intercompany receivables with Gilead) and inventories. As of March 31, 2011 and December 31, 2010, total liabilities held by the joint venture were $ 947.2 million and $759.5 million, respectively, and consisted primarily of accounts payable (including intercompany payables with Gilead) and other accrued expenses. These asset and liability amounts do not reflect the impact of intercompany eliminations that are included in our Condensed Consolidated Balance Sheets. Although we are the primary beneficiary of the joint venture, the legal structure of the joint venture limits the recourse that its creditors will have over our general credit or assets.

Europe

In December 2007, Gilead Sciences Limited (GSL), a wholly-owned subsidiary in Ireland, and BMS entered into a collaboration arrangement to commercialize and distribute Atripla in the European Union, Iceland, Liechtenstein, Norway and Switzerland (collectively, the European Territory). The parties formed a limited liability company which we consolidate, to manufacture Atripla for distribution in the European Territory using efavirenz that it purchases from BMS at BMS’s estimated net selling price of efavirenz in the European Territory. We are responsible for product distribution, inventory management and warehousing. Through our local subsidiaries, we have primary responsibility for order fulfillment, collection of receivables, customer relations and handling of sales returns in all the territories where we co-promote Atripla with BMS. We are also responsible for accounting, financial reporting and tax reporting for the collaboration. In December 2007, the European Commission approved Atripla for sale in the European Union. As of March 31, 2011 and December 31, 2010, efavirenz purchased from BMS at BMS’s estimated net selling price of efavirenz in the European Territory is included in inventories on our Condensed Consolidated Balance Sheets.

The parties also formed a limited liability company to hold the marketing authorization for Atripla in Europe. We have primary responsibility for regulatory activities and we share marketing and sales efforts with BMS. In the major market countries, both parties have agreed to provide equivalent sales force efforts. Revenue and cost sharing is based on the relative ratio of the respective net selling prices of Truvada and efavirenz.

Yale School of Medicine

In March 2011, we announced the formation of a multi-year research collaboration with the Yale School of Medicine (Yale), focused on the discovery of novel cancer therapies. The research effort will initially span four years with an option to renew for up to ten years. We will provide $40 million in research support and basic science infrastructure development during the initial four-year period, and will provide a total of up to $100 million over ten years should the collaboration be extended through that timeframe. We will have the first option to license Yale inventions that result from the collaboration. Expenses related to this collaboration agreement commenced in April 2011 and will be recorded as part of research and development expenses on our Condensed Consolidated Statement of Income.

9. LONG-TERM OBLIGATIONS

Financing Arrangements

The following table summarizes the carrying amount of our borrowings under various financing arrangements (in thousands):


	March 31, 2011		December 31, 2010
2011 convertible senior notes	$	647,238	$	638,991
2013 convertible senior notes		584,172		576,884
2014 convertible senior notes		1,160,635		1,153,805
2016 convertible senior notes		1,113,901		1,107,884
2021 senior unsecured notes		991,422		—

Total debt, net	$	4,497,368	$	3,477,564
Less current portion (2011 convertible senior notes)		647,238		638,991

Total long-term debt, net	$	3,850,130	$	2,838,573

2021 Senior Unsecured Notes

In March 2011, we issued the 2021 Notes in a registered offering for an aggregate principal amount of $1.00 billion. The 2021 Notes will mature on April 1, 2021 and pay interest at a fixed annual rate of 4.50%. Debt issuance costs incurred in connection with the issuance of this debt totaled approximately $5.83 million and are being amortized to interest expense over the contractual term of the 2021 Notes.

The 2021 Notes may be redeemed at our option at any time or from time to time, at a redemption price equal to the greater of (i) 100% of the principal amount of the notes to be redeemed and (ii) the sum, as determined by an independent investment banker, of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis at the Treasury Rate plus 20 basis points, plus, in each case, accrued and unpaid interest on the notes to be redeemed to the date of redemption. At any time on or after January 1, 2021, we may redeem the notes, in whole or in part, at 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to the date of redemption. In addition, in the event of the occurrence of both a change in control and a downgrade in the rating of the 2021 Notes below an investment grade rating by Standard & Poor’s Ratings Services and Moody’s Investors Service, Inc., the holders may require us to purchase all or a portion of their notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest.

We expect to use the net proceeds for general corporate purposes, which include the repayment of existing indebtedness and repurchases of our common stock.

Credit Facility

The credit agreement also includes a sub-facility for swing-line loans and letters of credit. Loans under the credit agreement bear interest at an interest rate of either LIBOR plus a margin ranging from 20 basis points to 32 basis points or the base rate, as described in the credit agreement. We may reduce the commitments and may prepay loans under the credit agreement in whole or in part at any time without penalty, subject to certain conditions. The credit agreement will terminate in December 2012 and all unpaid borrowings thereunder shall be due and payable at that time. As of March 31, 2011, we had $2.4 million in letters of credit outstanding under the $1.25 billion credit agreement. We are required to comply with certain covenants under the credit agreement and as of March 31, 2011, we were in compliance with all such covenants.

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

We are a party to various legal actions that arose in the ordinary course of our business. We do not believe that any of these legal actions will have a material adverse impact on our consolidated business, financial position or results of operations.

11. STOCK-BASED COMPENSATION EXPENSES

The following table summarizes the stock-based compensation expenses included in our Condensed Consolidated Statements of Income (in thousands):


	Three Months Ended March 31,
	2011			2010
Cost of goods sold	$	2,644		$	2,853
Research and development expenses		16,720			20,069
Selling, general and administrative expenses		30,106			23,919

Stock-based compensation expenses included in total costs and expenses		49,470			46,841
Income tax effect		(12,856	)		(12,428	)

Stock-based compensation expenses included in net income	$	36,614		$	34,413

12. STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

Under our current three-year, $5.00 billion stock repurchase program authorized by our Board of Directors (Board) in May 2010, we repurchased $3.57 billion of our common stock through March 31, 2011. As of March 31, 2011, the remaining authorized amount of stock repurchases that may be made under our current repurchase program was $1.43 billion. During the three months ended March 31, 2011, our total repurchase activity was $548.5 million which resulted in the repurchase and retirement of 14.0 million shares of our common stock at an average purchase price of $39.12 per share.

In January 2011, our Board authorized an additional three-year, $5.00 billion stock repurchase program which will commence upon the completion of our existing program authorized in May 2010.

We use the par value method of accounting for our stock repurchases. Under the par value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value is allocated to additional paid-in capital (APIC) based on an estimated average sales price per issued share with the excess amounts charged to retained earnings. As a result of our stock repurchases during the three months ended March 31, 2011, we reduced common stock and APIC by an aggregate of $42.4 million and charged $514.9 million to retained earnings.

Comprehensive Income

The components of comprehensive income were as follows (in thousands):


	Three Months Ended March 31,
	2011			2010
Net income	$	647,303		$	852,094
Other comprehensive income (loss):
Net foreign currency translation gain (loss)		7,194			(9,409	)
Net unrealized gain (loss) on available-for-sale securities, net of related tax effects		(3,119	)		854
Net unrealized gain (loss) on cash flow hedges, net of related tax effects		(136,169	)		97,786

Total other comprehensive income (loss)		(132,094	)		89,231

Comprehensive income		515,209			941,325
Comprehensive loss attributable to noncontrolling interest		3,838			2,807

Comprehensive income attributable to Gilead	$	519,047		$	944,132

13. SEGMENT INFORMATION

We operate in one business segment, which primarily focuses on the development and commercialization of human therapeutics for life threatening diseases. All products are included in one segment because our major products, Atripla, Truvada and Viread, which together accounted for substantially all of our total product sales for the three months ended March 31, 2011 and 2010, have similar economic and other characteristics, including the nature of the products and production processes, type of customers, distribution methods and regulatory environment.

Product sales consisted of the following (in thousands):


	Three Months Ended March 31,
	2011		2010
Antiviral products:
Atripla	$	744,512	$	692,872
Truvada		673,111		657,799
Viread		168,395		180,686
Hepsera		38,096		58,124
Emtriva		6,576		7,156

Total antiviral products		1,630,690		1,596,637
AmBisome		78,506		77,049
Letairis		62,174		55,499
Ranexa		68,293		51,243
Other products		23,915		7,635

Total product sales	$	1,863,578	$	1,788,063

The following table summarizes total revenues from external customers and collaboration partners by geographic region (in thousands). Product sales and product-related contract revenues are attributed to countries based on ship-to location. Royalty and non-product related contract revenues are attributed to countries based on the location of the collaboration partner.


	Three Months Ended March 31,
	2011		2010
United States	$	1,035,794	$	1,012,484
Outside of the United States:
Switzerland		32,566		261,245
France		133,897		124,717
Spain		119,631		124,320
United Kingdom		120,861		118,170
Italy		101,436		96,260
Germany		76,073		70,012
Other European countries		156,638		159,713
Other countries		149,198		118,932

Total revenues outside of the United States		890,300		1,073,369

Total revenues	$	1,926,094	$	2,085,853

The following table summarizes revenues from each of our customers who individually accounted for 10% or more of our total revenues (as a % of total revenues):


	Three Months Ended March 31,
	2011			2010
Cardinal Health, Inc.		17	%		16	%
McKesson Corp.		15	%		13	%
AmerisourceBergen Corp.		13	%		12	%

14. INCOME TAXES

Our income tax rate of 26.0% for the three months ended March 31, 2011 differed from the U.S. federal statutory rate of 35% due primarily to tax credits and certain operating earnings from non-U.S subsidiaries that are considered indefinitely invested outside of the United States, partially offset by state taxes and our portion of the non-tax deductible pharmaceutical excise tax. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be permanently reinvested.

We file federal, state and foreign income tax returns in many jurisdictions in the United States and abroad. For federal income tax purposes, the statute of limitations is open for 2003 and onwards. For certain acquired entities, the statute of limitations is open for all years from inception due to our utilization of their net operating losses and credits carried over from prior years. For California income tax purposes, the statute of limitations is open for 2002 and onwards.

Our income tax returns are audited by federal, state and foreign tax authorities. We are currently under examination by the Internal Revenue Service (IRS) for the 2005, 2006 and 2007 tax years and by various state and foreign jurisdictions. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. Each quarter we evaluate our exposures associated with our tax filing positions.

As of March 31, 2011, we believe it is reasonably possible that our unrecognized tax benefits will decrease by approximately $6.0 million in the next 12 months as we expect to have clarification from the IRS and other tax authorities around some of our uncertain tax positions. With respect to the remaining unrecognized tax benefits, we are currently unable to make a reasonable estimate as to the period of cash settlement, if any, with the respective tax authorities.

We record liabilities related to uncertain tax positions in accordance with the income tax guidance which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We do not believe any such uncertain tax positions currently pending will have a material adverse effect on our Condensed Consolidated Financial Statements, although an adverse resolution of one or more of these uncertain tax positions in any period could have a material impact on the results of operations for that period.

15. SUBSEQUENT EVENTS

Acquisition of Calistoga Pharmaceuticals, Inc.

In February 2011, we entered into an agreement to acquire Calistoga Pharmaceuticals, Inc. (Calistoga) for $375 million plus potential payments of up to $225 million based on the achievement of certain milestones. This transaction closed on April 1, 2011, at which time Calistoga became a wholly-owned subsidiary. Calistoga was a privately-held, biotechnology company based in Seattle, Washington, focused on the development of medicines to treat cancer and inflammatory diseases. This acquisition has provided us with a portfolio of proprietary compounds that selectively target isoforms of phosphoinositide-3 kinase (P13K). The lead product candidate, CAL-101, is a first-in-class specific inhibitor of the P13K delta isoform. P13K delta is preferentially expressed in leukocytes involved in a variety of inflammatory and autoimmune diseases and hematological cancers. We believe that the acquisition of Calistoga further broadens our pipeline and expertise in the areas of oncology and inflammation. Given the timing of the closing of this acquisition, we are currently in the process of valuing the assets acquired and liabilities assumed in the business combination. As a result, we are unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed and certain disclosures pertaining to the contingent consideration.

2011 Convertible Senior Notes

On May 1, 2011, our 2011 Notes matured. We will repay an aggregate principal balance of $650.0 million.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q 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). 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,” “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.” 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. 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, 2010 and our unaudited Condensed Consolidated Financial Statements for the three months ended March 31, 2011 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 Asia Pacific. We market products in the HIV/AIDS, liver disease, respiratory and cardiovascular/metabolic therapeutic areas. Our product portfolio is comprised of Atripla ^® (efavirenz 600 mg/emtricitabine 200 mg/tenofovir disoproxil fumarate 300 mg), Truvada ^® (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; 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; Cayston ^® (aztreonam for inhalation solution) as a treatment to improve respiratory symptoms in cystic fibrosis (CF) patients with Pseudomonas aeruginosa ( P. aeruginosa ); and Vistide ^® (cidofovir injection) for the treatment of cytomegalovirus infection.

In addition, we also sell and distribute certain products through our corporate partners under royalty-paying collaborative agreements. For example, F. Hoffmann-La Roche Ltd (together with Hoffmann-La Roche Inc.,

Roche) markets Tamiflu ^® (oseltamivir phosphate) for the treatment and prevention of influenza; GlaxoSmithKline Inc. (GSK) markets Hepsera and Viread for the treatment of chronic hepatitis B in certain territories outside of the United States; GSK also markets Volibris ^® (ambrisentan) outside of the United States for the treatment of PAH; Astellas Pharma US, Inc. markets AmBisome for the treatment of severe fungal infections in the United States and Canada; Astellas US LLC markets Lexiscan ^® (regadenoson) injection in the United States for use as a pharmacologic stress agent in radionuclide myocardial perfusion imaging; Rapidscan Pharma Solutions, Inc. markets Rapiscan ^® (regadenoson) in certain territories outside of the United States for the inducement of pharmacological stress and/or vasodilation of the coronary vasculature strictly for purposes of diagnosing cardiovascular disease; Menarini International Operations Luxembourg SA markets Ranexa in certain territories outside of the United States for the treatment of chronic angina; and Japan Tobacco Inc. markets Truvada, Viread and Emtriva in Japan.

Business Highlights

During the first quarter of 2011, we continued to grow our business, strengthen our product portfolio and advance pipeline programs, and make strategic investments in our business. Product sales increased by 4% over the first quarter of 2010, driven by strong market demand growth across our therapeutic areas despite net price reductions taken in the United States due to healthcare reform and austerity measures in certain European countries. Excluding the impact of Tamiflu royalties which decreased due to a decline in pandemic planning initiatives worldwide, diluted earnings per share would have increased by approximately 9% for the three months ended March 31, 2011 over the same period last year.

HIV

In February 2011, we announced the refiling of our New Drug Application (NDA) with the U.S. Food and Drug Administration (FDA) for the single-tablet regimen of Truvada and Tibotec Pharmaceuticals’s investigational non-nucleoside reverse transcriptase inhibitor TMC278 (rilpivirine hydrochloride) for the treatment of HIV-1 infection in adults. We had previously submitted an NDA for the single-tablet regimen of Truvada/TMC278 in 2010. In January 2011 we announced that we had received a “refuse to file” notification from the FDA requesting additional information on the analytical methodology and qualification data used to establish acceptable levels of recently identified degradants related to emtricitabine; this information was included in the refiling. On April 6, 2011, we were notified that the FDA had accepted the filing, granting it a “Priority Review” and assigning a Prescription Drug User Fee Act date of August 10, 2011.

In March 2011, we also announced the topline results of the Phase III clinical trial of our investigational antiretroviral agent elvitegravir, a novel oral HIV integrase inhibitor. The primary endpoint of this study was non-inferiority at week 48 of elvitegravir, dosed once daily, compared to raltegravir, dosed twice daily, each administered with a background regimen that includes a ritonavir-boosted protease inhibitor and a second antiretroviral agent in HIV-infected treatment-experienced patients. Responses at 48 weeks of elvitegravir met the statistical criteria of non-inferiority as compared to raltegravir based on the proportion of subjects who achieved and maintained HIV RNA levels (viral load) of less than 50 copies/mL. Discontinuation rates due to adverse events were comparable in both arms of the study.

Cardiovascular

In March 2011, we announced that the FDA had approved a change to the prescribing information for Letairis, our once-daily treatment to improve exercise ability and delay clinical worsening in PAH patients with predominantly WHO Functional Class II-III symptoms. This change removed language concerning the potential risk of liver injury from the Boxed Warning. In conjunction with this label update, PAH patients receiving Letairis are no longer required to obtain monthly liver function tests before their prescription of Letairis is sent to them. This change will help reduce the administrative burden on patients and the staff at the specialist centers who care for them.

Acquisitions and Business Development

We continue to deliver and remain focused on advancing our pipeline by capitalizing on selective opportunities consistent with our strategy towards innovative therapies in areas of unmet medical needs, which will drive both near and long-term growth.

Financial Highlights

Total product sales were $1.86 billion for the first quarter of 2011, an increase of 4% over total product sales of $1.79 billion for the same period last year driven by the strong fundamentals of our business with antiviral market demand growth of 11% and 9% in the United States and Europe, respectively. While we had strong growth in product sales, our operating results for the three months ended March 31, 2011 were significantly impacted by an 80% reduction in royalty revenues compared to the three months ended March 31, 2010. This was primarily due to decreased Tamiflu sales by Roche as influenza pandemic planning initiatives worldwide declined.

For the three months ended March 31, 2011, Atripla product sales increased 7% over the same period in 2010 primarily driven by sales volume growth in both the United States and Europe, and contributed $744.5 million, or 46%, to our first quarter 2011 antiviral product sales. For the three months ended March 31, 2011, Truvada product sales increased 2% over the same period in 2010 primarily driven by sales volume growth in the United States, Europe and Latin America, and contributed $673.1 million, or 41% to our first quarter 2011 antiviral product sales. Sequentially, while market demand growth for our antiviral franchise was 4% in the United States and 1% in Europe, our product sales decreased 3% from $1.93 billion in the fourth quarter of 2010, due primarily to declines in U.S. wholesaler inventory within the contractual boundaries set by our inventory management agreements and lower levels of purchasing by certain AIDS Drug Assistance Program (ADAP) entities. Foreign currency exchange had an unfavorable impact of $3.3 million and $6.6 million on our first quarter 2011 revenues and pre-tax earnings, respectively, compared to the first quarter of 2010.

In the first quarter of 2011, product sales in the United States increased 2% compared to the same quarter in 2010, primarily driven by the continued strong market demand growth of 11% in our antiviral franchise, offset by the impacts of U.S. healthcare reform and declines in wholesaler inventory. In addition, increased demand contributed to the sales growth in our cardiovascular and respiratory franchises. Ranexa sales in the United States contributed $67.1 million to our first quarter 2011 product sales, an increase of 32% over the same period in 2010. Letairis sales in the United States contributed $62.2 million to our first quarter 2011 product sales, an increase of 12% over the same period in 2010. Also, Cayston contributed a total of $19.8 million in its fourth full quarter of sales, the majority of which was in the United States. While antiviral market demand increased by 11% in the United States, antiviral product sales decreased 2% in the first quarter of 2011 compared to the same

quarter in 2010, due primarily to declines in wholesaler inventory and the impact of U.S. healthcare reform. Sequentially, while antiviral market demand growth was 4%, one of the largest gains in the past year, product sales in the United States decreased 7% quarter over quarter due to declines in wholesaler inventory and lower levels of purchasing by ADAP entities in Texas and Florida. While we have experienced lower purchasing by certain ADAP entities driven by uncertainties in the ADAP funding for fiscal year 2011, the recent announcement of a new Federal ADAP drug budget, which increased 6% over the previous year’s budget, and the release of the initial funds on April 1, 2011 has been positively welcomed by providers and advocacy groups.

In the first quarter of 2011, product sales in Europe increased 4% compared to the same quarter in 2010, due to strong continued market demand growth of our antiviral franchise partially offset by the impact of austerity measures in certain European countries. Antiviral product sales in Europe totaled $651.4 million in the first quarter of 2011, an increase of 4% compared to $623.5 million in the first quarter of 2010, driven primarily by sales of Atripla. Sequentially, antiviral product sales in Europe in the first quarter of 2011 were relatively consistent with the fourth quarter of 2010.

Our research and development (R&D) and selling, general and administrative (SG&A) expenses increased by $65.7 million, or 14%, for the three months ended March 31, 2011 compared to the same period in 2010. The increase was due primarily to the timing of reimbursements related to our collaboration with Tibotec Pharmaceuticals (Tibotec), the impact of the pharmaceutical excise tax resulting from U.S. healthcare reform, bad debt expenses associated with slower collections in southern European countries and higher headcount and expenses associated with acquisitions and ongoing growth of our business.

Cash, cash equivalents and marketable securities increased by $1.04 billion during the three months ended March 31, 2011, driven primarily by our operating cash flows of $820.5 million and proceeds of $987.4 million from the issuance of our 2021 senior unsecured notes (2021 Notes), net of related debt discount and issuance costs, partially offset by $221.1 million used to acquire Arresto Biosciences, Inc. (Arresto) and repurchases of our common stock under our stock repurchase program. Under our current three-year, $5.00 billion stock repurchase program, we repurchased $3.57 billion of our common stock through March 31, 2011. During the three months ended March 31, 2011, our total repurchase activity was $548.5 million which resulted in the repurchase and retirement of 14.0 million shares of our common stock at an average purchase price of $39.12 per share.

In January 2011, our Board authorized an additional three-year, $5.00 billion stock repurchase program which will commence upon the completion of our existing program authorized in May 2010. We intend to use the additional authorization to repurchase our shares from time to time to offset the dilution created by shares issued under employee stock plans and to repurchase shares opportunistically.

In March 2011, we issued our 2021 Notes in a registered offering for an aggregate principal amount of $1.00 billion. The 2021 Notes will mature on April 1, 2021 and pay interest at a fixed annual rate of 4.50%.

Critical Accounting Policies, Estimates and Judgments

There have been no material changes in our critical accounting policies, estimates and judgments during the three months ended March 31, 2011 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2010.

Results of Operations

Total Revenues

Total revenues for the three months ended March 31, 2011 were $1.93 billion, compared to $2.09 billion for the same period in 2010. Included in total revenues were product sales, royalty revenues and contract and other revenues. A significant percentage of our product sales continued to be denominated in foreign currencies and we

face exposure to adverse movements in foreign currency exchange rates. We used foreign currency exchange forward and option contracts to hedge a percentage of our forecasted international sales, primarily those denominated in Euro. Foreign currency exchange had an unfavorable impact of $3.3 million on our first quarter 2011 revenues compared to the first quarter of 2010.

Product Sales

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


	Three Months Ended March 31,				Change
	2011		2010		Change
Antiviral products:
Atripla	$	744,512	$	692,872		7	%
Truvada		673,111		657,799		2	%
Viread		168,395		180,686		(7	)%
Hepsera		38,096		58,124		(34	)%
Emtriva		6,576		7,156		(8	)%

Total antiviral products		1,630,690		1,596,637		2	%
AmBisome		78,506		77,049		2	%
Letairis		62,174		55,499		12	%
Ranexa		68,293		51,243		33	%
Other products		23,915		7,635		213	%

Total product sales	$	1,863,578	$	1,788,063		4	%

Total product sales increased by 4% for the three months ended March 31, 2011 compared to the same period in 2010. This increase was due primarily to the growth of Atripla sales.

Antiviral Products

Antiviral product sales increased by 2% for the three months ended March 31, 2011 compared to the same period in 2010.

•

Atripla

Atripla sales increased by 7% for the three months ended March 31, 2011 compared to the same period in 2010, driven primarily by sales volume growth in the United States and Europe. Atripla sales include the efavirenz component which has a gross margin of zero. The efavirenz portion of our Atripla sales was approximately $273.9 million and $255.8 million for the three months ended March 31, 2011 and 2010, respectively. Atripla sales accounted for 46% of our total antiviral product sales for the three months ended March 31, 2011.

•

Truvada

Truvada sales increased by 2% for the three months ended March 31, 2011 compared to the same period in 2010, driven primarily by sales volume growth in the United States, Europe and Latin America. Truvada sales accounted for 41% of our total antiviral product sales for the three months ended March 31, 2011.

•

Other Antiviral Products

Other antiviral product sales, which include product sales of Viread, Hepsera and Emtriva, decreased by 13% for the three months ended March 31, 2011 compared to the same period in 2010, due primarily to decreased sales volume for Hepsera in the United States and Europe and decreased sales volume for Viread in Brazil.

AmBisome

Sales of AmBisome increased by 2% for the three months ended March 31, 2011 compared to the same period in 2010. The increase for the three months ended March 31, 2011 was due primarily to sales volume growth in Europe. AmBisome product sales in the United States and Canada relate solely to our sales of AmBisome to Astellas Pharma US, Inc. which are recorded at our manufacturing cost.

Letairis

Sales of Letairis increased by 12% for the three months ended March 31, 2011 compared to the same period in 2010, driven primarily by sales volume growth.

Ranexa

Sales of Ranexa increased by 33% for the three months ended March 31, 2011 compared to the same period in 2010, driven primarily by sales volume growth.

Royalty Revenues

The following table summarizes the period over period changes in our royalty revenues (in thousands):


	Three Months Ended March 31,				Change
	Three Months Ended March 31,
	2011		2010
Royalty revenues	$	58,665	$	293,681		(80	)%

Historically, our most significant source of royalty revenues has been from sales of Tamiflu by Roche. We recognize royalties on Tamiflu sales by Roche in the quarter following the quarter in which Tamiflu sales are recognized by Roche.

Royalty revenues for the three months ended March 31, 2011 were $58.7 million, a decrease of 80% or $235.0 million compared to the same period in 2010, due to lower Tamiflu royalties from Roche of $11.1 million in the three months ended March 31, 2011, compared to Tamiflu royalties from Roche of $246.3 million in the same period in 2010. Tamiflu royalties declined sharply in the second quarter of 2010 and continued to decline through the first quarter of 2011 due to the fulfillment of many of the existing pandemic orders from governments and corporations.

Cost of Goods Sold and Product Gross Margin

The following table summarizes the period over period changes in our product sales (in thousands), cost of goods sold (in thousands) and product gross margin:


	Three Months Ended March 31,				Change
	2011		2010		Change
Total product sales	$	1,863,578	$	1,788,063		4%
Cost of goods sold	$	474,111	$	440,430		8%
Product gross margin		75%		75%

Our product gross margin for the three months ended March 31, 2011 was 75%, consistent with our product gross margin for the same period in 2010.

Research and Development Expenses

The following table summarizes the period over period changes in our R&D expenses (in thousands):


	Three Months Ended March 31,				Change
	2011		2010		Change
Research and development	$	254,446	$	218,664		16	%

R&D expenses consist primarily of personnel costs, including salaries, benefits and stock-based compensation, clinical studies performed by contract research organizations, materials and supplies, licenses and fees, milestone payments under collaboration arrangements and overhead allocations consisting of various support and facilities-related costs.

R&D expenses for the three months ended March 31, 2011 increased by $35.8 million, or 16%, compared to the same period in 2010, due primarily to $20.2 million of R&D expense reimbursements related to our collaboration with Tibotec and an increase in other contract and professional services of $10.9 million associated with the ongoing growth of our business.

Selling, General and Administrative Expenses

The following table summarizes the period over period changes in our SG&A expenses (in thousands):


	Three Months Ended March 31,				Change
	2011		2010		Change
Selling, general and administrative	$	295,568	$	265,618		11	%

SG&A expenses for the three months ended March 31, 2011 increased by $30.0 million, or 11%, compared to the same period in 2010. This was due primarily to a $12.2 million increase in compensation and benefits expenses related to higher headcount to support our expanding commercial activities, $11.8 million of estimated pharmaceutical excise tax charges resulting from U.S. healthcare reform, a $10.6 million increase in contract and professional services expenses and a $7.7 million increase in bad debt expenses associated with slower collections in southern European countries. These increases were partially offset by a $12.2 million decrease in expenses related to our 2010 restructuring activities which were comprised primarily of lease termination costs.

Interest and Other Income, Net

Interest and other income, net for the three months ended March 31, 2011 decreased by $1.8 million compared to the same period in 2010, due primarily to an unfavorable net foreign currency exchange impact.

Interest Expense

Interest expense for the three months ended March 31, 2011 increased by $24.3 million compared to the same period in 2010, due primarily to the issuance of our convertible senior notes for $2.46 billion, net of issuance costs, in July 2010. We expect interest expense to continue to increase as a result of the issuance of our 2021 Notes for $987.4 million, net of related debt discount and issuance costs, in March 2011.

Provision for Income Taxes

Our provision for income taxes was $227.3 million for the three months ended March 31, 2011 compared to $307.7 million for the three months ended March 31, 2010. Our effective tax rate was 26.0% for the three months

ended March 31, 2011 compared to our effective tax rate of 26.5% for the three months ended March 31, 2010. The effective tax rate for the three months ended March 31, 2011 was lower than the effective tax rate for the three months ended March 31, 2010 as a result of the federal research tax credit and lower state taxes partially offset by our portion of the non-tax deductible pharmaceutical excise tax.

The effective tax rate for the three months ended March 31, 2011 differed from the U.S. federal statutory rate of 35% due primarily to tax credits and certain operating earnings from non-U.S. subsidiaries that are considered indefinitely invested outside of the United States, partially offset by state taxes and our portion of the non-tax deductible pharmaceutical excise tax. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be permanently reinvested.

Liquidity and Capital Resources

The following table summarizes our cash, cash equivalents and marketable securities, our working capital and our cash flow activities as of the end of, and for each of, the periods presented (in thousands):


	As of March 31, 2011		As of December 31, 2010
Cash, cash equivalents and marketable securities	$	6,356,298	$	5,318,071
Working capital	$	4,082,367	$	3,243,132


	Three Months Ended March 31,
	2011			2010
Cash provided by (used in):
Operating activities	$	820,542		$	670,569
Investing activities	$	(300,381	)	$	(1,068,778	)
Financing activities	$	485,110		$	16,032

Cash, Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities totaled $6.36 billion at March 31, 2011, an increase of $1.04 billion or 20% from December 31, 2010. This increase was primarily attributable to net cash provided by operations of $820.5 million and $987.4 million of net proceeds from the issuance of our 2021 Notes, partially offset by $221.1 million used to acquire Arresto and $548.7 million used to repurchase common stock under our stock repurchase program, including commissions.

Working Capital

Working capital was $4.08 billion at March 31, 2011, an increase of $839.2 million or 26% from working capital as of December 31, 2010. This increase was primarily attributable to:

•

an increase of $912.6 million in cash, cash equivalents and short-term marketable securities; and

•

an increase of $179.2 million in accounts receivable, net, primarily driven by slower collections in southern European countries.

This increase was partially offset by:

•

an increase of $178.6 million in accounts payable, due primarily to the purchases of efavirenz from Bristol-Myers Squibb Company.

Cash Provided by Operating Activities

Cash provided by operating activities of $820.5 million for the three months ended March 31, 2011 primarily related to net income of $647.3 million, adjusted for non-cash items such as $80.9 million of depreciation and amortization expenses, $49.5 million of stock-based compensation expenses, $12.1 million of

tax benefits from employee stock plans and $31.7 million of net cash inflow related to changes in operating assets and liabilities. This was partially offset by $14.3 million of excess tax benefits from stock option exercises which we reclassified to cash provided by financing activities.

Cash provided by operating activities of $670.6 million for the three months ended March 31, 2010 primarily related to net income of $852.1 million, adjusted for non-cash items such as $60.1 million of depreciation and amortization expenses, $46.8 million of stock-based compensation expenses and $51.7 million of tax benefits from employee stock plans. This was partially offset by $323.8 million of net cash outflow related to changes in operating assets and liabilities and $49.8 million of excess tax benefits from stock option exercises which we reclassified to cash provided by financing activities.

Cash Used in Investing Activities

Cash used in investing activities for the three months ended March 31, 2011 was $300.4 million, consisting of a net use of $64.4 million in purchases of marketable securities, $221.1 million used in our acquisition of Arresto and $14.9 million of capital expenditures.

Cash used in investing activities for the three months ended March 31, 2010 was $1.07 billion, consisting of a net use of $1.06 billion in purchases of marketable securities and $11.7 million of capital expenditures.

Cash Provided by Financing Activities

Cash provided by financing activities for the three months ended March 31, 2011 was $485.1 million, driven primarily by the $987.4 million of net proceeds from the issuance of our 2021 Notes, partially offset by $548.7 million in cash used to repurchase our common stock under our stock repurchase program, including commissions.

Cash provided by financing activities for the three months ended March 31, 2010 was $16.0 million, driven primarily by $103.4 million of proceeds from issuances of common stock under our employee stock plans, $49.8 million of excess tax benefits from stock option exercises and $25.4 million of distributions from our noncontrolling interest, partially offset by $162.5 million in cash used to repurchase our common stock under our stock repurchase program, including commissions.

Other Information

Under our current three-year, $5.00 billion stock repurchase program authorized by our Board in May 2010, we repurchased $3.57 billion of our common stock through March 31, 2011. As of March 31, 2011, the remaining authorized amount of stock repurchases that may be made under our $5.00 billion repurchase program was $1.43 billion. During the three months ended March 31, 2011, our total repurchase activity was $548.5 million which resulted in the repurchase and retirement of 14.0 million shares of our common stock at an average purchase price of $39.12 per share.

Under our amended and restated credit agreement, we, along with our wholly-owned subsidiary, Gilead Biopharmaceutics Ireland Corporation, may borrow up to an aggregate of $1.25 billion in revolving credit loans. The credit agreement also includes a sub-facility for swing-line loans and letters of credit. Loans under the credit agreement bear interest at an interest rate of either LIBOR plus a margin ranging from 20 basis points to 32 basis points or the base rate, as described in the credit agreement. The credit agreement will terminate in December

2012 and all unpaid borrowings thereunder shall be due and payable at that time. We may reduce the commitments and may prepay loans under the credit agreement in whole or in part without penalty, subject to certain conditions. As of March 31, 2011, approximately $1.25 billion was available to be drawn down under this credit agreement.

On May 1, 2011, our convertible senior notes due in 2011 matured. We will repay an aggregate principal balance of $650.0 million.

We believe that our existing funds, cash generated from operations and existing sources of and access to financing are adequate to satisfy our capital needs for the foreseeable future.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

Recent Accounting Pronouncements

There have been no new accounting pronouncements during the three months ended March 31, 2011 that are of significance to us.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the three months ended March 31, 2011 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2010.

A portion of our marketable securities consist of auction rate securities. In 2008, we began observing the failed auctions for our auction rate securities for which the underlying assets are comprised of student loans. Most of our auction rate securities, including those subject to the failed auctions, are currently rated AAA, consistent with the high quality rating required by our investment policy, are supported by the federal government as part of the Federal Family Education Loan Program and are over-collateralized. Our auction rate securities reset every seven to 14 days with maturity dates ranging from 2025 through 2040 and have annual interest rates ranging from 0.23% to 1.11%. As of March 31, 2011, our auction rate securities continued to earn interest.

If auctions continue to fail for securities in which we have invested, we may be unable to liquidate some or all of our auction rate securities at par should we need or desire to access the funds invested in those securities. However, based on our total cash and marketable securities position, our expected operating cash flows as well as access to funds through our credit facility, we believe that we will be able to hold these securities until there is a recovery in the auction market and the related securities, which may be at final maturity. As a result, we do not anticipate that the current illiquidity of these auction rate securities will have a material effect on our cash requirements or working capital.

In 2010, we agreed to settle a portion of our outstanding accounts receivable with the Greek government in zero-coupon bonds issued by the Greek government. As of March 31, 2011, we have received substantially all of the bonds. Currently, these bonds trade infrequently on the open market at a substantial discount to the face value. We believe we will be able to hold these securities until maturity. As a result, we do not anticipate that the illiquidity of these securities will have a material effect on our cash requirements or working capital.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation as of March 31, 2011 was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “disclosure controls and procedures,” which are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act), as controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at March 31, 2011.

Changes in Internal Control over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2011, and has concluded that there was no change during such quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met and, as set forth above, our Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

PART II.

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

In November 2008, we received notice that Teva Pharmaceuticals (Teva) submitted an abbreviated new drug application (ANDA) to the FDA requesting permission to manufacture and market a generic version of Truvada. In the notice, Teva alleges that two of the patents associated with emtricitabine, owned by Emory University and licensed exclusively to us, are invalid, unenforceable and/or will not be infringed by Teva’s manufacture, use or sale of a generic version of Truvada. In December 2008, we filed a lawsuit in U.S. District Court in New York against Teva for infringement of the two emtricitabine patents. In March 2009, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Atripla. In the notice, Teva challenged the same two emtricitabine patents. In May 2009, we filed another lawsuit in U.S. District Court in New York against Teva for infringement of the two emtricitabine patents, and this lawsuit was consolidated with the lawsuit filed in December 2008. In January 2010, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Viread. In the notice, Teva challenged four of the tenofovir disoproxil fumarate patents protecting Viread. In January 2010, we also received notices from Teva amending its ANDAs related to Atripla and Truvada. In the notice related to Atripla, Teva challenged four patents related to tenofovir disoproxil fumarate, two additional patents related to emtricitabine and two patents related to efavirenz. In the notice related to Truvada, Teva challenged four patents related to tenofovir disoproxil fumarate and two additional patents related

to emtricitabine. In March 2010, we filed a lawsuit against Teva for infringement of the four Viread patents and two additional emtricitabine patents. In March 2010, BMS and Merck filed a lawsuit against Teva for infringement of the patents related to efavirenz.

In June 2010, we received notice that Lupin Limited (Lupin) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Ranexa. In the notice, Lupin alleges that ten of the patents associated with Ranexa are invalid, unenforceable and/or will not be infringed by Lupin’s manufacture, use or sale of a generic version of Ranexa. In July 2010, we filed a lawsuit in U.S. District Court in New Jersey against Lupin for infringement of our patents for Ranexa.

In August 2010, we received notice that Sigmapharm Labs (Sigmapharm) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Hepsera. In the notice, Sigmapharm alleges that both of the patents associated with Hepsera are invalid, unenforceable and/or will not be infringed by Sigmapharm’s manufacture, use or sale of a generic version of Hepsera. In September 2010, we filed a lawsuit in U.S. District Court in New Jersey against Sigmapharm for infringement of our patents for Hepsera. One of the patents challenged by Sigmapharm is also being challenged by Ranbaxy, Inc. (Ranbaxy) pursuant to a notice received in October 2010. The patent challenged by Ranbaxy expires in July 2018. We are considering our options for enforcing our patent.

In February 2011, we received notice that Natco Pharma Ltd. (Natco) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Tamiflu. In the notice, Natco alleges that one of the patents associated with Tamiflu is invalid, unenforceable and/or will not be infringed by Natco’s manufacture, use or sale of a generic version of Tamiflu. In March 2011, we and F. Hoffmann-La Roche Ltd. filed a lawsuit in U.S. District Court in New Jersey and Delaware against Natco for infringement of the patent associated with Tamiflu.

We cannot predict the ultimate outcome of these actions, and we may spend significant resources enforcing and defending these patents. If we are unsuccessful in these lawsuits, some or all of our original claims in the patents may be narrowed or invalidated and the patent protection for Atripla, Truvada, Viread, Hepsera, Ranexa and Tamiflu in the United States could be substantially shortened. Further, if all of the patents covering those products are invalidated, the FDA could approve the requests to manufacture a generic version of such products prior to the expiration date of those patents.

ITEM 1A.

RISK FACTORS

In evaluating our business, you should carefully consider the following risks in addition to the other information in this Quarterly Report on Form 10-Q. A manifestation of any of the following risks could materially and adversely affect our business, results of operations and financial condition. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors and, therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.

A substantial portion of our revenues is derived from sales of our HIV products, particularly Atripla and Truvada. If we are unable to maintain or continue increasing sales of these products, our results of operations may be adversely affected.

We are currently dependent on sales of our products for the treatment of HIV infection, particularly Atripla and Truvada, to support our existing operations. Our HIV products contain tenofovir disoproxil fumarate and/or emtricitabine, which belong to the nucleoside class of antiviral therapeutics. Were the treatment paradigm for HIV to change, causing nucleoside-based therapeutics to fall out of favor, or if we were unable to maintain or continue increasing our HIV product sales, our results of operations would likely suffer and we would likely need to scale back our operations, including our spending on research and development (R&D) efforts. For the quarter

ended March 31, 2011, Atripla and Truvada product sales together were $1.42 billion, or 74% of our total revenues. We may not be able to maintain or sustain the growth rate of sales of our HIV products, especially Atripla and Truvada, for any number of reasons including, but not limited to, the following:

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As our HIV products are used over a longer period of time in many patients and in combination with other products, and additional studies are conducted, new issues with respect to safety, resistance and interactions with other drugs may arise, which could cause us to provide additional warnings or contraindications on our labels, narrow our approved indications or halt sales of a product, each of which could reduce our revenues.

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As our HIV products mature, private insurers and government reimbursers often reduce the amount they will reimburse patients for these products, which increases pressure on us to reduce prices.

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A large part of the market for our HIV products consists of patients who are already taking other HIV drugs. If we are not successful in encouraging physicians to change patients’ regimens to include our HIV products, the sales of our HIV products will be limited.

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As generic HIV products are introduced into major markets, our ability to maintain pricing and market share may be affected.

If we fail to commercialize new products or expand the indications for existing products, our prospects for future revenues may be adversely affected.

If we do not introduce new products to market or increase sales of our existing products, we will not be able to increase or maintain our total revenues and continue to expand our R&D efforts. Drug development is inherently risky and many product candidates fail during the drug development process. For example, in January 2011, we announced our decision to terminate our Phase 3 clinical trial of ambrisentan in patients with idiopathic pulmonary fibrosis. In April 2011, we announced our decision to terminate our Phase 3 clinical trial of aztreonam for inhalation solution for the treatment of CF in patients with Burkholderia spp . In addition, our new drug application (NDA) for the single-tablet regimen of Truvada and Tibotec Pharmaceuticals’s investigational TMC278 for the treatment of HIV-1 infection in adults, which we re-filed in February 2011 in response to a “refuse to file” notification from the FDA requesting additional information, may not be approved by the U.S. Food and Drug Administration (FDA). Further, even if marketing approval is granted, the product label negotiated with the FDA could limit the uptake of the product by patients.

Our results of operations will be adversely affected by current and potential future healthcare reforms.

Legislative and regulatory changes to government prescription drug procurement and reimbursement programs occur relatively frequently in the United States and foreign jurisdictions. In March 2010, healthcare reform legislation was adopted in the United States. As a result, we are required to further rebate or discount products reimbursed or paid for by various public payers, including Medicaid and other entities eligible to purchase discounted products through the 340B Drug Pricing Program under the Public Health Service Act, such as AIDS Drug Assistance Programs (ADAPs). The discounts, rebates and fees in the legislation that impacted us include:

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our minimum base rebate amount owed to Medicaid on products reimbursed by Medicaid has been increased by 8%, and the discounts or rebates we owe to ADAPs and other Public Health Service entities which reimburse or purchase our products have also been increased by 8%;

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we are required to extend rebates to patients receiving our products through Medicaid managed care organizations;

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we are required to provide a 50% discount on products sold to patients while they are in the Medicare Part D “donut hole;” and

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we, along with other pharmaceutical manufacturers of branded drug products, are required to pay a portion of a new industry fee (also known as the pharmaceutical excise tax), calculated based on select government sales during the 2010 calendar year as a percentage of total industry government sales.

For 2011, excluding the impact of the new pharmaceutical excise tax, we estimate that the impact of healthcare reform on product sales will be approximately 5-6% of our U.S. net product sales.

Many of the specific determinations necessary to implement the healthcare reform legislation have yet to be decided and communicated by the federal government. For example, we do not know how many or how quickly patients receiving our product under the Medicare Part D program will reach the “donut hole” or how details of the pharmaceutical excise tax will be calculated and reflected in our financial results. Based on the information that we have to date, we estimate the 2011 impact of the pharmaceutical excise tax to be between $30-50 million, which will be classified as selling, general and administrative (SG&A) expense. The excise tax is not tax deductible. In calculating the anticipated financial impacts of healthcare reform described above, we made several estimates and assumptions with respect to our expected payer mix and how the reforms will be implemented.

Further, even though not addressed in the healthcare reform legislation, discussions continue at the federal level on legislation that would either allow or require the federal government to directly negotiate price concessions from pharmaceutical manufacturers or set minimum requirements for Medicare Part D pricing.

In addition, state Medicaid programs could request additional supplemental rebates on our products as a result of the increase in the federal base Medicaid rebate. Private insurers could also use the enactment of these increased rebates to exert pricing pressure on our products, and to the extent that private insurers or managed care programs follow Medicaid coverage and payment developments, the adverse effects may be magnified by private insurers adopting lower payment schedules.

Our existing products are subject to reimbursement from government agencies and other third parties. Pharmaceutical pricing and reimbursement pressures may reduce profitability.

Successful commercialization of our products depends, in part, on the availability of governmental and third-party payer reimbursement for the cost of such products and related treatments. Government health administration authorities, private health insurers and other organizations generally provide reimbursement. In the United States, the European Union and other significant or potentially significant markets for our products and product candidates, government authorities and third-party payers are increasingly attempting to limit or regulate the price of medical products and services, particularly for new and innovative products and therapies, which has resulted in lower average selling prices.

A significant portion of our sales of the majority of our products are subject to significant discounts from list price and rebate obligations. In addition, state ADAPs, which purchase a significant portion of our HIV products, rely on federal, supplemental federal and state funding to help fund purchases of our products. Given the current economic downturn, we have started to see and may continue to see a shift in our payer mix as patients previously covered by private insurance move to public reimbursement programs that require rebates or discounts from us or as patients previously covered by one public reimbursement program move to another public reimbursement program that requires greater rebates or discounts from us. If federal and state funds are not available in amounts sufficient to support the number of patients that rely on ADAPs, sales of our HIV products could be negatively impacted which would reduce our revenues. For example, during the first quarter of 2011, the state budget crisis in Florida led to a temporary movement of patients who were previously covered by Florida’s ADAP into industry-supported patient assistance programs. In recent quarters, we have also seen an increase in the number of patients on ADAP wait lists. Until these patients are enrolled in ADAP, they generally receive product from industry-supported patient assistance programs or are unable to access treatment.

The increased emphasis on managed healthcare in the United States and on country and regional pricing and reimbursement controls in the European Union will put additional pressure on product pricing, reimbursement and usage, which may adversely affect our product sales and profitability. These pressures can arise from rules and practices of managed care groups, judicial decisions and governmental laws and regulations related to Medicare, Medicaid and healthcare reform, pharmaceutical reimbursement policies and pricing in general.

In Europe, the success of our commercialized products, and any other product candidates we may develop, will depend largely on obtaining and maintaining government reimbursement, because in many European countries patients are unlikely to use prescription drugs that are not reimbursed by their governments. In addition, negotiating prices with governmental authorities can delay commercialization by 12 months or more. Reimbursement policies may adversely affect our ability to sell our products on a profitable basis. In many international markets, governments control the prices of prescription pharmaceuticals, including through the implementation of reference pricing, price cuts, rebates, revenue-related taxes and profit control, and they expect prices of prescription pharmaceuticals to decline over the life of the product or as volumes increase.

Recently, many countries in the European Union have increased the amount of discounts required on our products, and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. For example, in June 2010, Spain imposed an incremental discount on all branded drugs and in August 2010, Germany increased the rebate on prescription pharmaceuticals. As generic drugs come to market, we may face price decreases for our products in some countries in the European Union.

Approximately 45% of our product sales occur outside the United States, and currency fluctuations and hedging expenses may cause our earnings to fluctuate, which could adversely affect our stock price.

Because a significant percentage of our product sales are denominated in foreign currencies, primarily the Euro, we face exposure to adverse movements in foreign currency exchange rates. When the U.S. dollar strengthens against these foreign 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, benefit from a weaker U.S. dollar and are adversely affected by a stronger U.S. dollar relative to those foreign currencies in which we transact significant amounts of business.

We use foreign currency exchange forward and option contracts to hedge a percentage of our forecasted international sales, primarily those denominated in the Euro. 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. We cannot predict future fluctuations in the foreign currency exchange rate of the U.S. dollar. If the U.S. dollar appreciates significantly against certain currencies and our hedging program does not sufficiently offset the effects of such appreciation, our results of operations will be adversely affected and our stock price may decline.

Additionally, the expenses that we recognize in relation to our hedging activities can also cause our earnings to fluctuate. The level of hedging expenses that we recognize in a particular period is impacted by the changes in interest rate spreads between the foreign currencies that we hedge and the U.S. dollar.

Our inability to accurately estimate demand for our products, as well as sales fluctuations as a result of inventory levels held by wholesalers, pharmacies and non-retail customers make it difficult for us to accurately forecast sales and may cause our earnings to fluctuate, which could adversely affect our financial results and our stock price.

In the quarter ended March 31, 2011, approximately 83% of our product sales in the United States were to three wholesalers, Cardinal Health, Inc., McKesson Corp. and AmerisourceBergen Corp. The U.S. wholesalers with whom we have entered into inventory management agreements make estimates to determine end user

demand and may not be completely effective in matching their inventory levels to actual end user demand. As a result, changes in inventory levels held by those wholesalers can cause our operating results to fluctuate unexpectedly if our sales to these wholesalers do not match end user demand. In addition, inventory is held at retail pharmacies and other non-wholesale locations with whom we have no inventory management agreements and no control over buying patterns. Adverse changes in economic conditions or other factors may cause retail pharmacies to reduce their inventories of our products, which would reduce their orders from wholesalers and, consequently, the wholesalers’ orders from us, even if end user demand has not changed. For example, during the fourth quarter of 2010, our wholesalers increased their inventory levels for our antiviral products. In the first quarter of 2011, our wholesalers drew down on their inventory such that inventory levels for our antiviral products moved to the lower end of the contractual boundaries set by our inventory management agreements. As inventory in the distribution channel fluctuates from quarter to quarter, we may continue to see fluctuations in our earnings and a mismatch between prescription demand for our products and our revenues.

In addition, the non-retail sector in the United States, which includes government institutions, including state ADAPs, correctional facilities and large health maintenance organizations, tends to be even less consistent in terms of buying patterns and often causes quarter over quarter fluctuations that do not necessarily mirror patient demand. For example, in the first quarter of 2011, non-retail purchases, driven by certain state ADAPs, were lower as a percentage of their federal ADAP fiscal year purchases compared to the first quarters of 2009 and 2010. We believe this decrease was driven by uncertainty regarding the amount and availability of the federal ADAP budget for 2011-2012 and the lack of sufficient state funding. Federal and state budget pressures, as well as the annual grant cycles for federal and state ADAP funds, may cause ADAP purchasing patterns to not reflect patient demand. As a result, we expect to continue to experience fluctuations in the purchasing patterns of our non-retail customers which may result in fluctuations in our product sales, revenues and earnings in the future.

In light of the global economic downturn and budget crises faced by many European countries, we have observed variations in purchasing patterns induced by cost containment measures in Europe. We believe these measures have caused some purchasers to reduce inventory of our products in the distribution channels, and in some cases, even at the patient level, which has decreased our revenues and caused fluctuations in our product sales and earnings. We may continue to see this trend in the future.

We face significant competition.

We face significant competition from large pharmaceutical and biotechnology companies, most of whom have substantially greater resources than we do. In addition, our competitors have more products and have operated in the fields in which we compete for longer than we have. Our HIV products compete primarily with products from the joint venture established by GlaxoSmithKline Inc. (GSK) and Pfizer Inc. (Pfizer) which markets fixed-dose combination products that compete with Atripla and Truvada.

For example, lamivudine, marketed by this joint venture, is competitive with emtricitabine, the active pharmaceutical ingredient of Emtriva and a component of both Atripla and Truvada. In May 2010, the compound patent covering Epivir (lamivudine) itself expired in the United States and we expect to see generic lamivudine in the United States in the near future. Generic lamivudine has been available in Spain since March 2010 and is now also available in Portugal. We expect that generic versions of lamivudine will be launched in other countries within the European Union.

For Hepsera and Viread for treatment of chronic hepatitis B, we compete primarily with products produced by GSK, BMS and Novartis Pharmaceuticals Corporation (Novartis) in the United States, the European Union and China. For AmBisome, we compete primarily with products produced by Merck and Pfizer. In addition, 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. Furthermore, 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. Letairis competes directly with a product produced by Actelion Pharmaceuticals US, Inc. and

indirectly with pulmonary arterial hypertension products from United Therapeutics Corporation and Pfizer. Ranexa competes predominantly with generic compounds from three distinct classes of drugs, beta-blockers, calcium channel blockers and long-acting nitrates for the treatment of chronic angina in the United States. Cayston competes with a product marketed by Novartis. Tamiflu competes with products sold by GSK and generic competitors.

In addition, a number of companies are pursuing the development of technologies which are competitive with our existing products or research programs. These competing companies include specialized pharmaceutical firms and large pharmaceutical companies acting either independently or together with other pharmaceutical companies. Furthermore, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection and may establish collaborative arrangements for competitive products or programs.

If significant safety issues arise for our marketed products or our product candidates, our future sales may be reduced, which would adversely affect our results of operations.

The data supporting the marketing approvals for our products and forming the basis for the safety warnings in our product labels were obtained in controlled clinical trials of limited duration and, in some cases, from post-approval use. As our products are used over longer periods of time by many patients with underlying health problems, taking numerous other medicines, we expect to continue to find new issues such as safety, resistance or drug interaction issues, which may require us to provide additional warnings or contraindications on our labels or narrow our approved indications, each of which could reduce the market acceptance of these products.

Our product Letairis, which was approved by the FDA in June 2007, is a member of a class of compounds called endothelin receptor antagonists (ERAs) which pose specific risks, including serious risks of birth defects. Because of these risks, Letairis is available only through the Letairis Education and Access Program (LEAP), a restricted distribution program intended to help physicians and patients learn about the risks associated with the product and assure appropriate use of the product. As the product is used by additional patients, we may discover new risks associated with Letairis which may result in changes to the distribution program and additional restrictions on the use of Letairis which may decrease demand for the product.

If serious safety, resistance or drug interaction issues arise with our marketed products, sales of these products could be limited or halted by us or by regulatory authorities and our results of operations would be adversely affected.

Our operations depend on compliance with complex FDA and comparable international regulations. Failure to obtain broad approvals on a timely basis or to maintain compliance could delay or halt commercialization of our products.

The products we develop must be approved for marketing and sale by regulatory authorities and, once approved, are subject to extensive regulation by the FDA, the European Medicines Agency and comparable regulatory agencies in other countries. We are continuing clinical trials for Atripla, Truvada, Viread, Hepsera, Emtriva, AmBisome, Letairis, Ranexa and Cayston for currently approved and additional uses. We anticipate that we will file for marketing approval in additional countries and for additional indications and products over the next several years. These products may fail to receive such marketing approvals on a timely basis, or at all.

Further, our marketed products and how we manufacture and sell these products are subject to extensive regulation and review. Discovery of previously unknown problems with our marketed products or problems with our manufacturing or promotional activities may result in restrictions on our products, including withdrawal of the products from the market. If we fail to comply with applicable regulatory requirements, we could be subject to penalties including fines, suspensions of regulatory approvals, product recalls, seizure of products and criminal prosecution. For example, on September 24, 2010, our San Dimas manufacturing facility received a Warning Letter from the FDA. See the Risk Factor entitled “Manufacturing problems could delay product shipments and regulatory approvals, which may adversely affect our results of operations.”

On September 27, 2007, President Bush signed into law the Food and Drug Administration Amendments Act of 2007, which significantly expanded the FDA’s authority, including, among other things, to:

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require sponsors of marketed products to conduct post-approval clinical studies to assess a known serious risk, signals of serious risk or to identify an unexpected serious risk;

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mandate labeling changes to products, at any point in a product’s lifecycle, based on new safety information; and

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require sponsors to implement a Risk Evaluation and Mitigation Strategy for a product which could include a medication guide, patient package insert, a communication plan to healthcare providers or other elements as the FDA deems are necessary to assure safe use of the drug, which could include imposing certain restrictions on distribution or use of a product.

Failure to comply with these or other requirements, if imposed on a sponsor by the FDA, could result in significant civil monetary penalties and our operating results may be adversely affected.

The results and anticipated timelines of our clinical trials are uncertain and may not support continued development of a product pipeline, which would adversely affect our prospects for future revenue growth.

We are required to demonstrate the safety and efficacy of products that we develop for each intended use through extensive preclinical studies and clinical trials. The results from preclinical and early clinical studies do not always accurately predict results in later, large-scale clinical trials. Even successfully completed large-scale clinical trials may not result in marketable products. If any of our product candidates fails to achieve its primary endpoint in clinical trials, if safety issues arise or if the results from our clinical trials are otherwise inadequate to support regulatory approval of our product candidates, commercialization of that product candidate could be delayed or halted. For example, in January 2011, we announced our decision to terminate our Phase 3 clinical trial of ambrisentan in patients with idiopathic pulmonary fibrosis and, in April 2011, we announced our decision to terminate our Phase 3 clinical trial of aztreonam for inhalation solution for the treatment of CF in patients with Burkholderia spp . In addition, we may also face challenges in clinical trial protocol design. If the clinical trials for any of the product candidates in our pipeline are delayed or terminated, our prospects for future revenue growth would be adversely impacted. For example, we face numerous risks and uncertainties with our product candidates, including elvitegravir, our novel HIV integrase inhibitor for the treatment of HIV infection; and the fixed-dose regimen of elvitegravir, cobicistat and Truvada for the treatment of HIV in treatment-naïve patients; each currently in Phase 3 clinical trials that could prevent completion of development of these product candidates. These risks include our ability to enroll patients in clinical trials, the possibility of unfavorable results of our clinical trials, the need to modify or delay our clinical trials or to perform additional trials and the risk of failing to obtain FDA and other regulatory body approvals. As a result, our product candidates may never be successfully commercialized. Further, we may make a strategic decision to discontinue development of our product candidates if, for example, we believe commercialization will be difficult relative to other opportunities in our pipeline. If these programs and others in our pipeline cannot be completed on a timely basis or at all, then our prospects for future revenue growth may be adversely impacted. In addition, clinical trials involving our commercial products could raise new safety issues for our existing products, which could in turn decrease our revenues and harm our business.

Due to our reliance on third-party contract research organizations to conduct our clinical trials, we are unable to directly control the timing, conduct, expense and quality of our clinical trials.

We extensively outsource our clinical trial activities and usually perform only a small portion of the start-up activities in-house. We rely on independent third-party contract research organizations (CROs) to perform most of our clinical studies, including document preparation, site identification, screening and preparation, pre-study visits, training, program management and bioanalytical analysis. Many important aspects of the services performed for us by the CROs are out of our direct control. If there is any dispute or disruption in our relationship with our CROs, our clinical trials may be delayed. Moreover, in our regulatory submissions, we rely

on the quality and validity of the clinical work performed by third-party CROs. If any of our CROs’ processes, methodologies or results were determined to be invalid or inadequate, our own clinical data and results and related regulatory approvals could be adversely impacted.

We depend on relationships with other companies for sales and marketing performance and revenues. Failure to maintain these relationships, poor performance by these companies or disputes with these companies could negatively impact our business.

We rely on a number of significant collaborative relationships with major pharmaceutical companies for our sales and marketing performance in certain territories. These include collaborations with BMS for Atripla in the United States, Europe and Canada; F. Hoffmann-La Roche Ltd. (together with Hoffmann-La Roche Inc., Roche) for Tamiflu worldwide; and GSK for ambrisentan in territories outside of the United States. In some countries, we rely on international distributors for sales of Truvada, Viread, Hepsera, Emtriva and AmBisome. Some of these relationships also involve the clinical development of these products by our partners. Reliance on collaborative relationships poses a number of risks, including the risk that:

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we are unable to control the resources our corporate partners devote to our programs or products;

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disputes may arise with respect to the ownership of rights to technology developed with our corporate partners;

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disagreements with our corporate partners could cause delays in, or termination of, the research, development or commercialization of product candidates or result in litigation or arbitration;

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contracts with our corporate partners may fail to provide significant protection or may fail to be effectively enforced if one of these partners fails to perform;

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our corporate partners have considerable discretion in electing whether to pursue the development of any additional products and may pursue alternative technologies or products either on their own or in collaboration with our competitors;

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our corporate partners with marketing rights may choose to pursue competing technologies or to devote fewer resources to the marketing of our products than they do to products of their own development; and

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our distributors and our corporate partners may be unable to pay us, particularly in light of current economic conditions.

Given these risks, there is a great deal of uncertainty regarding the success of our current and future collaborative efforts. If these efforts fail, our product development or commercialization of new products could be delayed or revenues from products could decline.

Under our April 2002 licensing agreement with GSK, we gave GSK the right to control clinical and regulatory development and commercialization of Hepsera in territories in Asia, Africa and Latin America. These include major markets for Hepsera, such as China, Japan, Taiwan and South Korea. In November 2009, we entered into an agreement with GSK that provided GSK with exclusive commercialization rights and registration responsibilities for Viread for the treatment of chronic hepatitis B in China. In October 2010, we granted similar rights to GSK in Japan and Saudi Arabia. The success of Hepsera and Viread for the treatment of chronic hepatitis B in these territories depends almost entirely on the efforts of GSK. In this regard, GSK promotes Epivir-HBV/Zeffix, a product that competes with Hepsera and Viread for the treatment of chronic hepatitis B. Consequently, GSK’s marketing strategy for Hepsera and Viread for the treatment of chronic hepatitis B may be influenced by its promotion of Epivir-HBV/Zeffix. We receive royalties from GSK equal to a percentage of GSK’s net sales of Hepsera and Viread for the treatment of chronic hepatitis B as well as net sales of GSK’s Epivir-HBV/Zeffix. If GSK fails to devote sufficient resources to, or does not succeed in developing or commercializing Hepsera or Viread for the treatment of chronic hepatitis B in its territories, our potential revenues in these territories may be substantially reduced.

In addition, Cayston and Letairis are distributed through third-party specialty pharmacies, which are pharmacies specializing in the dispensing of medications for complex or chronic conditions that may require a

high level of patient education and ongoing counseling. The use of specialty pharmacies requires significant coordination with our sales and marketing, medical affairs, regulatory affairs, legal and finance organizations and involves risks, including but not limited to risks that these specialty pharmacies will:

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not provide us with accurate or timely information regarding their inventories, patient data or safety complaints;

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not effectively sell or support Cayston or Letairis;

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not devote the resources necessary to sell Cayston or Letairis in the volumes and within the time frames that we expect;

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not be able to satisfy their financial obligations to us or others; or

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cease operations.

We also rely on a third party to administer LEAP, the restricted distribution program designed to support Letairis. This third party provides information and education to prescribers and patients on the risks of Letairis, confirms insurance coverage and investigates alternative sources of reimbursement or assistance, ensures fulfillment of the risk management requirements mandated for Letairis by the FDA and coordinates and controls dispensing to patients through the third-party specialty pharmacies. Failure of this third party or the specialty pharmacies that distribute Letairis to perform as expected may result in regulatory action from the FDA or decreased Letairis sales, either of which would harm our business.

Further, Cayston may only be taken by patients using a specific inhalation device that delivers the drug to the lungs of patients. Our ongoing distribution of Cayston is entirely reliant upon the manufacturer of that device. For example, the manufacturer could encounter other issues with regulatory agencies related to the device or be unable to supply sufficient quantities of this device. In addition, the manufacturer may not be able to provide adequate warranty support for the device after it has been distributed to patients. With respect to distribution of the drug and device to patients, we are reliant on the capabilities of specialty pharmacies. For example, the distribution channel for drug and device is complicated and requires coordination. The reimbursement approval processes associated with both drug and device are similarly complex. If the device manufacturer is unable to obtain reimbursement approval or receives approval at a lower-than-expected price, sales of Cayston may be adversely affected. Any of the previously described issues may limit the sales of Cayston, which would adversely affect our financial results.

Expenses associated with clinical trials may cause our earnings to fluctuate, which could adversely affect our stock price.

The clinical trials required for regulatory approval of our products, as well as clinical trials we are required to conduct after approval, are very expensive. It is difficult to accurately predict or control the amount or timing of these expenses from quarter to quarter, and the FDA and/or other regulatory agencies may require more clinical testing than we originally anticipated. Uneven and unexpected spending on these programs may cause our operating results to fluctuate from quarter to quarter, and our stock price may decline.

Our success will depend to a significant degree on our ability to protect our patents and other intellectual property rights both domestically and internationally. We may not be able to obtain effective patents to protect our technologies from use by competitors and patents of other companies could require us to stop using or pay for the use of required technology.

Patents and other proprietary rights are very important to our business. Our success will depend to a significant degree on our ability to:

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obtain patents and licenses to patent rights;

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preserve trade secrets; and

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operate without infringing on the proprietary rights of others.

If we have a properly designed and enforceable patent, it can be more difficult for our competitors to use our technology to create competitive products and more difficult for our competitors to obtain a patent that prevents us from using technology we create. As part of our business strategy, we actively seek patent protection both in the United States and internationally and file additional patent applications, when appropriate, to cover improvements in our compounds, products and technology.

We have a number of U.S. and foreign patents, patent applications and rights to patents related to our compounds, products and technology, but we cannot be certain that issued patents will be enforceable or provide adequate protection or that pending patent applications will result in issued patents. Patent applications are confidential for a period of time before a patent is issued. As a result, we may not know if our competitors filed patent applications for technology covered by our pending applications or if we were the first to invent the technology that is the subject of our patent applications. Competitors may have filed patent applications or received patents and may obtain additional patents and proprietary rights that block or compete with our products. In addition, if competitors file patent applications covering our technology, we may have to participate in interference proceedings or litigation to determine the right to a patent. Litigation and interference proceedings are unpredictable and expensive, such that, even if we are ultimately successful, our results of operations may be adversely affected by such events.

From time to time, certain individuals or entities may challenge our patents. For example, in 2007, the Public Patent Foundation filed requests for re-examination with the United States Patent and Trademark Office (PTO) challenging four of our patents related to tenofovir disoproxil fumarate, which is an active ingredient in Atripla, Truvada and Viread. The PTO granted these requests and issued non-final rejections for the four patents, which is a step common in a proceeding to initiate the re-examination process. In 2008, the PTO confirmed the patentability of all four patents.

Although we were successful in responding to the PTO actions in the instance above, similar organizations may still challenge our patents in foreign jurisdictions. For example, in April 2008, the Brazilian Health Ministry, citing the U.S. patent re-examination proceedings as grounds for rejection, requested that the Brazilian patent authority issue a decision that is not supportive of our patent application for tenofovir disoproxil fumarate in Brazil. In August 2008, an examiner in the Brazilian patent authority issued a final rejection of our fumarate salt patent application, the only patent application for tenofovir disoproxil fumarate we have filed in Brazil. We then filed an appeal within the patent authority responding to the questions raised in the rejection. In July 2009, the Brazilian patent authority again rejected the application. This was the highest level of appeal available to us within the Brazilian patent authority. We have filed a civil action in Brazilian federal court to further appeal the action of the Brazilian patent authority. We cannot predict the outcome of this proceeding on our tenofovir disoproxil fumarate patent application. If we are unsuccessful in our appeal to the courts of the decision by the patent authority, the Brazilian government would likely purchase generic tenofovir disoproxil fumarate, which would significantly reduce our sales of HIV products in Brazil. In 2010, the Brazilian government purchased approximately $50 million of our HIV products. We are aware of applications from two generic companies to sell a generic version of Viread in Brazil, one of which has received approval from the Brazilian Health Ministry. If one or both of these generic applicants are able to compete for this contract for 2011, we would not expect the Brazilian government to purchase any of our HIV products in 2011.

As another example, the Patent Office of India initially allowed our claims covering tenofovir disoproxil and tenofovir disoproxil fumarate. However, under Indian civil procedure, prior to the official grant of the allowed applications, several parties filed legal actions to protest the decision to grant the patents. In August 2009, the Indian Patent Office announced that it had decided these actions against us and would not therefore allow the patents to be granted. We have filed an appeal within the Indian Patent Office Intellectual Property Appellate Board on both of these applications. We cannot predict the outcome of these proceedings. If we are unsuccessful in our appeal of these decisions, any further appeals will have to be pursued in the Indian court system, and may ultimately prove unsuccessful. In the meantime, any competitor is able to sell generic tenofovir disoproxil fumarate in India. In addition, if we are unsuccessful in appealing any further negative decisions by

the Indian Patent Office in the Indian courts, these competitors would be able to continue to sell generic tenofovir disoproxil fumarate, which could reduce the amount of royalties we receive from our Indian generic licenses.

Patents do not cover the ranolazine compound, the active ingredient of Ranexa. Instead, when it was discovered that only a sustained release formulation of ranolazine would achieve therapeutic plasma levels, patents were obtained on those formulations and the characteristic plasma levels they achieve. Patents do not cover the active ingredients in AmBisome. In addition, we do not have patent filings in China or certain other Asian countries covering all forms of adefovir dipivoxil, the active ingredient in Hepsera. Asia is a major market for therapies for hepatitis B, the indication for which Hepsera has been developed.

We may obtain patents for certain products many years before marketing approval is obtained for those products. Because patents have a limited life, which may begin to run prior to the commercial sale of the related product, the commercial value of the patent may be limited. However, we may be able to apply for patent term extensions in some countries.

As part of the approval process of some of our products, the FDA granted an exclusivity period during which other manufacturers’ applications for approval of generic versions of our product will not be granted. Generic manufacturers often wait to challenge the patents protecting products that have been granted exclusivity until one year prior to the end of the exclusivity period. From time to time, we have received notices from manufacturers indicating that they intend to import chemical intermediates possibly for use in making our products. Generic manufacturers have sought and may continue to seek FDA approval for a similar or identical drug through an abbreviated new drug application (ANDA), the application form typically used by manufacturers seeking approval of a generic drug.

For example, in November 2008, we received notice that Teva Pharmaceuticals (Teva) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Truvada. In the notice, Teva alleges that two of the patents associated with emtricitabine are invalid, unenforceable and/or will not be infringed by Teva’s manufacture, use or sale of a generic version of Truvada. In December 2008, we filed a lawsuit against Teva for infringement of the two emtricitabine patents. In March 2009, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Atripla. In the notice, Teva challenged the same two emtricitabine patents. In May 2009, we filed another lawsuit against Teva for infringement of the two emtricitabine patents, and this lawsuit was consolidated with the lawsuit filed in December 2008. In January 2010, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Viread. In the notice, Teva challenged four of the tenofovir disoproxil fumarate patents protecting Viread. In January 2010, we also received notices from Teva amending its ANDAs related to Atripla and Truvada. In the notice related to Truvada, Teva challenged four patents related to tenofovir disoproxil fumarate and two additional patents related to emtricitabine. In the notice related to Atripla, Teva challenged four patents related to tenofovir disoproxil fumarate, two additional patents related to emtricitabine and two patents related to efavirenz. In March 2010, we filed a lawsuit against Teva for infringement of the four Viread patents and two additional emtricitabine patents. In March 2010, BMS and Merck filed a lawsuit against Teva for infringement of the patents related to efavirenz.

In June 2010, we received notice that Lupin Limited (Lupin) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Ranexa. In the notice, Lupin alleges that ten of the patents associated with Ranexa are invalid, unenforceable and/or will not be infringed by Lupin’s manufacture, use or sale of a generic version of Ranexa. In July 2010, we filed a lawsuit against Lupin for infringement of our patents for Ranexa.

Sigmapharm’s manufacture, use or sale of a generic version of Hepsera. In September 2010, we filed a lawsuit against Sigmapharm for infringement of our patents for Hepsera. One of the patents challenged by Sigmapharm is also being challenged by Ranbaxy, Inc. (Ranbaxy) pursuant to a notice received in October 2010. The patent challenged by Ranbaxy expires in July 2018. We have the option of filing a lawsuit at any time if we believe that Ranbaxy is infringing our patent.

In February 2011, we received notice that Natco Pharma Limited (Natco) submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Tamiflu. In the notice, Natco alleges that one of the patents associated with Tamiflu is invalid, unenforceable and/or will not be infringed by Natco’s manufacture, use or sale of a generic version of Tamiflu. In March 2011, we and Roche filed a lawsuit against Natco for infringement of the patent associated with Tamiflu.

Our success depends in large part on our ability to operate without infringing upon the patents or other proprietary rights of third parties.

If we infringe the patents of others, we may be prevented from commercializing products or may be required to obtain licenses from these third parties. We may not be able to obtain alternative technologies or any required license on reasonable terms or at all. If we fail to obtain these licenses or alternative technologies, we may be unable to develop or commercialize some or all of our products. For example, we are aware of a body of patents that may relate to our operation of LEAP, our restricted distribution program designed to support Letairis.

Furthermore, we use significant proprietary technology and rely on unpatented trade secrets and proprietary know-how to protect certain aspects of our production and other technologies. Our trade secrets may become known or independently discovered by our competitors.

Manufacturing problems could delay product shipments and regulatory approvals, which may adversely affect our results of operations.

We depend on third parties to perform manufacturing activities effectively and on a timely basis for the majority of our solid dose products. In addition, Roche, either by itself or through third parties, is responsible for manufacturing Tamiflu. The manufacturing process for pharmaceutical products is highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. We, our third-party manufacturers and our corporate partners are subject to current Good Manufacturing Practices (GMP), which are extensive regulations governing manufacturing processes, stability testing, record keeping and quality standards as defined by the FDA and the European Medicines Agency. Similar regulations are in effect in other countries.

Our third-party manufacturers and corporate partners are independent entities who are subject to their own unique operational and financial risks which are out of our control. If we or any of these third-party manufacturers or corporate partners fail to perform as required, this could impair our ability to deliver our products on a timely basis or receive royalties or cause delays in our clinical trials and applications for regulatory approval. To the extent these risks materialize and affect their performance obligations to us, our financial results may be adversely affected.

Our manufacturing operations are subject to routine inspections by regulatory agencies. For example, in January and February 2010, the FDA conducted a routine inspection of our San Dimas, California, manufacturing and distribution facility, where we manufacture AmBisome and Cayston, fill and finish Macugen,

and package solid dosage form products. At the conclusion of that inspection, the FDA issued Form 483 Inspectional Observations stating concerns over: the maintenance of aseptic processing conditions in the manufacturing suite for our AmBisome product; environmental maintenance issues in the San Dimas warehousing facility; batch sampling; and the timeliness of completion of annual product quality reports. On September 24, 2010, our San Dimas manufacturing facility received a Warning Letter from the FDA further detailing the FDA’s concerns over the AmBisome manufacturing environment, including control systems and monitoring, procedures to prevent microbiological contamination and preventative cleaning and equipment maintenance. Referencing certain Viread lots, the letter also stated concerns connected with quality procedures, controls and investigation procedures, and a generalized concern over the effectiveness of the San Dimas quality unit in carrying out its responsibilities.

In November and December 2010, the FDA re-inspected the San Dimas facility. The re-inspection closed with no additional Form 483 observations. Consequently, we believe that we have addressed the FDA’s concerns as stated in the Form 483 observations and the Warning Letter, but we are awaiting confirmation of acceptance from the FDA.

Unless and until we receive confirmation from the FDA that it is satisfied we have corrected outstanding issues, the FDA may withhold permission to export AmBisome and Cayston manufactured at San Dimas to certain countries outside the United States and Europe. The FDA may also withhold approval of pending drug applications listing the San Dimas facility. Since, as required, we have notified appropriate international regulatory authorities of the letter’s issuance, it is possible that the letter may impact our ability to supply our aseptic products manufactured at San Dimas (AmBisome, Cayston and Macugen) outside the United States. If as a result of a Warning Letter, we are unable to receive export or regulatory approvals for AmBisome or any other products at issue, we may be unable to sell sufficient quantities of these products to meet market demand, which would decrease our revenues and harm our business. As described further in the risk factor entitled “We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell our products, which would limit our ability to generate revenues” below, we manufacture AmBisome and fill and finish Macugen exclusively at our San Dimas facility.

We do not believe the Warning Letter will impact our ability to supply any of the solid dosage form products that we package at the San Dimas facility, which include Atripla, Truvada, Viread, Emtriva, Hepsera, Letairis and Ranexa. In the event our solid dosage form products were affected, we have alternate sites from which we could supply such products.

Our ability to successfully manufacture and commercialize Cayston will depend upon our ability to manufacture in a multi-product facility.

Aztreonam, the active pharmaceutical ingredient in Cayston, is a mono-bactam Gram-negative antibiotic. We manufacture Cayston by ourselves in San Dimas, California, or through third parties, in multi-product manufacturing facilities. Historically, the FDA has permitted the manufacture of mono-bactams in multi-product manufacturing facilities; however, there can be no assurance that the FDA will continue to allow this practice. We do not currently have a single-product facility that can be dedicated to the manufacture of Cayston nor have we engaged a contract manufacturer with a single-product facility for Cayston. If the FDA prohibits the manufacture of mono-bactam antibiotics, like aztreonam, in multi-product manufacturing facilities in the future, we may not be able to procure a single-product manufacturing facility in a timely manner, which would adversely affect our commercial supplies of Cayston and our anticipated financial results attributable to such product.

On September 24, 2010, our San Dimas manufacturing facility received a Warning Letter from the FDA. See the Risk Factor entitled “Manufacturing problems could delay product shipments and regulatory approvals, which may adversely affect our results of operations.” It is possible that the Warning Letter may impact our ability to supply Cayston manufactured at San Dimas outside of the United States, which would decrease our revenues and harm our business.

We may not be able to obtain materials or supplies necessary to conduct clinical trials or to manufacture and sell our products, which would limit our ability to generate revenues.

We need access to certain supplies and products to conduct our clinical trials and to manufacture our products. In light of the global economic downturn, we have had increased difficulty in purchasing certain of the raw materials used in our manufacturing process. If we are unable to purchase sufficient quantities of these materials or find suitable alternate materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture our products would be limited, which would limit our ability to generate revenues.

Suppliers of key components and materials must be named in an NDA filed with the FDA for any product candidate for which we are seeking FDA approval, and significant delays can occur if the qualification of a new supplier is required. Even after a manufacturer is qualified by the FDA, the manufacturer must continue to expend time, money and effort in the area of production and quality control to ensure full compliance with GMP. Manufacturers are subject to regular, periodic inspections by the FDA following initial approval. If, as a result of these inspections, the FDA determines that the equipment, facilities, laboratories or processes do not comply with applicable FDA regulations and conditions of product approval, the FDA may suspend the manufacturing operations. If the manufacturing operations of any of the single suppliers for our products are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand, which would in turn decrease our revenues and harm our business. In addition, if delivery of material from our suppliers were interrupted for any reason, we may be unable to ship certain of our products for commercial supply or to supply our products in development for clinical trials. In addition, some of our products and the materials that we utilize in our operations are made at only one facility. For example, we manufacture AmBisome and fill and finish Macugen exclusively at our facilities in San Dimas, California. In the event of a disaster, including an earthquake, equipment failure or other difficulty, we may be unable to replace this manufacturing capacity in a timely manner and may be unable to manufacture AmBisome and Macugen to meet market needs.

Cayston is dependent on two different third-party single-source suppliers. First, aztreonam, the active pharmaceutical ingredient in aztreonam for inhalation solution, is manufactured by a single supplier at a single site. Second, it is administered to the lungs of patients through a device that is made by a single supplier at a single site. Disruptions or delays with any of these single suppliers could adversely affect our ability to supply Cayston, and we cannot be sure that alternative suppliers can be identified in a timely manner, or at all. See the Risk Factor entitled “Our ability to successfully manufacture and commercialize Cayston will depend upon our ability to manufacture in a multi-product facility.”

In addition, we depend on a single supplier for high quality cholesterol, which is used in the manufacture of AmBisome. We also depend on single suppliers for the active pharmaceutical ingredient of Vistide, Ranexa and Cayston and for the tableting of Emtriva and Letairis. Astellas US LLC, which markets Lexiscan in the United States, is responsible for the commercial manufacture and supply of product in the United States and is dependent on a single supplier for the active pharmaceutical ingredient of Lexiscan. Problems with any of the single suppliers we depend on may negatively impact our development and commercialization efforts.

A significant portion of the raw materials and intermediates used to manufacture our HIV products (Atripla, Truvada, Viread and Emtriva) are supplied by Chinese-based companies. As a result, an international trade dispute between China and the United States or any other actions by the Chinese government that would limit or prevent Chinese companies from supplying these materials would adversely affect our ability to manufacture and supply our HIV products to meet market needs and have a material and adverse effect on our operating results.

We face credit risks from our European customers that may adversely affect our results of operations.

Our European product sales to government-owned or supported customers in Greece, Italy, Portugal and Spain are subject to significant payment delays due to government funding and reimbursement practices. This has resulted and may continue to result in an increase in days sales outstanding due to the average length of time

that we have accounts receivable outstanding. Our accounts receivable in these countries totaled approximately $1.06 billion as of March 31, 2011, of which $525.7 million was more than 120 days past due based on contractual payment terms. As a result of the fiscal and debt crises in these countries, the number of days our invoices are past due has continued to increase in line with that being experienced by other pharmaceutical companies that are also selling directly to hospitals. Historically, receivables balances with certain publicly-owned hospitals accumulate over a period of time and are then subsequently settled as large lump sum payments. If significant changes were to occur in the reimbursement practices of these European governments or if government funding becomes unavailable, we may not be able to collect on amounts due to us from these customers and our results of operations would be adversely affected. For example, as of March 31, 2011, the Greek government settled the majority of its outstanding receivables subject to the bond settlement, totaling $88.5 million, with zero-coupon bonds that trade at a discount to face value. Our allowance for doubtful accounts was adequate to cover the exposure related to the discount on these bonds. In Spain, Italy and Portugal we are actively pursuing collection of the overdue receivables and taking action as necessary to enforce our legal right to payment.

Our revenues and gross margin could be reduced by imports from countries where our products are available at lower prices.

Prices for our products are based on local market economics and competition and sometimes differ from country to country. Our sales in countries with relatively higher prices may be reduced if products can be imported into those or other countries from lower price markets. There have been cases in which other pharmaceutical products were sold at steeply discounted prices in the developing world and then re-exported to European countries where they could be re-sold at much higher prices. If this happens with our products, particularly Truvada and Viread, which we have agreed to make available at substantially reduced prices to 130 countries participating in our Gilead Access Program, or Atripla, which Merck distributes at substantially reduced prices to HIV infected patients in developing countries under our August 2006 agreement, our revenues would be adversely affected. In addition, we have established partnerships with thirteen Indian generic manufacturers to distribute high-quality, low-cost generic versions of tenofovir disoproxil fumarate to 95 developing world countries, including India. If generic versions of our medications under these licenses are then re-exported to the United States, Europe or other markets outside of these 95 countries, our revenues would be adversely affected.

In addition, purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high may adversely impact our revenues and gross margin and may cause our sales to fluctuate from quarter to quarter. For example, in the European Union, we are required to permit products purchased in one country to be sold in another country. Purchases of our products in countries where our selling prices are relatively low for resale in countries in which our selling prices are relatively high affect the inventory level held by our wholesalers and can cause the relative sales levels in the various countries to fluctuate from quarter to quarter and not reflect the actual consumer demand in any given quarter. These quarterly fluctuations may impact our earnings, which could adversely affect our stock price and harm our business.

Expensive litigation and government investigations may reduce our earnings.

In November 2008, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Truvada. In the notice, Teva alleges that two of the patents associated with emtricitabine are invalid, unenforceable and/or will not be infringed by Teva’s manufacture, use or sale of a generic version of Truvada. In December 2008, we filed a lawsuit against Teva for infringement of the two emtricitabine patents. In March 2009, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Atripla. In the notice, Teva challenged the same two emtricitabine patents. In May 2009, we filed another lawsuit against Teva for infringement of the two emtricitabine patents, and this lawsuit was consolidated with the lawsuit filed in December 2008. In January 2010, we received notice that Teva submitted an ANDA to the FDA requesting permission to manufacture and

market a generic version of Viread. In the notice, Teva challenged four of the tenofovir disoproxil fumarate patents protecting Viread. In January 2010, we also received notices from Teva amending its ANDAs related to Atripla and Truvada. In the notice related to Truvada, Teva challenged four patents related to tenofovir disoproxil fumarate and two additional patents related to emtricitabine. In the notice related to Atripla, Teva challenged four patents related to tenofovir disoproxil fumarate, two additional patents related to emtricitabine and two patents related to efavirenz. In March 2010, we filed a lawsuit against Teva for infringement of the four Viread patents and two additional emtricitabine patents. In March 2010, BMS and Merck filed a lawsuit against Teva for infringement of the patents related to efavirenz.

In June 2010, we received notice that Lupin submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Ranexa. In the notice, Lupin alleges that ten of the patents associated with Ranexa are invalid, unenforceable and/or will not be infringed by Lupin’s manufacture, use or sale of a generic version of Ranexa. In July 2010, we filed a lawsuit against Lupin for infringement of our patents for Ranexa.

In August 2010, we received notice that Sigmapharm submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Hepsera. In the notice, Sigmapharm alleges that both of the patents associated with Hepsera are invalid, unenforceable and/or will not be infringed by Sigmapharm’s manufacture, use or sale of a generic version of Hepsera. In September 2010, we filed a lawsuit against Sigmapharm for infringement of our patents for Hepsera. One of the patents challenged by Sigmapharm is also being challenged by Ranbaxy pursuant to a notice received in October 2010. The patent challenged by Ranbaxy expires in July 2018. We are considering our options for enforcing our patent.

In February 2011, we received notice that Natco submitted an ANDA to the FDA requesting permission to manufacture and market a generic version of Tamiflu. In the notice, Natco alleges that one of the patents associated with Tamiflu is invalid, unenforceable and/or will not be infringed by Natco’s manufacture, use or sale of a generic version of Tamiflu. In March 2011, we and Roche filed a lawsuit against Natco for infringement of the patent associated with Tamiflu.

The outcome of the lawsuits above, or any other lawsuits that may be brought against us, are inherently uncertain, and adverse developments or outcomes can result in significant expenses, monetary damages, penalties or injunctive relief against us that could significantly reduce our earnings and cash flows and harm our business.

In some countries, we may be required to grant compulsory licenses for our products or face generic competition for our products.

In a number of developing countries, government officials and other interested groups have suggested that pharmaceutical companies should make drugs for HIV infection available at low cost. Alternatively, governments in those developing countries could require that we grant compulsory licenses to allow competitors to manufacture and sell their own versions of our products, thereby reducing our product sales. For example, in the past, certain offices of the government of Brazil have expressed concern over the affordability of our HIV products and declared that they were considering issuing compulsory licenses to permit the manufacture of otherwise patented products for HIV infection, including Viread. In July 2009, the Brazilian patent authority rejected our patent application for tenofovir disoproxil fumarate, the active pharmaceutical ingredient in Viread. This was the highest level of appeal available to us within the Brazilian patent authority. We have filed a civil action in Brazilian federal court to further appeal the action of the Brazilian patent authority. If we are unable to

successfully appeal the decision by the patent authority in the courts, the Brazilian government would likely purchase generic tenofovir disoproxil fumarate, which would significantly reduce our sales of HIV products in Brazil. In 2010, the Brazilian government purchased approximately $50 million of our HIV products. Further, we are aware of applications from two generic companies to sell a generic version of Viread in Brazil, one of which has received approval from the Brazilian Health Ministry. If one or both of these generic applicants are able to compete for this contract for 2011, we would not expect the Brazilian government to purchase any of our HIV products in 2011.

In addition, concerns over the cost and availability of Tamiflu related to a potential avian flu pandemic and H1N1 influenza have generated international discussions over compulsory licensing of our Tamiflu patents. For example, the Canadian government may allow Canadian manufacturers to manufacture and export the active ingredient in Tamiflu to eligible developing and least developed countries under Canada’s Access to Medicines Regime. Furthermore, Roche has issued voluntary licenses to permit third-party manufacturing of Tamiflu. For example, Roche has granted a sublicense to Shanghai Pharmaceutical (Group) Co., Ltd. for China and a sublicense to India’s Hetero Drugs Limited for India and certain developing countries. Should one or more compulsory licenses be issued permitting generic manufacturing to override our Tamiflu patents, or should Roche issue additional voluntary licenses to permit third-party manufacturing of Tamiflu, those developments could reduce royalties we receive from Roche’s sales of Tamiflu. Certain countries do not permit enforcement of our patents, and third-party manufacturers are able to sell generic versions of our products in those countries. Compulsory licenses or sales of generic versions of our products could significantly reduce our sales and adversely affect our results of operations, particularly if generic versions of our products are imported into territories where we have existing commercial sales.

Changes in royalty revenue disproportionately affect our pre-tax income, earnings per share and gross margins.

A portion of our revenues is derived from royalty revenues recognized from collaboration agreements with third parties. Royalty revenues impact our pre-tax income, earnings per share and gross margins disproportionately more than their contributions to our revenues. Any increase or decrease to our royalty revenue could be material and could significantly impact our operating results. For example, we recognized $386.5 million in royalty revenue for the year ended December 31, 2010 related to royalties received from sales of Tamiflu by F. Hoffmann-La Roche Ltd (together with Hoffmann-La Roche Inc., Roche). Although such royalty revenue represented approximately 5% of our total revenues in 2010, it represented approximately 10% of our pre-tax income during the period. Roche’s Tamiflu sales have unpredictable variability due to their strong relationship with global pandemic planning efforts. Tamiflu royalties increased sharply in 2009 and the first quarter of 2010 primarily as a result of pandemic planning initiatives worldwide. Tamiflu royalties declined sharply in the second quarter of 2010 and continued to decline through the first quarter of 2011 due to the fulfillment of many of the existing pandemic orders from governments and corporations.

We may face significant liability resulting from our products that may not be covered by insurance and successful claims could materially reduce our earnings.

The testing, manufacturing, marketing and use of our commercial products, as well as product candidates in development, involve substantial risk of product liability claims. These claims may be made directly by consumers, healthcare providers, pharmaceutical companies or others. In recent years, coverage and availability of cost-effective product liability insurance has decreased, so we may be unable to maintain sufficient coverage for product liabilities that may arise. In addition, the cost to defend lawsuits or pay damages for product liability claims may exceed our coverage. If we are unable to maintain adequate coverage or if claims exceed our coverage, our financial condition and our ability to clinically test our product candidates and market our products will be adversely impacted. In addition, negative publicity associated with any claims, regardless of their merit, may decrease the future demand for our products and impair our financial condition.

Business disruptions from natural or man-made disasters may harm our future revenues.

Our worldwide operations could be subject to business interruptions stemming from natural or man-made disasters for which we may be self-insured. Our corporate headquarters and Palo Alto locations, which together house a majority of our research and development activities, and our San Dimas manufacturing facility are located in California, a seismically active region. As we do not carry earthquake insurance and significant recovery time could be required to resume operations, our financial condition and operating results could be materially adversely affected in the event of a major earthquake.

Changes in our effective income tax rate could reduce our earnings.

Various factors may have favorable or unfavorable effects on our income tax rate. These factors include, but are not limited to, interpretations of existing tax laws, changes in tax laws and rates, our portion of the non-tax deductible pharmaceutical excise tax that we will be required to pay in August 2011 as a result of the enactment of U.S. healthcare reform legislation, the accounting for stock options and other share-based payments, mergers and acquisitions, future levels of R&D spending, changes in accounting standards, changes in the mix of earnings in the various tax jurisdictions in which we operate, changes in overall levels of pre-tax earnings and resolution of federal, state and foreign income tax audits. The impact on our income tax provision resulting from the above mentioned factors may be significant and could have a negative impact on our net income.

Our income tax returns are audited by federal, state and foreign tax authorities. We are currently under examination by the Internal Revenue Service for the 2005, 2006 and 2007 tax years and by various state and foreign jurisdictions. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. Resolution of one or more of these exposures in any reporting period could have a material impact on the results of operations for that period.

Changes in accounting rules or policies may affect our financial position and results of operations.

U.S. generally accepted accounting principles and related implementation guidelines and interpretations can be highly complex and involve subjective judgments. Changes in these rules or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

If we fail to attract and retain highly qualified personnel, we may be unable to successfully develop new product candidates, conduct our clinical trials and commercialize our product candidates.

Our future success will depend in large part on our continued ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations. Competition for qualified personnel in the biopharmaceutical field is intense, and there is a limited pool of qualified potential employees to recruit. We may not be able to attract and retain quality personnel on acceptable terms. If we are unsuccessful in our recruitment and retention efforts, our business may be harmed.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In January 2011, our Board authorized an additional three-year, $5.00 billion stock repurchase program which will commence upon the completion of our existing program authorized in May 2010.

The table below summarizes our stock repurchase activity for the three months ended March 31, 2011 (in thousands, except per share amounts):


	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs			Maximum Fair Value of Shares that May Yet Be Purchased Under the Program
January 1 – January 31, 2011		5,530		$	37.96		5,526		$	1,769,419
February 1 – February 28, 2011		4,041		$	38.72		3,957		$	1,616,219
March 1 – March 31, 2011		4,671		$	40.88		4,538		$	1,430,700

Total		14,242	⁽¹⁾	$	39.12		14,021	⁽¹⁾

⁽¹⁾	The difference between the total number of shares purchased and the total number of shares purchased as part of publicly announced programs is due to shares of common stock withheld by us from employee restricted stock awards in order to satisfy our applicable tax withholding obligations.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.

REMOVED AND RESERVED

ITEM 5.

OTHER INFORMATION

Not applicable.

ITEM 6.

EXHIBITS


Exhibit Footnote	Exhibit Number	Description of Document
(1)	1.1	Underwriting Agreement, dated March 23, 2011, among Registrant and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, as representatives of the several underwriters name in Schedule 1 thereto.

(2)	2.1	Agreement and Plan of Merger among Registrant, Apex Merger Sub, Inc. and CV Therapeutics, Inc., dated as of March 12, 2009

±+(3)	2.2	Agreement and Plan of Merger among Registrant, Cougar Merger Sub, Inc. and CGI Pharmaceuticals, Inc., dated as of June 23, 2010

≠+(4)	2.3	Agreement and Plan of Merger among Registrant, Arroyo Merger Sub, Inc. and Arresto Biosciences, Inc., dated as of December 19, 2010

‡+	2.4	Agreement and Plan of Merger among Registrant, Gilead Biopharmaceutics Ireland Corporation, Gilead Sciences Limited, Calistoga Pharmaceuticals, Inc. and Shareholder Representative Services LLC, as Stockholders’ Agent, dated as of February 21, 2011

+	2.5	Amendment No. 1 to the Agreement and Plan of Merger, entered into as of March 24, 2011

(5)	3.1	Restated Certificate of Incorporation of Registrant, as amended through May 8, 2008

(6)	3.2	Certificate of Designation of the Series A Junior Participating Preferred Stock of Registrant

(7)	3.3	Certificate of Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of Registrant

(8)	3.4	Amended and Restated Bylaws of Registrant, as amended and restated on October 24, 2008

	4.1	Reference is made to Exhibit 3.1, Exhibit 3.2, Exhibit 3.3 and Exhibit 3.4

(9)	4.2	Amended and Restated Rights Agreement between Registrant and ChaseMellon Shareholder Services, LLC, dated October 21, 1999

(10)	4.3	First Amendment to Amended and Restated Rights Agreement between Registrant and Mellon Investor Services, LLC (formerly known as ChaseMellon Shareholder Services, LLC), dated October 29, 2003

(11)	4.4	Second Amendment to Amended and Restated Rights Agreement between Registrant and Mellon Investor Services, LLC (formerly known as ChaseMellon Shareholder Services, LLC), dated May 11, 2006

(12)	4.5	Indenture related to the Convertible Senior Notes, due 2011, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 0.50% Convertible Senior Note due 2011), dated April 25, 2006

(12)	4.6	Indenture related to the Convertible Senior Notes, due 2013, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 0.625% Convertible Senior Note due 2013), dated April 25, 2006

(13)	4.7	Indenture related to the Convertible Senior Notes, due 2014, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 1.00% Convertible Senior Note due 2014), dated July 30, 2010


Exhibit Footnote	Exhibit Number	Description of Document
(13)	4.8	Indenture related to the Convertible Senior Notes, due 2016, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 1.625% Convertible Senior Note due 2016), dated July 30, 2010

(14)	4.9	Indenture, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee

(14)	4.10	First Supplemental Indenture, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee

(14)	4.11	Form of Note (included in Exhibit 4.10 above)

(15)	10.1	Confirmation of OTC Convertible Note Hedge related to 2011 Notes, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A.

(15)	10.2	Confirmation of OTC Convertible Note Hedge related to 2013 Notes, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A.

(15)	10.3	Confirmation of OTC Warrant Transaction, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A. for warrants expiring in 2011

(15)	10.4	Confirmation of OTC Warrant Transaction, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A. for warrants expiring in 2013

(16)	10.5	Amended and Restated Credit Agreement among Registrant, Gilead Biopharmaceutics Ireland Corporation, the lenders parties thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, dated as of December 18, 2007

(15)	10.6	Parent Guaranty Agreement, dated as of December 18, 2007, by Registrant

(4)	10.7	Amendment No. 1 to Amended and Restated Credit Agreement and Limited Consent and Waiver dated as of June 3, 2009, among Registrant, Gilead Biopharmaceutics Ireland Corporation and Bank of America, N.A. in its capacity as administrative agent for the Lenders

(4)	10.8	Amendment No. 2 to Amended and Restated Credit Agreement among Registrant, Gilead Biopharmaceutics Ireland Corporation and Bank of America, N.A. in its capacity as administrative agent for the Lenders, dated December 22, 2010

(3)	10.9	Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated July 26, 2010, between Registrant and Goldman, Sachs & Co.

(3)	10.10	Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association

(3)	10.11	Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated July 26, 2010, between Registrant and Goldman, Sachs & Co.
(3)	10.12	Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association

(3)	10.13	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2014


Exhibit Footnote	Exhibit Number	Description of Document
(3)	10.14	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2014

(3)	10.15	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2016

(3)	10.16	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2016

(17)	10.17	Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 5, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.18	Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.19	Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 5, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.20	Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.21	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2014

(17)	10.22	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2014

(17)	10.23	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2016

(17)	10.24	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2016

(17)	10.25	Amendment to Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.26	Amendment to Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.27	Amendment to Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.28	Amendment to Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.29	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.
(17)	10.30	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.31	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.


Exhibit Footnote	Exhibit Number	Description of Document
(17)	10.32	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

*(18)	10.33	Gilead Sciences, Inc. 1991 Stock Option Plan, as amended through January 29, 2003

*(19)	10.34	Form of option agreements used under the 1991 Stock Option Plan

*(18)	10.35	Gilead Sciences, Inc. 1995 Non-Employee Directors’ Stock Option Plan, as amended through January 30, 2002

*(20)	10.36	Form of option agreement used under the Gilead Sciences, Inc. 1995 Non-Employee Directors’ Stock Option Plan

*(21)	10.37	Gilead Sciences, Inc. 2004 Equity Incentive Plan, as amended through May 6, 2009

*(22)	10.38	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants prior to February 2008)

*(23)	10.39	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants made February 2008 through April 2009)

*(24)	10.40	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in May 2009)

*(25)	10.41	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in February 2010)

*	10.42	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(22)	10.43	Form of non-employee director stock option agreement used under 2004 Equity Incentive Plan (for grants prior to 2008)

*(23)	10.44	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for initial grants made in 2008)

*(23)	10.45	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants made in May 2008)

*(24)	10.46	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants commencing in May 2009)

*(24)	10.47	Form of restricted stock unit issuance agreement used under 2004 Equity Incentive Plan (for annual grants to non-employee directors commencing in May 2009)

*(24)	10.48	Form of restricted stock award agreement used under 2004 Equity Incentive Plan (for annual grants to certain non-employee directors)
*(26)	10.49	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2007)

*(27)	10.50	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2008)

*(24)	10.51	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2009)


Exhibit Footnote	Exhibit Number	Description of Document
*(25)	10.52	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2010)

*	10.53	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(28)	10.54	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants made prior to May 2009)

*(24)	10.55	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants commencing in May 2009)

*(29)	10.56	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (service-based vesting for executive officers commencing in November 2009)

*	10.57	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(25)	10.58	Gilead Sciences, Inc. Employee Stock Purchase Plan, amended and restated on November 3, 2009

*(30)	10.59	Gilead Sciences, Inc. International Employee Stock Purchase Plan, adopted November 3, 2009

*(31)	10.60	Gilead Sciences, Inc. Deferred Compensation Plan—Basic Plan Document

*(31)	10.61	Gilead Sciences, Inc. Deferred Compensation Plan—Adoption Agreement

*(31)	10.62	Addendum to the Gilead Sciences, Inc. Deferred Compensation Plan

*(32)	10.63	Gilead Sciences, Inc. 2005 Deferred Compensation Plan, as amended and restated on October 23, 2008

*(25)	10.64	Gilead Sciences, Inc. Severance Plan, as amended on December 14, 2009

*(22)	10.65	Gilead Sciences, Inc. Corporate Bonus Plan

*(22)	10.66	Gilead Sciences, Inc. Code Section 162(m) Bonus Plan

*(33)	10.67	2011 Base Salaries for the Named Executive Officers

*(34)	10.68	Offer Letter dated April 16, 2008 between Registrant and Robin Washington

*(19)	10.69	Form of Indemnity Agreement entered into between Registrant and its directors and executive officers
*(19)	10.70	Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees

*(25)	10.71	Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees (revised in September 2006)

+(35)	10.72	Amended and Restated Collaboration Agreement by and among Registrant, Gilead Holdings, LLC, Bristol-Myers Squibb Company, E.R. Squibb & Sons, L.L.C., and Bristol-Myers Squibb & Gilead Sciences, LLC, dated September 28, 2006


Exhibit Footnote	Exhibit Number	Description of Document
+(23)	10.73	Commercialization Agreement by and between Gilead Sciences Limited and Bristol-Myers Squibb Company, dated December 10, 2007

+(36)	10.74	Amendment Agreement, dated October 25, 1993, between Registrant, the Institute of Organic Chemistry and Biochemistry (IOCB) and Rega Stichting v.z.w. (REGA), together with the following exhibits: the License Agreement, dated December 15, 1991, between Registrant, IOCB and REGA (the 1991 License Agreement), the License Agreement, dated October 15, 1992, between Registrant, IOCB and REGA (the October 1992 License Agreement) and the License Agreement, dated December 1, 1992, between Registrant, IOCB and REGA (the December 1992 License Agreement)

(37)	10.75	Amendment Agreement between Registrant and IOCB/REGA, dated December 27, 2000 amending the 1991 License Agreement and the December 1992 License Agreement

(35)	10.76	Sixth Amendment Agreement to the License Agreement, between IOCB/REGA and Registrant, dated August 18, 2006 amending the October 1992 License Agreement and the December 1992 License Agreement

+(35)	10.77	Development and License Agreement among Registrant and F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., dated September 27, 1996

+(38)	10.78	First Amendment and Supplement dated November 15, 2005 to the Development and Licensing Agreement between Registrant, F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc. dated September 27, 1996

+(38)	10.79	Exclusive License Agreement between Registrant (as successor to Triangle Pharmaceuticals, Inc.), Glaxo Group Limited, The Wellcome Foundation Limited, Glaxo Wellcome Inc. and Emory University, dated May 6, 1999

+(40)	10.80	Royalty Sale Agreement by and among Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 18, 2005

+(40)	10.81	Amended and Restated License Agreement between Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 21, 2005.

+(41)	10.82	License Agreement between Japan Tobacco Inc. and Registrant, dated March 22, 2005

+(42)	10.83	License Agreement between Registrant (as successor to Myogen, Inc.) and Abbott Deutschland Holding GmbH dated October 8, 2001

+(42)	10.84	License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated March 27, 1996
+(43)	10.85	First Amendment to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated July 3, 1997

(43)	10.86	Amendment No. 2 to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated November 30. 1999

+(44)	10.87	Amendment No. 4 to Collaboration and License Agreement with Registrant (as successor to CV Therapeutics, Inc.) and Roche Palo Alto LLC (successor in interest by merger to Syntex (U.S.A.) Inc.), dated June 20, 2006


Exhibit Footnote	Exhibit Number	Description of Document
+(45)	10.88	License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 16, 2009

+(46)	10.89	Master Clinical and Commercial Supply Agreement between Gilead World Markets, Limited, Registrant and Patheon Inc., dated January 1, 2003

+(40)	10.90	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama), Ltd., dated July 17, 2003

+(47)	10.91	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated May 10, 2007

+(32)	10.92	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated December 5, 2008

+	10.93	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated February 3. 2011

+(4)	10.94	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and Ampac Fine Chemicals LLC, dated November 3, 2010

+(38)	10.95	Restated and Amended Toll Manufacturing Agreement between Gilead Sciences Limited, Registrant and Nycomed GmbH (formerly ALTANA Pharma Oranienburg GmbH), dated November 7, 2005

+(15)	10.96	Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Degussa AG, dated June 6, 2006

+(3)	10.97	Amendment No. 1 to Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Evonik Degussa GmbH (formerly known as Degussa AG), dated April 30, 2010

(32)	10.98	Purchase and Sale Agreement and Escrow Instructions between Electronics for Imaging, Inc. and Registrant, dated October 23, 2008

	31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

	31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended
	32.1**	Certifications of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)

	101***	The following materials from Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets at March 31, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010, (iii) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010, and (iv) Notes to Condensed Consolidated Financial Statements.

(1)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 28, 2011, and incorporated herein by reference.

(2)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 12, 2009, and incorporated herein by reference.

(3)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference.

(4)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference.

(5)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 9, 2008, and incorporated herein by reference.

(6)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on November 22, 1994, and incorporated herein by reference.

(7)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2006, and incorporated herein by reference.

(8)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 28, 2008, and incorporated herein by reference.

(9)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 22, 1999, and incorporated herein by reference.

(10)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 31, 2003, and incorporated herein by reference.

(11)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-135412) filed on June 28, 2006, and incorporated herein by reference.

(12)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 25, 2006, and incorporated herein by reference.

(13)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on August 2, 2010, and incorporated herein by reference.

(14)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 1, 2011, and incorporated herein by reference.

(15)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.

(16)	Filed as an exhibit to Registrant’s Current Report on Form 8-K also filed on December 19, 2007, and incorporated herein by reference.

(17)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, and incorporated herein by reference.

(18)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-102912) filed on January 31, 2003, and incorporated herein by reference.

(19)	Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (No. 33-55680), as amended, and incorporated herein by reference.

(20)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998, and incorporated herein by reference.

(21)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2009, and incorporated herein by reference.

(22)	Filed as an exhibit to Registrant’s Current Report on Form 8-K/A filed on February 22, 2006, and incorporated herein by reference.

(23)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference.

(24)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference.

(25)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference.

(26)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.

(27)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by reference.

(28)	Filed as an exhibit to Registrant’s Current Report on Form 8-K first filed on December 19, 2007, and incorporated herein by reference.

(29)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, and incorporated herein by reference.

(30)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-163871) filed on December 21, 2009, and incorporated herein by reference.

(31)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference.

(32)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and incorporated herein by reference.

(33)	Information is included in Registrant’s Current Report on Form 8-K filed on January 25, 2011, and incorporated herein by reference.

(34)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and incorporated herein by reference.

(35)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference.

(36)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994, and incorporated herein by reference.

(37)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.

(38)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference.

(39)	Filed as an exhibit to Triangle Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q/A filed on November 3, 1999, and incorporated herein by reference.

(40)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.

(41)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference.

(42)	Filed as an exhibit to Myogen, Inc.’s Registration Statement on Form S-1 (No. 333-108301), as amended, originally filed on August 28, 2003, and incorporated herein by reference.

(43)	Filed as an exhibit to CV Therapeutics, Inc.’s Registration Statement on Form S-3 (No. 333-59318), as amended, originally filed on April 20, 2001, and incorporated herein by reference.

(44)	Filed as an exhibit to CV Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.

(45)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, and incorporated herein by reference.

(46)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and incorporated herein by reference.

(47)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on August 7, 2007, and incorporated herein by reference.

The Agreement and Plan of Merger (the CGI Merger Agreement) contains representations and warranties of Registrant, Cougar Merger Sub, Inc. and CGI Pharmaceuticals, Inc. made solely to each other as of specific dates. Those representations and warranties were made solely for purposes of the CGI Merger Agreement and may be subject to important qualifications and limitations agreed to by Registrant, Cougar Merger Sub, Inc. and CGI Pharmaceuticals, Inc. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a standard of materiality provided for in the

CGI Merger Agreement and have been used for the purpose of allocating risk among Registrant, Cougar Merger Sub, Inc. and CGI Pharmaceuticals, Inc. rather than establishing matters as facts.

≠

The Agreement and Plan of Merger (the Arresto Merger Agreement) contains representations and warranties of Registrant, Arroyo Merger Sub, Inc. and Arresto Biosciences, Inc. made solely to each other as of specific dates. Those representations and warranties were made solely for purposes of the Arresto Merger Agreement and may be subject to important qualifications and limitations agreed to by Registrant, Arroyo Merger Sub, Inc. and Arresto Biosciences, Inc. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a standard of materiality provided for in the Arresto Merger Agreement and have been used for the purpose of allocating risk among Registrant, Arroyo Merger Sub, Inc. and Arresto Biosciences, Inc. rather than establishing matters as facts.

‡

The Agreement and Plan of Merger (the Calistoga Merger Agreement) contains representations and warranties of Registrant, Gilead Biopharmaceutics Ireland Corporation, Gilead Sciences Limited and Calistoga Pharmaceuticals, Inc. made solely to each other as of specific dates. Those representations and warranties were made solely for purposes of the Calistoga Merger Agreement and may be subject to important qualifications and limitations agreed to by Registrant, Gilead Biopharmaceutics Ireland Corporation, Gilead Sciences Limited and Calistoga Pharmaceuticals, Inc. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may be subject to a standard of materiality provided for in the Calistoga Merger Agreement and have been used for the purpose of allocating risk among Registrant, Gilead Biopharmaceutics Ireland Corporation, Gilead Sciences Limited and Calistoga Pharmaceuticals, Inc. rather than establishing matters as facts.

*	Management contract or compensatory plan or arrangement.

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

***

XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Exchange Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Certain confidential portions of this Exhibit were omitted by means of marking such portions with an asterisk (the Mark). This Exhibit has been filed separately with the Secretary of the SEC without the Mark pursuant to Registrant’s Application Requesting Confidential Treatment under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		GILEAD SCIENCES, INC. (Registrant)

Date: May 9, 2011		/ S / J OHN C. M ARTIN
		John C. Martin, Ph.D. Chairman and Chief Executive Officer (Principal Executive Officer)

Date: May 9, 2011		/ S / R OBIN L. W ASHINGTON
		Robin L. Washington Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit Index


Exhibit Footnote	Exhibit Number	Description of Document
(1)	1.1	Underwriting Agreement, dated March 23, 2011, among Registrant and J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated, as representatives of the several underwriters name in Schedule 1 thereto.

(2)	2.1	Agreement and Plan of Merger among Registrant, Apex Merger Sub, Inc. and CV Therapeutics, Inc., dated as of March 12, 2009

±+(3)	2.2	Agreement and Plan of Merger among Registrant, Cougar Merger Sub, Inc. and CGI Pharmaceuticals, Inc., dated as of June 23, 2010

≠+(4)	2.3	Agreement and Plan of Merger among Registrant, Arroyo Merger Sub, Inc. and Arresto Biosciences, Inc., dated as of December 19, 2010

‡+	2.4	Agreement and Plan of Merger among Registrant, Gilead Biopharmaceutics Ireland Corporation, Gilead Sciences Limited, Calistoga Pharmaceuticals, Inc. and Shareholder Representative Services LLC, as Stockholders’ Agent, dated as of February 21, 2011

+	2.5	Amendment No. 1 to the Agreement and Plan of Merger, entered into as of March 24, 2011

(5)	3.1	Restated Certificate of Incorporation of Registrant, as amended through May 8, 2008

(6)	3.2	Certificate of Designation of the Series A Junior Participating Preferred Stock of Registrant

(7)	3.3	Certificate of Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of Registrant

(8)	3.4	Amended and Restated Bylaws of Registrant, as amended and restated on October 24, 2008

	4.1	Reference is made to Exhibit 3.1, Exhibit 3.2, Exhibit 3.3 and Exhibit 3.4

(9)	4.2	Amended and Restated Rights Agreement between Registrant and ChaseMellon Shareholder Services, LLC, dated October 21, 1999

(10)	4.3	First Amendment to Amended and Restated Rights Agreement between Registrant and Mellon Investor Services, LLC (formerly known as ChaseMellon Shareholder Services, LLC), dated October 29, 2003

(11)	4.4	Second Amendment to Amended and Restated Rights Agreement between Registrant and Mellon Investor Services, LLC (formerly known as ChaseMellon Shareholder Services, LLC), dated May 11, 2006

(12)	4.5	Indenture related to the Convertible Senior Notes, due 2011, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 0.50% Convertible Senior Note due 2011), dated April 25, 2006

(12)	4.6	Indenture related to the Convertible Senior Notes, due 2013, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 0.625% Convertible Senior Note due 2013), dated April 25, 2006

(13)	4.7	Indenture related to the Convertible Senior Notes, due 2014, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 1.00% Convertible Senior Note due 2014), dated July 30, 2010


Exhibit Footnote	Exhibit Number	Description of Document
(13)	4.8	Indenture related to the Convertible Senior Notes, due 2016, between Registrant and Wells Fargo Bank, National Association, as trustee (including form of 1.625% Convertible Senior Note due 2016), dated July 30, 2010

(14)	4.9	Indenture, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee

(14)	4.10	First Supplemental Indenture, dated as of March 30, 2011, between Registrant and Wells Fargo, National Association, as Trustee

(14)	4.11	Form of Note (included in Exhibit 4.10 above)

(15)	10.1	Confirmation of OTC Convertible Note Hedge related to 2011 Notes, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A.

(15)	10.2	Confirmation of OTC Convertible Note Hedge related to 2013 Notes, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A.

(15)	10.3	Confirmation of OTC Warrant Transaction, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A. for warrants expiring in 2011

(15)	10.4	Confirmation of OTC Warrant Transaction, dated April 19, 2006, as amended and restated as of April 24, 2006, between Registrant and Bank of America, N.A. for warrants expiring in 2013

(16)	10.5	Amended and Restated Credit Agreement among Registrant, Gilead Biopharmaceutics Ireland Corporation, the lenders parties thereto and Bank of America, N.A., as Administrative Agent, Swing Line Lender and L/C Issuer, dated as of December 18, 2007

(15)	10.6	Parent Guaranty Agreement, dated as of December 18, 2007, by Registrant

(4)	10.7	Amendment No. 1 to Amended and Restated Credit Agreement and Limited Consent and Waiver dated as of June 3, 2009, among Registrant, Gilead Biopharmaceutics Ireland Corporation and Bank of America, N.A. in its capacity as administrative agent for the Lenders

(4)	10.8	Amendment No. 2 to Amended and Restated Credit Agreement among Registrant, Gilead Biopharmaceutics Ireland Corporation and Bank of America, N.A. in its capacity as administrative agent for the Lenders, dated December 22, 2010

(3)	10.9	Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated July 26, 2010, between Registrant and Goldman, Sachs & Co.

(3)	10.10	Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association

(3)	10.11	Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated July 26, 2010, between Registrant and Goldman, Sachs & Co.

(3)	10.12	Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association


Exhibit Footnote	Exhibit Number	Description of Document
(3)	10.13	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2014

(3)	10.14	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2014

(3)	10.15	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2016

(3)	10.16	Confirmation of OTC Warrant Transaction, dated July 26, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2016

(17)	10.17	Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 5, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.18	Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.19	Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 5, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.20	Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.21	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2014

(17)	10.22	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2014

(17)	10.23	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and Goldman, Sachs & Co. for warrants expiring in 2016

(17)	10.24	Confirmation of OTC Additional Warrant Transaction, dated August 5, 2010, between Registrant and JPMorgan Chase Bank, National Association for warrants expiring in 2016

(17)	10.25	Amendment to Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.26	Amendment to Confirmation of OTC Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.27	Amendment to Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.28	Amendment to Confirmation of OTC Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

(17)	10.29	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.30	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2014 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association


Exhibit Footnote	Exhibit Number	Description of Document
(17)	10.31	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and Goldman, Sachs & Co.

(17)	10.32	Amendment to Confirmation of OTC Additional Convertible Note Hedge related to 2016 Notes, dated August 30, 2010, between Registrant and JPMorgan Chase Bank, National Association

*(18)	10.33	Gilead Sciences, Inc. 1991 Stock Option Plan, as amended through January 29, 2003

*(19)	10.34	Form of option agreements used under the 1991 Stock Option Plan

*(18)	10.35	Gilead Sciences, Inc. 1995 Non-Employee Directors’ Stock Option Plan, as amended through January 30, 2002

*(20)	10.36	Form of option agreement used under the Gilead Sciences, Inc. 1995 Non-Employee Directors’ Stock Option Plan

*(21)	10.37	Gilead Sciences, Inc. 2004 Equity Incentive Plan, as amended through May 6, 2009

*(22)	10.38	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants prior to February 2008)

*(23)	10.39	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants made February 2008 through April 2009)

*(24)	10.40	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in May 2009)

*(25)	10.41	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for grants commencing in February 2010)

*	10.42	Form of employee stock option agreement used under 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(22)	10.43	Form of non-employee director stock option agreement used under 2004 Equity Incentive Plan (for grants prior to 2008)

*(23)	10.44	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for initial grants made in 2008)

*(23)	10.45	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants made in May 2008)

*(24)	10.46	Form of non-employee director option agreement used under 2004 Equity Incentive Plan (for annual grants commencing in May 2009)

*(24)	10.47	Form of restricted stock unit issuance agreement used under 2004 Equity Incentive Plan (for annual grants to non-employee directors commencing in May 2009)

*(24)	10.48	Form of restricted stock award agreement used under 2004 Equity Incentive Plan (for annual grants to certain non-employee directors)

*(26)	10.49	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2007)


Exhibit Footnote	Exhibit Number	Description of Document
*(27)	10.50	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2008)

*(24)	10.51	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2009)

*(25)	10.52	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for grants made in 2010)

*	10.53	Form of performance share award agreement used under the 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(28)	10.54	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants made prior to May 2009)

*(24)	10.55	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for grants commencing in May 2009)

*(29)	10.56	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (service-based vesting for executive officers commencing in November 2009)

*	10.57	Form of restricted stock unit issuance agreement used under the 2004 Equity Incentive Plan (for 2011 and subsequent year grants)

*(25)	10.58	Gilead Sciences, Inc. Employee Stock Purchase Plan, amended and restated on November 3, 2009

*(30)	10.59	Gilead Sciences, Inc. International Employee Stock Purchase Plan, adopted November 3, 2009

*(31)	10.60	Gilead Sciences, Inc. Deferred Compensation Plan—Basic Plan Document

*(31)	10.61	Gilead Sciences, Inc. Deferred Compensation Plan—Adoption Agreement

*(31)	10.62	Addendum to the Gilead Sciences, Inc. Deferred Compensation Plan

*(32)	10.63	Gilead Sciences, Inc. 2005 Deferred Compensation Plan, as amended and restated on October 23, 2008

*(25)	10.64	Gilead Sciences, Inc. Severance Plan, as amended on December 14, 2009

*(22)	10.65	Gilead Sciences, Inc. Corporate Bonus Plan

*(22)	10.66	Gilead Sciences, Inc. Code Section 162(m) Bonus Plan

*(33)	10.67	2011 Base Salaries for the Named Executive Officers

*(34)	10.68	Offer Letter dated April 16, 2008 between Registrant and Robin Washington

*(19)	10.69	Form of Indemnity Agreement entered into between Registrant and its directors and executive officers

*(19)	10.70	Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees


Exhibit Footnote	Exhibit Number	Description of Document
*(25)	10.71	Form of Employee Proprietary Information and Invention Agreement entered into between Registrant and certain of its officers and key employees (revised in September 2006)

+(35)	10.72	Amended and Restated Collaboration Agreement by and among Registrant, Gilead Holdings, LLC, Bristol-Myers Squibb Company, E.R. Squibb & Sons, L.L.C., and Bristol-Myers Squibb & Gilead Sciences, LLC, dated September 28, 2006

+(23)	10.73	Commercialization Agreement by and between Gilead Sciences Limited and Bristol-Myers Squibb Company, dated December 10, 2007

+(36)	10.74	Amendment Agreement, dated October 25, 1993, between Registrant, the Institute of Organic Chemistry and Biochemistry (IOCB) and Rega Stichting v.z.w. (REGA), together with the following exhibits: the License Agreement, dated December 15, 1991, between Registrant, IOCB and REGA (the 1991 License Agreement), the License Agreement, dated October 15, 1992, between Registrant, IOCB and REGA (the October 1992 License Agreement) and the License Agreement, dated December 1, 1992, between Registrant, IOCB and REGA (the December 1992 License Agreement)

(37)	10.75	Amendment Agreement between Registrant and IOCB/REGA, dated December 27, 2000 amending the 1991 License Agreement and the December 1992 License Agreement

(35)	10.76	Sixth Amendment Agreement to the License Agreement, between IOCB/REGA and Registrant, dated August 18, 2006 amending the October 1992 License Agreement and the December 1992 License Agreement

+(35)	10.77	Development and License Agreement among Registrant and F. Hoffmann-La Roche Ltd and Hoffmann-La Roche Inc., dated September 27, 1996

+(38)	10.78	First Amendment and Supplement dated November 15, 2005 to the Development and Licensing Agreement between Registrant, F. Hoffmann-La Roche Ltd and Hoffman-La Roche Inc. dated September 27, 1996

+(38)	10.79	Exclusive License Agreement between Registrant (as successor to Triangle Pharmaceuticals, Inc.), Glaxo Group Limited, The Wellcome Foundation Limited, Glaxo Wellcome Inc. and Emory University, dated May 6, 1999

+(40)	10.80	Royalty Sale Agreement by and among Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 18, 2005

+(40)	10.81	Amended and Restated License Agreement between Registrant, Emory University and Investors Trust & Custodial Services (Ireland) Limited, solely in its capacity as Trustee of Royalty Pharma, dated July 21, 2005.

+(41)	10.82	License Agreement between Japan Tobacco Inc. and Registrant, dated March 22, 2005

+(42)	10.83	License Agreement between Registrant (as successor to Myogen, Inc.) and Abbott Deutschland Holding GmbH dated October 8, 2001

+(42)	10.84	License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated March 27, 1996

+(43)	10.85	First Amendment to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated July 3, 1997


Exhibit Footnote	Exhibit Number	Description of Document
(43)	10.86	Amendment No. 2 to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated November 30. 1999

+(44)	10.87	Amendment No. 4 to Collaboration and License Agreement with Registrant (as successor to CV Therapeutics, Inc.) and Roche Palo Alto LLC (successor in interest by merger to Syntex (U.S.A.) Inc.), dated June 20, 2006

+(45)	10.88	License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 16, 2009

+(46)	10.89	Master Clinical and Commercial Supply Agreement between Gilead World Markets, Limited, Registrant and Patheon Inc., dated January 1, 2003

+(40)	10.90	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama), Ltd., dated July 17, 2003

+(47)	10.91	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated May 10, 2007

+(32)	10.92	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated December 5, 2008

+	10.93	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated February 3. 2011

+(4)	10.94	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and Ampac Fine Chemicals LLC, dated November 3, 2010

+(38)	10.95	Restated and Amended Toll Manufacturing Agreement between Gilead Sciences Limited, Registrant and Nycomed GmbH (formerly ALTANA Pharma Oranienburg GmbH), dated November 7, 2005

+(15)	10.96	Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Degussa AG, dated June 6, 2006

+(3)	10.97	Amendment No. 1 to Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Evonik Degussa GmbH (formerly known as Degussa AG), dated April 30, 2010

(32)	10.98	Purchase and Sale Agreement and Escrow Instructions between Electronics for Imaging, Inc. and Registrant, dated October 23, 2008

	31.1	Certification of Chief Executive Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

	31.2	Certification of Chief Financial Officer, as required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended

	32.1**	Certifications of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350)


Exhibit Footnote	Exhibit Number	Description of Document
	101***	The following materials from Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets at March 31, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2011 and 2010, (iii) Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2011 and 2010, and (iv) Notes to Condensed Consolidated Financial Statements.

(1)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 28, 2011, and incorporated herein by reference.

(2)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on March 12, 2009, and incorporated herein by reference.

(3)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, and incorporated herein by reference.

(4)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and incorporated herein by reference.

(5)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 9, 2008, and incorporated herein by reference.

(6)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on November 22, 1994, and incorporated herein by reference.

(7)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2006, and incorporated herein by reference.

(8)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 28, 2008, and incorporated herein by reference.

(9)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 22, 1999, and incorporated herein by reference.

(10)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on October 31, 2003, and incorporated herein by reference.

(11)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-135412) filed on June 28, 2006, and incorporated herein by reference.

(12)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 25, 2006, and incorporated herein by reference.

(13)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on August 2, 2010, and incorporated herein by reference.

(14)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on April 1, 2011, and incorporated herein by reference.

(15)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.

(16)	Filed as an exhibit to Registrant’s Current Report on Form 8-K also filed on December 19, 2007, and incorporated herein by reference.

(17)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, and incorporated herein by reference.

(18)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-102912) filed on January 31, 2003, and incorporated herein by reference.

(19)	Filed as an exhibit to Registrant’s Registration Statement on Form S-1 (No. 33-55680), as amended, and incorporated herein by reference.

(20)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 1998, and incorporated herein by reference.

(21)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2009, and incorporated herein by reference.

(22)	Filed as an exhibit to Registrant’s Current Report on Form 8-K/A filed on February 22, 2006, and incorporated herein by reference.

(23)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007, and incorporated herein by reference.

(24)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, and incorporated herein by reference.

(25)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and incorporated herein by reference.

(26)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, and incorporated herein by reference.

(27)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, and incorporated herein by reference.

(28)	Filed as an exhibit to Registrant’s Current Report on Form 8-K first filed on December 19, 2007, and incorporated herein by reference.

(29)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, and incorporated herein by reference.

(30)	Filed as an exhibit to Registrant’s Registration Statement on Form S-8 (No. 333-163871) filed on December 21, 2009, and incorporated herein by reference.

(31)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and incorporated herein by reference.

(32)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and incorporated herein by reference.

(33)	Information is included in Registrant’s Current Report on Form 8-K filed on January 25, 2011, and incorporated herein by reference.

(34)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, and incorporated herein by reference.

(35)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006, and incorporated herein by reference.

(36)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 1994, and incorporated herein by reference.

(37)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000, and incorporated herein by reference.

(38)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, and incorporated herein by reference.

(39)	Filed as an exhibit to Triangle Pharmaceuticals, Inc.’s Quarterly Report on Form 10-Q/A filed on November 3, 1999, and incorporated herein by reference.

(40)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference.

(41)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference.

(42)	Filed as an exhibit to Myogen, Inc.’s Registration Statement on Form S-1 (No. 333-108301), as amended, originally filed on August 28, 2003, and incorporated herein by reference.

(43)	Filed as an exhibit to CV Therapeutics, Inc.’s Registration Statement on Form S-3 (No. 333-59318), as amended, originally filed on April 20, 2001, and incorporated herein by reference.

(44)	Filed as an exhibit to CV Therapeutics, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, and incorporated herein by reference.

(45)	Filed as an exhibit to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2009, and incorporated herein by reference.

(46)	Filed as an exhibit to Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and incorporated herein by reference.

(47)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on August 7, 2007, and incorporated herein by reference.

≠

‡

*	Management contract or compensatory plan or arrangement.

***

Exhibit 2.4

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

GILEAD SCIENCES, INC.,

GILEAD BIOPHARMACEUTICS IRELAND CORPORATION,

GILEAD SCIENCES LIMITED,

CALISTOGA PHARMACEUTICALS, INC.

and

SHAREHOLDER REPRESENTATIVE SERVICES LLC,

AS STOCKHOLDERS’ AGENT

Dated as of February 21, 2011

TABLE OF CONTENTS


		Page

ARTICLE I DEFINITIONS			2

1.1	Certain Defined Terms		2

ARTICLE II THE MERGER			15

2.1	The Merger		15
2.2	Closing; Effective Time		15
2.3	Effect of the Merger		16
2.4	Certificate of Incorporation; Bylaws		16
2.5	Directors and Officers		16
2.6	Effect on Capital Stock		16
2.7	Surrender of Certificates		17
2.8	Lost, Stolen or Destroyed Certificates		19
2.9	Dissenting Shares		19
2.10	Taking of Further Action		20
2.11	Treatment of Company Warrants and Company Options		20
2.12	Certain Withholding		22

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY			22

3.1	Organization, Standing and Power		22
3.2	Authority		23
3.3	Governmental Authorizations		24
3.4	Financial Statements		24
3.5	Capitalization; Shares and Stockholder Information		24
3.6	Absence of Certain Changes		26
3.7	Absence of Undisclosed Liabilities		26
3.8	Litigation		27
3.9	Intellectual Property		27
3.10	Interested Party Transactions		33
3.11	Material Contracts		33
3.12	Assets		34
3.13	Real Estate		35
3.14	Environmental Matters		35
3.15	Taxes		36
3.16	Employee Benefit Plans		38
3.17	Employee and Labor Matters		42
3.18	Insurance		43
3.19	Compliance With Laws		43
3.20	Brokers’ and Finders’ Fee		43
3.21	Takeover Statutes		43

-i-

[*] = Certain confidential information contained in this document, marked by brackets, is filed with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended

TABLE OF CONTENTS (continued)


		Page

3.22	Regulatory Compliance		44
3.23	Suppliers		46
3.24	Product Liabilities		46
3.25	Healthcare Data Privacy and Security		46
3.26	Unlawful Payments		47
3.27	Information Statement		47

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB			48

4.1	Organization, Standing and Power		48
4.2	Authority		48
4.3	Noncontravention		48
4.4	Litigation		49
4.5	Adequacy of Funds		49

ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME			49

5.1	Conduct of Business of the Company		49

ARTICLE VI ADDITIONAL AGREEMENTS			52

6.1	Confidentiality; Access		52
6.2	Notification of Certain Matters		53
6.3	Public Disclosure		53
6.4	Regulatory Approval; Further Assurances		53
6.5	Employees		54
6.6	FIRPTA Matters		56
6.7	Indemnification of Officers and Directors of the Company		56
6.8	No Solicitation by the Company		57
6.9	Takeover Statute		58
6.10	Stockholder Vote Concerning Code Section 280G		58
6.11	Written Consents		59
6.12	Merger Consideration Certificate		59
6.13	Drag-Along Rights; *[]** Voting Agreement		61
6.14	Repayment of Indebtedness		61
6.15	Merger Sub		61
6.16	Other Actions		61

ARTICLE VII CONDITIONS TO THE MERGER			62

7.1	Conditions to Obligation of Each Party to Effect the Merger		62
7.2	Additional Conditions to the Obligations of Parent and Merger Sub		62
7.3	Additional Conditions to Obligation of the Company		65

ARTICLE VIII TERMINATION			65

TABLE OF CONTENTS (continued)


		Page

8.1	Termination		65
8.2	Effect of Termination		66

ARTICLE IX CONTINGENT PAYMENTS; INDEMNIFICATION			66

9.1	Contingent Payments		66
9.2	Indemnification		73
9.3	Stockholders’ Agent		80
9.4	Actions of the Stockholders’ Agent		83

ARTICLE X GENERAL PROVISIONS			83

10.1	Notices		83
10.2	Additional Definitions		84
10.3	Counterparts		86
10.4	Entire Agreement; Nonassignability; Parties in Interest		86
10.5	Severability		87
10.6	Remedies Cumulative		87
10.7	Governing Law		87
10.8	Rules of Construction		87
10.9	No Other Representations and Warranties		88
10.10	Time is of the Essence; Enforcement		88
10.11	Amendment; Waiver		88
10.12	Guarantee		88
10.13	[*]		89


Exhibit A – Form of Escrow Agreement
Exhibit B – Form of Tax Responsibility Agreement
Exhibit C – Form of Legal Opinions
Exhibit D – Form of General Release

iii

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of February 21, 2011 by and among Gilead Sciences, Inc., a Delaware corporation (“ Guarantor ”), Gilead Biopharmaceutics Ireland Corporation, a company formed under the laws of Ireland (“ Parent ”), Gilead Sciences Limited, a company formed under the laws of Ireland and a wholly owned subsidiary of Parent (“ Merger Sub ”), Calistoga Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”) and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as a Stockholders’ Agent hereunder (the “ Stockholders’ Agent ”).

RECITALS

A. Upon the terms and subject to the conditions of this Agreement and in accordance with Delaware General Corporation Law, as amended (“ Delaware Law ”), Parent, Merger Sub and the Company will enter into a business combination transaction pursuant to which Merger Sub will merge with and into the Company (the “ Merger ”);

B. The board of directors of the Company has, by resolutions duly adopted, unanimously: (i) declared that the Merger and the other transactions contemplated by this Agreement are advisable, fair to and in the best interests of the Company and its stockholders; (ii) approved this Agreement in accordance with the provisions of Delaware Law; (iii) directed that this Agreement and the Merger be submitted to the stockholders of the Company for their adoption and approval by written consent; and (iv) recommended that the stockholders of the Company adopt this Agreement and approve the Merger (the “ Board Recommendation ”);

C. The respective boards of directors of Guarantor, Parent and Merger Sub have, by resolutions duly adopted, unanimously declared that the Merger and the other transactions contemplated by this Agreement are advisable and approved this Agreement in accordance with the provisions of Delaware Law; and

D. Within four (4) hours after the execution and delivery of this Agreement, the Company shall obtain an action by written consent approving this Agreement, the Merger and the Preferred Stock Conversion (as defined herein) by the Required Stockholder Vote (as defined herein) in accordance with Delaware Law and the Company Organizational Documents (as defined herein).

NOW, THEREFORE, in consideration of the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the parties, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

1.1 Certain Defined Terms . As used in this Agreement, the following terms shall have the following meanings:

“ 2010 Health Care Law ” has the meaning set forth in Section 3.16(g).

“ 280G Shareholder Vote ” has the meaning set forth in Section 6.10.

“ Action ” means any civil, criminal, administrative or regulatory action, suit, hearing or proceeding.

“ Advisory Committee ” has the meaning set forth in Section 9.3(b).

“ Affiliate ” means, with respect to any person, another person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with such person.

“ Agent Losses ” has the meaning set forth in Section 9.3(b).

“ Agent NDA ” has the meaning set forth in Section 9.1(b)(iii)(E)(a).

“ Aggregate Escrow Balance ” has the meaning set forth in Section 9.2(c)(ii).

“ Agreement ” has the meaning set forth in the Preamble.

[*]

“ Applicable Law ” means any applicable federal, state, local or foreign law, statute, ordinance, rule, regulation, judgment, order, injunction or decree.

“ Assets ” means all tangible and intangible properties and assets (real, personal or mixed).

[*]

“ Board Recommendation ” has the meaning set forth in Recital B.

“ Business Day ” means each day that is not a Saturday, Sunday or other day on which Guarantor is closed for business or banking institutions located in San Francisco, California are authorized or obligated by law or executive order to close.

[*]

“ Certificate ” has the meaning set forth in Section 2.7(a).

“ cGMP ” means the applicable laws and regulations, as may be amended from time to time, for current Good Manufacturing Practice, which have been promulgated by (i) the FDA under the United States Federal Food, Drug and Cosmetic Act, 21 C.F.R. §210 et seq., (ii) the European Medicines Agency or under the European Union guide to Good Manufacturing Practice for medical products and (iii) any other applicable Governmental Entity in each jurisdiction where the Company, or a third party acting on its behalf, is undertaking or has undertaken a clinical trial as of or prior to the Closing Date.

“ Claim Expenses ” means any and all expenses incurred in connection with investigating, defending or asserting any claim or Action incident to any matter indemnified against or reimbursed hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).

“ Claim Notice ” has the meaning set forth in Section 9.2(c)(i).

“ Claimed Amount ” has the meaning set forth in Section 9.2(c)(i).

“ Closing ” has the meaning set forth in Section 2.2.

“ Closing Date ” has the meaning set forth in Section 2.2.

“ Closing Indebtedness ” means, with respect to the Company as of immediately prior to the Effective Time, without duplication: [*] .

“ COBRA ” has the meaning set forth in Section 3.16(f).

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Commercially Reasonable Efforts ” shall mean [*]

“ Committee Member Losses ” has the meaning set forth in Section 9.3(b).

“ Company ” has the meaning set forth in the Preamble.

[*]

“ Company Balance Sheet ” has the meaning set forth in Section 3.4.

“ Company Balance Sheet Date ” has the meaning set forth in Section 3.6.

“ Company Capital Stock ” means all shares of Company Common Stock and Company Preferred Stock.

“ Company Common Stock ” means shares of Company’s common stock, par value $.0001 per share.

“ Company Data ” has the meaning set forth in Section 3.9(a).

“ Company Disclosure Schedule ” has the meaning set forth in Article III.

“ Company Employees ” has the meaning set forth in Section 6.5(a).

“ Company Employee Plans ” has the meaning set forth in Section 3.16(a).

“ Company Financial Statements ” has the meaning set forth in Section 3.4.

“ Company IP Contract ” has the meaning set forth in Section 3.9(a).

“ Company IP Rights ” has the meaning set forth in Section 3.9(a).

“ Company IT Systems ” has the meaning set forth in Section 3.9(a).

“ Company Material Adverse Effect ” has the meaning set forth in Section 10.2(a).

“ Company Options ” means options to purchase shares of Company Common Stock.

“ Company Option Plan ” means the Company’s 2006 Stock Option Plan.

“ Company Organizational Documents ” means the Company’s Amended and Restated Certificate of Incorporation and the Company’s Amended and Restated By-Laws, each as in effect on the date hereof.

“ Company Preferred Stock ” means all shares of Series A Preferred Stock, Series B Preferred Stock and the Series C Preferred Stock.

“ Company Products ” has the meaning set forth in Section 3.22(b).

“ Company Securityholders ” means, collectively, Company Stockholders and those persons who held outstanding Company Warrants or Company Options, in each case, immediately prior to the Effective Time.

“ Company Stockholders ” means those persons who held shares of outstanding Company Capital Stock immediately prior to the Effective Time.

“ Company Suppliers ” has the meaning set forth in Section 3.23.

“ Company Unvested Shares ” means outstanding shares of Company Common Stock issued under the Company Option Plan that are unvested and subject to repurchase by the Company, upon the holder’s termination of employment or service with the Company, at a price per share not greater than the original purchase price per share paid for those shares, as adjusted for any subsequent stock split, stock dividend, reclassification or similar transaction affecting the outstanding Company

Common Stock without the Company’s receipt of consideration, or otherwise subject to a substantial risk of forfeiture.

“ Company Warrant ” means each outstanding warrant to purchase Company Capital Stock.

“ Computer Software ” has the meaning set forth in Section 3.9(a).

“ Confidentiality Agreements ” has the meaning set forth in Section 6.1(a).

“ Contingent Payments ” means each of the [*] and any amounts paid pursuant to Section 9.1(a)(iv).

“ Contract ” means any legally binding agreement, contract, lease, instrument, note, warrant, purchase order, license, sublicense or other legally binding commitment.

“ Copyrights ” has the meaning set forth in Section 3.9(a).

“ Current Company Business ” has the meaning set forth in Section 3.1.

“ Current Policies ” has the meaning set forth in Section 6.7(a).

“ Data Room ” has the meaning set forth in Section 3.1.

“ Delaware Law ” has the meaning set forth in the Recital A.

“ Disqualified Individual ” has the meaning set forth in Section 3.16(i).

“ Dissenting Share ” has the meaning set forth in Section 2.9.

“ Dissenting Stockholder ” has the meaning set forth in Section 2.9.

“ Effective Time ” has the meaning set forth in Section 2.2.

“ EMA ” means the European Medicines Agency of the European Union or any successor entity thereto having similar responsibilities with respect to pharmaceutical products.

“ Environmental Laws ” has the meaning set forth in Section 3.14(a)(i).

“ ERISA ” has the meaning set forth in Section 3.16(a).

“ ERISA Affiliate ” has the meaning set forth in Section 3.16(a).

“ Escrow Agent ” means US Bank National Association.

“ Escrow Agreement ” means the escrow agreement to be entered into among Guarantor, Parent, the Stockholders’ Agent and the Escrow Agent on the Closing Date, in substantially the form of Exhibit A.

“ Escrow Amount ” means [*]

“ Escrow Fund ” means the escrow fund established pursuant to the Escrow Agreement.

“ Escrow Release Date ” has the meaning set forth in Section 6.12(a).

“ Estimated Merger Consideration Certificate ” has the meaning set forth in Section 9.2(c)(i).

[*]

“ FCPA ” has the meaning set forth in Section 3.26(a).

“ FDA ” means the United States Food and Drug Administration or any successor agency thereto.

“ FDCA ” has the meaning set forth in Section 3.22(b).

[*]

“ Fully Diluted Share Number ” means the sum of, without duplication, (i) the aggregate number of shares of Company Capital Stock issued and outstanding immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion and including any Company Unvested Shares), (ii) the aggregate number of shares of Company Capital Stock subject to all outstanding Company Warrants immediately prior to the Effective Time, (iii) the aggregate number of shares of Company Capital Stock subject to all outstanding Company Options immediately prior to the Effective Time, (iv) the aggregate number of shares of Company Capital Stock purchasable under or otherwise subject to any rights (other than Company Options or Company Warrants) to acquire shares of Company Capital Stock (whether or not immediately exercisable) outstanding immediately prior to the Effective Time; and (v) the aggregate number of shares of Company Common Stock that would be issuable upon the conversion of any convertible securities of the Company (other than shares of Company Preferred Stock) outstanding immediately prior to the Effective Time.

“ Fundamental Representations ” means (i) the representations and warranties contained in [*] , and (ii) the representations and warranties set forth in any certificate delivered pursuant to this Agreement, to the extent such representations and warranties relate to any of the matters addressed in any of the representations and warranties specified in clause “(i)” of this sentence.

“ GAAP ” means accounting principles generally accepted in the United States.

“ Governmental Entity ” has the meaning set forth in Section 3.2(b).

“ Guarantor ” has the meaning set forth in the Preamble.

“ Hazardous Materials ” has the meaning set forth in Section 3.14(a).

“ Healthcare Data Requirements ” has the meaning set forth in Section 3.25(a).

[*]

“ HIPAA ” has the meaning set forth in Section 3.16(f).

“ HITECH ” has the meaning set forth in Section 3.25(a).

“ HMO ” has the meaning set forth in Section 3.16(l).

“ HSR ” has the meaning set forth in Section 3.2(b).

[*]

“ IND ” means an Investigational New Drug application in the US filed with the FDA or the corresponding application filed in the European Union with the EMA for the investigation of a Company Product, as provided in the Applicable Laws and filed with such Regulatory Authority.

“ Indebtedness ” means, with respect to any person at any date, without duplication: (i) all obligations of such person for borrowed money or in respect of loans or advances; (ii) all obligations of such person evidenced by bonds, debentures, notes or other similar instruments; (iii) all obligations in respect of letters of credit, whether or not drawn, and bankers’ acceptances issued for the account of such person; (iv) all interest rate or currency caps, collars, swaps or other similar protection agreements of such person (valued on a market quotation basis); (v) any indebtedness for the deferred purchase price of property or services with respect to which such person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the ordinary course of business consistent with past business practices which are not more than 120 days past due, unless the same are being contested in good faith by appropriate proceedings and with respect to which such person has set aside adequate reserves therefor in accordance with GAAP); (vi) any commitment by which such person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit); (vii) any obligations of such person under leases that are required to be capitalized in accordance with GAAP; (viii) any indebtedness secured by a lien or other encumbrance on such person’s assets; or (ix) any guarantee or other contingent obligation (including obligations to repurchase, reimburse or keep well) of such person in respect of the items set forth in the foregoing clauses (i) through (viii).

“ Information Statement ” has the meaning set forth in Section 6.11(b).

“ IP License ” has the meaning set forth in Section 3.9(a).

“ IP Rights ” has the meaning set forth in Section 3.9(a).

“ knowledge ” has the meaning set forth in Section 10.2(b).

“ Lease ” and “ Leases ” have the meanings set forth in Section 3.13(a).

“ Liabilities ” means any debt, liability or obligation of any kind, character or nature, whatsoever, whether known or unknown, secured or unsecured, fixed, absolute, contingent, accrued or otherwise, and whether due or to become due.

“ Losses ” (including, with the correlative meaning, the term “ Loss ”) means any losses, damages, costs, expenses, Claim Expenses, obligations, settlement payments, awards, judgments, fines, penalties or other charges.

“ Material Contract ” has the meaning set forth in Section 3.11(c).

“ Merger ” has the meaning set forth in Recital A.

“ Merger Consideration ” means (a) the Up-Front Payment, plus (b) the Contingent Payments, if any are payable pursuant to the terms of this Agreement, plus (c) any cash disbursements required to be made from the Escrow Fund to the Company Securityholders in accordance with the terms of Section 9.2(c), as and when such disbursements are required to be made, plus (d) any cash disbursements required to be made from the Stockholders’ Agent’s Fund to the Company Securityholders in accordance with Section 2.6(c), as and when such disbursements are required to be made.

“ Merger Consideration Certificate ” has the meaning set forth in Section 6.12(b).

“ Merger Consideration Certificate Data ” has the meaning set forth in Section 6.12(a).

“ Merger Sub ” has the meaning set forth in the Preamble.

“ Milestone ” means each of the [*] .

“ Milestone Abandonment Notice ” has the meaning set forth in Section 9.1(b)(iii)(F)(2).

“ Milestone End Date ” has the meaning set forth in Section 9.1(b)(iii)(B).

“ Milestone Obligor ” has the meaning set forth in Section 9.1(b)(iii)(B).

“ NDA/MAA ” means (i) a New Drug Application in the United States for authorization to market a Company Product or [*] , as applicable, as provided in the Applicable Laws and filed with the FDA; or (ii) an application for Regulatory Approval to market a Company Product or [*] , as

applicable, in the European Union, as provided in the Applicable Laws and filed with the applicable Regulatory Authority.

“ Net Sales ” means, with respect to [*] , the total gross amount invoiced or otherwise received by Parent, its Affiliates, or any Milestone Obligor for sales of [*] to an unrelated third party anywhere in the world less deductions allowed to such third party relating to such sales of [*] , to the extent reasonable, customary, and consistent with Parent’s, its Affiliate’s or Milestone Obligor’s accounting policies for external reporting purposes for:

(a) freight, postage and duties, and transportation charges relating to [*] (including handling and insurance thereto) separately identified on the invoice or other documentation maintained in the ordinary course of business;

(b) sales and excise taxes or customs duties paid by the selling party and any other similar governmental charges imposed upon the sale of [*] separately identified on the invoice or other documentation maintained in the ordinary course of business and not recovered or recoverable;

(d) allowances, chargebacks or credits to such third party not in excess of the selling price of [*] , on account of delay, rejection, outdating, recalls or return of [*] or retroactive price reductions that are actually allowed or granted; and

(e) rebates, reimbursements, fees or similar payments to (i) wholesalers and other distributors, pharmacies and other retailers, buying groups (including group purchasing organizations), health care insurance carriers, pharmacy benefit management companies, health maintenance organizations, Governmental Entities, or other institutions or health care organizations; or (ii) patients and other third parties arising in connection with any program applicable to [*] under which Parent or its Affiliates or any Milestone Obligor provides to low income, uninsured or other patients the opportunity to obtain [*] at a price less than the manufacturing cost of [*] .

For the avoidance of doubt, if a single item falls into more than one of the categories set forth in clauses (a)-(i) above, such item may not be deducted more than once. Sales of [*] for resale between Parent and its Affiliates and any Milestone Obligor shall be disregarded for purposes of calculating Net Sales; provided, however, that the subsequent resale of such product to an unrelated third party shall be included in calculating Net Sales hereunder. For purposes of determining Net Sales, [*] shall be deemed to be sold when invoiced. If [*] is sold or transferred for consideration other than cash or is otherwise sold at a below market price in exchange for other value, the Net Sales from such sale or transfer shall be deemed the then fair market value of [*].

If [*] either (i) is sold in the form of a combination product containing [*] and one or more active pharmaceutical products as separate molecular entity(ies) that are not [*] ; or (ii) is sold in a form that contains (or is sold bundled with) a delivery device therefor (in either case ((i) or (ii)), a “ Combination Product ”), the Net Sales of [*] shall be determined as follows: first, Parent shall determine the actual Net Sales of such Combination Product (using the above convention) and then

(I) such amount shall be multiplied by the fraction A/(A+B), where A is the invoice price of [*] , if sold separately, and B is the total invoice price of the other active pharmaceutical product(s) or delivery device in the Combination Product if sold separately, or (II) if the other active pharmaceutical product(s) or delivery device in the Combination Product is not sold separately, Net Sales shall be calculated by multiplying actual Net Sales of such Combination Product by a fraction A/C where A is the invoice price of [*] if sold separately, and C is the invoice price of the Combination Product; in each case of subsection (I) or (II), in the same country as the Combination Product during the applicable reporting period or, if sales of both [*] sold separately and the other active pharmaceutical product(s) or delivery device or the Combination Product did not occur during the applicable reporting period, then the respective invoice prices during the most recent reporting period in which sales of both occurred in the same country as the Combination Product described above. If neither [*] nor any other active pharmaceutical product (or delivery device) in the Combination Product is sold separately in the same country as the Combination Product, the adjustment to Net Sales shall be determined by Parent and the Stockholders’ Agent in good faith to reasonably reflect the fair market value of the contribution of [*] in the Combination Product to the total fair market value of such Combination Product.

“ Order ” has the meaning set forth in Section 7.1(a).

[*]

“ Parent ” has the meaning set forth in the Preamble.

“ Parent Claims ” has the meaning set forth in Section 9.1(b)(ii)(A).

“ Parent Indemnified Party ” has the meaning set forth in Section 9.2(b)(i).

“ Parent Plans ” has the meaning set forth in Section 6.5(a).

“ Patent Rights ” has the meaning set forth in Section 3.9(a).

[*]

“ Paying Agent ” has the meaning set forth in Section 2.7(b).

“ Payment Conditions ” has the meaning set forth in Section 9.1(b)(i).

“ Per Share Contingent Payment ” means, with respect to any Contingent Payment, an amount equal to such Contingent Payment divided by the Fully Diluted Share Number.

“ Per Share Up-Front Payment ” has the meaning set forth in Section 2.6(a).

“ Permits ” has the meaning set forth in Section 3.19.

“ Permitted Encumbrances ” has the meaning set forth in Section 3.12(a).

“ person ” has the meaning set forth in Section 10.2(d).

“ Personal Data ” means non-public personally identifiable information relating to a natural or legal person, the privacy of whom is protected under Applicable Laws.

“ Pre-Closing Period ” has the meaning set forth in Section 5.1.

“ Preferred Stock Conversion ” means the conversion immediately prior to the Effective Time of all outstanding shares of Company Preferred Stock into shares of Company Common Stock in accordance with the terms of the Company Organizational Documents.

“ Pro Rata Portion ” means, with respect to any Company Securityholder, the fraction having: (i) a numerator equal to the sum of (a) the number of shares of Company Capital Stock held by such person immediately prior to the Effective Time (after giving effect to the Preferred Stock Conversion and including any Company Unvested Shares), (b) the number of shares of Company Capital Stock subject to an outstanding Company Warrant held by such person immediately prior to the Effective Time, and (c) the number of shares of Company Capital Stock subject to an outstanding Company Option held by such person immediately prior to the Effective Time; and (ii) a denominator equal to the Fully Diluted Share Number.

“ Protected Health Information ” shall have the same meaning set forth in 45 C.F.R. §160.103.

“ Protocol ” means, with respect to a particular clinical study, the study plan setting forth the objective, design and methods of such study, as submitted to a Regulatory Authority in connection with the IND pursuant to which such study is conducted.

“ Regulatory Approval ” means, with respect to a particular country or jurisdiction, all approvals, licenses, registrations or authorizations by any Regulatory Authority necessary to market a Company Product in such country or jurisdiction, but excludes agencies or authorities regulating Environmental Laws. For clarity, for the purposes of Sections 9.1(a)(i)-(iii), (i) the receipt of a subpart H approval under 21 CFR 314.510 in the United States shall be deemed “Regulatory Approval” in the United States, (ii) the receipt of the conditional marketing authorization for medicinal products for human use falling within the scope of regulation (EC) No. 726/2004 in the European Union shall be deemed “Regulatory Approval” in the European Union, (iii) receipt of approval of an NDA/MAA submitted to the FDA shall be deemed receipt of “Regulatory Approval” in the United States, and (iv) receipt of centralized approval of an NDA/MAA submitted to the EMA shall be deemed receipt of “Regulatory Approval” in the European Union.

“ Regulatory Authority ” means any federal, national, or multinational governmental health regulatory agency or authority within a regulatory jurisdiction, with the authority to grant approvals, licenses, registrations or authorizations necessary for the development, manufacture, use, and sale of

a pharmaceutical product. For clarity, references in this Agreement to Regulatory Authority shall be deemed to include the EMA and the FDA.

“ Required Stockholder Vote ” has the meaning set forth in Section 3.2.

“ Restricted Party ” has the meaning set forth in Section 3.26(b).

[*]

“ Seller Group ” has the meaning set forth in Section 10.13.

“ Series A Preferred Stock ” means shares of the Company’s Series A Preferred Stock, par value $.0001 per share.

“ Series B Preferred Stock ” means shares of the Company’s Series B Preferred Stock, par value $.0001 per share.

“ Series C Preferred Stock ” means shares of the Company’s Series C Preferred Stock, par value $.0001 per share.

[*]

“ Stockholder Voting Agreement ” has the meaning set forth in Section 6.13(a).

“ Stockholders’ Agent’s Fund ” means the Stockholders’ Agent’s fund established pursuant to Section 2.6(c) and the Escrow Agreement.

“ Stockholders’ Agent’s Fund Amount ” means an amount in cash equal to $250,000.

“ Stockholders’ Agent’s Fund Distribution ” has the meaning set forth in Section 2.6(c).

“ Stockholders’ Agent’s Period ” has the meaning set forth in Section 2.6(c).

[*]

[*]

“ Subsidiary ” has the meaning set forth in Section 10.2(c).

“ Survival Termination Date ” has the meaning set forth in Section 9.2(a)(ii).

“ Surviving Corporation ” has the meaning set forth in Section 2.1.

“ Takeover Statute ” has the meaning set forth in Section 3.21.

“ Tax Responsibility Agreement ” means a Tax Responsibility Agreement in substantially the form of Exhibit B.

“ Tax(es) ” has the meaning set forth in Section 3.15(a).

“ Tax Returns ” has the meaning set forth in Section 3.15(b).

“ Third Party Claim ” has the meaning set forth in Section 9.2(c)(iv).

“ Third Party IP Rights ” has the meaning set forth in Section 3.9(a).

“ Trade Secrets ” has the meaning set forth in Section 3.9(a).

“ Trademark Rights ” has the meaning set forth in Section 3.9(a).

[*]

“ Unresolved Claim ” has the meaning set forth in Section 9.1(b)(ii)(A).

“ Unresolved Escrow Claim ” has the meaning set forth in Section 9.2(c)(ii).

“ Up-Front Payment ” shall mean an amount, in cash, equal to [*] $375,000,000 [*]

“ Update Reports ” has the meaning set forth in Section 9.1(b)(iii)(E)a).

“ Valid Claim ” means a claim of (i) an issued patent within the Company IP Rights that has not expired or been revoked, held invalid or unenforceable by a court or other governmental agency of competent jurisdiction in a final and non-appealable judgment (or judgment from which no appeal was taken within the allowable time period) and to the extent the same has not been admitted to be invalid or unenforceable, through reissue, re-examination, or terminal disclaimer or (ii) a patent application within the Company IP Rights that is directed to subject matter that has been pending less than [*] from the earliest priority date for such claim and for which there is a good faith argument for patentability, and which has not been withdrawn or abandoned. For purposes of this definition only, Patent Rights owned or exclusively licensed to the Company which come into existence after the Closing Date claiming (A) an invention to which the Company had ownership rights at the Effective Time as demonstrated by invention disclosures or other written records, or (B) that claim priority to the Company IP Rights existing as of the Closing Date, shall be deemed included within the Company IP Rights.

“ Voting Debt ” has the meaning set forth in Section 3.5(a).

“ Warrant Termination Agreement ” has the meaning set forth in Section 2.11(a).

“ Willful Breach ” means [*]

“ Written Consent ” has the meaning set forth in Section 6.11(a).

“ WSGR ” has the meaning set forth in Section 10.13.

ARTICLE II

THE MERGER

2.1 The Merger . At the Effective Time and upon the terms and subject to the conditions set forth in this Agreement, and pursuant to the applicable provisions of Delaware Law, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation in the Merger (the “ Surviving Corporation ”).

2.2 Closing; Effective Time . The consummation of the Merger (the “ Closing ”) shall take place as soon as practicable, but no later than two (2) Business Days, after the satisfaction or waiver of the last of the conditions set forth in Article VII to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), or at such other time as the parties hereto agree (the actual date on which the Closing takes place being the “ Closing Date ”). The Closing shall take place at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 701 Fifth Avenue, Suite 5100, Seattle, Washington 98104, or at such other location as the parties hereto agree. In connection with the Closing, Parent and the Company shall cause the Merger to be made effective by filing a Certificate of Merger in form and substance reasonably satisfactory to Parent and the Company (the “ Certificate of Merger ”) with the Secretary of State of the State of Delaware in accordance with the relevant provisions of Delaware Law (the time of such filing being the “ Effective Time ”).

2.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in this Agreement and the applicable provisions of Delaware Law.

2.4 Certificate of Incorporation; Bylaws . Unless otherwise agreed to by Parent and the Company prior to the Closing, at the Effective Time:

(a) the certificate of incorporation of the Company shall be amended to conform to the certificate of incorporation of Merger Sub, as in effect immediately prior to the Effective Time, except that the name of the Surviving Corporation shall be “Calistoga Pharmaceuticals, Inc.”; and

(b) the bylaws of the Company shall be amended to conform to the bylaws of Merger Sub, as in effect immediately prior to the Effective Time.

2.5 Directors and Officers . At the Effective Time, the directors and officers of Merger Sub immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation, to serve until their respective successors are duly elected or appointed and qualified.

2.6 Effect on Capital Stock .

(a) At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company, any stockholders of the Company or the Stockholders’ Agent, (i) any shares of Company Common Stock then held by the Company (or held in the Company’s treasury) shall be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor, (ii) each share of the common stock, $0.0001 par value per share, of Merger Sub then outstanding shall be converted into one share of common stock of the Surviving Corporation and (iii) each share of Company Common Stock then outstanding after giving effect to the Preferred Stock Conversion (other than Dissenting Shares and the shares referred in clause “(i)”) shall be converted into the right to receive (following the surrender of the Certificate representing such share of Company Common Stock in accordance with Section 2.7) (A) an amount, in cash, equal to the quotient of (x) the Up-Front Payment divided by (y) the Fully Diluted Share Number (such amount, the “ Per Share Up-Front Payment ”), plus (B) any amounts required to be paid by Parent with respect to such share to the former holder thereof in accordance with the terms of Section 9.1, as and when such payments are required to be made, plus (C) the applicable portion of any amounts required to be disbursed from the Escrow Fund to the Company Securityholders in accordance with Section 9.2(c), as and when such disbursements are required to be made; plus (D) the applicable portion of any amounts required to be disbursed from the Stockholders’ Agent’s Fund to the Company Securityholders in accordance with Section 2.6(c), as and when such disbursements are required to be made.

(b) At the Effective Time, Parent shall deliver the Escrow Amount to the Escrow Agent. The Escrow Fund: (i) shall be held by the Escrow Agent in accordance with the terms of this Agreement and the terms of the Escrow Agreement; (ii) shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or other judicial process of any creditor of any person, except that the portion attributable to the Company Options shall be subject to the claims of Parent’s creditors; and (iii) shall be held and disbursed solely for the purposes and in accordance with the terms of this Agreement and the Escrow Agreement.

(c) At the Effective Time, Parent shall deliver the Stockholders’ Agent’s Fund Amount to the Escrow Agent. The Stockholders’ Agent’s Fund: (i) shall be held by the Escrow Agent in accordance with the terms of the Escrow Agreement and Section 9.3(a); (ii) shall be held as a trust fund and shall not be subject to any lien, attachment, trustee process or other judicial process of any creditor of any person, except that the portion attributable to the Company Options shall be subject to the claims of Parent’s creditors; and (iii) shall be held and disbursed solely for the purposes and in accordance with the terms of this Agreement and the Escrow Agreement. The Stockholders’ Agent’s Fund shall terminate on [*] (such period, the “ Stockholders’ Agent Period ”). Promptly after the end of the Stockholders’ Agent Period, the Stockholders’ Agent shall deliver a written instruction to the Escrow Agent as to the final disbursement of the Stockholders’ Agent Fund. If, upon the expiration of the Stockholders’ Agent Period, the amount of cash remaining in the Stockholders’ Agent’s Fund exceeds the amount of Agent Losses and Committee Member Losses that have not been recovered, each Company Stockholder, holder of Company Warrants and holder of Company Options (subject, in the case of any holder of Company Options, to such holder having duly executed and delivered to Parent a Tax Responsibility Agreement with respect thereto prior to the Effective Time) shall be entitled to receive such holder’s Pro Rata Portion of such excess

(together with interest and income thereon, if any) (such amount, in the aggregate, the “ Stockholders’ Agent’s Fund Distribution ”).

2.7 Surrender of Certificates .

(a) At the Effective Time, (i) all shares of Company Capital Stock outstanding immediately prior to the Effective Time shall automatically be canceled and retired and shall cease to exist, (ii) no holder of record of a certificate that immediately prior to the Effective Time represented outstanding shares of the Company Capital Stock (a “ Certificate ”) shall have any rights as a stockholder of the Company and (iii) each Certificate (A) representing any outstanding shares of Company Capital Stock shall thereafter represent only the right to receive the applicable portion of the Merger Consideration payable in respect of such shares as set forth in this Agreement and (B) representing any Dissenting Shares shall thereafter represent only the right to receive the payments described in Section 2.9.

(b) At or prior to the Effective Time, Parent shall deposit or shall cause to be deposited with a paying agent designated by Parent and reasonably acceptable to the Company (the “ Paying Agent ”), for the benefit of Company Stockholders, an amount in cash sufficient in the aggregate to provide all funds necessary for the Paying Agent to make payments to each Company Stockholder (other than with respect to Company Unvested Shares, unless Parent elects to pay the holders of such shares through the Paying Agent pursuant to the last sentence of Section 2.11(c)) of the amounts set forth in Section 2.6(a)(iii)(A). Subject to Section 2.7(e), from and after the Effective Time, the Paying Agent shall act as the agent of Parent and the Surviving Corporation in effecting any amounts to be paid under this Agreement and the exchange of the Certificates.

(c) Promptly after the Effective Time, Parent shall cause the Paying Agent to mail to each holder of record of a Certificate immediately prior to the Effective Time (i) a letter of transmittal specifying that delivery shall be deemed to have occurred, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu thereof) to the Paying Agent, such letter of transmittal to be in such form and have such other provisions as Parent and the Company may reasonably agree (including a section allowing Company Stockholders to elect to be paid by wire transfer and, subject to customary exceptions, a release by the Company Stockholder of claims it may have in its capacity as a Company Securityholder as of the Effective Time) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the consideration to which such holder may be entitled pursuant to Section 2.6 hereof. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed and completed in accordance with the instructions thereto, the holder of such Certificate shall be entitled to receive in exchange therefor a payment of the applicable amount provided in Section 2.6 with respect to such Certificate (after giving effect to any required Tax withholdings) and the Certificate so surrendered shall forthwith be canceled. Parent shall cause the Paying Agent to make the payment of the applicable portion of the amount provided in Section 2.6(a)(iii) to the holder of such Certificate (other than with respect to Company Unvested Shares, unless Parent elects to pay the holders of such shares through the Paying Agent pursuant to the last sentence of Section 2.11(c)), in cash and Parent shall cause the Paying Agent Agreement to

provide that the Paying Agent shall make such payments no later than [*] after receipt of each properly surrendered Certificate. Until so surrendered, each outstanding Certificate that prior to the Effective Time represented shares of Company Capital Stock (other than Dissenting Shares) will be deemed from and after the Effective Time, for all purposes, to evidence the right to receive a payment of the applicable amount provided in Section 2.6. If, after the Effective Time, any Certificate is presented to the Paying Agent, the Surviving Corporation or Parent, it shall be cancelled and exchanged as provided in this Section 2.7. No interest shall be paid or accrued after the Effective Time on any amount payable upon due surrender of the Certificates. If payment is to be made to a person other than the registered holder of the Certificate surrendered, it shall be a condition of such payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered or establish to the satisfaction of the Paying Agent that such Tax was paid or is not applicable.

(d) At the Effective Time, the stock transfer books of the Company shall be closed, and there shall thereafter be no further registration of transfers of shares of Company Capital Stock outstanding immediately prior to the Effective Time on the records of the Company. After the Effective Time, no transfer of Company Capital Stock shall thereafter be made on the stock transfer books of the Surviving Corporation.

(e) Any portion of the funds received by the Paying Agent (including the proceeds of any investments thereof) which remains unclaimed by the Company Stockholders for one (1) year after the date of payment to the Paying Agent may be delivered to Parent or the Surviving Corporation upon request. Any Company Stockholder shall thereafter look only to Parent and the Surviving Corporation for payment of the applicable portion of the Merger Consideration (after giving effect to any required tax withholdings and without any interest thereon) upon due surrender of any applicable Certificate (or an effective affidavit of loss in lieu thereof). Notwithstanding anything to the contrary in this Section 2.7(e), none of Parent, the Merger Sub, the Company, the Surviving Corporation, the Stockholders’ Agent, the Paying Agent or any other person shall be liable to any Company Stockholder for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Applicable Laws.

2.8 Lost, Stolen or Destroyed Certificates . In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by such record holder, the Paying Agent shall pay to the record holder of such Certificate the applicable portion of the Merger Consideration; provided , however , that Parent or the Surviving Corporation may, in its discretion and as a condition precedent to the payment of such consideration, require such record holder to indemnify Parent, the Surviving Corporation and the Paying Agent against any claim that may be made against Parent, the Surviving Corporation or the Paying Agent with respect to such Certificate.

2.9 Dissenting Shares .

(a) Notwithstanding anything in this Agreement to the contrary, any share of Company Capital Stock that is issued and outstanding immediately prior to the Effective Time and

which is held by a stockholder who has properly exercised his, her or its appraisal rights under Delaware Law (such share being a “ Dissenting Share ,” and such stockholder being a “ Dissenting Stockholder ”), shall not be converted into the right to receive the consideration to which the holder of such share would be entitled pursuant to Section 2.6, but rather shall be converted into the right to receive such consideration as may be determined to be due with respect to such Dissenting Share pursuant to Delaware Law. If any Dissenting Stockholder fails to perfect such stockholder’s appraisal rights under Delaware Law, or effectively withdraws or otherwise loses such rights with respect to any Dissenting Shares, such Dissenting Shares shall thereupon automatically be converted into the right to receive the applicable amounts provided in Section 2.6, pursuant to the exchange procedures set forth in Section 2.7.

(b) At the Effective Time, the Dissenting Shares shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of Dissenting Shares shall cease to have any rights with respect thereto, except the right to receive the fair value of such shares in accordance with the provisions of Section 262 of Delaware Law. Notwithstanding the provisions of Section 2.9(a), if any holder of Dissenting Shares shall effectively withdraw or lose (through failure to perfect or otherwise) such holder’s appraisal rights under Section 262 of Delaware Law, or a court of competent jurisdiction shall determine that such holder is not entitled to relief provided under Section 262 of Delaware Law, then, as of the later of the Effective Time and the occurrence of such event, such holder’s shares of Company Capital Stock shall automatically be converted into and represent only the right to receive the consideration for Company Capital Stock set forth in Section 2.6(a), without interest, and at such times and subject to such conditions as are set forth in Section 2.6(a). The Company will give Parent prompt written notice of any demand or notice of intent to assert appraisal rights under Section 262 of Delaware Law received by the Company and, prior to the Effective Time, the Company shall conduct, at the direction and with the right to participate of Parent and Merger Sub, all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company will not, without the prior written consent of Parent (which shall not be unreasonably withheld) make any payments with respect to, or settle or offer to settle, any such demands.

2.10 Taking of Further Action . If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Article II of this Agreement and to vest the Surviving Corporation with full right, title and possession to all Assets, rights, privileges, powers and franchises of the Company and Merger Sub, Parent and the Surviving Corporation are fully authorized in their respective names to take, and will take, all such lawful and necessary or desirable action, so long as such action is not inconsistent with this Agreement.

2.11 Treatment of Company Warrants and Company Options .

(a) Warrants . At the Effective Time, each outstanding Company Warrant, whether or not then exercisable, shall be sold by the holder thereof to the Company and thereupon cancelled in consideration for the right to receive, for each share of Company Capital Stock which may be purchased under such Company Warrant, an amount, in cash, equal to: (i) the Per Share Up-Front Payment minus the exercise price per share of Company Capital Stock at which such

Company Warrant was exercisable immediately prior to the Effective Time, plus (ii) any amounts required to be paid by Parent with respect to such share to the former holder of such Company Warrant in accordance with the terms of Section 9.1, as and when such payments are required to be made, plus (iii) the applicable portion of any amounts required to be disbursed from the Escrow Fund to the Company Securityholders in accordance with Section 9.2(c), as and when such disbursements are required to be made; plus (iv) the applicable portion of any amounts required to be disbursed from the Stockholders’ Agent’s Fund to the Company Securityholders in accordance with Section 2.6(c), as and when such disbursements are required to be made. During the Pre-Closing Period, the Company shall use commercially reasonable efforts to cause each holder of a Company Warrant to execute and deliver an agreement, in form reasonably acceptable to Parent, [*] (a “ Warrant Termination Agreement ”). After the Effective Time, Parent shall, or shall cause the Surviving Corporation or the Paying Agent to, deliver the amount provided for in Section 2.11(a)(i) to each holder of Company Warrants that has executed a Warrant Termination Agreement. Subject to a Company Warrant holder’s first executing a Warrant Termination Agreement, (1) the Stockholders’ Agent shall cause the Escrow Agent to deliver to such Company Warrant holder such Company Warrant holder’s applicable Pro Rata Portion of any Stockholders’ Agent’s Fund Distribution to be distributed as provided in Section 2.6(c) and (2) Parent and the Stockholders’ Agent shall cause the Escrow Agent to deliver to such Company Warrant holder such Company Warrant holder’s applicable Pro Rata Portion of any distribution to be made to Company Securityholders from the Escrow Fund (in each case, solely with respect to Merger Consideration payable in respect of Company Warrants).

(b) Company Options . [*]

2.12 Certain Withholding . Parent or the Paying Agent shall be entitled to deduct and withhold from any portion of any payment payable pursuant to this Agreement to any Company Stockholder, former holder of a Company Warrant or former holder of a Company Option such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and the rules and regulations promulgated thereunder, or any provision of Applicable Law. To the extent that amounts are so withheld by Parent or the Paying Agent, such withheld amounts (a) shall be remitted by Parent or the Paying Agent to the applicable Governmental Entity and (b) shall be treated for all purposes of this Agreement as having been paid to such Company Stockholder, former holder of a Company Warrant or former holder of a Company Option.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent, except as disclosed in the disclosure schedule of even date herewith delivered by the Company to Parent (the “ Company Disclosure Schedule ”) (which Company Disclosure Schedule shall be arranged in sections and subsections corresponding to the numbered and lettered sections and subsections contained in this Article III, with the disclosure in any section or subsection of the Disclosure Schedule qualifying only the

corresponding section or subsection in this Article III and such other sections or subsections in this Article III where the relevance of such disclosure to such section or subsection is reasonably apparent on the face of such disclosure, without reference to any document referred to therein), as set forth in this Article III:

3.1 Organization, Standing and Power . The Company is a corporation duly organized, validly existing and, if applicable, in good standing under the Applicable Laws of the jurisdiction of its incorporation. The Company has the requisite corporate power and authority to own, lease and operate its Assets and to carry on its business as currently being conducted (collectively, the “ Current Company Business ”). The Company is duly qualified to do business, and is in good standing (if such concept is applicable in the relevant jurisdiction) in each jurisdiction where the operation of the Current Company Business by the Company requires such qualification, except where the failure to be so qualified or in good standing would not reasonably be expected to result in a Company Material Adverse Effect or prevent, materially delay or materially impair the ability of the Company to consummate the transactions contemplated by this Agreement. The Company has delivered, or made available in the virtual data room prepared by the Company in connection with the Merger (the “ Data Room ”), to Parent or its advisors true and correct copies of the Company Organizational Documents. The Company is not and has never been in violation of any of the provisions of its certificate of incorporation or bylaws. The Company has no Subsidiaries. The Company does not directly or indirectly own any equity or similar interest in, or any interest convertible or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity.

3.2 Authority .

(a) The Company has all requisite corporate power and authority to enter into this Agreement and, subject to the receipt of the Required Shareholder Vote, to consummate the Merger. The affirmative vote or consent of the holders of a majority of the shares of Company Capital Stock, a majority of the shares of Company Preferred Stock (voting together as a single class on an as-converted basis) and a majority of the shares of Series C Preferred Stock (voting together as a single class on an as-converted basis) outstanding on the record date chosen for purposes of determining the stockholders of the Company entitled to vote on the approval of this Agreement is the only vote of the holders of any Company Capital Stock necessary under Delaware Law and the Company Organizational Documents to approve this Agreement, the Merger and the Preferred Stock Conversion (the “ Required Stockholder Vote ”). The Required Stockholder Vote is sufficient for the holders of the Company Capital Stock to adopt and approve this Agreement, the Merger and the Preferred Stock Conversion, and no other corporate proceedings are necessary to authorize this Agreement or to consummate the Merger, the Preferred Stock Conversion and the other transactions contemplated hereby (other than the filing and recordation of the Certificate of Merger and such other documents as required by Delaware Law). The Board of Directors of the Company has unanimously (i) declared that the Merger and the other transactions contemplated by this Agreement are advisable, fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement in accordance with the provisions of Delaware Law, (iii) directed that this Agreement and the Merger be submitted to the stockholders of the Company for their adoption and approval by

written consent, and (iv) resolved to recommend that the stockholders of the Company vote in favor of the adoption of this Agreement and the approval of the Merger. This Agreement has been duly executed and delivered by the Company and, assuming that this Agreement constitutes a valid and binding obligation of the other parties hereto, this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Applicable Laws affecting or relating to creditors’ rights generally and general principles of equity, regardless of whether asserted in a proceeding in equity or at law.

(b) The execution and delivery of this Agreement by the Company does not constitute, and the consummation by the Company of the transactions contemplated hereby will not result in (i) a breach or violation by the Company of any provision of the Company Organizational Documents or (ii) a termination, or material breach or material violation by the Company of, or a default by the Company under (with or without notice or lapse of time, or both), (A) any Material Contract or (B) any Applicable Law relating to the Company or any of its Assets. No consent, approval, order or authorization of, or registration, declaration or filing with, any court, administrative agency or commission or other governmental authority or instrumentality (each, a “ Governmental Entity ”) is required to be obtained or made by the Company at or prior to the Effective Time in order for the Company to execute and deliver this Agreement or to consummate the Merger, except for: (x) the filing of the Certificate of Merger as provided in Section 2.2, and (y) such filings as may be required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“ HSR ”), and any foreign antitrust Applicable Laws.

3.3 Governmental Authorizations . The Company has obtained each material federal, state, county, local or foreign governmental consent, license, permit, grant or other authorization of a Governmental Entity that is required for the operation by the Company of the Current Company Business, and all of such consents, licenses, permits, grants and authorizations are in full force and effect.

3.4 Financial Statements . The Company has delivered to Parent or its advisors (a) the audited consolidated balance sheets and statements of operations of the Company as of and for the fiscal years ended December 31, 2008 and December 31, 2009 and (b) (i) the unaudited consolidated balance sheet of the Company as of December 31, 2010 (the “ Company Balance Sheet ”) and (ii) the unaudited consolidated statement of operations of the Company for the year ended December 31, 2010 (collectively, the “ Company Financial Statements ”). The Company Financial Statements have been prepared in accordance with GAAP (except as disclosed in the notes thereto and except that the unaudited Company Financial Statements do not contain footnotes and are subject to normal year-end audit adjustments) applied on a consistent basis throughout the periods covered. The Company Financial Statements fairly present, in all material respects, the consolidated financial condition of the Company as of the dates indicated therein and the consolidated results of operations and cash flows of the Company for the periods indicated therein, subject to normal year-end audit adjustments and the absence of footnotes in the case of the unaudited Company Financial Statements. The Company has no inventories (as such term is used for purposes of GAAP). The

Company has delivered to Parent or made available to Parent in the Data Room the Company’s annual budget for 2011.

3.5 Capitalization; Shares and Stockholder Information .

(a) Capitalization . The authorized capital stock of the Company consists of (i) 117,638,344 shares of Company Common Stock, of which there were issued and outstanding as of the close of business on the date of this Agreement 4,927,296 shares, and (ii) 97,191,718 shares of Company Preferred Stock. As of the date of this Agreement, there were issued and outstanding, 29,939,997 shares of Series A Preferred Stock; 30,437,000 shares of Series B Preferred Stock; and 16,595,851 shares of Series C Preferred Stock. Each share of Company Preferred Stock is convertible into Company Common Stock on a one to one basis. All outstanding shares of Company Common Stock and Company Preferred Stock (i) are duly authorized, validly issued, fully paid and non-assessable, (ii) are free of any liens or encumbrances created by the Company, and (iii) were not issued in violation of any preemptive rights or rights of first refusal created by statute, the certificate of incorporation or bylaws of the Company or any agreement to which the Company is a party or by which it is bound. As of the date of this Agreement, there were 13,968,668 shares of Company Common Stock reserved for issuance under the Company Option Plan, of which 10,121,372 shares of Company Common Stock were subject to outstanding Company Options and 20,000 shares of Company Common Stock were reserved for future option grants. The Company Option Plan is the only plan under which any securities of the Company are issuable to officers, employees and consultants of the Company and the non-employee members of the Company’s Board of Directors. All outstanding shares of Company Capital Stock, all outstanding Company Options, all outstanding Company Warrants and all other securities that have ever been issued or granted by the Company have been issued and granted in material compliance with: (i) all Applicable Law; and (ii) all requirements set forth in all applicable Contracts. For each Company Unvested Share subject to taxation under Code Section 83, an election under Section 83(b) of the Code have been timely filed with the applicable Internal Revenue Service Center, and the Company has provided Parent with a true and correct copy of each filed Code Section 83(b) election in its possession. Each Company Option either has an exercise price per share not less than the fair market value per share of Company Common Stock on the applicable grant date or has been structured so as to comply with the requirements of Section 409A of the Code applicable to options granted with a below fair market value exercise price. As of the date of this Agreement, there were 1,450,000 shares of Series A Preferred Stock reserved for issuance upon exercise of outstanding Company Warrants to Purchase Series A Preferred Stock, all of which were subject to outstanding Company Warrants. Except as set forth in this Section 3.5, there are no options, warrants, calls, rights, commitments or agreements that are outstanding to which the Company is a party or by which it is bound, obligating the Company to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Company Capital Stock or obligating the Company to grant, extend, accelerate the vesting of, change the price of, or otherwise amend or enter into any option, warrant, call, right, commitment or agreement regarding shares of Company Capital Stock. There are no other contracts, commitments or agreements relating to the voting, purchase or sale of the Company’s capital stock (i) between or among the Company and any of its stockholders, and (ii) to the Company’s knowledge, between or among any of the Company’s stockholders. The Company

does not have outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the Company Stockholders on any matter (“ Voting Debt ”). There are no declared and unpaid dividends on any share of Company Capital Stock. The terms of the Company Option Plan or the agreements evidencing the Company Options authorize the conversion of the Company Options contemplated by Section 2.11(b) without any required consent or approval of the holders of those options.

(b) Shares and Stockholder Information . Section 3.5(b) of the Company Disclosure Schedule sets forth, as of the date hereof: (i) the true and correct number of shares of Company Capital Stock that each current stockholder of the Company holds of record; and (ii) to the knowledge of the Company, the address of such stockholder. Section 3.5(b) of the Company Disclosure Schedule contains a correct and complete list, as of the date hereof of (i) each outstanding Company Option and Company Warrant, including the holder, date of grant, exercise price, number of shares subject thereto, the expiration date and, for each Company Option, whether such Company Option is an incentive stock option under Section 422 of the Code, and (ii) each holder of Company Unvested Shares and the number of Company Unvested Shares held by such person.

3.6 Absence of Certain Changes . Between December 31, 2010 (the “ Company Balance Sheet Date ”) and the date of this Agreement, the Company has conducted its business in the ordinary course consistent with past practice and there has not occurred (a) any amendment to the certificate of incorporation or bylaws of the Company; (b) any change in the financial condition, assets, liabilities, business or results of operations of the Company that, individually or in the aggregate, has had or would reasonably be expected to have or result in a Company Material Adverse Effect; (c) any material damage, destruction or other loss with respect to any material tangible Asset owned, leased, licensed or otherwise used by the Company, whether or not covered by insurance; (d) any merger or consolidation of the Company with any other person or any split, combination or reclassification of the capital stock of the Company or any purchase, redemption or other acquisition, directly or indirectly, by the Company of the capital stock of the Company or any securities convertible or exercisable therefor; (e) any declaration, setting aside or payment of any dividend or other distribution, payable in cash, stock, property or otherwise, in respect of the capital stock of the Company; (f) any transfer, lease, license, guarantee, sale, mortgage, pledge, disposal or encumbrance of any material Asset, other than in the ordinary course of business consistent with past practice; (g) any incurrence by the Company of any indebtedness or the issuance of any debt securities or warrants or other rights to acquire debt securities of the Company or the assumption, guarantee or endorsement as an accommodation or otherwise, by the Company of the obligations of any other person, in the case of any of the foregoing involving an aggregate principal amount or potential guaranteed amount in excess of [*] ; (h) any acquisition by the Company of any Assets or interest in any Assets from any other person outside the ordinary course of business or not consistent with past practice in excess of [*] ; (i) any incurrence of any lien on any material Asset; (j) any change by the Company in its accounting policies or procedures, except as required by GAAP or by Applicable Law; (k) any revaluation of any of the Company’s material Assets; (l) any increase in or establishment of any bonus, insurance, severance, retention, deferred compensation, pension, retirement, profit-sharing, stock option, stock purchase or other employee benefit plan, or any other

increase in the compensation payable or to become payable to any officers or employees of the Company or any amendment of any of the Company Employee Plans outside the ordinary course of business consistent with past practice; (m) any making of any loan, advance or capital contribution to, or investment in, any person other than loans, advances or capital contributions to, or investments in, any person in an amount in excess of [*] ; or (n) any agreement or undertaking to do any of the foregoing.

3.7 Absence of Undisclosed Liabilities . The Company does not have any Liabilities or obligations of any nature except (a) as and to the extent disclosed on or adequately reserved against in the Company Financial Statements (or the notes thereto), (b) for Liabilities and obligations under the Company’s Contracts (other than Liabilities for any breach of or default under such Contracts), (c) for Liabilities and obligations incurred since the Company Balance Sheet Date in the ordinary course of business, (d) for Transaction Costs, and (e) for the obligation to perform the covenants of the Company contained in this Agreement.

3.8 Litigation . There are no civil, criminal or administrative actions, suits, claims or proceedings pending or, to the knowledge of the Company, threatened either against the Company or, to the knowledge of the Company, that involves the Company or any of the material assets owned or used by the Company. None of the Company, any of the Company IP Rights or material Assets is subject to any order, judgment, decree, injunction or award of any Governmental Entity.

3.9 Intellectual Property .

(a) For purposes of this Agreement:

(i) “ Company Data ” means all (A) scientific data and research results related to the Company Products, (B) data maintained by the Company in any databases of the Company (including information containing Trade Secrets and Personal Data), and (C) other information and data compilations maintained and used by the Company in or necessary to the conduct of the Current Company Business; in each case owned by or licensed to the Company.

(ii) “ Company IP Rights ” means all IP Rights owned or purportedly owned exclusively by the Company or owned jointly or purportedly owned jointly by the Company and another person or other persons. For the purposes hereof, “Company IP Rights” shall include IP Rights exclusively licensed to the Company pursuant to that certain License Agreement dated as of [*] by and between Calistoga Pharmaceuticals, Inc. and [*] (the “ [*] Rights ”). For the purposes hereof, “purportedly owned” means with respect to any IP Right, to be the named owner of record of any IP Right registered or recorded with a Governmental Entity for the purposes of establishing or providing notice of ownership of such IP Right or otherwise claimed in writing by the Company as being owned by the Company.

(iii) “ Company IT Systems ” means all information technology equipment and computer systems used by the Company in or necessary to the conduct of the Current Company Business.

(iv) “ Computer Software ” means computer software, source and object codes, tools, user interfaces, manuals and other specifications and documentation and all know-how relating thereto.

(v) “ Copyrights ” means all copyrights, copyright registrations and applications therefor and copyrightable works (including Computer Software), including all rights of authorship, use, publication, reproduction, distribution, performance, preparation of derivative works, transformation, and rights of ownership of copyrightable works and all rights to register and obtain renewals and extensions of registrations.

(vi) “ IP License ” means any Contract, including any covenant not to enforce or assert IP Rights, to which the Company is a party and pursuant to which it has expressly obtained or granted rights under any IP Rights, other than an assignment of such IP Rights, including license or sublicense agreements (A) granting the Company rights under any IP Rights owned or licensed by any other person, or (B) pursuant to which the Company grants rights to any other person under any Company IP Rights or Third Party IP Rights, but in each case, excluding inbound “shrink-wrap” and similar publicly available commercial binary code end-user licenses and inbound material transfer agreements or terms and conditions for laboratory reagents or other materials purchased in similar commercial quantities pursuant to standard Contracts that are not generally negotiated in the industry (in each case of (A) or (B), a “ Company IP Contract ”).

(vii) “ IP Rights ” means any and all of the following in any country: Copyrights, Patent Rights, Trademark Rights, domain name registrations, Trade Secrets and other intellectual property rights arising under Applicable Laws.

(viii) “ Patent Rights ” means all issued patents and pending patent applications (including utility models, design patents, certificates of invention and applications for certificates of invention and priority rights) in any country or patent-granting region, including all provisional applications, international (PCT) applications, substitutions, continuations, continuations-in-part, divisions, renewals, reissues, re-examinations and extensions thereof.

(ix) “ Third Party IP Rights ” means any IP Rights licensed to the Company by a third party pursuant to any IP License other than the [*] Rights.

(x) “ Trade Secrets ” means any trade secrets, or any confidential unpatented or unpatentable inventions, processes, formulae, developments, discoveries, technology, cell lines, biological materials, compounds, probes, sequences, technical information, methods, bioassays, clones, molecules, protocols, reagents, experiments, lab results, test, know-how, concepts, ideas, research and development, business plans, strategies or other confidential information or materials, which in the reasonable business judgment of the owner thereof have value or confer a competitive advantage to such owner due to being not generally known or not publicly disseminated.

(xi) “ Trademark Rights ” means all registered trademarks, unregistered trademarks, applications for registration of trademarks, registered service marks, unregistered

service marks, applications for registration of service marks, registered trade names, unregistered trade names and applications for registration of trade names.

(b) Part 1 of Section 3.9(b) of the Company Disclosure Schedule lists all of the Patent Rights, all registered Trademark Rights (and Trademark Rights for which applications for registration have been filed), all material unregistered Trademark Rights, all registered Copyrights (or Copyrights for which applications for registration have been filed), and all domain name registrations, in each case owned by the Company or otherwise included in the Company IP Rights as of the date hereof (collectively, “ Registered IP Rights ”), setting forth in each case and to the extent applicable the jurisdictions in which such Registered IP Rights have been issued, or applications have been filed, the name of the owner, the application in registration number, the filing date, the date of registration and the expiration date of such Registered IP Rights. The Company has delivered to Parent in electronic form complete and accurate copies of all applications that are not publicly available related to each item included in the Registered IP Rights. For purposes of this Section 3.9(b), national or regional patent applications arising from a Patent Cooperation Treaty application published on or before the date of this Agreement shall be deemed “publicly available.”

(c) The Company has not received any written notice from any third party challenging or threatening to challenge the right, title or interest of the Company in, to or under the Company IP Rights, or the validity, enforceability or claim construction, as applicable, of any material Company IP Rights or any Third Party IP Rights exclusively licensed to the Company pursuant to any IP License.

(d) Section 3.9(d) of the Company Disclosure Schedule lists all IP Licenses (segregated according to whether such IP License is an in-bound or out-bound license).

(e) To the knowledge of the Company, the Company’s conduct of the Current Company Business as of the date hereof is not infringing, misappropriating or otherwise constitute unlawful use of any IP Rights of any other person. To the knowledge of the Company, the development of [*] as planned by the Company as of the date of this Agreement for the five (5) year period after the date of this Agreement would not reasonably be expected to infringe, misappropriate or otherwise constitute unlawful use of, any IP Rights of any other person. For purposes of this Section 3.9, “infringe” includes infringement directly, contributorily, or by inducement as determined under 35 U.S.C. 271 or any equivalent foreign Applicable Laws. Without limiting the generality of the foregoing:

(i) no infringement or misappropriation claim or Action is pending or, to the knowledge of the Company, threatened in writing against the Company or against any other person who is or may be entitled to be indemnified, defended, held harmless or reimbursed by the Company with respect to such claim or Action;

(ii) the Company has not received any written notice or other formal communication (in writing or otherwise) from any person asserting any actual, alleged or suspected infringement, misappropriation or violation by the Company, or any Company Employee or independent contractor of the Company, of any IP Rights of another person, including any letter or

other communication suggesting or offering that the Company obtain a license to any IP Rights of another person; and

(iii) the Company is not bound in writing by any Contract to indemnify, defend, hold harmless or reimburse any other person with respect to, and the Company has not otherwise assumed or agreed in writing to discharge or otherwise take responsibility for, any existing or potential intellectual property infringement, misappropriation or similar intellectual property claim (other than indemnification provisions in the Company’s standard forms of Company IP Contracts).

(f) The Company has made available to Parent in the Data Room a complete and accurate copy of each standard form of Company IP Contract used by the Company, including each standard form of: (i) employee agreement containing any assignment or license of IP Rights or any confidentiality provision; (ii) consulting or independent contractor agreement containing any assignment or license of IP Rights or any confidentiality provision; (iii) confidentiality or nondisclosure agreement; (iv) clinical trial agreement; (v) material transfer agreement; (vi) master service agreement or (vii) laboratory services agreement. Section 3.9(f) of the Company Disclosure Schedule lists by title and date of the Contract all Company IP Contracts, whether or not based on the foregoing forms. The Company has made available to Parent in the Data Room copies of all agreements listed in Section 3.9(f) of the Company Disclosure Schedule.

(g) To the knowledge of the Company, the Company is the sole and exclusive owner of all right, title and interest to and in all Registered IP Rights. Without limiting the generality of the foregoing:

(i) all documents and instruments necessary to establish, perfect and maintain the rights of the Company in any material Registered IP Rights included in the Company IP Rights have been validly executed, delivered, filed and/or recorded in a timely manner with the appropriate Governmental Entity;

(ii) to the knowledge of the Company, the Company has not divulged, furnished to or made accessible any of its Trade Secrets that (A) relate to the [*] or any other Company Products, and (B) are used in the Current Company Business, to any person who is not subject to a written agreement to maintain the confidentiality of such Trade Secrets;

(iii) to the knowledge of the Company, no officer or Company Employee is subject to any Contract with any other person which requires such officer or Company Employee to assign any interest in Company IP Rights to such other person; and

(iv) to the knowledge of the Company, [*] is the sole and exclusive owner of all right, title and interest in and to the [*] Rights (subject to the exclusive license thereof to the Company).

(h) To the knowledge of the Company, all material Company IP Rights are valid, subsisting and enforceable; and to the knowledge of the Company, all other material Third Party IP Rights are valid, subsisting and enforceable. Without limiting the generality of the foregoing:

(i) Section 3.9(h)(i) of the Company Disclosure Schedule describes each action, filing, and payment that must be taken or made on or before the date that is 90 days after the date of this Agreement in order to maintain such Registered IP Right in full force and effect (but excluding any such action, filing or payment the requirement for which first comes into being after the date of this Agreement and was unknown prior to the date of this Agreement);

(ii) Section 3.9(h)(ii) of the Company Disclosure Schedule describes every interference, opposition, reissue, reexamination or other Action before the U.S. Patent and Trademark Office or foreign counterpart that is pending or, to the knowledge of the Company, threatened in writing, in which the scope, validity or enforceability of any Patent Rights included in the Company IP Rights are being or would reasonably be expected to be contested or challenged;

(iii) As of the date of this Agreement, all necessary registration, maintenance and renewal fees in respect of the Registered IP Rights have been paid and all necessary documents and certificates have been filed with the relevant Governmental Entity for the purpose of maintaining such Registered IP Rights;

(iv) As of the date of this Agreement, to the knowledge of the Company, no act has been done or omitted to be done by the Company, which has had or would be reasonably expected to have the effect of (A) rendering any Patent Right relating to [*] unenforceable; or (B) impairing or dedicating to the public, or entitling any person to cancel, forfeit, modify or consider abandoned, any Company IP Right relating to [*] ;

(v) As of the date of this Agreement, all publications (including published Patent Rights) of which the Company has knowledge and reasonably believes may be material to the patentability of the claims in any Patent Rights of the Company relating to [*] has been provided to its patent prosecution counsel for such Patent Rights and, to the Company’s knowledge, has been disclosed by such patent counsel in accordance with Applicable Law; and

(vi) Company has taken reasonable steps to require employees to document information related to the potential conception and first reduction to practice of an invention in a timely manner to protect all inventions included within the Company IP Rights that relate to [*] and that Company has deemed in its reasonable business judgment to be protectable through the application for a Patent Right, taking into account issues of the scope and enforceability of the existing Company IP Rights, anticipated scope and enforceability of such Patent Right, costs of prosecution and maintenance of such Patent Right, the development and commercialization of Company Products, and other relevant factors, including legal, medical, scientific, technical and commercial factors, in a manner and within a sufficient time period to avoid statutory disqualification of any potential patent application.

(i) As of the date of this Agreement, the Company is not subject to any Contract that materially restricts the Company’s use, transfer, delivery or licensing of Company IP Rights or material Third Party IP Rights other than as set forth in the [*] License Agreement or the IP Licenses having provisions regarding the Company’s use, transfer, delivery or licensing of Company IP Rights or material Third Party IP Rights that are in substantially the form of the provisions regarding the Company’s use, transfer, delivery or licensing of Company IP Rights or material Third Party IP Rights contained in the Company’s agreements identified in Section 3.9(d) of the Company Disclosure Schedule.

(j) Section 3.9(j) of the Company Disclosure Schedule identifies the Company’s current outstanding or future obligations to pay any material royalties or other amounts or provide other material consideration to any other person in consideration for the Company’s practice of any material Company IP Rights or material Third Party IP Rights.

(k) To the knowledge of the Company, the Company owns, or otherwise possesses sufficient rights to use, all Company IP Rights and Third Party IP Rights used by the Company in and material to the conduct of the Current Company Business, as such Company IP Rights and Third Party IP Rights are currently used by the Company.

(l) To the knowledge of the Company, as of the date of this Agreement, no Company IP Rights are being infringed or misappropriated by any third party in any material respect.

(m) All current and former officers and employees of the Company who are or have been involved in the creation or development of Company IP Rights have executed and delivered to the Company an agreement (containing no exceptions or exclusions from the scope of its coverage) regarding the protection of proprietary information and providing for the assignment to the Company of any IP Rights made in the course of services performed by such officer or employee for the Company by such persons, the current form of which has been made available to Parent or its advisors in the Data Room. All current and former consultants and independent contractors to the Company who are or have been involved in the creation or development of Company IP Rights have executed and delivered to the Company an agreement in substantially the form provided to Parent or its counsel (containing no exceptions or exclusions from the scope of its coverage) regarding the protection of proprietary information and the assignment to the Company of any IP Rights made by such consultant or independent contractor in the course of services performed for the Company by such persons. To the knowledge of the Company, no current or former officer, employee, consultant or independent contractor of the Company is in material violation of any term of any such proprietary information assignment agreement between such person and the Company.

(n) Neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated by this Agreement will contravene, conflict with or result in, or give any person the right or option to cause or declare (i) a loss of, or encumbrance on, any Company IP Rights; (ii) a breach of or default under any IP License; (iii) the release, disclosure or delivery of any Company IP Right by or to any escrow agent or other person; (iv) the grant, assignment or transfer to any other person of any license or

other right or interest under, to or in any Company IP Rights; or (v) by the terms of any Company IP Contract, a reduction of any royalties or other payments the Company would otherwise be entitled to with respect to any Company IP Rights.

(o) The Company IT Systems owned or leased by the Company, and to the Company’s knowledge, those owned or leased by third party providers, are in good working condition to conduct the Current Company Business. The Company has maintenance and support contracts with vendors to provide for the back-up and recovery of the data and information necessary to the conduct of the business of the Company.

(p) To the knowledge of the Company, the Company has all necessary rights to use and distribute the data contained in the Company Data as such data is currently used and distributed in the Current Company Business.

(q) Except as set forth in Section 3.9(q) of the Company Disclosure Schedule, the Company has not received any written notice from any third party of any Patent Rights arising under any written Contract involving the outbound transfer of biological, chemical or other physical experimental or developmental materials related to [*] (including [*] ).

3.10 Interested Party Transactions . No director or officer of the Company, nor, to the knowledge of the Company, any other employee, consultant or Affiliate of the Company: (a) has any cause of action or other claim whatsoever against, or owes any amounts to, the Company except for claims of employees in the ordinary course of business, such as for accrued vacation pay or for accrued benefits under an employee benefit plan maintained by the Company or for benefits under an employment or indemnification agreement with the Company disclosed in the Company Disclosure Schedule; (b) owns, directly or indirectly, in whole or in part, any tangible or intangible property which the Company is using or which is necessary for the business of the Company; or (c) to the knowledge of the Company, owns any direct or indirect interest of any kind in (other than publicly traded securities in an amount less than [*] of the voting securities of such entity), or is an Affiliate or employee of, or consultant or lender to, or borrower from, or has the right to participate in the management, operations or profits of, any person that is (i) a competitor, supplier, lessor, tenant or creditor of the Company, (ii) a party to any contract with the Company, or (iii) engaged in any transaction with the Company.

3.11 Material Contracts .

(a) Section 3.11(a) of the Company Disclosure Schedule lists all of the Material Contracts in effect as of the date of this Agreement. The Company has delivered to Parent, or made available to Parent or its advisors in the Data Room, a complete and accurate copy of each such Material Contract and all amendments or modifications thereto that exist as of the date of this Agreement.

(b) With respect to each Material Contract: (i) such Material Contract is in full force and effect and is binding and enforceable against the Company and to the Company’s knowledge, any other party to such Material Contract, except as such enforceability may be limited

by bankruptcy, insolvency, moratorium or other similar Applicable Laws affecting or relating to creditors’ rights generally and general principles of equity, regardless of whether asserted in a proceeding in equity or at law; and (ii) (A) neither the Company nor, to the Company’s knowledge, any other party to a Material Contract, is in material breach or material default of such Material Contract, and (B) no event has occurred that with notice or lapse of time would constitute a material breach or material default thereunder by the Company or, to the Company’s knowledge, any other party to such Material Contract, or would permit the modification or premature termination of such Material Contract by any other party thereto.

(c) “ Material Contract ” means (i) each Contract that is currently in effect to which the Company is a party that (A) involved or involves payment by the Company of more than [*] in the current or any future calendar year (other than employment agreements or arrangements or any Leases) and pursuant to which the Company has continuing material obligations, rights or interests (other than a Contract under which the sole continuing obligation is to maintain confidentiality) and cannot be cancelled by the Company without penalty or further payment without more than [*] notice, or (B) has material continuing obligations or interests involving the payment of royalties or other amounts calculated based upon the revenues or income of the Company; (ii) each Contract pursuant to which the Company or any other party thereto has material continuing obligations, rights or interests relating to the research, development, clinical trial, distribution, supply, manufacture, marketing or co-promotion of, or collaboration with respect to, any product or product candidate for which the Company is currently engaged in research or development excluding (A) study agreements with clinical trial sites that provide for ownership of all improvements to any of the IP Rights of the Company to the Company; (B) non-disclosure agreements entered into in the ordinary course of business that do not convey ownership of any IP Rights of any person or contain any non-competition or non-solicitation covenants; (C) Contracts with contractors or vendors providing maintenance, repair or non-technical operating services to the Company, and (D) inbound material transfer Contracts for laboratory reagents or other materials purchased in similar commercial quantities pursuant to standard Contracts that are not generally negotiated in the industry; (iii) each Contract evidencing indebtedness for borrowed money of the Company; (iv) each Contract with any Governmental Entity; (v) each Contract that (A) contains a non-competition covenant or (B) limits or purports to limit in any material respect either the type of business in which the Company (or, after giving effect to the Merger, Parent or its Subsidiaries) may engage or the locations in which any of them may so engage any business; (vi) each Contract between or among the Company and any director, officer or employee of the Company, other than (A) confidentiality agreements, at-will offer letters in the Company’s standard form or consulting agreements entered into in the ordinary course of business consistent with past practice and pursuant to which the Company is not and will not become obligated to make any change of control, severance, termination, retention, gross-up or similar payment, and (B) Contracts entered into in connection with the issuance of Company Options or Company Warrants; (vii) each material IP License, except for IP Licenses described by clauses (A) through (D) of Section 3.11(c)(ii) above; and (viii) each Contract containing any “non-solicitation” or “no-hire” provision that restricts the Company or any Affiliate thereof.

3.12 Assets .

(a) The Company has (i) good and valid title to all of the owned tangible Assets reflected in the Company Balance Sheet and all tangible Assets of the Company acquired after the Company Balance Sheet Date (except for tangible Assets sold or otherwise disposed of since the Company Balance Sheet Date) material to the conduct of the Current Company Business, and (ii) with respect to leased tangible Assets material to the conduct of the Current Company Business, valid leasehold interests therein, free and clear of all mortgages, liens, pledges, charges or other encumbrances of any kind or character, except for the following (collectively, “ Permitted Encumbrances ”): (A) liens for current Taxes not yet delinquent or that are being contested in good faith by appropriate proceedings or that are otherwise not material; (B) encumbrances that do not materially impair the use of the Assets to which they relate; (C) liens securing debt that is reflected on the Company Balance Sheet that will be paid off and released on or prior to the Closing Date; (D) statutory or common law liens to secure obligations to landlords, lessors or renters under leases or rental agreements; (E) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by Applicable Law; and (F) statutory or common law liens in favor of carriers, warehousemen, mechanics and materialmen, to secure claims for labor, materials or supplies, and other like liens. Section 3.12(a) of the Company Disclosure Schedule sets forth a list of all owned tangible Assets of the Company having a book value of greater than [*] .

(b) The Assets that are tangible and that are owned, leased or licensed by or licensed to the Company constitute all the assets and properties that are tangible and that are used in, or reasonably necessary for, the operation of the Current Company Business (including all books, records, computers and computer programs and data processing systems), and all such Assets that are tangible are in good condition and repair (subject to normal wear and tear). The Company has unencumbered access to all material Assets that are tangible and that are owned or leased by or licensed to the Company.

3.13 Real Estate .

(a) The Company does not own any real property. Section 3.13 of the Company Disclosure Schedule sets forth a list of all real property leased or otherwise occupied by the Company (each a “ Lease ” and collectively, “ Leases ”). All Leases are in full force and effect and are binding and enforceable against the Company and, to the Company’s knowledge, against the lessors, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Applicable Laws affecting or relating to creditors’ rights generally and general principles of equity, regardless of whether asserted in a proceeding in equity or at law. True and correct copies of all such Leases, as amended or modified through the date hereof, have been delivered to Parent or its advisors (or have been made available to Parent or its advisors in the Data Room).

(b) The Company is not in material default of any of the Leases and, to the knowledge of the Company, no other party to any of the Leases is in material default thereof.

3.14 Environmental Matters .

(a) The following terms shall be defined as follows:

(i) “ Environmental Laws ” shall mean any federal, state or local Applicable Laws (including common law) applicable to the Company that regulate the protection of the environment, exposure of any individual to Hazardous Materials, or that regulate the handling, use, manufacturing, processing, storage, treatment, transportation, discharge, release, emission, disposal, re-use or recycling of Hazardous Materials, including the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Section 9601, et seq., as amended, and the federal Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., as amended.

(ii) “ Hazardous Materials ” shall mean any material, chemical, gas, compound, substance, mixture or by-product that is identified, defined, designated, listed, restricted or otherwise regulated under Environmental Laws as a “hazardous constituent,” “hazardous substance,” “hazardous material,” “acutely hazardous material,” “extremely hazardous material,” “hazardous waste,” “hazardous waste constituent,” “acutely hazardous waste,” “extremely hazardous waste,” “infectious waste,” “medical waste,” “biomedical waste,” “pollutant,” “toxic pollutant,” or “contaminant” or that is otherwise regulated under Environmental Law.

(b) (i) The Company has complied at all times in all material respects with all applicable Environmental Laws, holds all environmental permits, licenses, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals material and necessary for the conduct of the business of the Company and is in compliance in all material respects with respect thereto; (ii) none of the Assets currently owned, leased or operated by the Company (including soils, groundwater, surface water, buildings or other structures) are contaminated with any Hazardous Materials, as a result of the Company’s use or occupation of such Assets or, to the knowledge of the Company, otherwise, in a manner that would be reasonably likely to result in material Liability to, or a corrective action obligation on the part of, the Company; (iii) the Company is not subject to material Liability for any Hazardous Materials disposal or contamination by the Company on any third party property; (iv) the Company has not received any written notice alleging that the Company may be in violation of or subject to material Liability under any applicable Environmental Law; (v) the Company is not a party to, or named in, any order, decree, injunction or other agreement with any Governmental Entity relating to material Liability of the Company under any Environmental Law or relating to Hazardous Materials; and (vi) the Company has made available to Parent in the Data Room copies of all written environmental reports, studies and sampling data in its possession relating to the Company or any Assets of the Company.

3.15 Taxes .

(a) As used in this Agreement, the terms “Tax” and “Taxes” mean all income, profits, gross receipts, environmental, customs duty, capital stock, sales, use, occupancy, value added, ad valorem, stamp, franchise, withholding, payroll, employment, unemployment, disability, excise, property, production and other taxes, duties or assessments of any nature imposed by any Governmental Entity (whether national, local, municipal or otherwise) or political subdivision thereof, together with all interest, penalties and additions imposed with respect to such amounts, any interest in respect of such penalties or additions, and any obligations under any legally binding

agreements or arrangements with any other person with respect to such amounts and including any Liability for the aforementioned taxes of a predecessor entity.

(b) Each of the material returns, declarations, estimates, information statements or reports required to be filed with a Governmental Entity with respect to Taxes (“ Tax Returns ”) by or with respect to the Company: (i) has been timely filed on or before the applicable due date (including any extensions of such due date) and (ii) is true and complete in all material respects. All material Taxes due and payable by the Company (whether or not shown to be due on filed Tax Returns) have been timely paid, except to the extent such amounts are being contested in good faith by the Company or are properly reserved for on the books or records of the Company.

(c) All material Taxes that the Company has been required to collect or withhold have been duly collected or withheld and, to the extent required by Applicable Law when due, have been duly and timely paid to the proper Governmental Entity.

(d) There has not been any audit, examination or other administrative or court proceeding for or relating to any Liability in respect of Taxes by any Governmental Entity and the Company has not been notified in writing by any Governmental Entity that any such audit, examination or other administrative or court proceeding involving Taxes is contemplated or pending. No waiver or agreement by or with respect to the Company is in force for the extension of time for the payment, collection or assessment of any Taxes. No claim has been made in writing to the Company by any Governmental Entity in a jurisdiction where the Company does not file Tax Returns that the Company is subject to taxation by that jurisdiction. Each deficiency resulting from any completed audit or examination relating to Taxes by any Governmental Entity has been timely paid or is being contested in good faith and has been adequately reserved for on the books of the Company.

(e) The Company Financial Statements contain adequate accruals in accordance with GAAP for the unpaid Taxes of the Company through the date of such Company Financial Statements. Since the Company Balance Sheet Date, the Company has not incurred any Liability for Taxes outside of the ordinary course of business or otherwise inconsistent with past custom or practice.

(f) There are no liens for Taxes on any asset of the Company other than liens for Taxes not yet due and payable or Taxes which are being contested by the Company in good faith.

(g) The Company has not agreed, and will not be required, to make any adjustment for any period after the date of this Agreement pursuant to Section 481(a) of the Code by reason of any change in any accounting method. There is no application pending with any Governmental Entity requesting permission for any such change in any accounting method of the Company, and the Internal Revenue Service has not issued in writing any pending proposal regarding any such adjustment or change in accounting method.

(h) The Company is not a party to any Contract with any third party relating to allocating or sharing the payment of, or Liability for, Taxes. The Company does not have any

Liability for the Taxes of any third party under Treasury Regulation § 1.1502-6 (or any similar provision of state, local or foreign Applicable Law) as a transferee or successor, by Contract or otherwise.

(i) The Company has not been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code or of any group that has filed a combined, consolidated or unitary return under state, local or foreign Applicable Law, other than a group the common parent of which is the Company.

(j) The Company has not participated in a “reportable transaction” within the meaning of Treasury Regulation Section 1.6011-4(b). The Company has disclosed on its United States federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of United States federal income Tax within the meaning of Section 6662 of the Code.

(k) The Company is not (and has not been for the five-year period ending at Closing) a “United States real property holding corporation” as defined in Section 897(c)(2) of the Code and the applicable Treasury Regulations.

3.16 Employee Benefit Plans .

(a) General . Section 3.16 of the Company Disclosure Schedule sets forth a complete and accurate list of each plan, program, policy, contract, agreement or other arrangement providing for employment, compensation, retirement, pension, deferred compensation, severance, separation, relocation, repatriation, expatriation, visas, work permits, termination pay, performance awards, bonus, incentive, stock option, stock purchase, stock bonus, phantom stock, stock appreciation right, supplemental retirement, profit sharing, fringe benefits, cafeteria benefits, medical benefits, life insurance, disability benefits, accident benefits, salary continuation, accrued leave, vacation, sabbatical, sick pay, sick leave, unemployment benefits or other benefits, whether written or unwritten, including each “employee benefit plan” within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”) and all termination and severance contracts or agreements, employment agreements, and consulting services agreements involving consideration to the consultant in excess of [*] , in each case, for active, retired or former employees, directors or consultants, in each case, which is currently sponsored, maintained, contributed to, or required to be contributed to or with respect to which any current potential material liability is borne by the Company and any trade or business (whether or not incorporated) that is or at any relevant time was treated as a single employer with the Company within the meaning of Section 414 of the Code (an “ ERISA Affiliate ”) (collectively, the “ Company Employee Plans ”). Neither the Company nor, to the knowledge of the Company, any other person or entity, has made any commitment to modify, change or terminate any Company Employee Plan, other than with respect to a modification, change or termination required by ERISA or the Code. There are no loans by the Company to any of their officers, employees, contractors or directors outstanding on the date hereof, except pursuant to loans under any Company Employee Plan intended to qualify under Section 401(k) of the Code.

(b) Documents . The Company has delivered to Parent or its advisors (or made available in the Data Room for review by Parent or its advisors) true and complete copies of each of the Company Employee Plans and related material plan documents, including trust documents, group annuity contracts, plan amendments, insurance policies or contracts, participant agreements, employee booklets, administrative service agreements, summary plan descriptions, compliance and nondiscrimination tests (including 401(k) and 401(m) tests) for the last three (3) plan years, if applicable, standard COBRA forms and related notices, registration statements and prospectuses and, to the extent still in its possession, any material employee communications relating thereto. With respect to each Company Employee Plan that is subject to ERISA reporting requirements, the Company has made available in the Data Room for review by Parent or its advisors copies of the annual reports (Form 5500 or 990 series and all schedules attached thereto) filed for the last five (5) plan years or for such shorter period of time as the Company Employee Plan has been subject to ERISA reporting requirements (and, if such report is a Form 5500R, the two most recent Forms 5500C filed with respect to such Company Employee Plan). The Company has made available in the Data Room for review by Parent or its advisors the most recent Internal Revenue Service determination or opinion letter issued with respect to each applicable Company Employee Plan. The Company has made available in the Data Room for review by Parent or its advisors all filings made by the Company or any ERISA Affiliate of the Company with any Governmental Entity with respect to any Company Employee Plan to the extent relevant to any ongoing obligation or liability of the Company, including any filings under the IRS’ Employee Plans Compliance Resolution System program or any of its predecessors or the Department of Labor Delinquent Filer Voluntary Compliance program.

(c) Compliance . Each Company Employee Plan is being, and has been, administered substantially in accordance with its terms and complies in all material respects with and is being, and has been, administered substantially in material compliance with the requirements prescribed by any and all statutes, rules and regulations (including ERISA and the Code). The Company and each ERISA Affiliate are not in material default under or material violation of, and have no knowledge of any material default or material violation by any other party to, any of the Company Employee Plans. Any Company Employee Plan intended to be qualified under Section 401(a) of the Code has either obtained from the Internal Revenue Service a favorable opinion or determination letter as to its qualified status under the Code, including all currently effective amendments to the Code, and the corresponding related exemption of its trust from U.S. federal income taxation under Section 501(a) of the Code, or has applied to the Internal Revenue Service for such favorable determination letter within the remedial amendment period under Section 401(b) of the Code, and the Company is not aware of any circumstances likely to result in the loss of such qualifications of any such Company Employee Plan. None of the Company Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person, except for the provision of continued health coverage under COBRA and similar state laws. The Company has not engaged in, or participated in, any transaction which would be considered a non-exempt “prohibited transaction,” as such term is defined in Section 406 of ERISA or Section 4975 of the Code and, to the Company’s knowledge, no other third party fiduciary and/or party-in-interest has engaged in any such “prohibited transaction” with respect to any Company Employee Plan. To the Company’s knowledge, neither the Company nor any ERISA Affiliate is

subject to any liability or penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with respect to any Company Employee Plan. All contributions required to be made by the Company or any ERISA Affiliate to any Company Employee Plan have been timely paid and accrued on the Company Balance Sheet, if required under GAAP. Each Company Employee Plan subject to ERISA has prepared in good faith and timely filed all requisite governmental reports, which were true and correct in all material respects as of the date filed, and has properly and timely filed and distributed or posted all notices and reports to employees required to be filed, distributed or posted with respect to each such Company Employee Plan unless the failure to do so is not material. Except for routine claims for benefits, no suit, administrative proceeding or action has been brought or, to the knowledge of the Company, is overtly threatened in communication with the Company, against or with respect to any such Company Employee Plan, including any audit or inquiry by the Internal Revenue Service, the United States Department of Labor or the United States Department of Health and Human Services. There has been no amendment to, or written interpretation or announcement by, the Company or any ERISA Affiliate regarding any Company Employee Plan that would materially increase the expense of maintaining such Company Employee Plan above the level of expense incurred with respect to that Plan for the fiscal year ended December 31, 2009. All contributions and payments to Company Employee Plans are deductible under Section 162 or 404 of the Code. With respect to the Company Employee Plans, no event has occurred and, to the knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company would reasonably expect to be subject to any material liability (other than for liabilities with respect to routine benefit claims) under the terms of, or with respect to, such Company Employee Plans, ERISA, the Code or any other Applicable Law.

(d) No Title IV or Multiemployer Plan . Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to, or is obligated to materially contribute to, or otherwise incurred any obligation or liability (including any contingent liability) under, any “multiemployer plan” (as defined in Section 3(37) of ERISA) or any “employee pension benefit plan” (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA or Section 412 of the Code. Neither the Company nor any ERISA Affiliate has, as of the date of this Agreement, any actual or potential withdrawal liability (including any contingent liability) for any complete or partial withdrawal (as defined in Sections 4203 and 4205 of ERISA) from any multiemployer plan.

(e) No Self-Insured Plans . Neither the Company nor any ERISA Affiliate has ever maintained, established, sponsored, participated in or contributed to any self-insured plan that is governed by ERISA and that provides benefits to employees (including any such plan pursuant to which a stop-loss policy or contract applies).

(f) COBRA, FMLA, HIPAA, Cancer Rights . With respect to each Company Employee Plan, the Company is in material compliance with (i) the applicable health care continuation and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) and the regulations thereunder or any state Applicable Law governing health care coverage extension or continuation; (ii) the applicable requirements of the Family and Medical Leave Act of 1993 and the regulations thereunder; (iii) the applicable requirements of the Health

Insurance Portability and Accountability Act of 1996 (“ HIPAA ”); (iv) the applicable requirements of the Cancer Rights Act of 1998; and (v) the applicable requirements of the Newborns’ and Mothers’ Health Protection Act of 1996. The Company has no material unsatisfied obligations to any employees, former employees or qualified beneficiaries pursuant to COBRA, HIPAA or any state Applicable Law governing health care coverage extension or continuation.

(g) 2010 Health Care Act . Each Company Employee Plan is in compliance in all material respects with the Patient Protection and Affordable Care Act and its companion bill, the Health Care and Education Reconciliation Act of 2010 (the “ 2010 Health Care Law ”), to the extent applicable. The operation of each Company Employee Plan will not result in the incurrence of any material penalty to the Company pursuant to the 2010 Health Care Law, to the extent applicable.

(h) Section 409A . Each Company Employee Plan which is a nonqualified deferred compensation plan within the meaning of Section 409A of the Code (i) has, prior to January 1, 2009, been operated and maintained in a good faith effort to comply in all material respects according to the applicable requirements of Section 409A of the Code, and (ii) for all periods on or after January 1, 2009, has been documented, operated and administered in full compliance with Section 409A of the Code and the applicable Treasury Regulations. The Company does not have any obligation to indemnify, hold harmless or provide any tax gross-up payment to any individual with respect to any penalty tax, interest payments or other liability such individual may incur under Section 409A of the Code.

(i) Effect of Transaction . The consummation of the Merger (whether alone or in connection with the occurrence of any additional or subsequent event, including termination of employment or other service status) will not (i) entitle any current or former employee or other service provider of Company or any ERISA Affiliate to severance benefits or any other payment or benefit (including golden parachute, bonus or benefits under any Company Employee Plan); (ii) except as otherwise expressly provided under Section 2.11(b) of this Agreement, accelerate the time of payment or vesting of any such benefits or increase the amount of compensation or benefits due any such employee or service provider; (iii) result in the forgiveness of any indebtedness; (iv) result in any obligation to fund benefits under any Company Employee Plan; or (v) result in the imposition of any restrictions with respect to the amendment or termination of any of the Company Employee Plans. Following the Company’s compliance with Section 6.10 of this Agreement, no portion of any payment or benefit that could be received (whether in cash, property, the vesting of property or otherwise), as a result of the consummation of the transactions contemplated by this Agreement (whether alone or upon the occurrence of any additional or subsequent event, including termination of employment or other service status), by any current or former employee, officer, director or stockholder of the Company who is a disqualified individual (as such term is defined in Treasury Regulation Section 1.280G-1 and hereafter referred to as a “ Disqualified Individual ”) under any Company Employee Plan or otherwise will be an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code). Section 3.16(h) of the Company Disclosure Schedule lists each person who the Company reasonably believes to be a Disqualified Individual. Each Company Employee Plan can be amended, terminated or otherwise discontinued immediately after the

Effective Time in accordance with its terms, without liability to Parent or the Company other than ordinary administration expenses typically incurred in a termination event.

(j) The Company is not a party to any contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of the Company that, individually or in the aggregate, would reasonably be expected to give rise to the payment of any material amount that would be subject to the deductibility limits of Section 404 of the Code.

(k) The Company does not sponsor, contribute to or have any liability with respect to any employee benefit plan, program or arrangement that provides benefits to non-resident aliens with no United States source income outside of the United States.

(l) With respect to each Company Employee Plan that is an “employee welfare benefit plan” within the meaning of Section 3(2) of ERISA, other than any health care reimbursement plan under Section 125 of the Code, all claims incurred (including claims incurred but not reported) by employees, former employees and their dependents thereunder for which the Company is, or will become, liable are (i) insured pursuant to a contract of insurance whereby the insurance company bears any risk of loss with respect to such claims, (ii) covered under a contract with a health maintenance organization (an “ HMO ”) pursuant to which the HMO bears the liability for such claims, or (iii) reflected as a liability or accrued for on the Company Financial Statements.

(m) No Company Employee Plans provide for any bonus, retirement, severance, retention, job security or similar benefit or any change of control, accelerated or enhanced payment or benefit as a result of the transaction contemplated by this Agreement, either alone or together with any other event (including the subsequent termination of employee or other service provider status), nor do such transactions or this Agreement create any liabilities or trigger any expenses under any Company Employee Plan.

3.17 Employee and Labor Matters .

(a) No work stoppage or labor strike is pending against the Company or, to the knowledge of the Company, threatened. The Company is not delinquent in payments to any of its employees, temporary employees, consultants or independent contractors for any wages, salaries, commissions, bonuses or other direct compensation for any services performed for it or amounts required to be reimbursed to such persons. To the knowledge of the Company, the Company is in compliance in all material respects with all Applicable Laws respecting labor, employment, fair employment practices (including, but not limited to, equal employment opportunity laws), terms and conditions of employment, workers’ compensation, occupational safety and health, and wages and hours. The Company has withheld all amounts required by Applicable Law or by agreement to be withheld from the wages, salaries and other payments to employees and temporary employees, has timely deposited all such required withholding taxes with the appropriate taxing authorities, and is not liable for any arrears of wages or any Taxes or any penalty for failure to comply with any of the foregoing. The Company is not liable for any material payment to any trust or other fund or to any Governmental Entity, with respect to unemployment compensation benefits, social security or other

benefits or obligations for employees (other than routine payments to be made in the ordinary course of business consistent with past practice). There are no pending claims against the Company under any workers’ compensation plan or policy or for long-term disability, and the Company is not subject to, is a party to, or, to the knowledge of the Company, has been threatened in writing with any material action, proceeding, dispute, grievance, arbitration, investigation before any Governmental Entity, charge or lawsuit relating to labor or employment matters involving any current or former employees, consultants or temporary employees. To the Company’s knowledge, as of the date hereof, no employees, temporary employees, consultants or independent contractors of the Company are in any respect in violation of any term of any employment contract, non-disclosure agreement, non-competition agreement or any restrictive covenant to a former employer relating to the right of any such employee to be employed by the Company because of the nature of the business previously or presently conducted by the Company or to the use of trade secrets or proprietary information of others.

(b) The Company is not a party to or otherwise bound by any collective bargaining contract with a labor union or labor organization, nor is any such contract presently being negotiated, nor is there, nor has there been in the last two (2) years, a representation question respecting any of the employees of the Company.

3.18 Insurance . Section 3.18 of the Company Disclosure Schedule sets forth a list of each insurance policy under which the Company is an insured or otherwise the principal beneficiary of coverage. The Company has made available to Parent in the Data Room true and complete copies of all such policies. The Company is not in material breach or default (including any such breach or default with respect to the payment of premiums or the giving of notice under any such policy), and no event has occurred which, with notice or lapse of time, would constitute such breach or default, or permit termination or modification, under the policy. At no time has the Company been denied any insurance or indemnity bond coverage which it has requested. The Company has not received notice from any of its insurance carriers that any insurance coverage listed in Section 3.18 of the Company Disclosure Schedule will not be available in the future substantially on the same terms as are now in effect.

3.19 Compliance With Laws . The Current Company Business has been since January 1, 2008 and is being conducted in compliance with Applicable Laws in all material respects. The Company has since January 1, 2008 complied in all material respects with all Applicable Laws, including applicable health and safety laws and regulations. The Company has not received any written notice or communication of any noncompliance with any Applicable Laws that has not been cured as of the date hereof. The Company has (and at the time of the performance of all preclinical research, clinical development and manufacturing of the Company Products that it has conducted or sponsored, it did own, hold or possess) all material permits, licenses, franchises, variances, exemptions, orders and other governmental authorizations, consents and approvals (collectively, “ Permits ”) necessary under Applicable Law to conduct its business as presently conducted (or with respect to Permits held for past activities, as conducted at such time) and is in compliance in all material respects with Permits held or required to be held by the Company. To the knowledge of the Company, no event has occurred or condition or state of facts exists which constitutes or, after notice

or lapse of time or both, would constitute a material breach or material default under any such Permit or which permits or, after notice or lapse of time or both, would permit revocation or termination of any such Permit, or which could materially and adversely affect the rights of the Company under any such Permit.

3.20 Brokers’ and Finders’ Fee . No broker, finder or investment banker is entitled to brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges from the Company in connection with the Merger, this Agreement or any transaction contemplated hereby.

3.21 Takeover Statutes . No “fair price,” “moratorium,” “control share acquisition” or other similar anti-takeover statute or regulation (each, a “ Takeover Statute ”) is applicable to the Merger. The board of directors of the Company has taken all action so that neither Parent nor Merger Sub will be prohibited from entering into a “business combination” with the Company as an “interested stockholder” (in each case as such term is used in Section 203 of Delaware Law) as a result of the execution of this Agreement, or the consummation of the Merger or the other transactions contemplated hereby.

3.22 Regulatory Compliance .

(a) All submissions made to Regulatory Authorities by the Company with respect to the Company Products have complied in all material respects with all Applicable Laws. The Company is not subject to an FDA consent decree or any similar order of a Regulatory Authority or Governmental Entity. The Company has not received any written notice or any other form of written communication, or, to the knowledge of the Company, any other notice or communication, from any Regulatory Authority asserting any violation of, or failure to comply with, any Applicable Laws applicable to the manufacture, use, sale or investigation of any Company Products, including any FDA Form 483, Warning Letter or any other adverse action or notice from the FDA, EMA or other applicable Regulatory Authorities.

(b) All drug products being manufactured or developed by the Company as of the date hereof (“ Company Products ”) that are subject to the jurisdiction of the FDA have been and are being manufactured, labeled, stored and tested in compliance in all material respects with all applicable requirements under the federal Food and Drug and Cosmetic Act (“ FDCA ”), the Public Health Service Act, their applicable implementing regulations, and all comparable state and foreign Applicable Laws. The Company is reasonably monitoring clinical trial sites participating in any Company-sponsored trial for their compliance with the foregoing regulations and/or Applicable Laws.

(c) All pre-clinical and clinical trials and all preclinical research, clinical development and manufacturing activities conducted by or on behalf of the Company have been and are being conducted in material compliance with applicable requirements of, as applicable, Good Clinical Practice regulations, and all Applicable Laws relating to protection of human subjects, including those contained in 21 CFR Parts 50 and 56, good laboratory practice requirements and standards of 21 C.F.R. part 58, and, in each case, any comparable state and foreign Applicable Laws.

(d) All manufacturing operations conducted by, or, to the Company’s knowledge, for the benefit of, the Company with respect to Company Products being used in human clinical trials have been and are being conducted in accordance, in all material respects, with the FDA’s cGMP regulations. In addition, the Company is in material compliance with all applicable registration and listing requirements set forth in 21 U.S.C. Section 360 and 21 CFR Part 207 and all similar Applicable Laws.

(e) Neither the Company nor any representative of the Company nor, to the knowledge of the Company, any of its licensees or assignees of Company IP Rights has received any written notice that the FDA or any other Governmental Entity has initiated, or threatened to initiate, any action to suspend any clinical trial, or suspend or terminate any Investigational New Drug Application or any comparable foreign regulatory application, in each case sponsored by the Company with respect to any Company Product, or to recall or suspend the manufacture of any Company Product.

(f) Neither the Company nor, to the knowledge of the Company, any of its officers, key employees, or agents acting for the Company, has committed any act, made any statement or failed to make any statement that would reasonably be expected to provide a basis for the FDA to invoke its policy with respect to “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. Additionally, neither the Company, nor any officer, employee or agent of the Company has been convicted of any crime or engaged in any conduct that would reasonably be expected to result in (i) debarment under 21 U.S.C. Section 335a or any similar state or foreign Applicable Law or (ii) exclusion under 42 U.S.C. Section 1320a-7 or any similar state or foreign Applicable Law.

(g) All animal studies or other preclinical tests performed by or on behalf of the Company either (i) have been conducted in accordance, in all material respects, with applicable Good Laboratory Practice regulations as described in 21 CFR Part 58 or comparable foreign Applicable Laws or (ii) if not required to be conducted in accordance with Good Laboratory Practices, have employed the procedures and controls generally used by qualified experts in animal or preclinical study of products comparable to those being developed by the Company.

(h) The Company has delivered to Parent or made available to Parent in the Data Room each annual report filed by the Company with the FDA, EMA or any similar state or non-U.S. Regulatory Authority with respect to the Company Products. The Company has made available to Parent in the Data Room in an accurate and complete manner all clinical data from completed clinical trials (including all adverse events) in the possession or control of to the Company regarding the Company Products. The Company has delivered to Parent or made available to Parent in the Data Room all reports of monitoring visits of clinical studies sponsored by the Company, all internal, third party and FDA audits of clinical studies sponsored by the Company and all internal, third party and FDA audits related to compliance with applicable FDA requirements by the Company, in each case to the extent that reports are in the possession or control of the Company. [*] The Company has delivered to Parent or made available to Parent in the Data Room accurate and complete copies of: (i) each IND and each similar state or non-U.S. regulatory filing made on behalf

of the Company, including all related supplements, amendments and annual reports; and (ii) all correspondence and minutes of meetings or memoranda of meetings or regulatory contacts with a Regulatory Authority that concerns any Company Product.

(i) There are no proceedings pending with respect to a violation by the Company of the FDCA, FDA regulations adopted thereunder, the Controlled Substance Act or any other Applicable Law promulgated by any other United States Governmental Entity.

(j) No failure to comply with the applicable requirements of Good Clinical Practice regulations, or any Applicable Law relating to protection of human subjects, including those contained in 21 CFR Parts 50 and 56, good laboratory practice requirements and standards of 21 C.F.R. part 58, and, in each case, any comparable state and foreign Applicable Laws, has adversely affected the integrity, in the aggregate, of data collected in the pre-clinical or clinical trials, preclinical research, clinical development and manufacturing activities conducted by or on behalf of the Company, or the overall conclusions of any such trial or research.

3.23 Suppliers . Set forth in Section 3.23 of the Company Disclosure Schedule is a list of names and addresses of the top five (5) suppliers of the Company (the “ Company Suppliers ”) and the aggregate amount of purchases by the Company from each Company Supplier during the fiscal year ended December 31, 2010. Except as set forth in Section 3.23 of the Company Disclosure Schedule, as of the date of this Agreement, there exists no actual or threatened in writing, or, to the knowledge of the Company, otherwise threatened, termination or cancellation of, or any material and adverse change to, the business relationship of the Company with any Company Supplier.

3.24 Product Liabilities . The Company has not received any written claim and to the knowledge of the Company any other claim, for or based upon breach of product warranty, strict liability in tort, negligent manufacture of product, negligent provision of services or any product complaint, adverse event report or any other similar allegation of liability, arising from the materials, design, testing, manufacture, packaging or labeling (including instructions for use) of the Company Products or from the provision of services. The Company does not sell and has never sold any Company Products commercially.

3.25 Healthcare Data Privacy and Security .

(a) The Company (i) has operated its business in compliance in all material respects with all Applicable Laws and contractual requirements relating to medical records and medical information privacy that regulate or limit the maintenance, use, disclosure or transmission of medical records, patient information or other personal information made available to or collected by the Company in connection with the operation of its business (the “ Healthcare Data Requirements ”), (ii) has implemented any confidentiality, security and other protective measures required by the Healthcare Data Requirements and applicable to the Company and, (iii) if and to the extent applicable to the Company, has implemented or will have implemented, upon effectiveness, all such measures required by the Standards for Privacy of Individually Identifiable Health Information at 45 C.F.R. Parts 160 and 164 (subparts A and E), the Security Standards at 45 C.F.R. Parts 160 and 164 (subparts A and C), the Standards for Electronic Transactions and Code Sets at 45 C.F.R. Parts 160

and 162 promulgated under HIPAA, the Health Information Technology for Economic and Clinical Health Act (Pub. L. No. 111-5) (“ HITECH ”) and HITECH implementing regulations. The Company is and has at all times been in compliance in all material respects with the applicable privacy and security requirements of HIPAA and HITECH.

(b) All Personal Data and all Protected Health Information, if any, that the Company has shared, or will share in connection with the acquisition contemplated by this Agreement, with Parent, or that the Surviving Corporation will hold at the Effective Time, has been collected, maintained and used at all times by the Company in compliance in all material respects with (i) the requirements of all Applicable Laws, (ii) the requirements of Contracts to which the Company is a party and (iii) policies and practices relating to Personal Data that the Company has communicated to persons about whom the Personal Data relates.

3.26 Unlawful Payments .

(a) Neither the Company nor, to the knowledge of the Company, any manager, director, officer, agent, employee or other person acting on behalf of or in the name of the Company with authority to do so has: (i) offered or used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to any political campaign or activity; (ii) offered or made a direct or indirect unlawful payment or conveyance of something of value to any foreign or domestic government official, employee or political candidate or established or maintained any unlawful or unrecorded funds; (iii) violated any provision of the U.S. Foreign Corrupt Practices Act of 1977 (the “ FCPA ”) or any equivalent to the FCPA or concerning such unlawful payments or gifts in any jurisdiction; (iv) offered or given any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment or gift of money or anything of value to any foreign or domestic government official or employee of any Governmental Entity; (v) received any unlawful discounts or rebates in violation of any Applicable Law relating to antitrust or competition; or (vi) breached or waived any applicable foreign, federal or state law regarding business conduct, or any code of ethics promulgated by an applicable pharmaceutical industry representative organization or trade organization applicable to the Current Company Business such as the Pharmaceutical Research and Manufacturers of America (PhRMA) or the Association of the British Pharmaceutical Industry (ABPI) regarding business conduct.

(b) Neither the Company nor, to the knowledge of the Company, any manager, director, officer, agent, distributor, employee or other person acting on behalf of or in the name of the Company: (i) is, or is owned or controlled by, a person subject to the sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or included on any list of restricted entities, persons or organizations published by the government of the United States of America including the List of Specially Designated Nationals and Blocked Persons, Denied Persons List, Entities List, Debarred Parties List, Excluded Parties List and Terrorism Exclusion List, or any similar Applicable Law (any such person, a “ Restricted Party ”) or (ii) has engaged in any unlicensed transaction with any Restricted Party or has otherwise been in breach of any such sanctions, export controls, restrictions or any similar foreign, federal or state Applicable Law.

3.27 Information Statement . The information supplied by the Company for inclusion in the Information Statement will not, as of the date of the Information Statement: (i) contain any statement that is inaccurate or misleading with respect to any material fact; or (ii) omit to state any material fact necessary in order to make such information (in the light of circumstances under which it is provided) not false or misleading. The Information Statement shall comply in all material respects with all Applicable Law.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub represent and warrant to the Company as set forth in this Article IV:

4.1 Organization, Standing and Power . Each of Parent and Merger Sub is a corporation duly organized, validly existing and, if applicable, in good standing under the Applicable Laws of the jurisdiction in which it was incorporated.

4.2 Authority . Parent and Merger Sub have all requisite corporate power and authority to enter into this Agreement and to consummate the Merger. The execution and delivery by Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Merger have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub, and no other authorization or consent of Parent, Merger Sub or their respective stockholders is necessary. This Agreement has been duly executed and delivered by Parent and Merger Sub, and, assuming this Agreement constitutes the valid and binding obligation of the Company and the Stockholders’ Agent, this Agreement constitutes a valid and binding obligation of each of Parent and Merger Sub, enforceable against each of Parent and Merger Sub in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar Applicable Laws affecting or relating to creditors’ rights generally and general principles of equity, regardless of whether asserted in a proceeding in equity or at law.

4.3 Noncontravention . Neither the execution and delivery by Parent and Merger Sub of this Agreement, nor the consummation by Parent or Merger Sub of any of the transactions contemplated hereby, will:

(a) conflict with or violate any provision of the certificate of incorporation or bylaws of Parent or the certificate of incorporation or bylaws of Merger Sub;

(b) require on the part of Parent or Merger Sub any registration, declaration or filing with, or any permit, order, authorization, consent or approval of, any Governmental Entity, except for (i) compliance with the applicable requirements of HSR and foreign antitrust or trade regulation Applicable Laws, and (ii) any registration, declaration, filing, permit, order, authorization, consent or approval which if not made or obtained would not reasonably be expected to result in a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the other transactions contemplated hereby;

(c) conflict with, result in a breach of, constitute (with or without due notice or lapse of time or both) a default under, result in the acceleration of obligations under, create in any party any right to terminate or modify, or require any notice, consent or waiver under, any Contract to which Parent or Merger Sub is a party or by which Parent or Merger Sub is bound, except for that which would not reasonably be expected to result in a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the other transactions contemplated hereby;

(d) violate any order, writ, injunction or decree applicable to Parent or Merger Sub or any of their respective material Assets, except for any violation that would not reasonably be expected to result in a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the other transactions contemplated hereby; or

(e) violate any Applicable Law applicable to Parent or Merger Sub or any of their respective material Assets, except for any violation that would not reasonably be expected to result in a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the other transactions contemplated hereby.

4.4 Litigation . There are no Actions pending or, to the knowledge of Parent, threatened against Parent or the Merger Sub before any Governmental Entity or any arbitrator that seeks to restrain or enjoin the consummation of the transactions contemplated by this Agreement or which would reasonably be expected to have a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the other transactions contemplated hereby.

4.5 Adequacy of Funds . Parent has, and as of the Effective Time will have, adequate financial resources to satisfy its monetary obligations under this Agreement (other than with respect to any Contingent Payments). With respect to any Contingent Payment, Parent will have adequate financial resources to satisfy its obligation to pay to such Contingent Payment at the time such Contingent Payment becomes due and payable.

ARTICLE V

CONDUCT PRIOR TO THE EFFECTIVE TIME

5.1 Conduct of Business of the Company . During the period from the date of this Agreement through the Effective Time (the “ Pre-Closing Period ”), except (i) as set forth in Section 5.1 of the Company Disclosure Schedule, (ii) to the extent specifically required by this Agreement, (iii) as required by Applicable Law or (iv) as consented to in writing by Parent in its sole discretion [*] , (A) the Company shall (1) carry on its business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and in compliance with Applicable Law, pay its debts and Taxes when due (subject to good faith disputes regarding such debts and Taxes for which reserves have been established in accordance with GAAP) and pay or perform other material obligations when due, and (2) use commercially reasonable efforts consistent with past practice to keep and maintain its assets and properties in good operating condition and repair (subject to normal wear and tear) and to preserve, maintain the value of, renew, extend and keep in full force and effect all IP Rights of the Company, and to maintain its business organization intact

and to preserve the goodwill of the Company’s material suppliers, contractors, licensors, employees, customers, distributors and others having business relations with the Company, and (B) the Company shall not:

(a) amend the Certificate of Incorporation or Bylaws of the Company;

(b) merge or consolidate with any other person;

(c) split, combine or reclassify the outstanding shares of Company Capital Stock nor enter into any agreement with respect to voting of any of the Company Capital Stock;

(d) declare, set aside or pay any dividend or other distribution, payable in cash, stock, property or otherwise, in respect of the Company Capital Stock;

(e) purchase, redeem or otherwise acquire, except in connection with the repurchase of unvested shares of Company Common Stock under the Company Option Plan at a price per share not in excess of the purchase price paid for those shares, any shares of Company Capital Stock or any securities convertible or exchangeable or exercisable for any shares of Company Capital Stock;

(f) transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber any material Asset (except for the incurrence of Permitted Encumbrances) or any Company IP Rights;

(g) incur any indebtedness or issue any debt securities or warrants or other rights to acquire debt securities of the Company or assume, guarantee or endorse, as an accommodation or otherwise, the obligations of any other person for indebtedness or capital obligations, in the case of any of the foregoing;

(h) issue, sell, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable or exercisable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of its capital stock of any class or any Voting Debt, or any other property or Assets, except that the Company may (i) issue shares of Company Capital Stock upon the exercise of Company Options outstanding on the date of this Agreement in accordance with their terms as of the date of this Agreement, (ii) issue shares of Company Capital Stock upon the exercise of Company Warrants outstanding as of the date of this Agreement, and (iii) issue shares of Company Common Stock upon conversion of Company Preferred Shares;

(i) make or agree to make any capital expenditures other than any such expenditures not in excess of [*] ;

(j) make any material change in accounting policies or procedures, except as required by GAAP or by Applicable Law or a Governmental Entity;

(k) revalue any of its material Assets except as required by GAAP;

(l) enter into, modify or amend in any material manner or terminate, or waive, release or assign any material rights or claims under (i) any Material Contract pursuant to which the Company or any other party thereto has material continuing obligations, rights or interests relating to research, development, clinical trials, distribution, supply, manufacturing, marketing or co-promotion of, or collaboration with respect to, any product or product candidate for which the Company is currently engaged in research and development (excluding (A) study agreements with clinical trial sites that provide for ownership of all improvements to any of the IP Rights of the Company to the Company; (B) non-disclosure agreements entered into in the ordinary course of business that do not convey ownership of any IP Rights of any person or contain any non-competition or non-solicitation covenants; (C) Contracts with contractors or vendors providing maintenance, repair or non-technical operating services to the Company, and (D) inbound material transfer Contracts for laboratory reagents or other materials purchased in similar commercial quantities pursuant to standard Contracts that are not generally negotiated in the industry); (ii) any IP License pursuant to which the Company, or any other party thereto has, or will have, continuing obligations, rights or interests; or (iii) any real property lease;

(m) make any loan, advance, capital contribution to, or investment in, any person other than loans, advances or capital contributions to, or investments in the ordinary course of business consistent with past practice and routine travel-related expense advances to employees of the Company;

(n) (i) grant, extend, amend (except as required in the diligent prosecution of the Company IP Rights), waive or modify the Company’s rights in or to any Company IP Rights or material Third Party IP Rights, (ii) fail to diligently prosecute any Company IP Rights or (iii) fail to exercise a right of renewal or extension under or with respect to any Company IP Right or material Third Party IP Right;

(o) hire any new employees;

(p) (i) adopt, enter into, terminate or amend any Company Employee Plan (or any plan, program, policy, contract, agreement or other arrangement that would be a Company Employee Plan had it been in effect on the date hereof), except as required by Applicable Law, (ii) increase in any manner the compensation, bonus, or fringe or other benefits of, or pay any bonus to, any current or former employee or consultant, except (x) as required by any agreement existing as of the date hereof, or (y) pursuant to the Company’s annual bonus program in amounts, individually and in the aggregate, consistent with past practice and appropriately pro-rated for any partial year, (iii) pay any benefit or amount to any current or former employee or consultant not required under any Company Employee Plan, (iv) increase in any manner the severance or termination pay of any current or former employee or consultant except as required by any agreement existing as of the date hereof, (v) grant any awards under any bonus, incentive, performance or other compensation plan or arrangement or Company Employee Plan (including the grant of stock options, stock appreciation rights, performance units, restricted stock, “phantom” stock or other stock related awards), or remove any existing restrictions in any Company Employee Plans or agreements or awards made thereunder, or (vi) amend or modify any Company Option;

(q) settle or compromise any claims or litigation or adverse proceeding except in the ordinary course of business consistent with past practice;

(r) make any Tax election or settle or compromise any liability for Taxes, change any annual Tax accounting period, change any Tax accounting method, amend any Tax Return, enter into any closing agreement relating to any Tax, surrender any right to claim a Tax refund or consent to any extension or waiver of the statute of limitations period applicable to any Tax claim or assessment;

(s) accelerate collection of any notes or accounts receivable in advance of their regular due dates, or the dates when the same would have been collected, other than in the ordinary course of business consistent with past practices;

(t) delay payment of any account payable or other liability beyond its due date, or the date such liability would have been paid or collected, other than in the ordinary course of business consistent with past practices or to the extent the Company is contesting such payable or liability in good faith; or

(u) authorize or enter into an agreement to do any of the foregoing.

If the Company desires to take an action which would be prohibited pursuant to this Section 5.1 of this Agreement without the prior written consent of Parent, the Company may request such written consent by sending an email to both of the following individuals:

[*]

ARTICLE VI

ADDITIONAL AGREEMENTS

6.1 Confidentiality; Access .

(a) The parties acknowledge that the Company and Parent have previously executed those certain confidentiality agreements, dated January 4, 2011 and January 28, 2011, each as amended (the “ Confidentiality Agreements ”).

(b) Subject to Applicable Law and upon reasonable notice, the Company shall afford Guarantor, Parent and their respective employees, attorneys, accountants, consultants and other representatives reasonable access, during normal business hours during the period prior to the Effective Time, to its properties, books, contracts and records and appropriate individuals as Guarantor or Parent may reasonably request (including employees, attorneys, accountants, consultants and other professionals), and during such period, the Company shall furnish promptly to Guarantor or Parent such information concerning its business, properties and personnel as Guarantor

or Parent may reasonably request. Prior to the Effective Time, the Company shall deliver to Parent, not later than fifteen (15) Business Days after the end of each calendar month and in the form customarily prepared by the Company, the unaudited financial statements of the Company, including an income statement and balance sheet, for the month then ended and for the period from December 31, 2010 to the end of such month. Promptly following the date of this Agreement, the Company shall deliver to Parent, on DVDs or other digital media, an electronic copy of the contents of each folder and sub-folder in the Data Room (in a format where it is clear which documents were contained in each folder or sub-folder) as it existed on the date of this Agreement.

6.2 Notification of Certain Matters . The Company shall give prompt written notice to Parent, and Guarantor or Parent shall give prompt written notice to the Company, of the occurrence, or failure to occur, of any event that would be reasonably likely to result in a failure to satisfy any of the closing conditions set forth in Section 7.1 or Section 7.2 as it relates to the Company, or Section 7.1 or Section 7.3, as it relates to Parent. No such notification shall be deemed to supplement or amend the Company Disclosure Schedule for the purpose of: (a) determining the accuracy of any of the representations and warranties made by the Company in this Agreement; or (b) determining whether any of the conditions set forth in Section 7.2 has been satisfied.

6.3 Public Disclosure . During the Pre-Closing Period, (a) Guarantor and the Company shall consult with each other before issuing any press release or otherwise making any statement or making any other disclosure (whether or not in response to an inquiry) regarding the terms of this Agreement and the transactions contemplated hereby, and (b) no party shall issue any such press release or make any such statement or disclosure without the prior written approval of the other party, except as required by Applicable Law or any listing agreement with any applicable national or regional securities exchange (in which case the parties shall use reasonable efforts to consult with each other prior to making any such disclosure); provided that Guarantor, Parent, the Company and the Company Securityholders may make public statements or disclosures that are not inconsistent with (or more expansive than) previous press releases, public disclosures or public statements made by Guarantor and the Company in compliance with this Section 6.3. Notwithstanding the foregoing, the Company and each Company Securityholder shall be permitted to disclose a summary of the terms and conditions of this Agreement and the transactions contemplated hereby to any director, officer, employee, affiliate, general or limited partner, member or shareholder of the Company or the Company Securityholders who has a right or need to know such information, or to any investor or potential investor in an investment fund (or group of affiliated funds) that is a Company Securityholder, in each case, who is informed of the confidential nature of such information and who is subject to an obligation of confidentiality with respect to such information); provided, however, that any disclosure to a potential investor in an investment fund shall be limited to information that is publicly disclosed and, if this Agreement is not filed with the Securities and Exchange Commission, the amounts of the milestone payments and the fact that they are triggered by regulatory approvals or sales generally.

6.4 Regulatory Approval; Further Assurances .

(a) Each party shall use commercially reasonable efforts to effectuate the Merger and make effective the other transactions contemplated by this Agreement. Without limiting the generality of the foregoing, each party to this Agreement shall: (i) make any filings and give any notices required to be made or given by such party in connection with the Merger and the other transactions contemplated by this Agreement; (ii) use commercially reasonable efforts to obtain any consent required to be obtained (pursuant to any applicable legal requirement, contract or otherwise) by such party in connection with the Merger or any of the other transactions contemplated by this Agreement; and (iii) use commercially reasonable efforts to lift any restraint, injunction or other legal bar to the Merger. Each of Parent and the Company shall promptly deliver to the other a copy of each such filing made, each such notice given and each such consent obtained during the Pre-Closing Period.

(b) Each party shall use its reasonable best efforts to file, as promptly as practicable following the date of this Agreement, all notices, reports and other documents required to be filed by such party with any Governmental Entity with respect to the Merger and the other transactions contemplated by this Agreement, and to submit promptly any additional information requested by any such Governmental Entity. Without limiting the generality of the foregoing, each party shall use its reasonable best efforts to cause to be prepared and filed, as promptly as practicable following the date of this Agreement, the notifications required under HSR in connection with the Merger. Each party shall elect early termination of the statutory waiting period under HSR. Each party shall respond as promptly as practicable to (i) any inquiries or requests received from the Federal Trade Commission or the Department of Justice for additional information or documentation and (ii) any inquiries or requests received from any state attorney general or other Governmental Entity in connection with antitrust or related matters. Subject to Applicable Law, each party (to the extent it has knowledge of such facts) shall (A) give the other party prompt notice of the commencement of any legal proceeding by or before any Governmental Entity with respect to the Merger or any of the other transactions contemplated by this Agreement; (B) keep the other party informed as to the status of any such legal proceeding; and (C) promptly inform the other party of any communication to or from the Federal Trade Commission, the Department of Justice or any other Governmental Entity regarding the Merger. Each party will consult and cooperate with one another, and will consider in good faith the views of one another, in connection with any analysis, appearance, presentation, memorandum, brief, argument, opinion or proposal made or submitted by either of them in connection with any legal proceeding under or relating to HSR or any other foreign, federal or state antitrust, anticompetition or fair trade Applicable Law.

(d) Notwithstanding anything to the contrary contained in this Section 6.4 or elsewhere in this Agreement, none of Guarantor, Parent or Merger Sub shall have any obligation under this Agreement to divest or agree to divest (or cause any of its Subsidiaries or the Company to divest or agree to divest) any of its respective businesses, product lines or assets, or to agree (or cause any of its Subsidiaries or the Company to agree) to any limitation or restriction on any of its respective businesses, product lines or assets.

6.5 Employees .

(a) Parent agrees that the employees of the Company at the Effective Time (the “ Company Employees ”) will be provided benefits that [*] . With respect to each benefit plan, program, practice, policy or arrangement maintained by Guarantor or a subsidiary of Guarantor in which Company Employees subsequently participate (the “ Parent Plans ”), [*]

(b) If requested by Parent at least [*] prior to the Effective Time, the Company shall terminate any and all Company Employee Plans intended to qualify under Section 401(k) of the Code, effective not later than the day immediately preceding the Effective Time. In the event that Parent requests that such 401(k) plan(s) be terminated, the Company shall provide Parent with evidence that such 401(k) plan(s) have been terminated pursuant to resolution of the Company’s Board of Directors (in form and substance reasonably satisfactory to Parent) not later than the day immediately preceding the Effective Time. Prior to the adoption of such resolution, the Company shall provide Parent with a draft thereof and an opportunity to review and comment on it.

(c) No provision of this Section 6.5 shall create any third party beneficiary rights in any Company Employee, any beneficiary or dependent thereof, with respect to the compensation, terms and conditions of employment and/or benefits that may be provided to any employee of the Company by Guarantor or the Surviving Corporation or under any benefit plan which Guarantor or the Surviving Corporation may maintain.

(d) As of the Effective Time, Guarantor shall, or shall cause the Surviving Corporation and its other Subsidiaries to, [*]

(e) Parent shall, or shall cause the Surviving Corporation or applicable Subsidiary to, [*]

6.6 FIRPTA Matters . At the Closing, the Company shall deliver to Parent: (a) a statement conforming to the requirements of Section 1.1445-2(c)(3) of the United States Treasury Regulations; and (b) the notification to the Internal Revenue Service required under Section 1.897-2(h)(2) of the United States Treasury Regulations.

6.7 Indemnification of Officers and Directors of the Company .

(a) Subject to any limitations imposed from time to time under Applicable Law, for a period of [*] from and after the Effective Time, Parent shall cause the Surviving Corporation to indemnify (including the advancement of expenses) and hold harmless all past and present officers and directors of the Company to the same extent such individuals are entitled to indemnification by the Company pursuant to the Company Organizational Documents, employment agreements and/or indemnification agreements identified in Section 6.7 of the Company Disclosure Schedule, each as in effect as of the date of this Agreement, for any costs or expenses (including attorneys’ fees and expenses), judgments, fines, Losses, claims, settlements, damages or Liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to acts or omissions of such individuals in

their capacities as directors or officers of the Company that occurred at or prior to the Effective Time. If the “tail policy” referred to in the following sentence is not commercially available, Parent shall cause to be maintained in effect for not less than [*] after the Effective Time any policy of directors’ and officers’ liability insurance maintained by the Company as of the Effective Time with respect to matters occurring prior to the Effective Time (the “ Current Policies ”); provided , however , that Parent may substitute therefor policies of insurance providing for substantially the same coverage as the Current Policies containing terms and conditions no less favorable in the aggregate to any person covered by such Current Policies than the terms and conditions of the Current Policies. Notwithstanding anything to the contrary in this Section 6.7(a), Parent shall not be required to pay in any year, an annual premium in excess of [*] of the last annual premium paid by the Company for the Current Policies. The Company shall purchase (if commercially available) a [*] prepaid “tail policy” for any policy of directors’ and officers’ liability insurance maintained by the Company as of the Effective Time with respect to matters occurring prior to the Effective Time, which shall provide such directors and officers with coverage of not less than the existing coverage under, and have other terms not materially less favorable to the insured persons than the terms of, such insurance policy. This Section 6.7 shall survive the consummation of the Merger, and is intended to be for the benefit of, and shall be enforceable by, all past and present officers and directors of the Company, their respective heirs and personal representatives and shall be binding upon Parent and the Surviving Corporation. The obligations of Parent and the Surviving Corporation under this Section 6.7 shall not be terminated or modified in such a manner as to adversely affect any indemnitee to whom this Section 6.7 applies without the express written consent of such affected indemnitee.

(b) If Parent, the Surviving Corporation or any of their successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of their Assets and IP Rights to any person, then, and in each such case, to the extent necessary, proper provision shall be made so that the successors and assigns of Parent or the Surviving Corporation, as the case may be, shall assume the obligations set forth in this Section 6.7.

(c) Parent, for a period of [*] years from and after the Effective Time, shall cause the organizational documents of the Surviving Corporation to contain provisions no less favorable to the officers and directors of the Company with respect to limitation of Liabilities of directors and indemnification of directors and officers than are set forth as of the date of this Agreement in the Company Organizational Documents, which provisions shall not be amended, repealed or otherwise modified in a manner that would adversely affect the rights thereunder of the officers and directors of the Company.

(d) The rights of each past and present officer and director of the Company under this Section 6.7 shall be in addition to any rights such individual may have under the Company Organizational Documents or under any Applicable Law.

6.8 No Solicitation by the Company . Prior to the Closing, [*]

6.9 Takeover Statute . If any Takeover Statute is or may become applicable to the Merger or the other transactions contemplated by this Agreement, each of Parent and the Company and its

board of directors shall grant such approvals and take such actions as are necessary so that such transactions may be consummated as promptly as practicable on the terms contemplated by this Agreement or by the Merger and otherwise act to eliminate or minimize the effects of such statute or regulation on such transactions.

6.10 Stockholder Vote Concerning Code Section 280G . Prior to the Effective Time, the Company shall submit to its stockholders, for approval (in a manner and with a disclosure document reasonably satisfactory to Parent) by a vote of such shareholders as is required pursuant to Section 280G(b)(5)(B) of the Code and the Treasury Regulations thereunder (the “ 280G Shareholder Vote ”), any such payments or other benefits that may, separately or in the aggregate, constitute “excess parachute payments” (within the meaning of Section 280G of the Code and the Treasury Regulations thereunder), such that, if the 280G Shareholder Vote is received approving such payments and benefits, such payments and benefits shall not be deemed to be “excess parachute payments” under Section 280G of the Code and the Treasury Regulations thereunder. Prior to such 280G Shareholder Vote, the Company shall obtain, from each person whom the Company or Parent believes to be with respect to the Company a Disqualified Individual and who might otherwise have, receive or have the right or entitlement to receive a parachute payment under Section 280G of the Code, a written waiver (in form and substance reasonably satisfactory to Parent) pursuant to which such person agrees to waive any and all right or entitlement to such parachute payment, to the extent such payment would not be deductible pursuant to Section 280G of the Code, Such waivers shall cease to have any force or effect with respect to any item covered thereby to the extent the 280G Shareholder Vote for such item is obtained.

6.11 Written Consents .

(a) Promptly following the execution and delivery hereof, the Company shall prepare and distribute to persons holding at least the number and class of shares of Company Capital Stock sufficient to provide the Required Stockholder Vote an irrevocable written consent of Company Stockholders adopting this Agreement, approving the Preferred Stock Conversion, waiving any appraisal rights under Section 262 of Delaware Law with respect thereto and waiving any right of the holders of Company Preferred Stock to receive advance notice with respect to the Merger set forth in the Company Organizational Documents, in a form reasonably acceptable to Parent (the “ Written Consent ”) in accordance with Delaware Law and the Company Organizational Documents. The Company shall use its reasonable best efforts to cause such Company Stockholders to execute the Written Consent and deliver such executed Written Consent to the Company within [*] following the execution and delivery hereof. Upon obtaining the Required Stockholder Vote, the Company shall so notify Parent and shall provide to Parent a certificate of the Company’s secretary certifying as to such vote.

(b) As promptly as practicable following the receipt by the Company of Written Consents executed by Company Stockholders sufficient to satisfy the Required Stockholder Vote, the Company shall, in accordance with applicable Law, including Sections 228 and 262 of Delaware Law, and the Company Organizational Documents, promptly send an information statement (the “ Information Statement ”) to each stockholder of the Company that has not theretofore executed the

Written Consent (i) notifying him, her or it that (A) action has been taken by less than unanimous written consent of the stockholders of the Company, (B) this Agreement was duly adopted by the stockholders of the Company and (C) appraisal rights are available pursuant to Section 262 of Delaware Law, and (ii) seeking a waiver of such appraisal rights from such stockholder. The Company shall use commercially reasonable efforts to obtain such waivers from each stockholder of the Company who has not theretofore executed a Written Consent. The Information Statement shall be in a form reasonably acceptable to Parent and shall at all relevant times be in compliance with Section 262 of Delaware Law and Applicable Law. The Information Statement shall include the Board Recommendation, and the Company’s Board of Directors shall not withdraw or adversely modify (or propose to withdraw or adversely modify) the Board Recommendation unless required to do so by their fiduciary duties under Delaware Law.

6.12 Merger Consideration Certificate .

(a) At least [*] prior to the anticipated Closing Date, the Company shall deliver to Parent a certificate (in a form and substance reasonably satisfactory to Parent) duly executed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company (the “ Estimated Merger Consideration Certificate ”) setting forth the Company’s good faith estimates of the following information (collectively, the “ Merger Consideration Certificate Data ”), which shall be set forth on an accompanying spreadsheet: [*] . The spreadsheet accompanying the Estimated Merger Consideration Certificate shall show with detailed specificity the basis for the calculation of each element of the Merger Consideration Certificate Data and shall break out all payments that are subject to withholding Taxes on a separate worksheet for payment by Parent or the Surviving Corporation rather than by the Paying Agent.

(b) On the Closing Date, the Company shall deliver to Parent (with a copy to the Stockholders’ Agent) a certificate (in a form and substance reasonably satisfactory to Parent) duly executed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company (the “ Merger Consideration Certificate ”) certifying as to the Merger Consideration Certificate Data, which shall be set forth on an accompanying spreadsheet. The spreadsheet accompanying the Merger Consideration Certificate shall show with detailed specificity the basis for the calculation of each element of the Merger Consideration Certificate Data and shall break out all payments that are subject to withholding Taxes on a separate worksheet for payment by Parent or the Surviving Corporation rather than by the Paying Agent. The Company shall use commercially reasonable efforts deliver to Parent therewith applicable invoices for the unpaid Transaction Costs.

6.13 Drag-Along Rights; [*] Voting Agreement .

(a) If the holders of a majority of the shares of Company Preferred Stock (voting together as a single class on an as-converted basis) approve this Agreement and the transactions contemplated hereby, the Company shall invoke the drag-along rights described in Section 3 of the Amended and Restated Voting Agreement dated as of June 29, 2010, as amended, among the Company and the Company Stockholders identified therein (the “ Stockholder Voting Agreement ”) to the fullest extent permitted by the Stockholder Voting Agreement. Prior to the Closing, the Company shall use commercially reasonable efforts to cause any Investor (as defined in the

Stockholder Voting Agreement) who does not execute the Written Consent as part of obtaining the Required Stockholder Vote to execute a waiver of all appraisal rights pursuant to Section 262 of the DGCL in connection with the Merger in compliance with Section 3(iii) of the Voting Agreement. The Company shall provide periodic updates to Parent of the status of such efforts, in reasonable detail.

(b) The Company shall invoke the obligation of [*] , pursuant to Section 1 of the [*] Voting Agreement dated [*] between the Company and [*] , to vote in favor of the transactions contemplated by this Agreement. If [*] does not execute the Written Consent as part of the Required Stockholder Vote, then, prior to the Closing, the Company shall use commercially reasonable efforts to cause [*] to execute a waiver of all appraisal rights pursuant to Section 262 of the DGCL in connection with the Merger.

6.14 Repayment of Indebtedness . Provided that the Company has a sufficient amount of cash to do so, the Company shall repay all Closing Indebtedness in full prior to the Closing. The Company shall notify Parent at least three (3) Business Days prior to the Closing if it does not anticipate having a sufficient amount of cash to repay all Closing Indebtedness.

6.15 Merger Sub . Within five (5) Business Days after the date hereof, Parent shall incorporate a new Delaware corporation, which shall be a direct wholly owned subsidiary of Parent, solely for the purpose of engaging in the transactions contemplated by this Agreement and shall substitute such subsidiary for Merger Sub by written notice to the Company pursuant to Section 10.4(a)(iii). As of the Closing Date, Merger Sub shall have engaged in no other business activities and shall have conducted its operations only as contemplated by this Agreement.

6.16 Other Actions . During the Pre-Closing Period, the Company shall take the actions set forth in Section 6.16 of the Company Disclosure Schedule.

ARTICLE VII

CONDITIONS TO THE MERGER

7.1 Conditions to Obligation of Each Party to Effect the Merger . The respective obligations of Parent and Merger Sub, on the one hand, and the Company, on the other hand, to effect the Merger and otherwise to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (it being understood that any one or more of the following conditions may be waived by the written agreement of Parent and the Company, unless prohibited by Applicable Law):

(a) Litigation . No Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated or entered any Applicable Law (whether temporary, preliminary or permanent) that is in effect and restrains, enjoins or otherwise prohibits consummation of the Merger (collectively, an “ Order ”), and no Governmental Entity shall have instituted or overtly threatened

any proceeding seeking (i) any such Order or otherwise challenging the legality or validity of any of the transactions contemplated by this Agreement, (ii) to nullify or render ineffective this Agreement if consummated, or (iii) to take any other action that would result in the prohibition or a material change in the terms of the transactions contemplated hereby.

(b) Antitrust . The waiting period applicable to the consummation of the Merger under the HSR or any other antitrust or competition Applicable Law shall have expired or been terminated. All consents or approvals of any Governmental Entity required to be obtained in connection with the transactions contemplated by this Agreement under Applicable Laws pertaining to antitrust or competition shall have been obtained.

(c) Company Stockholder Approval . This Agreement shall have been adopted and the Preferred Stock Conversion shall have been approved by the Required Stockholder Vote of the stockholders of the Company in accordance with Applicable Law and the Company Organizational Documents.

7.2 Additional Conditions to the Obligations of Parent and Merger Sub . The obligations of Parent and Merger Sub to effect the Merger and otherwise to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (it being understood that any one or more of the following conditions may be waived by the written agreement of Parent):

(a) Representations and Warranties .

(i) The representations and warranties of the Company in Article III (other than the Fundamental Representations) (A) shall have been accurate in all respects as of the date of this Agreement and (B) shall be accurate in all respects as of the Closing Date as if made on and as of the Closing Date (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which case such representation or warranty shall have been accurate in all respects as of such date), in each case except where the circumstances giving rise to any inaccuracies in such representations and warranties have not had and would not reasonably be expected to have or result in, individually or in the aggregate, a Company Material Adverse Effect; provided, however , that for purposes of determining the accuracy of such representations and warranties as of the foregoing dates for purposes of this Section 7.2(a)(i): (1) all materiality, Company Material Adverse Effect and similar qualifications limiting the scope of such representations and warranties shall be disregarded; and (2) any update of or modification to the Company Disclosure Schedule made or purported to have been made on or after the date of this Agreement shall be disregarded.

(ii) The Fundamental Representations (A) shall have been accurate in all material respects as of the date of this Agreement and (B) shall be accurate in all material respects as of the Closing Date as if made on and as of the Closing Date (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which case such representation or warranty shall have been accurate in all material respects as of such date); provided, however , that for purposes of determining the accuracy of such representations

and warranties as of the foregoing dates for purposes of this Section 7.2(a)(ii): (1) all materiality, Company Material Adverse Effect and similar qualifications limiting the scope of such representations and warranties shall be disregarded; and (2) any update of or modification to the Company Disclosure Schedule made or purported to have been made on or after the date of this Agreement shall be disregarded.

(b) Performance of Covenants . The Company shall have complied with and performed in all material respects all covenants under this Agreement required to be complied with or performed by the Company at or prior to the Closing.

(c) Certificate of Officer . Parent and Merger Sub shall have received a certificate executed on behalf of the Company by an officer of the Company, to the effect that the conditions set forth in Sections 7.2(a), 7.2(b) and 7.2(d) have been satisfied.

(d) No Company Material Adverse Effect . Following the date of this Agreement, no change, circumstance, effect, event or fact shall have occurred or exist and be continuing that, individually or in the aggregate with all other changes, circumstances, effects, events or facts, has had, or would reasonably be expected to have or result in, a Company Material Adverse Effect.

(e) Stockholder Approval Regarding Code Section 280G . Prior to the Effective Time, the Company shall have delivered to Parent evidence reasonably satisfactory to Parent that any 280G Shareholder Vote pursuant to Section 6.10 was solicited in conformity with Section 280G of the Code and the Treasury Regulations thereunder and (i) the requisite shareholder approval was obtained with respect to any payments or benefits that were subject to the 280G Shareholder Vote or (ii) that such “excess parachute payments” shall not be made or provided to the Disqualified Individuals, whether pursuant to the terms of the applicable plan, agreement or arrangement under which such payments or benefits were to be made or pursuant to valid waivers of those payments or benefits, which were duly executed, in accordance with Section 6.10, by each such Disqualified Individual who might otherwise receive such “excess parachute payments.”

(f) Agreements and Documents . Parent shall have received the following agreements and documents, each of which shall be in full force and effect:

(i) the Merger Consideration Certificate and accompanying spreadsheet referred to in Section 6.12(b);

(ii) written resignations, in form and substance satisfactory to Parent, from each officer and director of the Company (it being understood that such resignations would not constitute a resignation from any employee’s employment with the Company);

(iii) the Certificate of Merger, duly executed by the Company;

(iv) a legal opinion, in substantially the form of Exhibit C, executed by Wilson Sonsini Goodrich & Rosati, P.C;

(v) General Releases, in substantially the form of Exhibit D, duly executed by each officer and director of the Company;

(vi) agreements, in form and substance reasonably satisfactory to Parent, terminating the agreements identified in Section 7.2(f)(vi) of the Company Disclosure Schedule; and

(vii) Warrant Termination Agreements, duly executed by each holder of a Company Warrant that is outstanding as of immediately prior to the Effective Time.

(g) Repayment of Closing Indebtedness . If the Company has a sufficient amount of cash as of the Closing to repay all Closing Indebtedness, the Company shall have delivered to Parent payoff letters or other evidence, in form and substance reasonably satisfactory to Parent, that (i) all Closing Indebtedness has been repaid in full; (ii) all liens and encumbrances relating to or securing such Closing Indebtedness have been released; and (iii) related UCC-3 Termination Statements have been filed with respect to any such liens or encumbrances. If the Company does not have a sufficient amount of cash as of the Closing to repay all Closing Indebtedness, the Company shall have delivered to Parent payoff letters or other evidence, in form and substance reasonably satisfactory to Parent, with respect to all Closing Indebtedness and all liens and encumbrances relating to or securing such Closing Indebtedness.

(h) Termination of 401(k) Plan . If Parent requests, pursuant to Section 6.5(b), that the Company 401(k) plan be terminated, then the Company shall have adopted resolutions (in form and substance reasonably satisfactory to Parent) to effect the termination of the Company 401(k) plan, with such termination effective on the day immediately prior to the Closing Date but contingent on the Closing.

(i) Appraisal Rights . The shares of Company Capital Stock that constitute (or that are or may be eligible to become) Dissenting Shares shall be less than [*] of the shares of Company Capital Stock outstanding as of the Closing Date.

(j) Termination of Rights to Purchase Stock . The Company shall have provided Parent with evidence reasonably satisfactory to Parent as to the exercise or termination of all rights to purchase shares of Company Capital Stock, other than Company Options and Company Warrants terminated in accordance with Section 2.11.

7.3 Additional Conditions to Obligation of the Company . The obligation of the Company to effect the Merger and to otherwise consummate the transactions contemplated by this Agreement shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (it being understood that any one or more of the following conditions may be waived by the written agreement of the Company):

(a) Representations and Warranties . The representations and warranties of Parent and Merger Sub in this Agreement shall be accurate in all respects as of the Closing (except to the extent any such representation or warranty speaks as of the date of this Agreement, in which case such representation or warranty shall have been accurate in all material respects as of such date),

except where the failure of such representations and warranties to be so true and correct has not had and would not reasonably be expected to result in, individually or in the aggregate with any other failures of such representations and warranties to be true and correct, a material adverse effect on Parent’s or Merger Sub’s ability to consummate the Merger or any of the transactions contemplated hereby; provided, however , that for purposes of determining the accuracy of such representations and warranties for purposes of this Section 7.3(a), all materiality, material adverse effect and similar qualifications limiting the scope of such representations and warranties shall be disregarded.

(b) Performance of Covenants . Parent and Merger Sub shall have each complied with and performed in all material respects all of their respective material covenants under this Agreement required to be complied with or performed by either of them at or prior to the Closing.

(c) Certificate of Officers . The Company shall have received a certificate executed on behalf of each of Parent and Merger Sub by an officer of Parent and Merger Sub, respectively, to the effect that the conditions set forth in Sections 7.3(a) and 7.3(b) have been satisfied.

ARTICLE VIII

TERMINATION

8.1 Termination . This Agreement may be terminated at any time prior to the Closing (with respect to Sections 8.1(b) through (e), by notice from the terminating party to the other party setting forth a brief description of the basis for termination):

(a) by the mutual written consent of Parent and the Company;

(b) by either Parent or the Company if the Merger shall not have been consummated by the date that is [*] from the date of the Agreement; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b) shall not be available to a party whose failure to fulfill any of its obligations under this Agreement has been the primary cause of the Effective Time not occurring by such date;

(c) by either Parent or the Company if a Governmental Entity of competent jurisdiction shall have enacted, issued, promulgated or entered a nonappealable final and permanent Order;

(d) by the Company if (i) there is an inaccuracy in any of the representations or warranties of Parent or Merger Sub in this Agreement (as of the date of this Agreement or as of any subsequent date) such that the condition set forth in Section 7.3(a) would not be satisfied, or there has been a breach by Parent or Merger Sub of any of their respective covenants in this Agreement such that the condition set forth in Section 7.3(b) would not be satisfied, (ii) the Company shall have delivered to Parent a written notice of such inaccuracy or breach, and (iii) at least 30 days shall have elapsed since the delivery of such notice without such inaccuracy or breach having been cured;

(e) by Parent if (i) there (A) is an inaccuracy in any of the representations or warranties of the Company in this Agreement (as of the date of this Agreement or as of any subsequent date) such that any condition set forth in Section 7.2(a) would not be satisfied, (B) has been a breach by the Company of any of its covenants in this Agreement such that the condition set forth in Section 7.2(b) would not be satisfied or (C) has occurred a Company Material Adverse Effect such that the condition set forth in Section 7.2(d) would not be satisfied, (ii) Parent shall have delivered to the Company a written notice of such inaccuracy, breach or Company Material Adverse Effect, and (iii) at least 30 days shall have elapsed since the delivery of such notice without such inaccuracy, breach or Company Material Adverse Effect having been cured; and

(f) by Parent if the Company has not received the Required Stockholder Vote within [*] following the execution and delivery of this Agreement.

8.2 Effect of Termination . In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect, and there shall be no liability on the part of Guarantor, Parent, the Company, Merger Sub or their respective officers, directors or stockholders, except to the extent that such liability results from the Willful Breach by a party of this Agreement; provided , however , that the Confidentiality Agreements and the provisions of Section 6.3, this Section 8.2 and Article X (other than Sections 10.12, except with respect to any liability of Parent or Merger Sub resulting from the Willful Breach by Parent or Merger Sub of this Agreement, and Section 10.13) shall remain in full force and effect and survive any termination of this Agreement.

ARTICLE IX

CONTINGENT PAYMENTS; INDEMNIFICATION

9.1 Contingent Payments .

(a) Milestones .

(i) [*] .

(ii) [*]

(iii) [*]

(iv) [*]

(A) [*]

(B) [*]

(b) General .

(i) Payment Procedures . [*] Parent shall pay or cause to be paid (by the Paying Agent or otherwise) to each Company Securityholder, with respect to (A) each share of Company Capital Stock held by such Company Securityholder as of immediately prior to the Effective Time, (B) each share of Company Capital Stock that was subject to a Company Warrant held by such Company Securityholder as of immediately prior to the Effective Time and (C) each share of Company Capital Stock that was subject to a Company Option held by such Company Securityholder as of immediately prior to the Effective Time, the Per Share Contingent Payment with respect to such Milestone (less any applicable withholding Taxes); provided, however, that Parent shall have no obligation to make any payment under this Section 9.1(b): (1) with respect to any share of Company Capital Stock, until such time as the Certificate representing such share has been properly surrendered in accordance with Section 2.6(c), (2) with respect to any Company Warrant, until such time as the former holder thereof has duly executed and delivered to Parent a Warrant Termination Agreement with respect thereto, or (3) with respect to any Company Option, unless the former holder thereof has duly executed and delivered to Parent a Tax Responsibility Agreement with respect thereto prior to the Effective Time (the conditions to payment described in clauses “(1),” “(2)” and “(3)” of this proviso, the “ Payment Conditions ”). The right of the Company Securityholders to receive any portion of the Contingent Payments shall not be evidenced by any form of certificate or instrument. The right of any Company Securityholder to receive any portion of any Contingent Payment shall not be assignable or transferable except by will, the Applicable Laws of intestacy or other operation of Applicable Law, and neither Parent, the Surviving Corporation, the Paying Agent, nor the Stockholders’ Agent shall give effect to any purported assignment or transfer made in contravention of this sentence.

(ii) Adjustments .

(A) Any Contingent Payment that is payable following the completion (or deemed completion) of a Milestone shall be [*]

(B) [*]

(iii) Miscellaneous .

(A) If any Milestone occurs prior to the Effective Time, (1) Parent shall not be obligated to make any Contingent Payment unless the Effective Time occurs, and (2) the related Contingent Payment will be payable at the Effective Time.

(B) Until the earlier of (1) [*] and (2) [*] , Guarantor, Parent and the Surviving Corporation shall, and shall cause any of their respective Subsidiaries or Affiliates, and any successor, partner, joint partner, licensee, assignee or sublicensee of [*] , as applicable, or any other person that has been delegated responsibility for achieving such Milestone (each, a “ Milestone Obligor ”), to (x) use Commercially Reasonable Efforts to [*] , and (y) [*]

(C) Except as provided in this Section 9.1(b), none of Guarantor, Parent or the Surviving Corporation shall be under any obligation whatsoever to, or to cause any Milestone Obligor or any other person to, use any efforts, make any particular expenditure, engage

in any particular activity or to take (or omit to take) any particular action (1) in connection with the conduct of the business of the Surviving Corporation or the combined business of Guarantor, Parent and the Surviving Corporation, including the development and/or commercialization of any Company Product, or (2) to satisfy the Milestones and, except as provided in Section 9.1(b)(iii)(B), Parent shall have sole discretion as to the development and commercialization of, or obtaining Regulatory Approval for, any [*] after the Closing. Without limiting the generality of the foregoing, and notwithstanding anything to the contrary contained in this Agreement, none of Guarantor, Parent or the Surviving Corporation shall be under any obligation whatsoever (and none of Guarantor, Parent or the Surviving Corporation shall be under any obligation to cause any Milestone Obligor or any other person) to use any efforts, make any particular expenditure, engage in any particular activity or to take (or omit to take) any particular action to [*]

(D) In the event of any of the following events, each Contingent Payment associated with any Milestone that has not yet been satisfied or deemed to have been satisfied shall be immediately due and payable in full in accordance with the procedures set forth in Section 9.1(b)(i): [*]

(E) The parties acknowledge and agree that Parent’s or the Surviving Corporation’s achievement of the Milestones are material factors in determining the valuation of the Company by Parent. Therefore, the Company Securityholders shall have no right to receive any particular Contingent Payment (or any portion thereof) unless and until the particular Milestone that must be achieved in order for the Company Securityholders to receive such Contingent Payment is actually achieved.

(F) Duty to Notify; Information Rights .

(1) Provided that the Stockholders’ Agent has first entered into a confidentiality agreement with Guarantor that is reasonably satisfactory to Guarantor, it being agreed that a confidentiality agreement containing terms that are consistent with the Confidentiality Agreements shall be deemed satisfactory to Guarantor (which shall include the right to disclose such information to its employees, attorneys and advisors who have a need to know such information and are subject to a confidentiality obligation with respect to such information) (the “ Agent NDA ”), Parent shall, or shall cause a Milestone Obligor to, deliver a status update to the Stockholders’ Agent not less frequently than (i) [*] , and (ii) [*] from January 1, 2012 until the Milestone End Date. Such reports (“ Update Reports ”) shall include reasonably detailed reports as to the progress and results of development and regulatory activities with respect to the [*] , including with respect to interactions with Regulatory Authorities and plans for further such development activities and interactions over the next year, [*] . The Stockholders’ Agent shall not disclose any information contained in any Update Report, except (w) to its employees, attorneys and advisors in accordance with the terms of the Agent NDA, (x) to Company Securityholders who have executed a confidentiality agreement with Guarantor that is reasonably satisfactory to Guarantor (it being agreed that a confidentiality agreement containing terms that are consistent with the Confidentiality Agreements shall be deemed satisfactory to Guarantor) [*] , (y) as necessary to enforce this Agreement, or (z) as required by Applicable Law. In any such Update Report, Parent shall, or shall cause a Milestone Obligor to,

advise the Stockholders’ Agent of progress during the period to which the Update Report applies towards the achievement of any Milestone for which the applicable Contingent Payment has not been paid pursuant to this Agreement.

(2) In the event that a Milestone Obligor determines that a Milestone will not be achieved, Parent shall promptly notify the Stockholders’ Agent in writing of such determination (a “ Milestone Abandonment Notice ”) and shall provide the Stockholders’ Agent and its advisors with access (including electronic access, to the extent available) to any information, data, books, records, work papers or personnel that are reasonably necessary for the Stockholders’ Agent to evaluate such determination. The Milestone Abandonment Notice shall specify in reasonable detail the reasons the applicable determination was made.

(G) Notwithstanding anything to the contrary contained in this Agreement, each Contingent Payment is payable one time only, [*]

9.2 Indemnification .

(a) Survival, Etc .

(i) Subject to Section 9.2(a)(iii), all obligations of the parties under the covenants and agreements contained in this Agreement or any other document or certificate delivered pursuant hereto shall survive (x) until fully performed or fulfilled, unless noncompliance with such covenants, agreements or obligations is waived in writing by the party entitled to such performance, or (y) if not fully performed or fulfilled, until the expiration of the applicable statute of limitations; provided, however, that, subject to Section 9.2(a)(iii), the rights of the Parent Indemnified Parties to assert claims for recovery under Section 9.2(b) in connection with breaches of such covenants and agreements, shall survive until the Survival Termination Date.

(ii) Subject to Section 9.2(a)(iii), (A) all Fundamental Representations shall survive the Closing and remain in full force and effect [*] (the “ Milestone End Date ”) and (B) all other representations and warranties made by the Company in this Agreement or any other document or certificate delivered pursuant hereto shall survive the Closing and remain in full force and effect until [*] following the Closing Date (the termination date applicable to any representation, warranty, covenant or agreement made by the Company pursuant to this Agreement, the “ Survival Termination Date ”). Notwithstanding anything to the contrary in this Section 9.2, in the event that, at any time prior to the applicable Survival Termination Date, a Parent Indemnified Party delivers to the Stockholders’ Agent a Claim Notice asserting a claim for recovery under this Section 9.2 based on a breach of any applicable representation, warranty, covenant or agreement of the Company, the claim asserted in such Claim Notice shall survive the applicable Survival Termination Date until such time as such claim is fully and finally resolved. No Claim Notice may be submitted after [*] for any claim under Section 9.2(b)(i)(A), Section 9.2(b)(i)(B) or Section 9.2(b)(i)(C), other than with respect to a breach of a Fundamental Representation or in the event of fraud or Willful Breach. All representations and warranties made by Parent or Merger Sub in this Agreement shall terminate and expire as of the Effective Time.

(iii) Notwithstanding anything to the contrary contained in Section 9.2(a)(i) or Section 9.2(a)(ii), the limitations set forth in Sections 9.2(a)(i) and 9.2(a)(ii) shall not apply in the event of fraud or Willful Breach.

(iv) The representations, warranties, covenants and obligations of the Company, and the rights and remedies that may be exercised by the Parent Indemnified Parties, shall not be limited or otherwise affected by or as a result of any information furnished to, or any investigation made by or knowledge of, any Parent Indemnified Party or any of its Representatives.

(v) For purposes of this Agreement, each statement or other item of information set forth in the Company Disclosure Schedule shall be deemed to be a representation and warranty made by the Company in Article III.

(b) Indemnification .

(i) Each of Guarantor, Parent, the Surviving Corporation and their respective directors, officers, employees and Affiliates (the “ Parent Indemnified Parties ” and each, a “ Parent Indemnified Party ”) shall be indemnified and reimbursed, by the Company Securityholders, severally and not jointly, subject to the provisions of this Section 9.2, from and against any and all Losses incurred by such Parent Indemnified Party arising out of or resulting from:

(A) any breach or inaccuracy of any representation or warranty made by the Company in or pursuant to this Agreement as of the date of this Agreement (without giving effect to: (1) any materiality, Company Material Adverse Effect or similar qualification limiting the scope of such representation or warranty, other than any such qualification contained in Section 3.4, Section 3.6(b) or Section 3.11 (excluding references to “material” contained in Section 3.11(b)); or (2) any update of or modification to the Company Disclosure Schedule made or purported to have been made on or after the date of this Agreement);

(B) any breach or inaccuracy of any representation or warranty made by the Company (1) in or pursuant to this Agreement as if such representation or warranty was made on and as of the Closing Date (except to the extent any such representation or warranty speaks as of the date of this Agreement or any other specific date, in which case any breach or inaccuracy of such representation or warranty as of such date); or (2) in any certificate delivered pursuant to this Agreement, in the case of clauses “(1)” and “(2)”, without giving effect to: (x) any materiality, Company Material Adverse Effect or similar qualification limiting the scope of such representation or warranty, other than any such qualification contained in Section 3.4, Section 3.6(b) or Section 3.11 (excluding references to “material” contained in Section 3.11(b)); or (y) any update of or modification to the Company Disclosure Schedule made or purported to have been made on or after the date of this Agreement;

(C) any failure to perform any covenant or obligation of the Company or the Stockholders’ Agent in or pursuant to this Agreement;

(D) any inaccuracy in any information, or any failure to properly calculate any amount, contained or set forth in the Merger Consideration Certificate and accompanying spreadsheet;

(E) regardless of the disclosure of any matter set forth in the Company Disclosure Schedule, any Liability of the Company relating to any unpaid Tax (including Losses arising out of or resulting from the determination, assessment or collection of any such Tax) attributable to any taxable period or portion thereof ending on or prior to the Effective Time; provided , however , that any real, personal and intangible property Taxes for any taxable period beginning before and ending after the Closing Date shall be allocated to the portion of the taxable period ending on the Closing Date on a per diem basis, and all other Taxes shall be allocated as if such taxable period ending on the Closing Date, except that exemptions, allowances or deductions that are calculated on an annual basis (including depreciation and amortization deductions), other than with respect to property placed in service after the Closing Date, shall be allocated on a per diem basis; provided further , that the Parent Indemnified Parties shall not be indemnified or reimbursed for any Losses related to Excluded Taxes;

(F) regardless of the disclosure of any matter set forth in the Company Disclosure Schedule, any claim asserted or held by any current, former or alleged securityholder of the Company, in their capacity as such, (1) relating to this Agreement, any other agreement entered into in connection with this Agreement to which such securityholder is a party or any of the transactions contemplated hereby or thereby, other than (x) any exercise of appraisal rights pursuant to Section 262 of the Delaware Law or demand therefor by any Company Stockholder or (y) any claim on behalf of any Company Securityholders identified in the Merger Consideration Certificate (I) to enforce this Agreement or (II) in response to a claim for indemnification or reimbursement made by any Parent Indemnified Party pursuant to this Section 9.2 or any fraud claim related thereto, or (2) alleging any ownership of or interest in any shares or other securities of the Company; or

(G) regardless of the disclosure of any matter set forth in the Company Disclosure Schedule, any parachute payment under Section 280G of the Code required to be made by the Company in connection with the transactions contemplated by this Agreement or any indemnification payment or tax gross-up payment required to be made by the Company with respect to any liability incurred under Section 409A of the Code by any Company employee or other service provider.

(ii) Notwithstanding anything to the contrary in this Agreement, no claim shall be made for any Losses related to or arising from [*]

(iii) Notwithstanding anything herein to the contrary, no party which is obligated pursuant to Section 9.2(b) to provide indemnification or reimbursement as set forth herein shall be liable under Section 9.2(b)(i)(A) or Section 9.2(b)(i)(B), (x) [*] and (y) [*] ; provided, however, that the limitations contained in this Section 9.2(b)(iii) shall not apply (and shall not limit the indemnification or other obligations of any Company Securityholder): (1) in the event of fraud (whether on the part of such Company Securityholder, any other Company Securityholder, the

Company or any representative of the Company) or Willful Breach or (2) to any breach or inaccuracy of any Fundamental Representation.

(i) Any Parent Indemnified Party seeking indemnification or reimbursement shall provide to the Stockholders’ Agent (and, prior to the Escrow Release Date, to the Escrow Agent) a reasonably detailed written notice of any claims that it may have (a “ Claim Notice ”). Each Claim Notice shall contain a reasonable non-binding estimate of the Losses against which such Indemnified Party seeks indemnification or reimbursement, to the extent that such an estimate can be made (the amount of such Losses, as such amount may be modified by the Parent Indemnified Party from time to time, the “ Claimed Amount ”). The Stockholders’ Agent shall have [*] from the date of delivery to it of any Claim Notice to accept or object to all or a portion of the Claimed Amount. In the event that the Stockholders’ Agent, in good faith, disagrees with any portion of the Claimed Amount, then the Stockholders’ Agent shall deliver to the Parent Indemnified Party (and, prior to the Escrow Release Date, to the Escrow Agent), by no later than the expiration of such [*] period, written notice of such disagreement, which notice shall include in reasonable detail its reasons for such disagreement. If the Stockholders’ Agent fails to dispute the Claimed Amount (or any portion thereof) in accordance with the foregoing provisions, then (A) such Claimed Amount or portion thereof, as applicable, shall be deemed to be finally determined to be owing to the Parent Indemnified Party for all purposes under this Agreement, and (B) within [*] following the expiration of the [*] period, the Stockholders’ Agent and Parent shall deliver joint written instructions to the Escrow Agent to disburse the Claimed Amount or portion thereof, as applicable, to the Parent Indemnified Party from the Escrow Fund. If the Stockholders’ Agent delivers a timely dispute notice, for a period of [*] from the date of delivery of such notice, the Stockholders’ Agent and the Parent Indemnified Party shall attempt to resolve all disputes set forth in such notice. If the Stockholders’ Agent and Parent Indemnified Party resolve such disputes, an agreement setting forth such resolution shall be prepared and signed by the Stockholders’ Agent and Parent and, in the case of a claim against the Escrow Fund, joint written instructions setting forth such resolution shall be furnished by Parent and the Stockholders’ Agent to the Escrow Agent.

(ii) Within [*] after the date that is [*] after the Closing Date (the “ Escrow Release Date ”), if the amount of cash remaining in the Escrow Fund (the “ Aggregate Escrow Balance ”) on the Escrow Release Date exceeds the sum of the Claimed Amounts associated with all claims for indemnification or reimbursement made pursuant to this Section 9.2 that have not been finally resolved and paid prior to the Escrow Release Date (each, an “ Unresolved Escrow Claim ”), Parent and the Stockholders’ Agent shall deliver joint written instructions to the Escrow Agent to disburse or cause to be disbursed to each Company Securityholder from the Escrow Fund, subject to the satisfaction of any applicable Payment Conditions and Section 2.12, an amount equal to such Company Securityholder’s Pro Rata Portion of the amount by which the Aggregate Escrow Balance on the Escrow Release Date exceeds the sum of such Claimed Amounts (it being understood that such instructions shall provide that any such amounts to be released in respect of Company Unvested Shares (only if withholding Taxes are required to be withheld or deducted from such amounts with respect thereto) or Company Options shall be delivered by the Escrow Agent to Parent and Parent

shall cause such amounts, less applicable withholding Taxes, to be disbursed to the applicable Company Securityholders).

(iii) Following the Escrow Release Date, if an Unresolved Escrow Claim is finally resolved, within [*] after the final resolution of such Unresolved Escrow Claim, Parent and the Stockholders’ Agent shall deliver joint written instructions to the Escrow Agent, instructing the Escrow Agent to (A) disburse to any Parent Indemnified Party from the Escrow Fund all amounts payable to such Parent Indemnified Party from the Escrow Fund (if any) and (B) disburse to each Company Securityholder from the Escrow Fund, subject to the satisfaction of any applicable Payment Conditions and Section 2.12, an amount equal to such Company Securityholder’s Pro Rata Portion of the amount by which the Aggregate Escrow Balance on the date of such instructions (after giving effect to any disbursement referred to in clause “(A)”) exceeds [*] , if any (it being understood that such instructions shall provide that any such amounts to be released in respect of Company Unvested Shares (only if withholding Taxes are required to be withheld or deducted from such amounts with respect thereto) or Company Options shall be delivered by the Escrow Agent to Parent and Parent shall cause such amounts, less applicable withholding Taxes, to be disbursed to the applicable Company Securityholders).

(iv) In the event that there be asserted against any Parent Indemnified Party any written claim or demand for which any Parent Indemnified Party may be entitled to indemnification or reimbursement hereunder (a “ Third Party Claim ”), such Parent Indemnified Party shall provide notice thereof to the Stockholders’ Agent within [*] following the Parent Indemnified Party’s receipt of such claim or demand (and no fewer than [*] prior to a scheduled appearance date in a litigated matter). The failure to so notify the Stockholders’ Agent of a Third Party Claim shall not relieve any Liability that any Company Securityholder may have to the Parent Indemnified Party with respect thereto, except to the extent that the defense against any associated legal action has been materially prejudiced thereby.

(d) Third Party Claims . With respect to each Third Party Claim that is the subject of a Claim Notice:

(i) The Parent Indemnified Party and the Stockholders’ Agent shall keep each other reasonably informed concerning the status of such Third Party Claim and any related proceedings at all stages thereof, and shall render to each other such assistance as they may reasonably require of each other and shall cooperate with each other in good faith in order to ensure the proper and adequate defense of such Third Party Claim. For the avoidance of doubt, all reasonable out-of-pocket costs and expenses incurred by the Parent Indemnified Party in connection therewith shall be subject to indemnification in accordance with the terms of Section 9.2(b).

(ii) The Parent Indemnified Party and the Stockholders’ Agent shall use commercially reasonable efforts to avoid production of confidential information (consistent with Applicable Law and rules of procedure), and to cause all communications among employees, counsel and other representatives of the Parent Indemnified Party and the Stockholders’ Agent to be made so as to preserve any applicable attorney-client or work-product privileges.

(iii) Each party hereby consents to the non-exclusive jurisdiction of any court in which a Third Party Claim is brought for purposes of any claim for indemnification or reimbursement with respect to such Third Party Claim or the matters alleged therein, and agrees that process may be served on such party with respect to any such claim anywhere in the world.

(iv) [*]

(e) Payment .

(i) To the extent permitted by Applicable Law, any payment made by a person indemnifying an Indemnified Party pursuant to this Section 9.2 shall be treated on the parties’ Tax Returns as an adjustment to the purchase price for all Tax purposes.

(ii) In the event a claim for indemnification or reimbursement under this Section 9.2 shall have been finally determined, except as otherwise provided in Section 9.2(i), the amount of the related Losses owing to any Parent Indemnified Party shall be paid [*] . To the extent a payment relates to any Loss denominated in a currency other than United States Dollars, such payment shall be made or deducted in United States Dollars calculated at the United States Dollar exchange rate in effect for such currency on the date preceding the date of payment. Any claim, liability therefor and the amount of the related Losses shall be “finally determined” when the parties to such claim have so determined by mutual written agreement or, if disputed, when a final and nonappealable Order of a court of competent jurisdiction shall have been entered concerning such matters.

(f) Sole Remedy . Following the Closing, other than in the event of fraud (which shall be subject to Section 9.2(e)(ii) and Section 9.2(i)), the indemnification rights provided in this Section 9.2 shall constitute the sole and exclusive remedy (other than equitable remedies) and the sole basis for and means of recourse by any Parent Indemnified Parties with respect to any Losses of any kind or nature arising out of or in connection with any breach by the Company of any representation, warranty or covenants contained in this Agreement.

(g) [*]

(h) No Right of Indemnity or Contribution . No Company Securityholder, in their capacity as a securityholder of the Company, has any right of indemnification or contribution against the Company with respect to any breach by the Company of any of its representations, warranties, covenants, agreements or obligations in this Agreement or any certificate or document executed in relation hereto or thereto, whether by virtue of any contractual or statutory right of indemnity or otherwise, and all claims to the contrary are hereby waived and released.

(i) Limit on Direct Recovery from Company Securityholders; Fraud; Willful Breach .

(i) Except in the event of fraud or Willful Breach, in no event will any Parent Indemnified Party have any recourse to recover directly from any Company Securityholder

any Losses resulting from the matters referred to in Section 9.2(b)(i) from any Merger Consideration that has been paid to such Company Securityholder. In the event of fraud or Willful Breach (whether on the part of any Company Securityholder, the Company or any representative of the Company), there shall be no limits on the obligations of the Company Securityholders pursuant to Section 9.2(b)(i), and each Parent Indemnified Party shall have the right to proceed directly against, and recover Losses directly from, the Company Securityholders; [*]

(ii) The liability of any Company Securityholder under Section 9.2 will be in addition to, and not exclusive of, any other liability that such Company Securityholder may have at law or in equity based on such Company Securityholder’s fraud. Notwithstanding anything to the contrary contained in this Agreement, none of the provisions set forth in this Agreement, including the provisions set forth in Section 9.2, shall be deemed a waiver by any party to this Agreement of any right or remedy that such party may have at law or in equity based on any other person’s fraud, nor will any such provisions limit, or be deemed to limit: (A) the amounts of recovery sought or awarded from such other person in any claim for fraud committed by such other person; (B) the time period during which a claim for fraud may be brought against such other person; or (C) the recourse which any such party may seek against such other person with respect to a claim for fraud committed by such other person.

9.3 Stockholders’ Agent .

(a) By virtue of the approval of this Agreement by the Company Securityholders, the execution of a letter of transmittal or Warrant Termination Agreement by the Company Securityholders, the cancellation of Company Options in exchange for Merger Consideration and/or by the Company Securityholders otherwise participating in the Merger and receiving the benefits thereof, including the right to receive the Merger Consideration, and without further action of any Company Securityholder, each Company Securityholder shall be deemed to have irrevocably constituted and appointed, or shall irrevocably constitute and appoint, as the case may be, the Stockholders’ Agent (and by execution of this Agreement, the Stockholders’ Agent hereby accepts such appointment) as agent and attorney-in-fact for and on behalf of the Company Securityholders, with full power of substitution, to act in the name, place and stead of each Company Securityholder with respect to this Article IX and the taking by the Stockholders’ Agent of any and all actions and the making of any decisions required or permitted to be taken by the Stockholders’ Agent under this Agreement, including the exercise of the power to: (i) give and receive notices and communications under this Article IX; (ii) object to claims for indemnification or reimbursement made by any Parent Indemnified Party under this Article IX; (iii) agree to, negotiate, enter into settlements and compromises of, and comply with orders of courts with respect to claims for indemnification or reimbursement made by any Parent Indemnified Party under this Article IX or any dispute relating to the Milestones or Contingent Payments; (iv) receive information under Section 9.1; (v) object to the calculation of any Contingent Payment; (vi) use the amounts in the Stockholders’ Agent’s Fund in furtherance of its duties as Stockholders’ Agent as it may determine in its good faith discretion and to cause the Stockholders’ Agent’s Fund Distribution to be distributed upon the expiration of the Stockholders’ Agent Period; (vii) enforce the Agreement on behalf of the Company Securityholders; and (viii) take all actions necessary or appropriate in the good faith judgment of the Stockholders’

Agent for the accomplishment of the foregoing. The power of attorney granted in this Section 9.3 by each Company Securityholder to the Stockholders’ Agent is coupled with an interest and is irrevocable, may be delegated by the Stockholders’ Agent and shall survive the death or incapacity of any Company Securityholder. The identity of the Stockholders’ Agent and the terms of the agency may be changed, and a successor Stockholders’ Agent reasonably acceptable to Parent may be appointed, from time to time (including in the event of the resignation, death, disability or other incapacity of the Stockholders’ Agent) by consent of those Company Securityholders entitled to at least a majority of the Merger Consideration, and any such successor shall succeed the Stockholders’ Agent as Stockholders’ Agent hereunder. No bond shall be required of the Stockholders’ Agent. Each Company Securityholder shall be deemed to have agreed to receive correspondence from the Stockholders’ Agent, including in electronic form.

(b) The Stockholders’ Agent shall not be liable to any Company Securityholder for any liability or Loss incurred without gross negligence by the Stockholders’ Agent while acting in good faith and arising out of or in connection with the acceptance or administration of its duties hereunder (it being understood that any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith). The members of the advisory committee to the Stockholders’ Agent (the “ Advisory Committee ”) shall not be liable to any Company Securityholder for any liability or Loss incurred by the members of the Advisory Committee while acting in good faith and arising out of or in connection with the acceptance or administration of their duties (it being understood that any act done or omitted pursuant to the advice of counsel shall be conclusive evidence of such good faith), even if such act or omission constitutes negligence on the part of the Advisory Committee. Each Company Securityholder shall, in accordance with their Pro Rata Portion, (i) indemnify and defend the Stockholders’ Agent and hold the Stockholders’ Agent harmless against any Loss or liability, including but not limited to the hiring of legal counsel, accountants, auditors and other advisors, incurred by the Stockholders’ Agent arising out of or in connection with the acceptance, performance or administration of the Stockholders’ Agent’s duties under this Agreement (each, an “ Agent Loss ”), in each case as such Agent Loss is incurred; provided that in the event it is adjudicated that an Agent Loss or any portion thereof arises from the fraud, gross negligence, willful misconduct or bad faith of the Stockholders’ Agent, such person or persons will reimburse the Company Securityholders the amount of such Agent Loss attributable to such fraud, gross negligence, willful misconduct or bad faith; and (ii) indemnify and defend the members of the Advisory Committee (solely in their individual roles as members of the Advisory Committee and not in their roles as Company Securityholders) and hold the members of the Advisory Committee harmless against any Loss or liability, including but not limited to the hiring of legal counsel, accountants, auditors and other advisors, incurred by the Advisory Committee arising out of or in connection with the acceptance or administration of the Advisory Committee’s duties (each, an “ Committee Member Loss ”), in each case as such Committee Member Loss is incurred. Agent Losses and Committee Member Losses shall be recoverable by the Stockholders’ Agent on its own behalf or on behalf of the members of the Advisory Committee (i) first by recourse to any amounts available in the Stockholders’ Agent’s Fund in accordance with instructions provided by the Stockholders’ Agent to the Escrow Agent, which shall specify in reasonable detail the amount of all Agent Losses, (ii) by recourse to any portion of any Contingent Payment otherwise payable to Company Securityholders as set forth in Section 9.1(b)(ii) in accordance with instructions provided

by the Stockholders’ Agent to Parent, which shall specify in reasonable detail the amount of all Agent Losses and Committee Member Losses, (iii) by recourse to any amounts in the Escrow Fund otherwise distributable to Company Securityholders pursuant to the terms hereof and the Escrow Agreement in accordance with instructions provided by the Stockholders’ Agent to the Escrow Agent, which shall specify in reasonable detail the amount of all Agent Losses, and (iv) if such amounts are insufficient to pay such Agent Losses or Committee Member Losses or unavailable at such time, directly to the Company Securityholders (in proportion to the Merger Consideration received by such persons under this Agreement); provided that while this Section 9.3 allows Agent Losses and Committee Member Losses to be paid from the Stockholders’ Agent’s Fund, from the Escrow Fund and from any Contingent Payments to be paid to the Company Securityholders, this does not relieve the Company Securityholders from their obligation to promptly pay such Agent Losses, Committee Member Losses or other amounts set forth above, nor does it prevent the Stockholders’ Agent from seeking any remedies available to it at law or otherwise. Upon receipt of written notice of any Committee Member Losses, the Stockholders’ Agent shall take all actions reasonably required to facilitate the collection of any amounts necessary to satisfy such Committee Member Losses.

(c) From and after the Effective Time, Parent shall cause the Surviving Corporation to provide the Stockholders’ Agent with reasonable updates about the Surviving Corporation, reasonable access (including electronic access, to the extent available) to the books, records and other documents and materials of the Surviving Corporation and the reasonable assistance of the officers and employees of Parent and the Surviving Corporation as reasonably requested by the Stockholders’ Agent and, in each case, as necessary for performing its duties and exercising its rights under this Agreement; provided that any information so provided to or obtained by the Stockholders’ Agent shall be subject to the Agent NDA.

(d) None of Guarantor, Parent or the Surviving Corporation shall have any liability to any of the Company Securityholders or otherwise arising out of the acts or omissions of the Stockholders’ Agent or any disputes among the Company Securityholders or between the Company Securityholders and the Stockholders’ Agent. Parent may rely entirely on its dealings with, and notices to and from, the Stockholders’ Agent to satisfy any obligations it might have under this Agreement or otherwise to the Company Securityholders. From and after the Effective Time, Stockholder’s Agent or its representatives may retain copies, reproductions, summaries, analyses or extracts (whether in hard-copy form or on intangible media, such as electronic mail or computer files) of the contents of the Data Room, the Company’s corporate books and records and all of the Company’s historical written communications (including electronic mail) prior to the Effective Time, in each case to be used solely for record retention purposes or in connection with the performance by the Stockholders’ Agent of its duties or the exercise of its rights under this Agreement. All of the documents, communications and other information referred to in the preceding sentence shall be subject to the Agent NDA.

9.4 Actions of the Stockholders’ Agent . From and after the Effective Time, a decision, act, consent or instruction of the Stockholders’ Agent shall constitute a decision of all Company Securityholders and shall be final, binding and conclusive upon each Company Securityholder, and

Parent may rely upon any decision, act, consent or instruction of the Stockholders’ Agent as being the decision, act, consent or instruction of each Company Securityholder. Guarantor, Parent and the Surviving Corporation are hereby relieved from any liability to any person for any acts done by Stockholders’ Agent and any acts done by Parent or the Surviving Corporation in accordance with any such decision, act, consent or instruction of the Stockholders’ Agent.

ARTICLE X

GENERAL PROVISIONS

10.1 Notices . All notices and other communications hereunder shall be in writing and shall be deemed duly delivered (i) upon receipt if delivered personally, (ii) one (1) Business Day after being sent by commercial overnight courier service, or (iii) upon transmission if sent via facsimile with confirmation of receipt to the parties made by the recipient at the following addresses (or at such other address for a party as shall be specified upon like notice):

(a) if to Guarantor, Parent or Merger Sub, to:

c/o Gilead Sciences, Inc.

333 Lakeside Drive

Foster City, CA 94404

Attention: General Counsel

Telecopy: (650) 522-5771

with a copy to (which shall not constitute notice):

Dewey & LeBoeuf LLP

1950 University Avenue, Suite 500

East Palo Alto, CA 94303

Attention: Jane Ross

Telecopy: (650) 845-7333

(b) if to the Company, to:

Calistoga Pharmaceuticals, Inc.

2101 Fourth Avenue, Suite 1960

Seattle, Washington 98121

Attention: Chief Executive Officer

Telecopy: (206) 728-4777

with a copy to (which shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, P.C.

701 Fifth Avenue, Suite 5100

Seattle, Washington 98104

Attention: Patrick J. Schultheis

Telecopy: (206) 883-2699

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, California 94304

Attention: Kenneth A. Clark

Robert T. Ishii

Telecopy: (650) 493-6811

Shareholder Representative Services LLC

601 Montgomery Street, Suite 2020

San Francisco, CA 94111

Attention: Managing Director

Telecopy: (415) 962-4147

Telephone No.: (415) 367-9400

In all cases, with a copy to (which shall not constitute notice):

Wilson Sonsini Goodrich & Rosati, P.C.

701 Fifth Avenue, Suite 5100

Seattle, Washington 98104

Attention: Patrick J. Schultheis

Telecopy: (206) 883-2699

Wilson Sonsini Goodrich & Rosati, P.C.

650 Page Mill Road

Palo Alto, California 94304

Attention: Kenneth A. Clark

Robert T. Ishii

Telecopy: (650) 493-6811

10.2 Additional Definitions .

(a) For purposes of this Agreement, “ Company Material Adverse Effect ” means [*] :

(i) [*]

(ii) [*]

(iii) [*]

(iv) [*]

(v) [*]

(vi) [*]

(b) For purposes of this Agreement, any reference to the Company’s “ knowledge ” of any fact, circumstance, event or other matter, means [*] .

(c) For purposes of this Agreement, “ Subsidiary ” means any entity, whether incorporated or unincorporated, of which at least a majority of the securities or ownership interests having by their terms voting power to elect a majority of the board of directors or other persons performing similar functions is directly or indirectly owned or controlled by such party or by one or more of its respective Subsidiaries.

(d) For purposes of this Agreement, “ person ” means any individual, corporation (including not-for-profit), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.

10.3 Counterparts . This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

10.4 Entire Agreement; Nonassignability; Parties in Interest .

(a) This Agreement and the documents and instruments delivered pursuant hereto, including the exhibits hereto, the Company Disclosure Schedule and the other schedules hereto:

(i) together constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, except for the Confidentiality Agreements, which shall continue in full force and effect in accordance with their terms and shall survive any termination of this Agreement;

(ii) are not intended to confer upon any other person any rights or remedies hereunder, except as provided in clause (b) of this Section 10.4; and

(iii) shall not be assigned by Parent or Merger Sub, on the one hand, or by the Company, on the other hand (by operation of law or otherwise), without the written consent of

each of the parties hereto (and any purported assignment in violation of this Agreement shall be void); provided , however , that Parent may substitute, by written notice to the Company, another direct or indirect Subsidiary of Parent, or an Affiliate of Parent, in lieu of Merger Sub, in which event all references herein to Merger Sub shall be deemed references to such other person, except that all representations and warranties made herein with respect to Merger Sub as of the date of this Agreement shall be deemed representations and warranties made with respect to such other person as of the date of such substitution.

(b) This Agreement is not intended to, and does not, confer upon any person other than the parties who are signatories hereto any rights or remedies hereunder [*] The rights granted pursuant to clause (i) of this Section 10.4(b) shall not be exercisable by any Company Securityholder and shall only be enforceable on behalf of Company Securityholders by the Stockholders’ Agent in its sole and absolute discretion, as agent for such holders.

10.5 Severability . In the event that any provision of this Agreement, or the application thereof becomes, or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances other than those as to which it is determined to be illegal, void or unenforceable, will not be impaired or otherwise affected and will continue in full force and effect and be enforceable to the fullest extent permitted by Applicable Law.

10.6 Remedies Cumulative . Except as otherwise provided in Section 9.2(f) or elsewhere herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with, and not exclusive of, any other remedy conferred hereby, or by Applicable Law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy.

10.7 Governing Law . This Agreement shall be governed by and construed in accordance with the internal Applicable Laws of the State of Delaware applicable to parties residing in the State of Delaware, without regard to applicable principles of conflicts of law. Subject to Section 9.2(d)(iii), each of the parties irrevocably consents to the exclusive jurisdiction and venue of any Delaware State court, or Federal court of the United States of America, sitting in Delaware, and any appellate court from any thereof, in connection with any matter based upon or arising out of this Agreement or the transactions contemplated hereby and agrees that process may be served upon it in any manner authorized by the Applicable Laws of the State of Delaware for such persons and waives and covenants not to assert or plead any objection which it might otherwise have to such jurisdiction and such process. Each of the parties irrevocably waives the right to trial by jury in connection with any matter based upon or arising out of this Agreement or the transactions contemplated hereby.

10.8 Rules of Construction .

(a) The parties hereto agree that they have been represented by counsel during the negotiation, preparation and execution of this Agreement and, therefore, waive the application of any Applicable Law, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

(b) For purposes of this Agreement, whenever the context requires: the singular number shall include the plural, and vice versa; the masculine gender shall include the feminine and neuter genders; the feminine gender shall include the masculine and neuter genders; and the neuter gender shall include the masculine and feminine genders.

(c) As used in this Agreement, (i) the words “include” and “including,” and variations thereof, shall not be deemed to be terms of limitation, but rather shall be deemed to be followed by the words “without limitation” and (ii) the words “hereby,” “herein,” “hereunder” and “hereto” shall be deemed to refer to this Agreement in its entirety and not to any specific section of this Agreement.

(d) Except as otherwise indicated, all references in this Agreement to “Sections,” “Exhibits” and “Annexes” are intended to refer to Sections of this Agreement or the Company Disclosure Schedule, as appropriate, and Exhibits and Annexes to this Agreement.

(e) The headings and subheadings used in this Agreement are for convenience of reference only and shall have no force or effect whatsoever in interpreting any of the provisions of this Agreement.

10.9 No Other Representations and Warranties . Subject to Section 9.2(i), Parent acknowledges that the Company has not made and is not making any representations or warranties whatsoever regarding the subject matter of this Agreement, express or implied, except as set forth in Article III (and any certificate delivered by the Company hereunder); provided, however, that, nothing in this Section 10.9 or elsewhere in this Agreement, shall limit or otherwise adversely affect any remedy of Parent or any other person for fraud.

10.10 Time is of the Essence; Enforcement . Time is of the essence of this Agreement. Each of the parties hereto agrees that irreparable damage would occur and that the parties would not have any adequate remedy at Applicable Law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at Applicable Law or in equity.

10.11 Amendment; Waiver . This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. Any waiver of any of the terms or conditions of this Agreement must be in writing and must be duly executed by or on behalf of the party to be charged with such waiver. Except as expressly set forth in this Agreement, the failure of a party to exercise any of its rights hereunder or to insist upon strict adherence to any term or condition hereof on any one occasion shall not be construed as a waiver or deprive that party of the right thereafter to insist upon strict adherence to the terms and conditions of this Agreement at a later date. Further, no waiver of any of the terms and conditions of this Agreement shall be deemed to or shall constitute a waiver of any other term of condition hereof (whether or not similar).

10.12 Guarantee . Guarantor hereby unconditionally, absolutely, continuing and irrevocably guarantees, as principal and not as surety, the full and complete payment and performance of all obligations and liabilities, whether now in existence or hereafter arising, of Parent, Merger Sub and, following the Effective Time, the Surviving Corporation under this Agreement or any other agreement to which Parent, Merger Sub or, following the Effective Time, the Surviving Corporation is or may become a party in connection with this Agreement (the “ Guarantor Undertakings ”). The obligations of the undersigned shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration, compromise, modification or amendment. Notice of acceptance of this guarantee and of the incurring of any obligation or default of the Guarantor Undertakings, as well as demand and protest with respect to such Guarantor Undertakings, are hereby waived by Guarantor.

[*]

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IN WITNESS WHEREOF, the Company, Guarantor, Parent, Merger Sub and the Stockholders’ Agent have caused this Agreement to be executed and delivered by each of them or their respective officers thereunto duly authorized, all as of the date first written above.


GILEAD SCIENCES, INC.

By:		/s/ John F. Milligan
		Name: John F. Milligan, Ph.D. Title: President and Chief Operating Officer


GILEAD BIOPHARMACEUTICS IRELAND CORPORATION

By:		/s/ Brett A. Pletcher
		Name: Brett A. Pletcher Title: Director


HOT SPRINGS ACQUISITION CORP.

By:		/s/ John F. Milligan
		Name: John F. Milligan, Ph.D. Title: Director


CALISTOGA PHARMACEUTICALS, INC.

By:		/s/ Carol Gallagher
		Carol Gallagher, Pharm.D. Chief Executive Officer


SHAREHOLDER REPRESENTATIVE SERVICES LLC as Stockholders’ Agent

By:		/s/ Mark B. Vogel
		Name: Mark B. Vogel Title: Managing Director

[Signature Page to Agreement and Plan of Merger]

EXHIBIT 2.5

AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER

This AMENDMENT NO. 1 (this “ Amendment ”) to the Agreement and Plan of Merger, dated as of February 21, 2011 (the “ Agreement ”), by and among Gilead Sciences, Inc., a Delaware corporation (“ Guarantor ”), Gilead Biopharmaceutics Ireland Corporation, a company formed under the laws of Ireland (“ Parent ”), Hot Springs Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (as successor in interest to Gilead Sciences Limited) (“ Merger Sub ”), Calistoga Pharmaceuticals, Inc., a Delaware corporation (the “ Company ”) and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as a Stockholders’ Agent hereunder (the “ Stockholders’ Agent ”) is entered into as of March 24, 2011 in accordance with Section 10.11 of the Agreement. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement.

RECITALS

WHEREAS, in accordance with Section 2.2 of the Merger Agreement, the parties to the Merger Agreement have agreed to delay the Closing on the condition that the parties amend the Merger Agreement in the manner, and subject to the conditions, set forth in this Amendment;

WHEREAS, the board of directors of the Company has, by resolutions duly adopted: (i) approved this Amendment in accordance with the provisions of Delaware Law; (ii) directed that this Amendment be submitted to the stockholders of the Company for their adoption by written consent in accordance with Applicable Law and the Company Organizational Documents; and (iii) recommended that the stockholders of the Company adopt this Amendment; and

NOW, THEREFORE, in consideration of the covenants set forth herein, and for other good and valuable consideration, the parties, intending to be legally bound, agree as follows:

1. Amendment Conditions; Termination .

(a) For purposes of this Amendment, the term “ Amendment Conditions ” shall mean (i) the adoption of this Amendment by the Requisite Stockholder Vote of the stockholders of the Company in accordance with Applicable Law and the Company Organizational Documents and (ii) that the shares of Company Capital Stock that constitute (or that are or may be eligible to become) Dissenting Shares with respect to this Amendment shall be less than 10% of the shares of Company Capital Stock outstanding as of the Closing Date.

(b) If, prior to the Closing, each of the Amendment Conditions are satisfied, the Merger Agreement shall be amended as set forth in Section 2 below, effective as of the date on which the last of the Amendment Conditions is satisfied. If one or more of the Amendment Condition are not satisfied prior to the Closing, this Amendment shall terminate (without the Merger Agreement having been amended as set forth in Section 2 below) and be of no further force or effect.

2. Amendment of the Merger Agreement . If the Amendment Conditions are satisfied as set forth in Section 1(b):

(a) The following definition shall be added to Section 1.1 of the Agreement:

“ Measurement Date ” shall mean [*] .

(b) The definition of “Up-Front Payment” in Section 1.1 of the Agreement shall be amended and restated in its entirety as follows:

“ Up-Front Payment ” shall mean an amount, in cash, equal [*] $375,000,000 [*]

“6.12 Merger Consideration Certificate

(a) No later than [*] the Company shall deliver to Parent a certificate (in a form and substance reasonably satisfactory to Parent) duly executed on behalf of the Company by the Chief Executive Officer or Chief Financial Officer of the Company (the “ Estimated Merger Consideration Certificate ”) setting forth the Company’s good faith estimates of the following information (collectively, the “ Merger Consideration Certificate Data ”), which shall be set forth on an accompanying spreadsheet: [*] The spreadsheet accompanying the Estimated Merger Consideration Certificate shall show with detailed specificity the basis for the calculation of each element of the Merger Consideration Certificate Data and shall break out all payments that are subject to withholding Taxes on a separate worksheet for payment by Parent or the Surviving Corporation rather than by the Paying Agent.

3. Full Force and Effect . Except as expressly amended hereby, the Agreement shall be unmodified and shall remain in full force and effect.

4. Counterparts . This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart.

[Remainder of page intentionally left blank]


GILEAD SCIENCES, INC.

By:		/s/ John F. Milligan
		Name: John F. Milligan, Ph.D.
		Title: President and Chief Operating Officer

GILEAD BIOPHARMACEUTICS IRELAND CORPORATION

By:		/s/ Brett A. Pletcher
		Name: Brett A. Pletcher
		Title: Director

HOT SPRINGS ACQUISITION CORP.

By:		/s/ John F. Milligan
		Name: John F. Milligan, Ph.D.
		Title: Director

CALISTOGA PHARMACEUTICALS, INC.

By:		/s/ Carol Gallagher
		Carol Gallagher, Pharm.D.
		Chief Executive Officer

SHAREHOLDER REPRESENTATIVE SERVICES LLC as Stockholders’ Agent

By:		/s/ W. Paul Koenig
		Name: W. Paul Koenig
		Title: Managing Director

[Signature Page to Amendment No. 1 to Agreement and Plan of Merger]

EXHIBIT 10.42

GILEAD SCIENCES, INC.

STOCK OPTION AGREEMENT

RECITALS

A. Optionee is to render valuable services to the Corporation (or a Related Entity), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s grant of an option to Optionee.

B. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix.

NOW, THEREFORE , the Corporation hereby grants an option to Optionee upon the following terms and conditions:

1. Grant of Option . The Corporation hereby grants to the person identified on attached Schedule I (the “Optionee”) an option to purchase shares of Common Stock under the Plan. The date on which this option is granted (the “Grant Date”), the number of shares of Common Stock purchasable under this option (the “Option Shares”), the exercise price payable per share (the “Exercise Price”), the applicable vesting schedule by which this option shall vest and become exercisable incrementally for the Option Shares (the “Vesting Schedule”) and the date to be used to measure the maximum term of this option (the “Expiration Date”) are also indicated on attached Schedule I to this Agreement. The option is a non-statutory option under the U.S. federal income tax laws. The remaining terms and conditions governing this option shall be as set forth in this Agreement.

2. Option Term . The term of this option shall commence on the Grant Date and continue to be in effect until the close of business on the last business day prior to the Expiration Date specified in attached Schedule I, unless sooner terminated in accordance with Paragraph 5 or 6 below.

3. Limited Transferability .

(a) This option may be assigned in whole or in part during Optionee’s lifetime to a Living Trust. The assigned portion may only be exercised by the Living Trust. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents to be executed by the Optionee and the Living Trust as the Corporation may deem appropriate.

(b) Except for the limited transferability provided under Paragraph 3(a), this option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionee’s death and may be exercised, during Optionee’s lifetime, only by Optionee. However, Optionee may designate one or more persons as the beneficiary or beneficiaries of this option by completing the Corporation’s Universal Beneficiary Designation form and filing the completed form with the Corporation’s Human Resources Department. Should Optionee file such Universal Beneficiary Designation form and die while holding this option, then this option shall automatically be transferred to the designated

beneficiary or beneficiaries. Such beneficiary or beneficiaries shall take the transferred option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which this option may, pursuant to Paragraph 5 below, be exercised following Optionee’s death.

4. Dates of Exercise . This option shall vest and become exercisable for the Option Shares in a series of installments in accordance with the Vesting Schedule set forth in attached Schedule I. As the option vests and becomes exercisable for such installments, those installments shall accumulate, and the option shall remain exercisable for the accumulated installments until the last business day prior to the Expiration Date or any sooner termination of the option term under Paragraph 5 or 6 below.

5. Cessation of Service . The option term specified in Paragraph 2 above shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date should any of the following provisions become applicable:

(a) Except as otherwise expressly provided in subparagraphs (b) through (f) of this Paragraph 5, should Optionee cease to remain in Continuous Service for any reason while this option is outstanding, then Optionee shall have until the close of business on the last business day prior to the expiration of the three (3)-month period measured from the date of such cessation of Continuous Service during which to exercise this option for any or all of the Option Shares for which this option is vested and exercisable at the time of Optionee’s cessation of Continuous Service, but in no event shall this option be exercisable at any time after the close of business on the last business day prior to the Expiration Date.

(b) In the event Optionee ceases Continuous Service by reason of his or her death while this option is outstanding, then this option may be exercised, for any or all of the Option Shares for which this option is vested and exercisable at the time of Optionee’s cessation of Continuous Service, by (i) the personal representative of Optionee’s estate or (ii) the person or persons to whom the option is transferred pursuant to Optionee’s will or the laws of inheritance following Optionee’s death. However, if Optionee dies while holding this option and has an effective beneficiary designation in effect for this option at the time of his or her death, then the designated beneficiary or beneficiaries shall have the exclusive right to exercise this option following Optionee’s death. Any such right to exercise this option shall lapse, and this option shall cease to be outstanding, upon the close of business on the last business day prior to the earlier of (i) the expiration of the twelve (12)-month period measured from the date of Optionee’s death or (ii) the Expiration Date. Upon the expiration of such limited exercise period, this option shall terminate and cease to be outstanding for any exercisable Option Shares for which the option has not otherwise been exercised.

(c) Should Optionee cease Continuous Service by reason of Permanent Disability while this option is outstanding, then Optionee shall have until the close of business on the last business day prior to the expiration of the twelve (12)-month period measured from the date of such cessation of Continuous Service during which to exercise this option for any or all of the Option Shares for which this option is vested and exercisable at the time of such cessation of Continuous Service. In no event, however, shall this option be exercisable at any time after the close of business on the last business day prior to the Expiration Date.

(d) Except as otherwise precluded by Applicable Laws, should (i) Optionee cease Continuous Service after completion of at least three (3) years of Continuous Service and (ii) the sum of Optionee’s attained age and completed years of Continuous Service at the time of such cessation of service equals or exceeds seventy (70) years, then Optionee shall have until the close of business on the last business day prior to the expiration of the thirty-six (36)-month period measured from the date of such cessation of Continuous Service during which to exercise this option for any or all of the Option Shares for which this option is vested and exercisable at the time of such cessation of Continuous Service. In no event, however, shall this option be exercisable at any time after the close of business on the last business day prior to the Expiration Date.

(e) The applicable period of post-service exercisability in effect pursuant to the foregoing provisions of this Paragraph 5 shall automatically be extended by an additional period of time equal in duration to any interval within such post-service exercise period during which the exercise of this option or the immediate sale of the Option Shares acquired under this option cannot be effected in compliance with applicable federal and state securities laws, but in no event shall such an extension result in the continuation of this option beyond the close of business on the last business day prior to the Expiration Date.

(f) Should Optionee’s Continuous Service be terminated for Cause, or should Optionee engage in any other conduct, while in Continuous Service or following cessation of Continuous Service, that is materially detrimental to the business or affairs of the Corporation (or any Related Entity), as determined in the sole discretion of the Administrator, then this option, whether or not vested and exercisable at the time, shall terminate immediately and cease to be outstanding.

(g) During the limited period of post-service exercisability provided under this Paragraph 5, this option may not be exercised in the aggregate for more than the number of Option Shares for which this option is at the time vested and exercisable. Except to the extent (if any) specifically authorized by the Administrator pursuant to an express written agreement with the Optionee, this option shall not vest or become exercisable for any additional Option Shares, whether pursuant to the normal Vesting Schedule set forth in attached Schedule I or the special vesting acceleration provisions of Paragraph 6 below, following Optionee’s cessation of Continuous Service. Upon the expiration of such limited exercise period or (if earlier) upon the close of business on the last business day prior to the Expiration Date, this option shall terminate and cease to be outstanding for any exercisable Option Shares for which the option has not otherwise been exercised.

6. Special Acceleration of Option .

(a) This option, to the extent outstanding at the time of an actual Change in Control but not otherwise fully exercisable, shall automatically accelerate so that this option shall, immediately prior to the effective date of such Change in Control, become exercisable for all of the Option Shares at the time subject to this option and may be exercised for any or all of those Option Shares as fully vested shares of Common Stock. However, this option shall not become exercisable on such an accelerated basis if and to the extent: (i) this

option is to be assumed by the successor corporation (or parent thereof) or is otherwise to continue in full force and effect pursuant to the terms of the Change in Control transaction, (ii) this option is to be replaced with an economically-equivalent substitute equity award or (iii) this option is to be replaced with a cash retention program of the successor corporation which preserves the spread existing at the time of the Change in Control on any Option Shares for which this option is not otherwise at that time vested and exercisable (the excess of the Fair Market Value of those Option Shares over the aggregate Exercise Price payable for such shares) and provides for the subsequent vesting and concurrent payout of that spread in accordance with the same Vesting Schedule for those Option Shares as set forth in attached Schedule I. Notwithstanding the foregoing, no such cash retention program shall be established for this option (or any other option granted to Optionee under the Plan) to the extent such program would otherwise be deemed to constitute a deferred compensation arrangement subject to the requirements of Code Section 409A and the Treasury Regulations thereunder.

(b) Immediately following the consummation of the Change in Control, this option shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) or otherwise continued in effect pursuant to the terms of the Change in Control transaction.

(c) If this option is assumed in connection with a Change in Control or otherwise continued in effect, then this option shall be appropriately adjusted, immediately after such Change in Control, to apply to the number and class of securities into which the shares of Common Stock subject to this option would have been converted in consummation of such Change in Control had those shares actually been outstanding at the time. Appropriate adjustments shall also be made to the Exercise Price, provided the aggregate Exercise Price shall remain the same. To the extent the actual holders of the Corporation’s outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation may, in connection with the assumption or continuation of this option but subject to the Administrator’s approval, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in such Change in Control, provided such common stock is readily tradable on an established U.S. securities exchange or market.

(d) If this option is assumed or otherwise continued in effect in connection with a Change in Control or replaced with an economically-equivalent equity award or a cash retention program in accordance with Paragraph 6(a) above, then:

(i) the option (or such economically equivalent award) shall vest and become immediately exercisable for all of the Option Shares or other securities at the time subject to the option (or such award) and may, within the applicable exercise period under Paragraph 5, be exercised for any or all of those Option Shares or other securities as fully vested shares or securities, or

(ii) the balance credited to Optionee under any cash retention program established in accordance with Paragraph 6(a) shall immediately be paid to Optionee in a lump sum, subject to the Corporation’s collection of all applicable Withholding Taxes;

if, within the period beginning with the execution date of the definitive agreement for the Change in Control transaction and ending with the earlier of (i) the termination of that definitive agreement without the consummation of such Change in Control or (ii) the expiration of the Applicable Acceleration Period following the consummation of such Change in Control, Optionee’s Continuous Service terminates due to an involuntary termination (other than for death or Permanent Disability) without Cause or a voluntary termination by Optionee due to Constructive Termination.

(e) This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

7. Adjustment in Option Shares . Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable and proportional adjustments shall be made by the Administrator to (i) the total number and/or class of securities subject to this option and (ii) the Exercise Price. The adjustments shall be made in such manner as the Administrator deems appropriate in order to reflect such change and thereby prevent the dilution or enlargement of benefits hereunder, and those adjustments shall be final, binding and conclusive upon Optionee and any other person or persons having an interest in the option. In the event of any Change in Control transaction, the adjustment provisions of Paragraph 6(c) above shall be controlling.

8. Stockholder Rights . The holder of this option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the option, paid the Exercise Price and become a holder of record of the purchased shares.

9. Manner of Exercising Option .

(a) In order to exercise this option with respect to all or any part of the Option Shares for which this option is at the time exercisable, Optionee (or any other person or persons exercising the option) must take the following actions:

(i) Execute and deliver to the Corporation a Notice of Exercise as to the Option Shares for which the option is exercised or comply with such other procedures as the Corporation may establish for notifying the Corporation, either directly or through an on-line internet transaction with a brokerage firm authorized by the Corporation to effect such option exercises, of the exercise of this option for one or more Option Shares. Copies of the Notice of Exercise may be obtained from the Corporation’s intranet at http://gnet/finance/doc/noe.doc.

(ii) Pay the aggregate Exercise Price for the purchased shares in one or more of the following forms:

(A) cash or check made payable to the Corporation; or

(B) through a special sale and remittance procedure pursuant to which Optionee (or any other person or persons exercising the option) shall concurrently provide irrevocable instructions (i) to a brokerage firm (reasonably satisfactory to the Corporation for purposes of administering such procedure in accordance with the Corporation’s pre-clearance/pre-notification policies) to effect the immediate sale of all or a sufficient portion of the purchased shares so that such brokerage firm can remit to the Corporation, on the settlement date, sufficient funds out of the resulting sale proceeds to cover the aggregate Exercise Price payable for all the purchased shares plus all applicable Withholding Taxes and (ii) to the Corporation to deliver the certificates for the purchased shares directly to such brokerage firm on such settlement date.

Except to the extent the sale and remittance procedure is utilized in connection with the option exercise, payment of the Exercise Price must accompany the Notice of Exercise (or other notification procedure) delivered to the Corporation in connection with the option exercise.

(iii) Furnish to the Corporation appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

(iv) Make appropriate arrangements with the Corporation (or Parent or Subsidiary employing or retaining Optionee) for the satisfaction of all applicable Withholding Taxes.

(b) As soon as practical after the Exercise Date, the Corporation shall issue to or on behalf of Optionee (or any other person or persons exercising this option) a certificate for the purchased Option Shares (either in paper or electronic form), with the appropriate legends affixed thereto.

10. Compliance with Laws and Regulations .

(a) The exercise of this option and the issuance of the Option Shares upon such exercise shall be subject to compliance by the Corporation and Optionee with all Applicable Laws relating thereto.

(b) The inability of the Corporation to obtain approval from any regulatory body having authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common Stock pursuant to this option shall relieve the Corporation of any liability with respect to the non-issuance or sale of the Common Stock as to which such approval shall not have been obtained. The Corporation, however, shall use its best efforts to obtain all such approvals.

11. Successors and Assigns . Except to the extent otherwise provided in Paragraphs 3 and 6 above, the provisions of this Agreement shall inure to the benefit of and be binding upon the Corporation and its successors and assigns and Optionee, Optionee’s assigns, the legal representatives, heirs and legatees of Optionee’s estate and any beneficiaries of this option designated by Optionee.

12. Notices . Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the most current address then indicated for Optionee on the Corporation’s employee records or shall be delivered electronically to Optionee through the Corporation’s electronic mail system or through an on-line brokerage firm authorized by the Corporation to effect option exercises through the internet. All notices shall be deemed effective upon personal delivery or delivery through the Corporation’s electronic mail system or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. Construction . This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the provisions of this Agreement and the terms of the Plan, the terms of the Plan shall be controlling. All decisions of the Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

14. Governing Law . The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to California’s conflict-of-laws rules.

15. Excess Shares . If the Option Shares covered by this Agreement exceed, as of the Grant Date, the number of shares of Common Stock which may without stockholder approval be issued under the Plan, then this option shall be void with respect to those excess shares, unless stockholder approval of an amendment sufficiently increasing the number of shares of Common Stock issuable under the Plan is obtained in accordance with the provisions of the Plan. In no event shall the option be exercisable with respect to any of the excess Option Shares unless and until such stockholder approval is obtained.

16. Leaves of Absence . The following provisions shall govern leaves of absence, except to the extent the application of such provisions to Optionee would contravene Applicable Laws.

(a) For purposes of this Agreement, Optionee’s Continuous Service shall not be deemed to cease during any period for which Optionee is on a military leave, sick leave or other personal leave approved by the Corporation. However, Optionee shall not receive any Continuous Service credit, for purposes of vesting in this option and the Option Shares pursuant to the Vesting Schedule set forth in attached Schedule I, for any period of such leave of absence, except to the extent otherwise required by law or pursuant to the following policy:

•

Optionee shall receive Continuous Service credit for such vesting purposes for (i) the first three (3) months of an approved personal leave of absence or (ii) the first seven (7) months of any bona fide leave of absence (other than an approved personal leave), but in no event beyond the expiration date of such leave of absence.

(b) In no event shall Optionee be deemed to remain in Continuous Service at any time after the earlier of (i) the expiration date of his or her leave of absence, unless Optionee returns to active Continuous Service on or before that date, or (ii) the date Optionee’s Continuous Service actually terminates by reason of his or her voluntary or involuntary termination or by reason of his or her death or disability.

17. Employment at Will . Nothing in this Agreement or in the Plan shall confer upon Optionee any right to remain in Employee status for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Related Entity employing Optionee) or of Optionee, which rights are hereby expressly reserved by each, to terminate Optionee’s Employee status at any time for any reason, with or without Cause.

18. Plan Prospectus . The official prospectus for the Plan is available on the Corporation’s intranet at:

http://gnet/HR/stocks_new.asp . Optionee may also obtain a printed copy of the prospectus by contacting Stock Plan Services at stockplanservices@gilead.com.

19. Optionee Acceptance . Optionee must accept the terms and conditions of this Agreement either electronically through the electronic acceptance procedure established by the Corporation or through a written acceptance delivered to the Corporation in a form satisfactory to the Corporation. In no event shall this option be exercised in the absence of such acceptance.

IN WITNESS WHEREOF , Gilead Sciences, Inc. has caused this Agreement to be executed on its behalf by its duly-authorized officer on the day and year first indicated above.


GILEAD SCIENCES, INC.

By:		/s/ Kristen M. Metza
		Kristen M. Metza
Title:		SVP, Human Resources

APPENDIX

The following definitions shall be in effect under the Agreement:

A. Administrator shall mean the Compensation Committee of the Board (or a subcommittee thereof) acting in its capacity as administrator of the Plan.

B. Agreement shall mean this Stock Option Agreement.

C. Applicable Acceleration Period shall have the meaning assigned to such term in Section 2(b) of the Plan and shall be determined on the basis of Optionee’s status on the Grant Date.

D. Applicable Laws shall mean the legal requirements related to the Plan and the option under applicable provisions of the federal securities laws, state corporate and state securities laws, the Code, the rules of any applicable Stock Exchange on which the Common Stock is listed for trading, and the rules of any non-U.S. jurisdiction applicable to options granted to residents therein.

E. Board shall mean the Corporation’s Board of Directors.

F. Cause shall, for purposes of Paragraph 5 of the Agreement, mean the termination of Optionee’s Continuous Service as a result of Optionee’s (i) performance of any act, or failure to perform any act, in bad faith and to the detriment of the Corporation or a Related Entity; (ii) dishonesty, intentional misconduct, material violation of any applicable Corporation or Related Entity policy, or material breach of any agreement with the Corporation or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person. However, for purposes of Paragraph 6(d) of the Agreement, Cause shall mean the termination of Optionee’s Continuous Service as a result of Optionee’s (a) conviction of, a guilty plea with respect to, or a plea of nolo contendere to, a charge that Optionee has committed a felony under the laws of the United States or of any State or a crime involving moral turpitude, including (without limitation) fraud, theft, embezzlement or any crime that results in or is intended to result in personal enrichment to Optionee at the expense of the Corporation or a Related Entity; (b) material breach of any agreement entered into between Optionee and the Corporation or a Related Entity that impairs the Corporation’s or the Related Entity’s interest therein; (c) willful misconduct, significant failure to perform his or her duties or gross neglect of his or her duties; or (d) engagement in any activity that constitutes a material conflict of interest with the Corporation or a Related Entity.

G. Change in Control shall mean a change in ownership or control of the Corporation effected through any of the following transactions:

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successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction;

(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets;

(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with the Corporation) becomes directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve- (12) month period ending with the most recent acquisition) the beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Corporation or the acquisition of outstanding securities held by one or more of the Corporation’s existing stockholders; or

(iv) a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (a) have been Board members continuously since the beginning of such period or (b) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) above who were still in office at the time the Board approved such election or nomination.

In no event, however, shall a Change in Control be deemed to occur upon a merger, consolidation or other reorganization effected primarily to change the State of the Corporation’s incorporation or to create a holding company structure pursuant to which the Corporation becomes a wholly-owned subsidiary of an entity whose outstanding voting securities immediately after its formation are beneficially owned, directly or indirectly, and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to the formation of such entity.

H. Code shall mean the Internal Revenue Code of 1986, as amended.

I. Common Stock shall mean shares of the Corporation’s common stock.

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J. Constructive Termination shall have the meaning assigned to such term in Section 11(d) of the Plan.

K. Consultant shall mean any person, including an advisor, who is compensated by the Corporation or any Related Entity for services performed as a non-employee consultant; provided, however, that the term “Consultant” shall not include non-employee Directors serving in their capacity as Board members. The term “Consultant” shall include a member of the board of directors of a Related Entity.

L. Continuous Service shall mean the performance of services for the Corporation or a Related Entity (whether now existing or subsequently established) by a person in the capacity of an Employee, Director or Consultant. For purposes of this Agreement, Optionee shall be deemed to cease Continuous Service immediately upon the occurrence of either of the following events: (i) Optionee no longer performs services in any of the foregoing capacities for the Corporation or any Related Entity or (ii) the entity for which Optionee is performing such services ceases to remain a Related Entity of the Corporation, even though Optionee may subsequently continue to perform services for that entity. In jurisdictions requiring notice in advance of an effective termination of Optionee’s service as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of such service to the Corporation or a Related Entity notwithstanding any required notice period that must be fulfilled before Optionee’s termination as an Employee, Director or Consultant can be effective under Applicable Laws.

M. Corporation shall mean Gilead Sciences, Inc., a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of Gilead Sciences, Inc. which shall by appropriate action adopt the Plan.

N. Director shall mean a member of the Board.

O. Employee shall mean an individual who is in the employ of the Corporation (or any Related Entity), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

P. Exercise Date shall mean the date on which the option shall have been exercised in accordance with Paragraph 9 of the Agreement.

Q. Exercise Price shall mean the exercise price payable per Option Share as specified in attached Schedule I.

R. Expiration Date shall mean the date specified on attached Schedule I for measuring the maximum term for which the option may remain outstanding.

S. Fair Market Value per share of Common Stock on any relevant date shall be the closing price per share of Common Stock (or the closing bid, if no sales were reported) on that date, as quoted on the Stock Exchange that is at the time serving as the primary trading market for the Common Stock; provided, however, that if there no reported closing price or

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closing bid for that date, then the closing price or closing bid, as applicable, for the last trading date on which such closing price or closing bid was quoted shall be determinative of such Fair Market Value. The applicable quoted price shall be as reported in The Wall Street Journal or such other source as the Administrator deems reliable.

T. Grant Date shall mean the date on which the option is granted, as specified on attached Schedule I.

U. Living Trust shall mean a revocable living trust established by Optionee or by Optionee and his or her spouse of which Optionee is the sole trustee (or sole co-trustee with his or her spouse) and sole beneficiary (or sole co-beneficiary with his or her spouse) during Optionee’s lifetime.

V. 1934 Act shall mean the Securities Exchange Act of 1934, as amended from time to time.

W. Non-Statutory Option shall mean an option not intended to satisfy the requirements of Code Section 422.

X. Notice of Exercise shall mean the notice of option exercise in the form authorized by the Corporation.

Y. Option Shares shall mean the number of shares of Common Stock subject to the option as specified in attached Schedule I.

Z. Optionee shall mean the person identified in attached Schedule I to whom the option is granted pursuant to the Agreement.

AA. Parent shall mean a “parent corporation,” whether now existing or hereafter established, as defined in Section 424(e) of the Code.

BB. Permanent Disability shall mean the inability of Optionee to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or to be of continuous duration of twelve (12) months or more.

CC. Plan shall mean the Corporation’s 2004 Equity Incentive Plan, as amended from time to time.

DD. Related Entity shall mean (i) any Parent or Subsidiary of the Corporation and (ii) any corporation in an unbroken chain of corporations beginning with the Corporation and ending with the corporation in the chain for which Optionee provides services as an Employee, Director or Consultant, provided each corporation in such chain owns securities representing at least twenty percent (20%) of the total outstanding voting power of the outstanding securities of another corporation or entity in such chain and there is a legitimate non-tax business purpose for making this option grant to Optionee.

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EE. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange.

FF. Subsidiary shall mean a “subsidiary corporation,” whether now existing or hereafter established, as defined in Section 424(f) of the Code.

GG. Vesting Schedule shall mean the schedule set forth in attached Schedule I, pursuant to which the option is to vest and become exercisable for the Option Shares in a series of installments over Optionee’s period of Continuous Service.

HH. Withholding Taxes shall mean the federal, state, local and/or foreign income taxes and the employee portion of the federal, state, local and/or foreign employment taxes required to be withheld by the Corporation in connection with the exercise of the option.

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SCHEDULE I

OPTION GRANT SPECIFICS

Name of Optionee: «FIRST_NAME» «MIDDLE_NAME» «LAST_NAME»

Grant Date: «OPTION_DATE»

Grant Number: «NUM»

Total Number of Option Shares: «SHARES_GRANTED»

Exercise Price: US «OPTION_PRICE»

Vesting Schedule:


Shares	Vest Type	Full Vest Date	Expiration Date
«SHARES_PERIOD_1»	«VEST_TYPE_PERIOD_1»	«VEST_DATE_PERIOD_1»	«EXPIRATION_DATE_PERIOD_1»
«SHARES_PERIOD_2»	«VEST_TYPE_PERIOD_2»	«VEST_DATE_PERIOD_2»	«EXPIRATION_DATE_PERIOD_2»
«SHARES_PERIOD_3»	«VEST_TYPE_PERIOD_3»	«VEST_DATE_PERIOD_3»	«EXPIRATION_DATE_PERIOD_3»
«SHARES_PERIOD_4»	«VEST_TYPE_PERIOD_4»	«VEST_DATE_PERIOD_4»	«EXPIRATION_DATE_PERIOD_4»

The option will vest and become exercisable for the number of Option Shares noted on the first line above on the first anniversary of the Grant Date, as noted by the date listed under “Full Vest Date.” With respect to each subsequent line, the option will vest and become exercisable for the listed Option Shares in equal quarterly installments, beginning one quarter after the Full Vest Date on the previous line and ending on the corresponding Full Vest Date for the listed Option Shares at issue. Fractional shares will be rounded down to the nearest whole number.

EXHIBIT 10.53

GILEAD SCIENCES, INC.

PERFORMANCE SHARE AWARD AGREEMENT

RECITALS

A. The Corporation has implemented the Plan for the purpose of providing incentives to attract, retain and motivate eligible Employees, Directors and Consultants to continue their service relationship with the Corporation.

B. Participant is to render valuable services to the Corporation (or a Related Entity), and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Corporation’s issuance of shares of Common Stock to Participant thereunder.

C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix A.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Performance Shares . The Corporation hereby awards to Participant, as of the Award Date indicated below, an award (the “Award”) of Performance Shares under the Corporation’s 2004 Equity Incentive Plan, as amended (the “Plan”). Each Performance Share which vests pursuant to the terms of this Agreement shall provide Participant with the right to receive one or more shares of Common Stock on the designated issuance date. The number of shares of Common Stock subject to the awarded Performance Shares, the applicable performance vesting requirement for those shares, the date on which those vested shares of Common Stock shall become issuable and the remaining terms and conditions governing the Award, including the applicable service vesting requirement, shall be as set forth in this Agreement.

AWARD SUMMARY


Participant		__________________________________________________

Award Date:		, 200

Designated Number of Performance Shares:		The actual number of shares of Common Stock that may become issuable pursuant to the Performance Shares awarded under this Agreement shall be determined in accordance with the Vesting Schedule below. For purposes of the percentage calculations set forth in the Performance Vesting section of such schedule, the designated number of Performance Shares to be utilized is shares.

Vesting Schedule:

The number of shares of Common Stock which may actually vest and become issuable pursuant to the Award shall be determined pursuant to a two-step process: (i) first the maximum number of shares of Common Stock in which Participant can vest under the Performance Vesting section below shall be calculated on the basis of the level at which each of the Performance Goals specified on attached Schedule I is actually attained and (ii) then the number of shares calculated under clause (i) in which Participant may actually vest shall be determined on the basis of his or her completion of the applicable Continuous Service vesting requirements set forth in Paragraph 3 of this Agreement.

Performance Vesting : Attached Schedule I specifies the two Performance Goals to be attained for the specified Performance Period. Within sixty-five (65) days after the completion of that Performance Period, the Administrator shall determine and certify the actual level of attainment for each Performance Goal. On the basis of that certified level of attainment, the number of Performance Shares will be multiplied by the applicable percentage (which may range from 0% to 200%) determined in accordance with the percentile matrix set forth in Schedule I. The number of shares resulting from such calculation shall constitute the maximum number of shares of Common Stock in which Participant may vest under this Award and shall be designated the “Performance-Qualified Shares.” In no event may the number of such Performance-Qualified Shares exceed 200% of the number of Performance Shares specified in the Designated Number of Performance Shares section above.

To the extent any Performance Goal is attained at a level below the twentieth percentile, a portion of the Performance Shares, as determined in accordance with the percentile matrix set forth in Schedule I, shall be forfeited, and any such forfeited Performance Shares shall be immediately cancelled. Participant shall thereupon cease to have any further right, title or interest in the shares of Common Stock underlying those cancelled Performance Shares.

Continuous Service Vesting . The number of Performance-Qualified Shares in which Participant actually vests shall be determined on the basis of his or her satisfaction of the Continuous-Service vesting requirements set forth in Paragraph 3.

Change in Control Vesting . The shares of Common Stock underlying the Performance Shares subject to this Award may also vest on an accelerated basis in accordance with Paragraph 5 should a Change in Control occur prior to the completion of the Performance Period.



Issuance Date:		The shares of Common Stock which actually vest and become issuable pursuant to the terms of this Agreement shall be issued in accordance with the provisions of this Agreement applicable to the particular circumstances under which such vesting occurs.

2. Limited Transferability . Prior to the actual issuance of the shares of Common Stock which vest hereunder, Participant may not transfer any interest in the Performance Shares subject to this Award or the underlying shares of Common Stock or pledge or otherwise hedge the sale of those Performance Shares or underlying shares, including (without limitation) any short sale or any acquisition or disposition of any put or call option or other instrument tied to the value of the underlying shares of Common Stock. However, any shares of Common Stock which vest hereunder but otherwise remain unissued at the time of Participant’s death may be transferred pursuant to the provisions of Participant’s will or the laws of inheritance or to Participant’s designated beneficiary or beneficiaries of this Award. Participant may also direct the Corporation to record the ownership of any shares of Common Stock which in fact vest and become issuable hereunder in the name of a revocable living trust established for the exclusive benefit of Participant or Participant and his or her spouse. Participant may make such a beneficiary designation or ownership directive at any time by completing the Corporation’s Universal Beneficiary Designation form and filing the completed form with the Plan Administrator or its designee.

3. Continuous Service Requirement . The number of Performance-Qualified Shares calculated in accordance with the Performance-Vesting provisions of Paragraph 1 and attached Schedule I represent the maximum number of shares of Common Stock in which Participant can vest hereunder. The actual number of shares of Common Stock in which Participant shall vest shall be determined as follows:

•

If Participant remains in Continuous Service through the date following the completion of the Performance Period on which the Administrator certifies the attained level of the Performance Goals for that Performance Period, Participant shall vest in one hundred percent (100%) of the Performance-Qualified Shares.

•

If Participant’s Continuous Service terminates prior to the completion of the Performance Period (or after the completion of the Performance Period but before the date the Administrator certifies the attained level of the Performance Goals for that Performance Period) by reason of death or Permanent Disability, then Participant shall, following the completion of the Performance Period, vest in that number of shares of Common Stock (if any) determined by multiplying the maximum number of Performance-Qualified Shares in which Participant could vest, based on the actual level at which the Performance Goals are attained and certified for the Performance Period, by a fraction, the numerator

of which is the number of months of Continuous Service actually completed by Participant in such Performance Period (rounded to the closest whole month), and the denominator of which is the number of months (rounded to the closest whole number) constituting the entire Performance Period.

•

If Participant’s Continuous Service terminates by reason of his or her Retirement at any time after the completion of the first twelve (12) months of the Performance Period but prior to the completion of the Performance Period (or after the completion of the Performance Period but before the date the Administrator certifies the attained level of the Performance Goals for that Performance Period), then Participant shall, following the completion of the Performance Period, vest in that number of shares of Common Stock (if any) determined by multiplying the maximum number of Performance-Qualified Shares in which Participant could vest, based on the actual level at which the Performance Goals are attained and certified for the Performance Period, by a fraction, the numerator of which is the number of months of Continuous Service actually completed by Participant in such Performance Period prior to his or her Retirement (rounded to the closest whole month), and the denominator of which is the number of months (rounded to the closest whole number) constituting the entire Performance Period.

•

If (i) Participant’s Continuous Service terminates by reason of an involuntary termination other than for Cause, or his or her resignation due to Constructive Termination, at any time after the completion of the Performance Period but before the date the Administrator certifies the attained level of the Performance Goals for that Performance Period and (ii) such termination of Continuous Service also occurs during a period while there is in effect a definitive executed agreement for the Change in Control transaction, then Participant shall vest in the maximum number of Performance-Qualified Shares in which Participant could vest, based on the actual level at which the Performance Goals are attained and certified for the Performance Period, had Participant remained in Continuous Service through such certification date.

If Participant’s Continuous Service ceases for any other reason (including, without limitation, any deemed cessation of Continuous Service under Paragraph 10) prior to the completion of the Performance Period or prior to the date on which the Administrator certifies the attained level of the Performance Goals for that Performance Period, then Participant shall not vest in any of the Performance-Qualified Shares, and all of Participant’s right, title and interest to the shares of Common Stock subject to this Award shall immediately terminate; provided, however , that should a Change in Control occur prior to the completion of the Performance Period, then the provisions of Paragraph 5 shall govern the vesting of the Performance Shares.

4. Stockholder Rights and Dividend Equivalents

(a) The holder of this Award shall not have any stockholder rights, including voting, dividend or liquidation rights, with respect to the shares of Common Stock subject to the Award until Participant becomes the record holder of those shares upon their actual issuance following the Corporation’s collection of the applicable Withholding Taxes.

(b) Notwithstanding the foregoing, should any dividend or other distribution, whether regular or extraordinary and whether payable in cash, securities (other than Common Stock) or other property, be declared and paid on the outstanding Common Stock while one or more Performance Shares remain subject to this Award (i.e., the underlying shares of Common Stock are not otherwise issued and outstanding for purposes of entitlement to the dividend or distribution), then a special book account shall be established for Participant and credited with a phantom dividend equivalent to the actual dividend or distribution that would have been paid on the maximum number of shares of Common Stock that can qualify as Performance-Qualified Shares under this Award, had that number of shares been issued and outstanding and entitled to that dividend or distribution. As one or more shares of Common Stock subsequently vest hereunder upon the satisfaction of the applicable vesting requirements, the phantom dividend equivalents credited to those particular shares in the book account shall vest, and those vested dividend equivalents shall be distributed to Participant (in the same form the actual dividend or distribution was paid to the holders of the Common Stock entitled to that dividend or distribution or in such other form as the Administrator deems appropriate under the circumstances) concurrently with the issuance of those vested shares. However, such distribution shall be subject to the Corporation’s collection of the Withholding Taxes applicable to that distribution.

(c) To the extent the maximum number of shares of Common Stock that can qualify as Performance-Qualified Shares under this Award are not in fact earned by reason of the levels at which the Performance Goals are actually attained, then the phantom dividend equivalents credited to those unearned shares shall be cancelled, and Participant shall cease to have any right or entitlement to receive any distributions or other amounts with respect to those cancelled dividend equivalents.

(d) Should Participant cease Continuous Service without vesting in one or more of the shares of Common Stock subject to this Award (including any shares which do not otherwise vest at that time after taking into account any applicable vesting acceleration provisions set forth in Paragraphs 3 and 5 of this Agreement), then the phantom dividend equivalents credited to those unvested shares shall be cancelled, and Participant shall thereupon cease to have any further right or entitlement to those cancelled amounts.

5. Change in Control . The following provisions shall apply only to the extent a Change in Control is consummated prior to the completion of the Performance Period and shall have no force or effect in the event the effective date of the Change in Control occurs after the completion of such Performance Period.

(a) Should (i) the Change in Control occur within the first twelve (12) months of the Performance Period and (ii) Participant remain in Continuous Service through the effective date of that Change in Control, then Participant shall immediately vest in that number of shares of Common Stock equal to the designated number of Performance Shares set forth in Paragraph 1, without any measurement of Performance Goal attainment to date.

(b) Should (i) the Change in Control occur at any time on or after the completion of the first twelve (12) months of the Performance Period but prior to the completion of the entire Performance Period and (ii) Participant remain in Continuous Service through the effective date of that Change in Control, then Participant shall immediately vest in that number of shares of Common Stock equal to the greater of:

(i) the designated number of Performance Shares set forth in Paragraph 1, or

(ii) the number of Performance-Qualified Shares determined by multiplying (A) the Designated Number of Performance Shares set forth in Paragraph 1 by (B) the applicable percentage (determined in accordance with the percentile matrix in attached Schedule I) for the levels at which the Performance Goals are attained over an abbreviated Performance Period ending with the close of the Corporation’s fiscal quarter coincident with or immediately preceding the effective date of the Change in Control.

(c) The provisions of subparagraphs (a) and (b) of this Paragraph 5 shall also apply should Participant’s Continuous Service terminate, by reason of an involuntary termination other than for Cause or his or her resignation due to Constructive Termination, at any time during the period beginning with the execution date of the definitive agreement for the Change in Control transaction and ending with the earlier of (i) the effective date of that Change in Control or (ii) the termination of the definitive agreement without the consummation of the Change in Control; provided, however , that in no event shall Participant become entitled to any shares of Common Stock pursuant to this Paragraph 5 if the Change in Control is not in fact consummated.

(d) Should Participant cease Continuous Service during the Performance Period by reason of death or Permanent Disability and a Change in Control subsequently occur prior to the completion of that Performance Period, then the Participant shall, at the time of such Change in Control, vest in a pro-rated number of shares of Common Stock calculated by multiplying (i) the number of Performance Shares or Performance-Qualified Shares determined in accordance with the applicable provisions of subparagraphs (a) and (b) of this Paragraph 5 by (ii) a fraction, the numerator of which is the number of months of Continuous Service actually completed by Participant in such Performance Period (rounded to

the closest whole month), and the denominator of which is the number of months (rounded to the closest whole number) comprising the portion of the Performance Period ending with the earlier of (i) the effective date of the Change in Control or (ii) the last day of the abbreviated Performance Period (if any) taken into account under Paragraph 5(b)(ii).

(e) Should Participant cease Continuous Service by reason of his or her Retirement at any time after the completion of the first twelve (12) months of the Performance Period but prior to the completion of the entire Performance Period and a Change in Control subsequently occur prior to the completion of that Performance Period, then the Participant shall, at the time of such Change in Control, vest in a pro-rated number of shares of Common Stock calculated by multiplying (i) the number of Performance Shares or Performance-Qualified Shares determined in accordance with the provisions of subparagraph (b) of this Paragraph 5 by (ii) a fraction, the numerator of which is the number of months of Continuous Service actually completed by Participant in such Performance Period prior to his or her Retirement (rounded to the closest whole month), and the denominator of which is the number of months (rounded to the closest whole number) comprising the portion of the Performance Period ending with the earlier of (i) the effective date of the Change in Control or (ii) the last day of the abbreviated Performance Period (if any) taken into account under Paragraph 5(b)(ii).

(f) The number of shares of Common Stock in which Participant vests on the basis of the Performance Shares or Performance-Qualified Shares determined in accordance with the foregoing provisions of this Paragraph 5 shall be converted into the right to receive for each such share the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of the Change in Control, and such consideration shall be distributed to Participant on the tenth (10th) business days following the effective date of that Change in Control. Each issuance or distribution made under this Paragraph 5(f) shall be subject to the Corporation’s collection of the applicable Withholding Taxes.

(g) Except for the actual number of shares of Common Stock in which Participant vests in accordance with this Paragraph 5, Participant shall have cease to have any further right or entitlement to any additional shares of Common Stock under this Agreement following the effective date of the Change in Control.

(h) This Agreement shall not in any way affect the right of the Corporation to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

shall be made by the Administrator to the total number and/or class of securities issuable pursuant to this Award in order to reflect such change. In making such equitable adjustments, the Administrator shall take into account any amounts credited to Participant’s book account under Paragraph 4(b) in connection with the transaction, and the determination of the Administrator shall be final, binding and conclusive. In the event of any Change in Control transaction, the provisions of Paragraph 5 shall be controlling.

7. Issuance or Distribution of Vested Shares or Other Amounts .

(a) Except as otherwise provided in Paragraph 5, the shares of Common Stock in which Participant vests pursuant to the Performance and Continuous Service vesting provisions of Paragraphs 1 and 3 shall be issued following the completion of the Performance Period, in accordance with the following provisions:

(i) If the applicable Performance Period is coincidental with one or more successive complete calendar years, the issuance shall be effected during the period beginning with the first business day of the calendar year immediately succeeding the end of the Performance Period and ending no later than March 15 of that year.

(ii) If the applicable Performance Period ends on a date other than the last day of the calendar year, then the issuance shall be effected as soon as administratively practicable following the completion of that Performance Period, but no later than the later of (A) the last day of the calendar year in which such Performance Period ends or (B the fifteenth (15th) day of third (3rd) calendar month following the last of day of such Performance Period.

(b) The Corporation shall, on the applicable issuance date, issue to or on behalf of Participant a certificate (which may be in electronic form) for the shares of Common Stock in which Participant vests pursuant to the Performance and Continuous Service vesting provisions of Paragraphs 1 and 3 and shall concurrently distribute to the Participant any phantom dividend equivalents with respect to those Shares.

(c) Except as otherwise provided in Paragraph 5, no shares of Common Stock shall be issued prior to the completion of the Performance Period. No fractional shares of Common Stock shall be issued pursuant to this Award, and any fractional share resulting from any calculation made in accordance with the terms of this Agreement shall be rounded down to the next whole share.

(d) Until such time as the Corporation provides Participant with notice to the contrary, the Corporation shall collect, and Participant hereby authorizes the Corporation to collect, the Withholding Taxes with respect to the Shares issued under this Agreement (including shares of Common Stock issued in settlement of phantom dividend equivalents) through an automatic Share withholding procedure pursuant to which the Corporation will withhold, immediately as the Shares are issued under the Award, a portion of those Shares with a

Fair Market Value (measured as of the issuance date) equal to the amount of such Withholding Taxes (the “ Share Withholding Method ”).

(e) If the Share Withholding Method is to be utilized for the collection of Withholding Taxes, then the Corporation shall withhold the number of otherwise issuable Shares necessary to satisfy the applicable Withholding Taxes based on the applicable minimum statutory rate or other applicable withholding rate. If the obligation for Withholding Taxes is satisfied by using the Share Withholding Method, then Participant will, for tax purposes, be deemed to have been issued the full number of Shares subject to the vested Award, notwithstanding that a number of the Shares are withheld solely for the purpose of paying the applicable Withholding Taxes.

(f) The Corporation shall have sole discretion to determine whether or not the Share Withholding Method shall be utilized for the collection of the applicable Withholding Taxes. Participant shall be notified (in writing or through the Corporation’s electronic mail system) in the event the Corporation no longer intends to utilize the Share Withholding Method. Should any Shares become issuable under the Award (including shares of Common Stock issued in settlement of phantom dividend equivalents) at a time when the Share Withholding Method is not being utilized by the Corporation, then the Withholding Taxes shall be collected from Participant through a sale-to-cover transaction authorized by Participant, pursuant to which an immediate open-market sale of a portion of the Shares issued to Participant will be effected, for and on behalf of Participant, by the Corporation’s designated broker to cover the Withholding Tax liability estimated by the Corporation to be applicable to such issuance. Participant shall, promptly upon request from the Corporation, execute (whether manually or through electronic acceptance) an appropriate sales authorization (in form and substance reasonably satisfactory to the Corporation) that authorizes and directs the broker to effect such open-market, sale-to-cover transactions and remit the sale proceeds, net of brokerage fees and other applicable charges, to the Corporation in satisfaction of the applicable Withholding Taxes. However, no sale-to-cover transaction shall be effected unless (i) such a sale is at the time permissible under the Corporation’s insider trading policies governing the sale of Common Stock and (ii) the transaction is not otherwise deemed to constitute a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002.

(g) If the Corporation determines that such sale-to-cover transaction is not permissible or advisable at the time or if Participant otherwise fails to effect a timely sales authorization as required by this Agreement, then the Corporation may, in its sole discretion, elect either to defer the issuance of the Shares until such sale-to-cover transaction can be effected in accordance with Participant’s executed sale directive or to collect the applicable Withholding Taxes through Participant’s delivery of his or her separate check payable to the Corporation in the amount of such Withholding Taxes or by withholding such amount from other wages payable to Participant. In no event shall any Shares be issued in the absence of an arrangement reasonably satisfactory to the Corporation for the satisfaction of the applicable Withholding Taxes and in compliance with any applicable requirements of Code Section 409A.

(h) The Corporation shall collect the Withholding Taxes with respect to the phantom dividend equivalents distributed in a form other than shares of Common Stock

by withholding a portion of that distribution equal to the amount of the applicable Withholding Taxes, with the cash portion of the distribution to be the first portion so withheld, or through such other tax withholding arrangement as the Corporation deems appropriate

(i) Notwithstanding the foregoing provisions of Paragraphs 7(d) through 7(h), the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting of the shares of Common Stock or any other amounts hereunder (the “Employment Taxes”) shall in all events be collected from Participant no later than the last business day of the calendar year in which those shares or other amounts vest hereunder. Accordingly, to the extent the applicable issuance date for one or more vested shares of Common Stock or the distribution date for such other amounts is to occur in a year subsequent to the calendar year in which those shares or other amounts vest, the Participant shall, on or before the last business day of the calendar year in which such shares or other amounts vest, deliver to the Corporation a check payable to its order in the dollar amount equal to the Employment Taxes required to be withheld with respect to those shares or other amounts. The provisions of this Paragraph 7(i) shall be applicable only to the extent necessary to comply with the applicable tax withholding requirements of Code Section 3121(v).

(j) Except as otherwise provided in Paragraph 5 or this Paragraph 7, the settlement of all Performance or Performance-Qualified Shares which vest under the Award shall be made solely in shares of Common Stock.

8. Special Deferral Election . Provided Participant is a U.S. tax resident and subject to Participant’s satisfaction of any applicable Withholding Tax obligations under Paragraph 7 and any other eligibility requirements established by the Administrator for a deferral election hereunder, Participant may elect to defer the receipt of any shares of Common Stock which may become issuable to Participant pursuant to the terms of this Agreement, by submitting to the Corporation on a timely basis a deferral election in the form provided for such purpose. Such deferral election must be submitted to the Corporation prior to the last six (6) months of the Performance Period (including any abbreviated Performance Period), and any deferral election submitted within that six (6)-month period shall have no force and effect. In submitting such deferral election, Participant must represent that he or she understands the effect of such deferral under relevant federal, state and local income and employment tax laws, including (without limitation) the fact that Social Security, Medicare and other taxes may be due upon the vesting of the shares of Common Stock notwithstanding the deferral election. In no event may such a deferral election be made after Participant’s cessation of Continuous Service, and no deferral election shall have any force or effect unless such election complies with all applicable requirements of Code Section 409A and the Treasury Regulations thereunder.

In the absence of a valid deferral election filed in accordance with this Paragraph 8, this Agreement shall be administered and interpreted in a manner that complies with the short-term deferral exception to Code Section 409A. Accordingly, any ambiguity in the terms and provisions of this Agreement shall be interpreted and applied so as to comply with the short-term deferral exception standards under Code Section 409A and the Treasury Regulations thereunder.

9. Deferred Issuance Date . Notwithstanding any provision to the contrary in this Agreement, to the extent this Award may be deemed to create a deferred compensation arrangement under Code Section 409A by reason of a deferral election made pursuant to Paragraph 8 above or otherwise, then the following limitations shall apply:

•

No shares of Common Stock or other amounts which become issuable or distributable under this Agreement by reason of Participant’s cessation of Continuous Service shall actually be issued or distributed to Participant until the date of Participant’s Separation from Service or as soon thereafter as administratively practicable, but in no event later than the later of (i) the close of the calendar year in which such Separation from Service occurs or (ii) the fifteenth day of the third calendar month following the date of such Separation from Service.

•

No shares of Common Stock or other amounts which become issuable or distributable under this Agreement by reason of Participant’s cessation of Continuous Service shall actually be issued or distributed to Participant prior to the earlier of (i) the first day of the seventh (7th) month following the date of Participant’s Separation from Service or (ii) the date of Participant’s death, if Participant is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations issued under Code Section 409A, as determined by the Administrator in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Corporation, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). The deferred Shares or other distributable amount shall be issued or distributed in a lump sum on the first day of the seventh (7th) month following the date of Participant’s Separation from Service or, if earlier, the first day of the month immediately following the date the Corporation receives proof of Participant’s death.

•

No amounts that vest and become payable under Paragraph 5 of this Agreement by reason of a Change in Control shall be distributed to Participant at the time of such Change in Control, unless that transaction also qualifies as a change in control event under Code Section 409A and the Treasury Regulations thereunder and (if applicable) Participant’s deferral election under Paragraph 8 of this Agreement provides for a distribution upon such an event. In the absence of such a qualifying change in control, the distribution shall not be made until the date on which those amounts become distributable in accordance with Participant’s deferral election under Paragraph 8 of this Agreement or (if there is no such election) the provisions of Paragraph 7(a) of this Agreement.

10. Leaves of Absence . For purposes of the applying the various Continuous Service vesting provisions of this Agreement, Participant shall be deemed to cease Continuous Service on the commencement date of any leave of absence and not to remain in Continuous

Service status during the period of that leave, except to the extent otherwise required by law or pursuant to the following policy:

•

Participant shall be deemed to remain in Continuous Service status during (i) the first three (3) months of an approved personal leave of absence or (ii) the first seven (7) months of any bona fide leave of absence (other than an approved personal leave) and shall be deemed to cease Continuous Service upon the expiration of the applicable three (3)-month or seven (7)-month period.

•

In no event, however, shall Participant be deemed, for vesting purposes hereunder, to remain in Continuous Service beyond the earlier of (i) the expiration date of that leave of absence, unless Participant returns to active Continuous Service or Employee status on or before that date or (ii) the date Participant’s Continuous Service or Employee status actually terminates by reason of his or her voluntary or involuntary termination or by reason of his or her death or disability.

11. Compliance with Laws and Regulations . The issuance of shares of Common Stock pursuant to the Award shall be subject to compliance by the Corporation and Participant with all Applicable Laws relating thereto.

12. Notices . Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the most current address then indicated for Participant on the Corporation’s employee records or shall be delivered electronically to Participant through the Corporation’s electronic mail system or through an on-line brokerage firm authorized by the Corporation to effect sales of the Common Stock issued hereunder. All notices shall be deemed effective upon personal delivery or delivery through the Corporation’s electronic mail system or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

13. Successors and Assigns . Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant, Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries of the Award designated by Participant.

14. Construction . This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the provisions of this Agreement and the terms of the Plan, the terms of the Plan shall be controlling. All decisions of the Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.

15. Governing Law . The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules.

16. Employment at Will . Nothing in this Agreement or in the Plan shall confer upon Participant any right to remain in Continuous Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Related Entity employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s Continuous Service at any time for any reason, with or without Cause.

17. Plan Prospectus . The official prospectus for the Plan is available on the Corporation’s intranet at:

http://gnet/HR/stocks_new.asp . Participant may also obtain a printed copy of the prospectus by contacting Stock Plan Services at stockadministration@gilead.com .

18. Participant Acceptance . Participant must accept the terms and conditions of this Agreement either electronically through the electronic acceptance procedure established by the Corporation or through a written acceptance delivered to the Corporation in a form satisfactory to the Corporation. In no event shall any shares of Common Stock be issued (or other securities or property distributed) under this Agreement in the absence of such acceptance.

IN WITNESS WHEREOF , Gilead Sciences, Inc. has caused this Agreement to be executed on its behalf by its duly-authorized officer on the day and year first indicated above.


GILEAD SCIENCES, INC.

By:
Title:

APPENDIX A

DEFINITIONS

The following definitions shall be in effect under the Agreement:

A. Administrator shall mean the Compensation Committee of the Board acting in its capacity as administrator of the Plan.

B. Agreement shall mean this Performance Share Award Agreement.

C. Applicable Laws shall mean the legal requirements related to the Plan and the Award under applicable provisions of the federal securities laws, state corporate and securities laws, the Code, the rules of any applicable Stock Exchange on which the Common Stock is listed for trading, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

D. Award shall mean the award of Performance Shares made to Participant pursuant to the terms of this Agreement.

E. Award Date shall mean the date the Performance Shares are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement.

F. Board shall mean the Corporation’s Board of Directors.

G. Cause shall have the meaning assigned to such term in Section 11(c) of the Plan.

H. Change in Control shall mean a change in ownership or control of the Corporation effected through the consummation of any of the following transactions:

(i) a merger, consolidation or other reorganization approved by the Corporation’s stockholders, unless securities representing more than fifty percent (50%) of the total combined voting power of the voting securities of the successor corporation are immediately thereafter beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to such transaction;

(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets;

A-1

(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Corporation) becomes directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) the beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Corporation or the acquisition of outstanding securities held by one or more of the Corporation’s existing stockholders; or

(iv) a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

In no event, however, shall a Change in Control be deemed to occur upon a merger, consolidation or other reorganization effected primarily to change the State of the Corporation’s incorporation or to create a holding company structure pursuant to which the Corporation becomes a wholly-owned subsidiary of an entity whose outstanding voting securities immediately after its formation are beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to the formation of such entity. Should such holding company structure or other Parent entity be established for the Corporation, then subparagraph (iv) shall be applied solely to the board of directors of that holding company or Parent entity.

I. Code shall mean the Internal Revenue Code of 1986, as amended.

J. Common Stock shall mean shares of the Corporation’s common stock.

K. Constructive Termination shall have the meaning assigned to such term in Section 11(d) of the Plan.

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L. Consultant shall mean any person, including an advisor, who is compensated by the Corporation or any Related Entity for services performed as a non-employee consultant; provided, however , that the term “Consultant” shall not include non-employee Directors serving in their capacity as Board members. The term “Consultant” shall include a member of the board of directors of a Related Entity.

M. Continuous Service shall mean the performance of services for the Corporation or a Related Entity (whether now existing or subsequently established) by a person in the capacity of an Employee, Director or Consultant. For purposes of this Agreement, Participant shall be deemed to cease Continuous Service immediately upon the occurrence of either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Corporation or any Related Entity or (ii) the entity for which Participant is performing such services ceases to remain a Related Entity of the Corporation, even though Participant may subsequently continue to perform services for that entity. In jurisdictions requiring notice in advance of an effective termination of Participant’s service as an Employee, Director or Consultant, Continuous Service shall be deemed to terminate upon the actual cessation of such service to the Corporation or a Related Entity notwithstanding any required notice period that must be fulfilled before Participant’s termination as an Employee, Director or Consultant can be effective under Applicable Laws.

N. Corporation shall mean Gilead Sciences, Inc., a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of Gilead Sciences, Inc. which shall by appropriate action adopt the Plan.

O. Director shall mean a member of the Board.

P. Employee shall mean an individual who is in the employ of the Corporation (or any Related Entity), subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance.

Q. Fair Market Value per share of Common Stock on any relevant date shall be the closing price per share of Common Stock (or the closing bid, if no sales were reported) on that date, as quoted on the Stock Exchange that is at the time serving as the primary trading market for the Common Stock; provided, however, that if there no reported closing price or closing bid for that date, then the closing price or closing bid, as applicable, for the last trading date on which such closing price or closing bid was quoted shall be determinative of such Fair Market Value. The applicable quoted price shall be as reported in The Wall Street Journal or such other source as the Administrator deems reliable.

R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended from time to time.

S. Participant shall mean the person to whom the Award is made pursuant to the Agreement.

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T. Parent shall mean any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation, provided each corporation in the unbroken chain (other than the Corporation) owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

U. Performance Goals shall mean the performance goals specified on attached Schedule I which must be attained in order to satisfy the performance vesting requirements for the shares of Common Stock subject to this Award.

V. Performance Period shall mean the period specified on attached Schedule I over which the attainment of the Performance Goals is to be measured.

W. Performance-Qualified Shares shall mean the maximum number of shares of Common Stock in which Participant can vest based on the level at which the Performance Goals for the Performance Period are attained and shall be calculated in accordance with the provisions of this Agreement. In no event shall the number of such Performance-Qualified Shares exceed two hundred percent (200%) of the number of Performance Shares designated in Paragraph 1 of this Agreement.

X. Performance Share shall mean the phantom shares of Common Stock awarded under this Agreement which will entitle Participant to receive one or more actual shares of Common Stock pursuant to this Award upon the satisfaction of the performance and Continuous Service vesting requirements applicable to such Award.

Y. Permanent Disability shall mean the inability of Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment expected to result in death or to be of continuous duration of twelve (12) months or more.

Z. Plan shall mean the Corporation’s 2004 Equity Incentive Plan, as amended.

AA. Related Entity shall mean any Parent or Subsidiary of the Corporation and (ii) any corporation in an unbroken chain of corporations beginning with the Corporation and ending with the corporation in the chain for which Participant provides services as an Employee, Director or Consultant, provided each corporation in such chain owns securities representing at least fifty percent (50%) of the total outstanding voting power of the outstanding securities of another corporation or entity in such chain.

BB. Retirement shall mean the Participant’s cessation of Employee status on or after the date on which his or her combined age and years of Continuous Service equal or exceed seventy (70) years.

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CC. Separation from Service shall mean the Participant’s cessation of Employee status by reason of his or her death, retirement or termination of employment. The Participant shall be deemed to have terminated employment for such purpose at such time as the level of his or her bona fide services to be performed as an Employee (or as a consultant or independent contractor) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services he or she rendered as an Employee during the immediately preceding thirty-six (36) months (or such shorter period for which he or she may have rendered such services). Solely for purposes of determining when a Separation from Service occurs, Participant will be deemed to continue in “Employee” status for so long as he or she remains in the employ of one or more members of the Employer Group, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. “Employer Group” means the Corporation and any Parent or Subsidiary and any other corporation or business controlled by, controlling or under common control with, the Corporation, as determined in accordance with Sections 414(b) and (c) of the Code and the Treasury Regulations thereunder, except that in applying Sections 1563(1), (2) and (3) of the Code for purposes of determining the controlled group of corporations under Section 414(b), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in such sections and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses that are under common control for purposes of Section 414(c), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in Section 1.414(c)-2 of the Treasury Regulations. Any such determination as to Separation from Service, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Section 409A of the Code.

DD. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange.

EE. Subsidiary shall mean any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation, provided each corporation (other than the last corporation) in the unbroken chain owns, at the time of the determination, stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

FF. Vesting Schedule shall mean the schedule set forth in Paragraph 1 of the Agreement, pursuant to which the Performance Shares and the underlying shares of Common Stock are to vest upon the satisfaction of the performance and Continuous Service vesting requirements applicable to this Award.

GG. Withholding Taxes shall mean the federal, state and local income taxes and the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting and issuance of the shares of Common Stock which vest under of the Award, any phantom dividend equivalents distributed with respect to those shares and any other amounts distributable in replacement or substitution of such shares.

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SCHEDULE I

PERFORMANCE GOALS AND PERFORMANCE PERIOD

PERFORMANCE PERIOD

The measurement period for the Performance Shares awarded to Participant shall be the three-year period beginning January 1, 20 and ending December 31, 20 (the “Performance Period”).

PERFORMANCE GOALS FOR PERFORMANCE VESTING

Performance Goal One – Total Shareholder Return: The first performance vesting requirement for the Performance Shares awarded to Participant shall be tied to the percentile level at which the total shareholder return (including stock price appreciation and reinvestment of any cash dividends or other stockholder distributions) to the Corporation’s stockholders over the Performance Period stands in relation to the total shareholder return realized for that period by the companies comprising the AMEX BioPharma Index.

For such purpose, the total shareholder return (“TSR”) shall be determined pursuant to the following formula:


TSR =		(Ending Stock Price* – Beginning Stock Price) + Reinvested Dividends*
		Beginning Stock Price**

* Ending Stock Price is the average daily closing price per share calculated for all trading days within the entire duration of the Performance Period.

** Beginning Stock Price is the average daily closing price per share calculated for all trading days within the 20 calendar year.

*** Reinvested Dividends shall be calculated by multiplying (i) the aggregate number of shares (including fractional shares) that could have been purchased during the Performance Period had each cash dividend paid on a single share during that period been immediately reinvested in additional shares (or fractional shares) at the closing selling price per share on the applicable dividend payment date by (ii) the average daily closing price per share calculated for the entire duration of the Performance Period.

Each of the foregoing amounts shall be equitably adjusted for stock splits, stock dividends, recapitalizations and other similar events affecting the shares in question without the issuer’s receipt of consideration.

For companies in the AMEX BioPharma Index which are not on a calendar fiscal year, TSR will be measured on the basis of their four fiscal quarters each year that coincide with the Corporation’s calendar fiscal year.

Should a Change in Control occur during the Performance Period, then TSR will be measured on the basis of daily closing prices and reinvested dividends over an abbreviated Performance Period ending with the Corporation’s last complete fiscal quarter coincident with or immediately preceding the effective date of that Change in Control.

Performance Goal Two - Revenue Growth: The second performance vesting requirement for the Performance Shares shall be tied to the percentile level at which Corporation’s revenue growth for that same 3-year period stands in relation to the revenue growth realized for that period by the companies comprising the AMEX BioPharma Index.

For such purpose, revenue growth shall be determined pursuant to the following formula:


Revenue Growth =		(Ending Revenue** - Beginning Revenue*)
		Beginning Revenue*

* Ending Revenue is the annual revenue recognized for financial reporting purposes (on a consolidated basis) for the last completed calendar year in the Performance Period.

** Beginning Revenue is the annual revenue recognized for financial reporting purposes (on a consolidated basis) for the 20 calendar year.

Revenue Growth shall be calculated for the Corporation and each company comprising the AMEX BioPharma Index on a calendar fiscal year basis, whether or not that company is on a calendar fiscal year. Accordingly, for each non-calendar fiscal year company, Ending Revenue shall be measured on the basis of its four fiscal quarters falling within the 20 calendar year.

Should a Change in Control occur during the Performance Period, then Ending Revenue for the Corporation and each company comprising the AMEX BioPharma Index shall be calculated by multiplying (i) the quarterly revenue for each such company for the fiscal quarter ending coincident with or immediately prior to the effective date of the Change in Control by four (4).

Performance-Qualified Shares: The actual number of Performance-Qualified Shares may range from 0% to 200% of the number of Performance Shares designated in Paragraph 1 of this Agreement, with the actual percentage to be determined on the basis of the percentile level at which the Administrator certifies that each Performance Goal has been attained in relation to the corresponding Performance Goal for the companies comprising the AMEX BioPharma Index; provided, however , that the maximum number of the shares of the Corporation’s common stock that may qualify as Performance-Qualified Shares may not exceed 200% of the number of Performance Shares designated in Paragraph 1 of this Agreement.

Matrix for Determining Number of Performance-Qualified Shares Based on Attained Levels of Performance Goals: The number of shares of the Corporation’s common stock that may qualify as Performance-Qualified Shares on the basis of the certified percentile levels of attainment shall be calculated by multiplying the number of Performance Shares designated in Paragraph 1 of this Agreement by the applicable percentage determined in accordance with the following matrix:

TSR of Corporation vs. AMEX BioPharma Index


> 80th percentile	100.0	%	110.0	%	150.0	%	175.0	%	200.0	%
60th to 79th percentile	75.0	%	85.0	%	125.0	%	150.0	%	175.0	%
40th to 59th percentile	50.0	%	60.0	%	100.0	%	125.0	%	150.0	%
20th to 39th percentile	10.0	%	20.0	%	60.0	%	85.0	%	110.0	%
< 20th percentile	0.0	%	10.0	%	50.0	%	75.0	%	100.0	%
	< 20th percentile		20th to 39th percentile		40th to 59th percentile		60th to 79th percentile		> 80th percentile

Revenue Growth of Corporation vs. AMEX BioPharma Index

EXHIBIT 10.57

GILEAD SCIENCES, INC.

RESTRICTED STOCK UNIT ISSUANCE AGREEMENT

RECITALS

A. The Board has adopted the Plan for the purpose of providing incentives to attract, retain and motivate eligible Employees, Directors and Consultants who provide services to the Corporation (or any Related Entity).

C. All capitalized terms in this Agreement shall have the meaning assigned to them in the attached Appendix A.

NOW, THEREFORE , the Corporation hereby awards Restricted Stock Units to Participant upon the following terms and conditions:

1. Grant of Restricted Stock Units . The Corporation hereby awards to Participant, as of the Award Date, Restricted Stock Units under the Plan. Each Restricted Stock Unit that vests hereunder will entitle Participant to receive one share of Common Stock on the specified issuance date for that unit. The number of shares of Common Stock subject to the awarded Restricted Stock Units, the applicable vesting schedule for those shares, the dates on which those vested shares shall become issuable to Participant and the remaining terms and conditions governing the award (the “ Award ”) shall be as set forth in this Agreement.

AWARD SUMMARY


Participant:		_______________________

Award Date:		, 200

Number of Shares Subject to Award:		shares of Common Stock (the “Shares”)

Vesting Schedule:		The Shares shall vest in a series of four (4) successive equal annual installments upon the Participant’s completion of each successive year of Continuous Service over the four (4)-year period measured from the Award Date (the “ *Normal Vesting Schedule* ”). However, one or more Shares may be subject to accelerated vesting in accordance with the provisions of Paragraph 5 of this Agreement.



Issuance Schedule		The Shares in which Participant vests in accordance with the Normal Vesting Schedule shall become issuable immediately on the applicable annual vesting date, subject to the Corporation’s collection of the applicable Withholding Taxes. In no event will the Shares in which the Participant so vests be issued later than the later of (i) the close of the calendar year in which the Shares vest pursuant to the Normal Vesting Schedule or (ii) the fifteenth (15th) day of the third (3rd) calendar month following such vesting date. The procedures pursuant to which the applicable Withholding Taxes are to be collected are set forth in Paragraph 7 of this Agreement.

2. Limited Transferability . Prior to actual receipt of the Shares which vest hereunder, Participant may not transfer any interest in the Award or the underlying Shares or pledge or otherwise hedge the sale of those Shares, including (without limitation) any short sale or any acquisition or disposition of any put or call option or other instrument tied to the value of the underlying shares of Common Stock. However, any Shares which vest hereunder but which otherwise remain unissued at the time of Participant’s death may be transferred pursuant to the provisions of Participant’s will or the laws of inheritance or to Participant’s designated beneficiary or beneficiaries of this Award. Participant may also direct the Corporation to re-issue the stock certificates for any Shares which in fact vest and become issuable under the Award during his or her lifetime to one or more designated members of Participant’s Immediate Family or a trust established for Participant and/or the members of his or her Immediate Family. Participant may make such a beneficiary designation at any time by completing the Corporation’s Universal Beneficiary Designation form and filing the completed form with the Corporation’s Human Resources Department.

3. Cessation of Service . Except as otherwise provided in Paragraph 5 below, should Participant cease Continuous Service for any reason prior to vesting in one or more Shares pursuant to the Normal Vesting Schedule, then the Award will be immediately cancelled with respect to those unvested Shares, and the number of Restricted Stock Units will be reduced accordingly. Participant shall thereupon cease to have any right or entitlement to receive any Shares under those cancelled units.

4. Stockholder Rights and Dividend Equivalents

(a) The holder of this Award shall not have any stockholder rights, including voting, dividend or liquidation rights, with respect to the Shares subject to the Award until Participant becomes the record holder of those Shares upon their actual issuance following the Corporation’s collection of the applicable Withholding Taxes.

account shall be established for Participant and credited with a phantom dividend equivalent to the actual dividend or distribution which would have been paid on the Shares at the time subject to this Award had they been issued and outstanding and entitled to that dividend or distribution. As the Shares subsequently vest hereunder, the phantom dividend equivalents so credited to those Shares in the book account shall vest, and those vested dividend equivalents shall be distributed to Participant (in the same form the actual dividend or distribution was paid to the holders of the Common Stock entitled to that dividend or distribution or in such other form as the Administrator deems appropriate under the circumstances) concurrently with the issuance of the vested Shares to which those phantom dividend equivalents relate. However, each such distribution shall be subject to the Corporation’s collection of the Withholding Taxes applicable to that distribution.

(c) Should Participant cease Continuous Service without vesting in one or more of the shares of Common Stock subject to this Award (including any shares which do not otherwise vest at that time after taking into account any applicable vesting acceleration provisions set forth in Paragraph 5 of this Agreement), then the phantom dividend equivalents credited to those unvested shares shall be cancelled, and Participant shall thereupon cease to have any further right or entitlement to those cancelled amounts.

5. Change in Control.

(a) Any Restricted Stock Units subject to this Award at the time of a Change in Control may be (i) assumed or otherwise continued in full force and effect by the surviving corporation, (ii) replaced with an economically-equivalent substitute award or (iii) replaced with a cash retention program of the successor corporation that is in a dollar amount equal to the Fair Market Value of the Shares underlying those Restricted Stock Units (as measured immediately prior to the Change in Control) and provides for the subsequent vesting and payout of that dollar amount in accordance with the same vesting and issuance provisions that would otherwise be in effect for those Shares in the absence of the Change in Control. In the event of such assumption or continuation of the Award or such replacement of the Award with an economically-equivalent award or cash retention program, no accelerated vesting of the Restricted Stock Units shall occur at the time of the Change in Control. Notwithstanding the foregoing, no such cash retention program shall be established for the Restricted Stock Units subject to this Award to the extent such program would otherwise be deemed to constitute a deferred compensation arrangement subject to the requirements of Code Section 409A and the Treasury Regulations thereunder.

(b) In the event the Award is assumed or otherwise continued in effect, the Restricted Stock Units subject to the Award shall be adjusted immediately after the consummation of the Change in Control so as to apply to the number and class of securities into which the Shares underlying those units immediately prior to the Change in Control would have been converted in consummation of that Change in Control had those Shares actually been issued and outstanding at that time. To the extent the actual holders of the outstanding Common Stock receive cash consideration for their Common Stock in consummation of the Change in Control, the successor corporation (or parent entity) may, in connection with the assumption or continuation of the Restricted Stock Units subject to the Award at that time and with the

approval of the Administrator, substitute one or more shares of its own common stock with a fair market value equivalent to the cash consideration paid per share of Common Stock in the Change in Control transaction, provided the substituted common stock is readily tradable on an established U.S. securities exchange.

(c) Any Restricted Stock Units which are to be assumed or otherwise continued in effect in connection with the Change in Control or are to be replaced with an economically equivalent award or cash retention program in accordance with Paragraph 5(a) shall be subject to accelerated vesting in accordance with the following provision:

•

If the Participant’s Employee status is unilaterally terminated as a result of an involuntary termination (other than for death or Permanent Disability) without Cause, or if the Participant resigns from such Employee status due to a Constructive Termination, at any time during the period beginning with the execution date of the definitive agreement for that Change in Control transaction and ending with the earlier of (i) the termination of that definitive agreement without the consummation of such Change in Control or (ii) the expiration of the Applicable Acceleration Period following the consummation of such Change in Control, then the Participant shall immediately vest in all the unvested Shares (or any replacement securities or cash proceeds) at the time subject to this Award. The Shares (or any replacement securities or cash proceeds) that vest pursuant to this Paragraph 5(c) shall be issued or distributed on the date of the Participant’s Separation from Service in connection with such termination of Employee status or as soon as administratively practicable thereafter, but in no event later than the later of (i) the close of the calendar year in which the such Separation from Service occurs or (ii) the fifteenth (15th) day of the third (3rd) calendar month following the date of such Separation from Service. The applicable Withholding Taxes with respect to such issuance shall be collected in accordance with Paragraph 7 of this Agreement.

(d) If the Restricted Stock Units subject to this Award at the time of the Change in Control are not assumed or otherwise continued in effect in connection with the Change in Control or are not replaced with an economically equivalent award or cash incentive program in accordance with Paragraph 5(a), then those units will vest immediately prior to the closing of the Change in Control. The Shares subject to those vested units shall be converted into the right to receive for each such Share the same consideration per share of Common Stock payable to the other stockholders of the Corporation in consummation of that Change in Control, and such consideration per Share shall be distributed to Participant upon the tenth (10th) business day following the earliest to occur of (i) the date the Share would have otherwise vested and been issued pursuant to the Vesting and Issuance Schedules set forth in Paragraph 1 in the absence of such Change in Control, (ii) the date of Participant’s Separation from Service or (iii) the first date following a Qualifying Change in Control on which the distribution can be made without contravention of any applicable provisions of Code Section 409A. Such distribution shall be subject to the Corporation’s collection of the applicable Withholding Taxes pursuant to the provisions of Paragraph 7.

6. Adjustment in Shares . Should any change be made to the Common Stock by reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares, spin-off transaction, extraordinary dividend or distribution or other change affecting the outstanding Common Stock as a class without the Corporation’s receipt of consideration, or should the value of outstanding shares of Common Stock be substantially reduced as a result of a spin-off transaction or an extraordinary dividend or distribution, or should there occur any merger, consolidation or other reorganization, then equitable adjustments shall be made by the Administrator to the total number and/or class of securities issuable pursuant to this Award. The Administrator shall make the adjustments in such manner as the Administrator deems appropriate in order to reflect such change and shall, in making such adjustments, take into account any amounts to be credited to Participant’s book account under Paragraph 4(b) in connection with the transaction. The adjustments made by the Administrator shall be final, binding and conclusive. In the event of a Change in Control, the provisions of Paragraph 5 shall be controlling.

7. Issuance of Shares of Common Stock .

(a) On each date on which one or more Shares are to be issued in accordance with the express provisions of this Agreement, the Corporation shall issue to or on behalf of the Participant a certificate (which may be in electronic form) for those Shares and shall concurrently distribute to the Participant any phantom dividend equivalents with respect to those Shares, subject in each instance to the Corporation’s collection of the applicable Withholding Taxes.

(b) Until such time as the Corporation provides Participant with notice to the contrary, the Corporation shall collect, and Participant hereby authorizes the Corporation to collect, the Withholding Taxes with respect to the Shares issued under this Agreement (including shares of Common Stock issued in settlement of phantom dividend equivalents) through an automatic Share withholding procedure pursuant to which the Corporation will withhold, immediately as the Shares are issued under the Award, a portion of those Shares with a Fair Market Value (measured as of the issuance date) equal to the amount of such Withholding Taxes (the “ Share Withholding Method ”).

(c) If the Share Withholding Method is to be utilized for the collection of Withholding Taxes, then the Corporation shall withhold the number of otherwise issuable Shares necessary to satisfy the applicable Withholding Taxes based on the applicable minimum statutory rate or other applicable withholding rate. If the obligation for Withholding Taxes is satisfied by using the Share Withholding Method, then Participant will, for tax purposes, be deemed to have been issued the full number of Shares subject to the vested Award, notwithstanding that a number of the Shares are withheld solely for the purpose of paying the applicable Withholding Taxes.

(d) The Corporation shall have sole discretion to determine whether or not the Share Withholding Method shall be utilized for the collection of the applicable Withholding Taxes. Participant shall be notified (in writing or through the Corporation’s electronic mail system) in the event the Corporation no longer intends to utilize the Share Withholding Method. Should any Shares become issuable under the Award (including shares of Common Stock issued in settlement of phantom dividend equivalents) at a time when the Share Withholding Method is not being utilized by the Corporation, then the Withholding Taxes shall be collected from Participant through a sale-to-cover transaction authorized by Participant, pursuant to which an immediate open-market sale of a portion of the Shares issued to Participant will be effected, for and on behalf of Participant, by the Corporation’s designated broker to cover the Withholding Tax liability estimated by the Corporation to be applicable to such issuance. Participant shall, promptly upon request from the Corporation, execute (whether manually or through electronic acceptance) an appropriate sales authorization (in form and substance reasonably satisfactory to the Corporation) that authorizes and directs the broker to effect such open-market, sale-to-cover transactions and remit the sale proceeds, net of brokerage fees and other applicable charges, to the Corporation in satisfaction of the applicable Withholding Taxes. However, no sale-to-cover transaction shall be effected unless (i) such a sale is at the time permissible under the Corporation’s insider trading policies governing the sale of Common Stock and (ii) the transaction is not otherwise deemed to constitute a prohibited loan under Section 402 of the Sarbanes-Oxley Act of 2002.

(e) If the Corporation determines that such sale-to-cover transaction is not permissible or advisable at the time or if Participant otherwise fails to effect a timely sales authorization as required by this Agreement, then the Corporation may, in its sole discretion, elect either to defer the issuance of the Shares until such sale-to-cover transaction can be effected in accordance with Participant’s executed sale directive or to collect the applicable Withholding Taxes through Participant’s delivery of his or her separate check payable to the Corporation in the amount of such Withholding Taxes or by withholding such amount from other wages payable to Participant. In no event shall any Shares be issued in the absence of an arrangement reasonably satisfactory to the Corporation for the satisfaction of the applicable Withholding Taxes and in compliance with any applicable requirements of Code Section 409A.

(f) The Corporation shall collect the Withholding Taxes with respect to the phantom dividend equivalents distributed in a form other than shares of Common Stock by withholding a portion of that distribution equal to the amount of the applicable Withholding Taxes, with the cash portion of the distribution to be the first portion so withheld, or through such other tax withholding arrangement as the Corporation deems appropriate.

(g) Except as otherwise provided in Paragraph 5 or Paragraph 7(b), the settlement of all Restricted Stock Units which vest under the Award shall be made solely in shares of Common Stock. In no event, however, shall any fractional shares be issued. Accordingly, the total number of shares of Common Stock to be issued at the time the Award vests shall, to the extent necessary, be rounded down to the next whole share in order to avoid the issuance of a fractional share.

(h) Notwithstanding the foregoing provisions of this Paragraph 7, the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the vesting of the Shares or any other amounts hereunder (the “ Employment Taxes ”) shall in all events be collected from the Participant no later than the last business day of the calendar year in which the Shares or other amounts vest hereunder. Accordingly, to the extent the issuance date for one or more vested Shares or the distribution date for such other amounts is to occur in a year subsequent to the calendar year in which those Shares or other amounts vest hereunder, the Participant shall, on or before the last business day of the calendar year in which the Shares or other amounts vest, deliver to the Corporation a check payable to its order in the dollar amount equal to the Employment Taxes required to be withheld with respect to those Shares or other amounts. The provisions of this Paragraph 7(h) shall be applicable only to the extent necessary to comply with the applicable tax withholding requirements of Code Section 3121(v).

8. Leaves of Absence . For purposes of the applying the various vesting provisions of this Agreement, Participant shall be deemed to cease Continuous Service on the commencement date of any leave of absence and not to remain in Continuous Service during the period of that leave, except to the extent otherwise required by law or pursuant to the following policy:

•

Participant shall receive Continuous Service credit for such vesting purposes for (i) the first three (3) months of an approved personal leave of absence and (ii) the first seven (7) months of any bona fide leave of absence (other than an approved personal leave), but in no event beyond the expiration date of such leave of absence.

•

In no event, however, shall Participant be deemed, for vesting purposes hereunder, to remain in Continuous Service or Employee status beyond the earliest of (i) the expiration date of that leave of absence, unless Participant returns to active Continuous Service or Employee status on or before that date, (ii) the date Participant’s Continuous Service or Employee status actually terminates by reason of his or her voluntary or involuntary termination or by reason of his or her death or disability or (iii) the date the Participant is deemed to have a Separation from Service.

9. Compliance with Laws and Regulations . The issuance of shares of Common Stock pursuant to the Award shall be subject to compliance by the Corporation and Participant with all Applicable Laws relating thereto.

10. Deferred Issuance Date . Notwithstanding any provision to the contrary in this Agreement, to the extent this Award may be deemed to create a deferred compensation arrangement under Code Section 409A, then the following limitation shall apply:

•

No Shares or other amounts which become issuable or distributable under this Agreement upon Participant’s Separation from Service shall actually be issued or distributed to Participant prior to the earlier of (i) the first day of the

seventh (7th) month following the date of such Separation from Service or (ii) the date of Participant’s death, if Participant is deemed at the time of such Separation from Service to be a specified employee under Section 1.409A-1(i) of the Treasury Regulations issued under Code Section 409A, as determined by the Administrator in accordance with consistent and uniform standards applied to all other Code Section 409A arrangements of the Corporation, and such delayed commencement is otherwise required in order to avoid a prohibited distribution under Code Section 409A(a)(2). The deferred Shares or other distributable amount shall be issued or distributed in a lump sum on the first day of the seventh (7th) month following the date of Participant’s Separation from Service or, if earlier, the first day of the month immediately following the date the Corporation receives proof of Participant’s death.

•

To the extent there is any ambiguity as to whether any provision of this Agreement would otherwise contravene one or more requirements or limitations of Code Section 409A, such provisions shall be interpreted and applied in a manner that does not result in a violation of the applicable requirements or limitations of Code Section 409A and the Treasury Regulations thereunder.

11. Notices . Any notice required to be given or delivered to the Corporation under the terms of this Agreement shall be in writing and addressed to the Corporation at its principal corporate offices. Any notice required to be given or delivered to Participant shall be in writing and addressed to Participant at the most current address then indicated for Participant on the Corporation’s employee records or shall be delivered electronically to Participant through the Corporation’s electronic mail system or through the on-line brokerage firm authorized by the Corporation to effect sale of the Common Stock issued hereunder. All notices shall be deemed effective upon personal delivery or delivery through the Corporation’s electronic mail system or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified.

12. Successors and Assigns . Except to the extent otherwise provided in this Agreement, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the Corporation and its successors and assigns and Participant, Participant’s assigns, the legal representatives, heirs and legatees of Participant’s estate and any beneficiaries of the Award designated by Participant.

13. Construction . This Agreement and the Award evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan. In the event of any conflict between the provisions of this Agreement and the terms of the Plan, the terms of the Plan shall be controlling. All decisions of the Administrator with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in the Award.

14. Governing Law . The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State’s conflict-of-laws rules.

15. Employment at Will . Nothing in this Agreement or in the Plan shall confer upon Participant any right to remain in Continuous Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Corporation (or any Related Entity employing or retaining Participant) or of Participant, which rights are hereby expressly reserved by each, to terminate Participant’s Continuous Service at any time for any reason, with or without Cause.

16. Plan Prospectus . The official prospectus for the Plan is available on the Corporation’s intranet at: http://gnet/HR/stocks_new. asp . Participant may also obtain a printed copy of the prospectus by contacting Stock Plan Services at stockplanservices@gilead.com.

17. Participant Acceptance . Participant must accept the terms and conditions of this Agreement either electronically through the electronic acceptance procedure established by the Corporation or through a written acceptance delivered to the Corporation in a form satisfactory to the Corporation. In no event shall any shares of Common Stock be issued (or other securities or property distributed) under this Agreement in the absence of such acceptance.

IN WITNESS WHEREOF , Gilead Sciences, Inc. has caused this Agreement to be executed on its behalf by its duly-authorized officer on the day and year first indicated above.


GILEAD SCIENCES, INC.

By:

Title:

APPENDIX A

DEFINITIONS

The following definitions shall be in effect under the Agreement:

A. Administrator shall mean the Compensation Committee of the Board in its capacity as administrator of the Plan.

B. Agreement shall mean this Restricted Stock Unit Issuance Agreement.

C. Applicable Acceleration Period shall have the meaning assigned to such term in Section 2(b) of the Plan and shall be determined on the basis of the Participant’s status on the Award Date.

D. Applicable Laws shall mean the legal requirements related to the Plan and the Award under applicable provisions of the federal securities laws, state corporate and securities laws, the Code, the rules of any applicable Stock Exchange on which the Common Stock is listed for trading, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

E. Award shall mean the award of restricted stock units made to Participant pursuant to the terms of this Agreement.

F. Award Date shall mean the date the restricted stock units are awarded to Participant pursuant to the Agreement and shall be the date indicated in Paragraph 1 of the Agreement.

G. Board shall mean the Corporation’s Board of Directors.

H. Cause shall mean the termination of Participant’s Continuous Service as a result of Participant’s (i) conviction of, a guilty plea with respect to, or a plea of nolo contendere to, a charge that Participant has committed a felony under the laws of the United States or of any State or a crime involving moral turpitude, including (without limitation) fraud, theft, embezzlement or any crime that results in or is intended to result in personal enrichment to Participant at the expense of the Corporation or a Related Entity; (ii) material breach of any agreement entered into between Participant and the Corporation or a Related Entity that impairs the Corporation’s or the Related Entity’s interest therein; (iii) willful misconduct, significant failure to perform his or her duties or gross neglect of his or her duties; or (iv) engagement in any activity that constitutes a material conflict of interest with the Corporation or a Related Entity.

I. Change in Control shall mean a change in ownership or control of the Corporation effected through the consummation of any of the following transactions:

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(ii) a sale, transfer or other disposition of all or substantially all of the Corporation’s assets;

(iii) the closing of any transaction or series of related transactions pursuant to which any person or any group of persons comprising a “group” within the meaning of Rule 13d-5(b)(1) of the 1934 Act (other than the Corporation or a person that, prior to such transaction or series of related transactions, directly or indirectly controls, is controlled by or is under common control with, the Corporation) becomes directly or indirectly (whether as a result of a single acquisition or by reason of one or more acquisitions within the twelve (12)-month period ending with the most recent acquisition) the beneficial owner (within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing (or convertible into or exercisable for securities possessing) more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities (as measured in terms of the power to vote with respect to the election of Board members) outstanding immediately after the consummation of such transaction or series of related transactions, whether such transaction involves a direct issuance from the Corporation or the acquisition of outstanding securities held by one or more of the Corporation’s existing stockholders; or

(iv) a change in the composition of the Board over a period of twelve (12) consecutive months or less such that a majority of the Board members ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who either (A) have been Board members continuously since the beginning of such period or (B) have been elected or nominated for election as Board members during such period by at least a majority of the Board members described in clause (A) who were still in office at the time the Board approved such election or nomination.

In no event, however, shall a Change in Control be deemed to occur upon a merger, consolidation or other reorganization effected primarily to change the State of the Corporation’s incorporation or to create a holding company structure pursuant to which the Corporation becomes a wholly-owned subsidiary of an entity whose outstanding voting securities immediately after its formation are beneficially owned, directly or indirectly and in substantially the same proportion, by the persons who beneficially owned the Corporation’s outstanding voting securities immediately prior to the formation of such entity.

F. Code shall mean the Internal Revenue Code of 1986, as amended.

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G. Common Stock shall mean shares of the Corporation’s common stock.

H. Constructive Termination shall have the meaning assigned to such term in Section 11(d) of the Plan.

I. Consultant shall mean any person, including an advisor, who is compensated by the Corporation or any Related Entity for services performed as a non-employee consultant; provided, however , that the term “Consultant” shall not include non-employee Directors serving in their capacity as Board members. The term “Consultant” shall include a member of the board of directors of a Related Entity.

J. Continuous Service shall mean the performance of services for the Corporation or a Related Entity (whether now existing or subsequently established) by a person in the capacity of an Employee, Director or Consultant. For purposes of this Agreement, Participant shall be deemed to cease Continuous Service immediately upon the occurrence of either of the following events: (i) Participant no longer performs services in any of the foregoing capacities for the Corporation or any Related Entity or (ii) the entity for which Participant is performing such services ceases to remain a Related Entity of the Corporation, even though Participant may subsequently continue to perform services for that entity. In jurisdictions requiring notice in advance of an effective termination of Participant’s service as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of such service to the Corporation or a Related Entity notwithstanding any required notice period that must be fulfilled before Participant’s termination as an Employee, Director or Consultant can be effective under Applicable Laws.

K. Corporation shall mean Gilead Sciences, Inc., a Delaware corporation, and any successor corporation to all or substantially all of the assets or voting stock of Gilead Sciences, Inc. which shall by appropriate action adopt the Plan.

L. Director shall mean a member of the Board.

M. Domestic Partner shall mean a person who meets and continues to meet all of the criteria detailed in the Gilead Sciences Affidavit of Domestic Partnership when the Domestic Partnership has been internally registered with the Corporation by filing with the Corporation an original, properly completed, notarized Gilead Sciences Affidavit of Domestic Partnership.

N. Employee shall mean any person who is in the employ of the Corporation (or any Related Entity), subject to the control and direction of the Corporation or Related Entity as to both the work to be performed and the manner and method of performance.

O. Fair Market Value per share of Common Stock on any relevant date shall be the closing price per share of Common Stock (or the closing bid, if no sales were reported) on that date, as quoted on the Stock Exchange that is at the time serving as the primary trading market for the Common Stock; provided, however, that if there no reported closing price or closing bid for that date, then the closing price or closing bid, as applicable, for the last trading

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date on which such closing price or closing bid was quoted shall be determinative of such Fair Market Value. The applicable quoted price shall be as reported in The Wall Street Journal or such other source as the Administrator deems reliable.

P. Immediate Family shall mean, with respect to Participant, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law including adoptive relationships, Domestic Partner, a trust in which such persons (or person) have more than fifty percent (50%) of the beneficial interest, a foundation in which such persons (or person) control the management of the entity’s assets, or any other entity in which such persons (or person) own more than fifty percent (50%) of the voting interests.

Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended from time to time.

R. Normal Vesting Schedule shall mean the schedule set forth in Paragraph 1 of the Agreement, pursuant to which the Restricted Stock Units and the underlying Shares are to vest in a series of installments over the Participant’s period of Continuous Service.

S. Participant shall mean the person to whom the Award is made pursuant to the Agreement.

T. Parent shall mean a “parent corporation,” whether now existing or hereafter established, as defined in Section 424(e) of the Code.

U. Plan shall mean the Corporation’s 2004 Equity Incentive Plan, as amended and restated from time to time.

V. Permanent Disability shall mean the inability of Participant to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which is expected to result in death or to be of continuous duration of twelve (12) months or more.

W. Qualifying Change in Control shall mean a change in the ownership of the Corporation, a change in the effective control of the Corporation or a change in ownership of a substantial portion of the Corporation’s assets, with each such event to be determined in accordance with the requirements for a change in control event set forth in Section 1.409A-3(i)((5) of the Treasury Regulations; provided, however, that a change in the effective control of the Corporation will only be deemed to occur if there is an acquisition, within the applicable twelve (12)-month period, of ownership of securities possessing more than fifty percent (50%) of the total combined voting power of the Corporation’s outstanding securities.

X. Related Entity shall mean (i) any Parent or Subsidiary of the Corporation and (ii) any corporation in an unbroken chain of corporations beginning with the Corporation and ending with the corporation in the chain for which Participant provides services as an Employee,

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Director or Consultant, provided each corporation in such chain owns securities representing at least twenty percent (20%) of the total outstanding voting power of the outstanding securities of another corporation or entity in such chain and there is a legitimate non-tax business purpose for making this Award to Participant.

Y. Separation from Service shall mean the Participant’s cessation of Employee status by reason of his or her death, retirement or termination of employment. The Participant shall be deemed to have terminated employment for such purpose at such time as the level of his or her bona fide services to be performed as an Employee (or as a consultant or independent contractor) permanently decreases to a level that is not more than twenty percent (20%) of the average level of services such person rendered as an Employee during the immediately preceding thirty-six (36) months (or such shorter period for which he or she may have rendered such services). Solely for purposes of determining when a Separation from Service occurs, Participant will be deemed to continue in “Employee” status for so long as he remains in the employ of one or more members of the Employer Group, subject to the control and direction of the employer entity as to both the work to be performed and the manner and method of performance. “Employer Group” means the Corporation and any Parent or Subsidiary and any other corporation or business controlled by, controlling or under common control with, the Corporation, as determined in accordance with Sections 414(b) and 414(c) of the Code and the Treasury Regulations thereunder, except that in applying Sections 1563(1), (2) and (3) of the Code for purposes of determining the controlled group of corporations under Section 414(b), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in such sections, and in applying Section 1.414(c)-2 of the Treasury Regulations for purposes of determining trades or businesses that are under common control for purposes of Section 414(c), the phrase “at least 50 percent” shall be used instead of “at least 80 percent” each place the latter phrase appears in Section 1.4.14(c)-2 of the Treasury Regulations. Any such determination as to Separation from Service, however, shall be made in accordance with the applicable standards of the Treasury Regulations issued under Section 409A of the Code. In addition, the following special provisions shall be in effect for any leave of absence taken by the Participant while this Award is outstanding:

(i) Should the period of such leave (other than a disability leave) exceed six (6) months, then Participant shall be deemed to incur a Separation from Service upon the expiration of the initial six (6) - month period of that leave, unless Participant retains a right to re-employment under applicable law or by contract with the Corporation (or any Parent or Subsidiary or other Related Entity).

(ii) Should the period of a disability leave exceed twenty-nine (29) months, then Participant shall be deemed to incur a Separation from Service upon the expiration of the initial twenty-nine (29)-month period of that leave, unless Participant retains a right to re-employment under applicable law or by contract with the Corporation (or any Parent or Subsidiary or other Related Entity). For such purpose, a disability leave shall be a leave of absence due to any medically determinable physical or mental impairment that can be expected

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to result in death or to last for a continuous period of not less than six (6) months and causes Participant to be unable to perform the duties of his position of employment with the Corporation (or any Parent or Subsidiary or other Related Entity) or any substantially similar position of employment.

Z. Stock Exchange shall mean the American Stock Exchange, the Nasdaq Global or Global Select Market or the New York Stock Exchange.

AA. Subsidiary shall mean a “subsidiary corporation,” whether now existing or hereafter established, as defined in Section 424(f) of the Code.

BB. Withholding Taxes shall mean the federal, state and local income taxes and the employee portion of the federal, state and local employment taxes required to be withheld by the Corporation in connection with the issuance of the shares of Common Stock which vest under the Award and any phantom dividend equivalents distributed with respect to those shares.

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Exhibit 10.93

GILEAD SCIENCES LIMITED – PHARMACHEM TECHNOLOGIES (GRAND BAHAMA), LTD.

ADDENDUM TO TENOFOVIR DISOPROXIL FUMARATE MANUFACTURING SUPPLY AGREEMENT

The Parties hereby acknowledge and agree to the following:

This Addendum agreement (the “ Addendum ”) is entered into as of February 3, 2011 by and between PharmaChem Technologies (Grand Bahama) Ltd., a Commonwealth of the Bahamas company (“ PharmaChem ”) having its principal place of business at West Sunrise Highway, Freeport, Grand Bahama, Commonwealth of the Bahamas, and Gilead Sciences Limited, an Irish limited company (“ GSL ”) whose registered address is Unit 12, Stillorgan Industrial Park, Blackrock, Co. Dublin, Ireland. PharmaChem and GSL may be referred to individually as a “ Party ” and collectively as the “ Parties ” in this Addendum.

WHEREAS, by a Manufacturing Supply Agreement dated July 17, 2003 made between PharmaChem and Gilead World Markets Ltd. (“ GWM ”), as novated by a Novation Agreement dated June 14, 2004 and further amended on July 15, 2005 _, July 31, 2005, May 10, 2007, August 20, 2007 and December 5, 2008 (collectively, the “ Agreement ”), PharmaChem agreed to manufacture and supply bulk tenofovir disoproxil fumarate (the “ Product ”) to GSL on the terms and conditions set forth therein;

WHEREAS, a previous addendum to the Agreement provided for GSL to coordinate purchases of certain key raw materials required for manufacturing of the Product (the “ Key Raw Materials ”);

WHEREAS, the Parties desire (i) to extend the term of the Agreement until December 31, 2016, and give GSL an option to extend the term further until December 31, 2017, (ii) to amend certain provisions of the Agreement relating to the quantities and price of Product to be supplied thereunder, and (iii) [*], in each case upon the terms and conditions set forth herein;

WHEREAS, PharmaChem has been acquired by Novasep Holdings, a company organized under the laws of France (“ Novasep ”); and

WHEREAS, in order to induce GSL to enter into this Addendum, Novasep [*].

NOW THEREFORE, in consideration of the covenants herein and intending to be legally bound hereby, the “Whereas” clauses being an integral and material part of this Addendum, the Parties hereby agree as follows:

1. Article 2 of the Agreement is cancelled and replaced by the following:

The term of the Agreement shall begin as of the Effective Date, and shall remain in effect until December 31, 2016 (the “ Initial Term ”) unless earlier terminated according to Section 12 “Termination” of the Agreement. Notwithstanding the foregoing, GSL shall have the option (the “ Option ”), exercisable [*] by written notice from GSL to PharmaChem (the “ Exercise Notice ”), to extend the term of

the Agreement until December 31, 2017, subject to the Parties’ rights under Section 12.

2. Notwithstanding any provision of the Agreement to the contrary, the price of Product delivered in accordance with the Agreement (Exhibit B) for calendar years 2011 through 2016 (and, if the Option is exercised, 2017), and the minimum quantity of Product delivered in accordance with the Agreement for calendar years 2011 through 2016, shall be as set forth on Schedule 1 hereto. It is intended that all purchases of Product within a calendar year, [*] and at whatever modified pricing agreed to by GSL, will be counted towards the commitment under Schedule 1, Combined Quantity, and that pricing for GSL will be calculated according to the formula and examples in Schedule 1 based on quantities of Product purchased/forecasted by [*].

3. Notwithstanding any provision of the Agreement to the contrary, in the event GSL exercises the Option, the Exercise Notice shall specify the quantity of Product to be supplied by PharmaChem during each month of 2017 and PharmaChem shall, within [*], provide written confirmation to GSL of PharmaChem’s obligation to supply Product pursuant to the Agreement in accordance with the Exercise Notice at the price set forth on Schedule 1 hereto. In the event PharmaChem does not provide such confirmation that it shall supply the quantities of Product specified in the Exercise Notice within [*], such failure shall be considered a failure to supply, and GSL shall have the rights set forth in [*]. In the event GSL exercises the Option but [*] purchases less than [*] of Product from PharmaChem in 2017, then (i) [*] and (ii) [*].

4. PharmaChem agrees to [*]

5. The current and projected purchase prices for the Key Raw Materials are set forth on Schedule 2. The current and projected purchase prices for the other Raw Materials are set forth on Schedule 3. The current and projected energy costs are set forth on Schedule 4. Deviations of actual costs, and energy prices from the values in Schedules 2, 3 and 4 may be used to modify the purchase price for Product pursuant to Section 10 of the Agreement; provided, however, that [*].

6. Price reductions for yield improvements under Process Improvements Sections 8 and 10 will be calculated using the per step yields as listed in Schedule 5.

7. For avoidance of doubt, as set forth in a previous addendum to the Agreement, GSL may substitute quantities of a different compound for tenofovir disoproxil fumarate (“ TDF ”) as the “Product” to be manufactured by PharmaChem under the Agreement, on terms and conditions [*] to be mutually agreed in writing by GSL and PharmaChem. If that happens, the quantities of such other compound manufactured by PharmaChem shall [*].

8. Without regard to any limitation set forth in the Agreement, PharmaChem shall permit any designated employee or agent of GSL to observe and inspect any manufacturing facilities or processes related to PharmaChem’s performance under the Agreement[*].

9. In connection with matters which are the subject of the Agreement, neither Party nor its Affiliates (as defined in the Agreement) have made, offered or authorized, or will make, offer or authorize, any payment, gift, promise or other advantage, whether directly or through any other person, to or for the use or benefit of any person holding a legislative, administrative or judicial office, or any person employed by or acting on behalf of a public agency, public enterprise, public international organization or political party, or any political party official or candidate for office, where such payment, gift, promise or advantage would

constitute a violation of any law, including the Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq.

10. Notwithstanding any provision of the Agreement to the contrary, in the event [*], GSL may terminate the Agreement in its sole discretion, with such termination being effective on such date as may be specified by GSL, by written notice to PharmaChem.

11. This Addendum shall take effect only upon [*].

12. For purposes of this Addendum, any consent that may be provided by GSL shall be in GSL’s sole discretion unless otherwise expressly specified herein.

13. This Addendum shall be governed by and construed in accordance with the laws of the State of California, without giving effect to its conflict of laws principles.

14. This Addendum may only be amended by a written instrument signed by each of the parties hereto.

15. This Addendum shall be deemed severable; the invalidity or unenforceability of any term or provision of this Addendum shall not affect the validity or enforceability of this Addendum or of any other term thereof, which shall remain in full force and effect.

16. The Agreement amended hereby shall continue in full force and effect except as expressly amended hereby.

In WITNESS WHEREOF, the parties hereto hereby execute this Addendum as of the date first indicated above.


PharmaChem Technologies (Grand Bahama), Ltd.

By:		/s/ Roger-Marc Nicoud
Name:		Roger-Marc Nicoud
Title:		Director

Gilead Sciences Limited

By:		/s/ John F. Milligan
Name:		John F. Milligan
Title:		Director

[*]

Schedule 1

A. Price List .

During calendar year 2011:

$ [*]

During calendar year 2012:

$ [*]

During calendar year 2013:

$ [*]

During calendar year 2014:

$ [*]

During calendar year 2015:

$ [*]

During calendar year 2016:

$ [*]

During calendar year 2017:

$ [*]

For calendar year 2011, the minimum total purchase shall be [*]. For each of calendar years 2012 through 2016, the minimum total purchase shall be [*]. In accordance with the Option, [*] minimum total purchase for calendar year 2017.

In the list above, the metric tons of Product means the total (the “Combined Quantity”) forecasted/ordered [*].

In the event [*] elects to purchase [*] in any given year in calendar years 2012-2017, all invoices for such year shall reflect a blended price based on the total quantity to be purchased in such year. For example, if in 2012 [*] elects to purchase [*], then all invoices for such year shall reflect the blended price of [*].

B. Gilead Price Based on Total Forecasted Purchases . The price for any given calendar year shall be based on the list in “A” above with Gilead Annual Quantity set as per Section 3 of the Agreement.

The [*] shall determine the total commitment in USD to PharmaChem for the given calendar year (the “Annual USD Commitment”). For example,

Year 2011 [*] which gives a total Annual USD Commitment of [*].

Gilead’s [*] tentative price for the year would then be calculated taking into consideration [*] as follows:

[*]

C. Gilead Price Adjustments Based on Total Actual Purchases . Because [*] actual purchases in a calendar year may vary from the [*] projected purchases used in the initial annual Gilead price calculation in “B,” Gilead and PharmaChem shall, [*], recalculate the price using the formula in section “B” above and the [*]. If the adjusted price is higher than the price paid by Gilead based on the start-of-year calculation, then [*].

Price reductions due to reduced Key Raw Material, raw material, or energy costs as well as reductions due to Process Improvements shall be applied [*].

D. Price for Gilead Purchases above Amounts in Price List . If [*] order more Product than the amounts provided in “A” for a calendar year, Gilead’s price for such excess amount will be [*]. Such excess quantities and the price therefor shall [*].

Schedule 2

Current and Projected purchase prices for Key Raw Materials in USD per kilogram

Key Raw Materials

2011

2012

through

2017

[*]

Schedule 3

Current and Projected purchase prices for other Raw Materials in USD and their

usage rates per Key Raw Material

[*]

Schedule 4

Current and Projected Energy Costs in USD


*[]**

Cost per kwh.

*[]**

*[]**



Total		*[]**



*[]**

		*[]**

*[]**		*[]**

Schedule 5

Baseline yield per step

[*]

Exhibit 31.1

CERTIFICATION

I, John C. Martin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gilead Sciences, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2011

/s/ J OHN C. M ARTIN

John C. Martin, Ph.D.

Chairman and Chief Executive Officer

Exhibit 31.2

CERTIFICATION

I, Robin L. Washington, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Gilead Sciences, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2011

/ S / R OBIN L. W ASHINGTON

Robin L. Washington

Senior Vice President and Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350, as adopted), John C. Martin, Ph.D., the Chairman and Chief Executive Officer of Gilead Sciences, Inc. (the Company), and Robin L. Washington, the Senior Vice President and Chief Financial Officer of the Company, each hereby certifies that, to the best of his or her knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2011, to which this Certification is attached as Exhibit 32 (the Periodic Report), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition of the Company at the end of the periods covered by the Periodic Report and results of operations of the Company for the periods covered by the Periodic Report.

Dated: May 9, 2011

/ S / J OHN C. M ARTIN

/ S / R OBIN L. W ASHINGTON

John C. Martin, Ph.D.

Chairman and Chief Executive Officer

Robin L. Washington

Senior Vice President and Chief Financial Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the SEC and is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.