GILEAD SCIENCES INC (Form: 10-Q, Received: 11/04/2011 16:51:53)

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 September 30, 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 October 28, 2011: 751,139,232

GILEAD SCIENCES, INC.

INDEX



PART I.	FINANCIAL INFORMATION		3

	Item 1.	Condensed Consolidated Financial Statements	3

		Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010	3

		Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2011 and 2010	4

		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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	27

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

	Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION		38

	Item 1.	Legal Proceedings	38

	Item 1A.	Risk Factors	39

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57

	Item 3.	Defaults Upon Senior Securities	57

	Item 4.	Removed and Reserved	57

	Item 5.	Other Information	57

	Item 6.	Exhibits	58

SIGNATURES			68

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 ^® , COMPLERA ^® , 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)


	September 30, 2011			December 31, 2010
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	909,359		$	907,879
Short-term marketable securities		1,347,776			1,190,789
Accounts receivable, net		1,867,092			1,621,966
Inventories		1,337,751			1,203,809
Deferred tax assets		283,856			279,339
Prepaid taxes		194,973			320,424
Prepaid expenses		90,817			67,632
Other current assets		115,643			116,244

Total current assets		6,147,267			5,708,082
Property, plant and equipment, net		761,190			701,235
Noncurrent portion of prepaid royalties		181,080			203,790
Noncurrent deferred tax assets		82,728			153,379
Long-term marketable securities		3,224,981			3,219,403
Intangible assets		2,111,003			1,425,592
Other noncurrent assets		131,649			181,149

Total assets	$	12,639,898		$	11,592,630

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,063,723		$	803,025
Accrued government rebates		412,372			325,018
Accrued compensation and employee benefits		149,092			147,632
Income taxes payable		33,672			1,862
Other accrued liabilities		495,312			437,893
Deferred revenues		68,673			103,175
Current portion of long-term debt and other obligations, net		1,587			646,345

Total current liabilities		2,224,431			2,464,950
Long-term deferred revenues		34,704			32,844
Long-term debt, net		3,891,758			2,838,573
Long-term income taxes payable		117,025			107,025
Other long-term obligations		138,774			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; 756,094 and 801,998 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively		757			802
Additional paid-in capital		4,809,752			4,648,286
Accumulated other comprehensive income (loss)		(15,541	)		30,911
Retained earnings		1,321,796			1,183,730

Total Gilead stockholders’ equity		6,116,764			5,863,729
Noncontrolling interest		116,442			258,108

Total stockholders’ equity		6,233,206			6,121,837

Total liabilities and stockholders’ equity	$	12,639,898		$	11,592,630

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

(in thousands, except per share amounts)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Revenues:
Product sales	$	2,065,859		$	1,865,559		$	5,969,025		$	5,459,683
Royalty revenues		51,629			69,358			204,615			480,829
Contract and other revenues		4,172			2,739			11,367			10,221

Total revenues		2,121,660			1,937,656			6,185,007			5,950,733

Costs and expenses:
Cost of goods sold		531,989			477,584			1,539,963			1,373,539
Research and development		290,066			230,440			826,915			680,170
Selling, general and administrative		295,927			250,559			895,764			764,183

Total costs and expenses		1,117,982			958,583			3,262,642			2,817,892

Income from operations		1,003,678			979,073			2,922,365			3,132,841
Interest and other income, net		14,406			15,593			40,216			49,523
Interest expense		(43,097	)		(33,620	)		(130,420	)		(68,339	)

Income before provision for income taxes		974,987			961,046			2,832,161			3,114,025
Provision for income taxes		237,449			258,883			704,861			850,641

Net income		737,538			702,163			2,127,300			2,263,384
Net loss attributable to noncontrolling interest		3,586			2,713			11,192			8,454

Net income attributable to Gilead	$	741,124		$	704,876		$	2,138,492		$	2,271,838

Net income per share attributable to Gilead common stockholders—basic	$	0.97		$	0.85		$	2.72		$	2.61

Shares used in per share calculation—basic		767,033			833,006			787,272			871,887

Net income per share attributable to Gilead common stockholders—diluted	$	0.95		$	0.83		$	2.66		$	2.55

Shares used in per share calculation—diluted		781,312			847,228			802,762			890,216

See accompanying notes.

GILEAD SCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)


	Nine Months Ended September 30,
	2011			2010
Operating Activities:
Net income	$	2,127,300		$	2,263,384
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense		53,232			49,375
Amortization expense		175,575			138,585
Stock-based compensation expenses		145,775			146,690
Excess tax benefits from stock-based compensation		(30,255	)		(68,642	)
Tax benefits from employee stock plans		26,574			69,940
Deferred income taxes		43,415			42,720
Other non-cash transactions		47,159			(19,621	)
Changes in operating assets and liabilities:
Accounts receivable, net		(221,393	)		(352,081	)
Inventories		(136,684	)		(228,263	)
Prepaid expenses and other assets		13,373			(5,818	)
Accounts payable		257,805			141,692
Income taxes payable		85,177			(135,499	)
Accrued liabilities		106,492			97,115
Deferred revenues		(32,642	)		(30,507	)

Net cash provided by operating activities		2,660,903			2,109,070

Investing Activities:
Purchases of marketable securities		(4,161,322	)		(3,800,280	)
Proceeds from sales of marketable securities		3,498,720			1,808,222
Proceeds from maturities of marketable securities		506,513			591,646
Acquisitions, net of cash acquired		(588,608	)		(91,000	)
Capital expenditures and other		(105,794	)		(38,523	)

Net cash used in investing activities		(850,491	)		(1,529,935	)

Financing Activities:
Proceeds from issuances of senior notes, net of issuance costs		987,370			—
Proceeds from issuances of convertible notes, net of issuance costs		—			2,462,500
Proceeds from sale of warrants		—			155,425
Purchases of convertible note hedges		—			(362,622	)
Proceeds from issuances of common stock		158,234			166,826
Proceeds from credit facility		—			500,000
Repayments of credit facility		—			(500,000	)
Repurchases of common stock		(2,156,830	)		(3,407,055	)
Repayment of convertible senior notes		(649,987	)		—
Repayments of other long-term obligations		(1,619	)		(5,589	)
Excess tax benefits from stock-based compensation		30,255			68,642
Distributions (to) from noncontrolling interest		(130,474	)		42,819

Net cash used in financing activities		(1,763,051	)		(879,054	)

Effect of exchange rate changes on cash		(45,881	)		49,954

Net change in cash and cash equivalents		1,480			(249,965	)
Cash and cash equivalents at beginning of period		907,879			1,272,958

Cash and cash equivalents at end of period	$	909,359		$	1,022,993

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 is 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.

In May 2011, our 2011 Notes matured and as a result, we have only considered their impact for the period they were outstanding on our net income per share calculations. In August 2011, the warrants related to our 2011 Notes expired and as a result, we have only considered their impact for the period they were outstanding on our net income per share calculations.

During the three and nine months ended September 30, 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 and nine months ended September 30, 2011 and 2010, the average market prices of our common stock did not exceed the conversion prices of the 2014 Notes and 2016 Notes, which were issued in July 2010, 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 and nine months ended September 30, 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 21.0 million and 21.4 million weighted-average shares of our common stock were outstanding during the three and nine months ended September 30, 2011, respectively, but were not included in the computation of diluted net income per share attributable to Gilead common stockholders because their effect was antidilutive. Stock options to purchase approximately 27.1 million and 22.6 million weighted-average shares of our common stock were outstanding during the three and nine months ended September 30, 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 September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Numerator:
Net income attributable to Gilead	$	741,124	$	704,876	$	2,138,492	$	2,271,838

Denominator:
Weighted-average shares of common stock outstanding used in the calculation of basic net income per share attributable to Gilead common stockholders		767,033		833,006		787,272		871,887
Effect of dilutive securities:
Stock options and equivalents		13,548		14,222		14,452		17,120
Conversion spread related to the 2011 Notes		—		—		253		461
Conversion spread related to the 2013 Notes		731		—		785		748

Weighted-average shares of common stock outstanding used in the calculation of diluted net income per share attributable to Gilead common stockholders		781,312		847,228		802,762		890,216

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 September 30, 2011.

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued new accounting guidance intended to simplify goodwill impairment testing. Entities will be allowed to perform a qualitative assessment on goodwill impairment to determine whether a quantitative assessment is necessary. This guidance is effective for goodwill impairment tests performed in interim and annual periods for fiscal years beginning after December 15, 2011. The standard is effective for us beginning in the first quarter of fiscal 2012. Early adoption is permitted. The adoption of this guidance is not expected to have a material impact on our Consolidated Financial Statements.

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 $2.90 billion and $3.53 billion, respectively, as of September 30, 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. In March 2011, we issued senior unsecured notes due in 2021 (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 $991.9 million and $1.07 billion, respectively, as of September 30, 2011. The fair value of the Convertible Notes and 2021 Notes were 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):


	September 30, 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	$	1,155,328	$	—	$	—	$	1,155,328	$	1,355,437	$	—	$	—	$	1,355,437
Money market funds		372,260		—		—		372,260		520,063		—		—		520,063
U.S. government agencies and FDIC guaranteed securities		—		1,090,587		—		1,090,587		—		1,296,110		—		1,296,110
Municipal debt securities		—		24,591		—		24,591		—		17,625		—		17,625
Non-U.S. government securities		—		211,764		25,314		237,078		—		278,610		9,594		288,204
Corporate debt securities		—		1,703,869		—		1,703,869		—		1,119,254		—		1,119,254
Residential mortgage and asset-backed securities		—		316,526		—		316,526		—		277,043		—		277,043
Student loan-backed securities		—		—		56,507		56,507		—		—		70,771		70,771

Total debt securities		1,527,588		3,347,337		81,821		4,956,746		1,875,500		2,988,642		80,365		4,944,507
Equity securities		5,267		—		—		5,267		4,631		—		—		4,631
Derivatives		—		46,229		—		46,229		—		64,461		—		64,461

	$	1,532,855	$	3,393,566	$	81,821	$	5,008,242	$	1,880,131	$	3,053,103	$	80,365	$	5,013,599

Liabilities:
Contingent consideration	$	—	$	—	$	128,305	$	128,305	$	—	$	—	$	11,100	$	11,100
Derivatives		—		39,119		—		39,119		—		38,553		—		38,553

	$	—	$	39,119	$	128,305	$	167,424	$	—	$	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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Balance, beginning of period	$	104,145		$	94,062		$	80,365		$	105,662
Total realized and unrealized gains (losses) included in:
Interest and other income, net		1,707			—			4,578			115
Other comprehensive income, net		(22,681	)		2,299			(28,375	)		4,066
Sales of marketable securities		(1,350	)		(8,050	)		(28,630	)		(21,532	)
Transfers into Level 3		—			—			53,883			—

Balance, end of period	$	81,821		$	88,311		$	81,821		$	88,311

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 2.38%. 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 0.14% to 0.90%. As of September 30, 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 September 30, 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 agreed 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. As of September 30, 2011, we had received a total of $63.5 million in bonds, of which $53.9 million were received during the nine months ended September 30, 2011 and were included in transfers into Level 3. 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 September 30, 2011.

As of September 30, 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.

As of September 30, 2011, we had contingent consideration liabilities totaling $128.3 million. These liabilities were incurred as a result of our acquisitions of CGI Pharmaceuticals, Inc. (CGI) in July 2010, Arresto Biosciences, Inc. (Arresto) in January 2011 and Calistoga Pharmaceuticals, Inc. (Calistoga) in April 2011. The fair value measurements of contingent consideration obligations are based on significant unobservable inputs, and accordingly, such amounts are considered Level 3 measurements. The majority of our contingent consideration liabilities is related to our acquisition of Calistoga. The estimated fair value of the contingent consideration liabilities for the Calistoga acquisition was based on the probability of technical and regulatory success to achieve each of the milestone events at the expected dates and the present value of the total earnout amount. We estimated the fair value using a discount rate of 8.00%. For the three and nine months ended September 30, 2011, changes in the fair values of our contingent consideration liabilities were not significant. See Note 5 for a description of our acquisitions.

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
September 30, 2011
Debt securities:
U.S. treasury securities	$	1,147,146	$	8,505	$	(322	)	$	1,155,329
Money market funds		372,260		—		—			372,260
U.S. government agencies and FDIC guaranteed securities		1,082,230		8,593		(236	)		1,090,587
Municipal debt securities		24,410		183		(2	)		24,591
Non-U.S. government securities		266,234		1,450		(30,606	)		237,078
Corporate debt securities		1,698,857		9,242		(4,231	)		1,703,868
Residential mortgage and asset-backed securities		317,371		1,063		(1,908	)		316,526
Student loan-backed securities		61,300		—		(4,793	)		56,507

Total debt securities		4,969,808		29,036		(42,098	)		4,956,746
Equity securities		1,451		3,816		—			5,267

Total	$	4,971,259	$	32,852	$	(42,098	)	$	4,962,013

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):


	September 30, 2011		December 31, 2010
Cash and cash equivalents	$	389,256	$	538,946
Short-term marketable securities		1,347,776		1,190,789
Long-term marketable securities		3,224,981		3,219,403

Total	$	4,962,013	$	4,949,138

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


	September 30, 2011				December 31, 2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Less than one year	$	1,732,877	$	1,737,032	$	1,726,095	$	1,729,735
Greater than one year but less than five years		3,103,055		3,090,532		3,022,744		3,044,114
Greater than five years but less than ten years		32,160		32,703		33,076		33,580
Greater than ten years		101,716		96,479		142,338		137,078

Total	$	4,969,808	$	4,956,746	$	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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Gross realized gains on sales	$	4,830		$	1,290		$	13,784		$	10,588
Gross realized losses on sales	$	(644	)	$	(260	)	$	(2,421	)	$	(2,434	)

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
September 30, 2011
Debt securities:
U.S. treasury securities	$	(322	)	$	249,055	$	—		$	—	$	(322	)	$	249,055
U.S. government agencies and FDIC guaranteed securities		(236	)		179,879		—			—		(236	)		179,879
Municipal debt securities		(2	)		9,785		—			—		(2	)		9,785
Non-U.S. government securities		(30,604	)		25,314		(2	)		2,995		(30,606	)		28,309
Corporate debt securities		(4,182	)		548,008		(49	)		6,298		(4,231	)		554,306
Residential mortgage and asset-backed securities		(739	)		100,102		(1,169	)		60,755		(1,908	)		160,857
Student loan-backed securities		—			—		(4,793	)		56,507		(4,793	)		56,507

Total	$	(36,085	)	$	1,112,143	$	(6,013	)	$	126,555	$	(42,098	)	$	1,238,698

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 September 30, 2011 and December 31, 2010, approximately 31% 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 a lack of market activity and liquidity 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 September 30, 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 and nine months ended September 30, 2011, we recorded net unrealized losses on available-for-sale securities of $24.8 million and $24.1 million, respectively, in accumulated other comprehensive income (OCI) and reclassified gains of $2.6 million and $7.2 million, respectively, out of accumulated OCI into interest and other income, net. Comparatively, during the three and nine months ended September 30, 2010, we recorded net unrealized gains on available-for-sale securities of $9.7 million and $18.4 million, respectively, in accumulated OCI and reclassified gains of $1.0 million and $5.0 million, respectively, 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 September 30, 2011 will be reclassified to product sales within 12 months.

We had notional amounts on foreign currency exchange contracts outstanding of $3.94 billion and $3.55 billion at September 30, 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):


	September 30, 2011
	Asset Derivatives			Liability Derivatives
	Location	Fair Value		Location	Fair Value
Derivatives designated as hedges:
Foreign currency exchange contracts	Other current assets	$	26,835	Other accrued liabilities	$	38,709
Foreign currency exchange contracts	Other noncurrent assets		19,386	Other long-term obligations		146

Total derivatives designated as hedges			46,221			38,855

Derivatives not designated as hedges:
Foreign currency exchange contracts	Other current assets		8	Other accrued liabilities		264

Total derivatives not designated as hedges			8			264

Total derivatives		$	46,229		$	39,119


	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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Derivatives designated as hedges:
Net gains (losses) recognized in OCI (effective portion)	$	107,871		$	(174,321	)	$	(66,236	)	$	76,023
Net gains (losses) reclassified from accumulated OCI into product sales (effective portion)	$	(44,072	)	$	31,526		$	(55,088	)	$	69,080
Net losses recognized in interest and other income, net (ineffective portion and amounts excluded from effectiveness testing)	$	(7,759	)	$	5,158		$	(10,825	)	$	3,493
Derivatives not designated as hedges:
Net gains (losses) recognized in interest and other income, net	$	86,781		$	(106,918	)	$	(33,409	)	$	31,916

The net unrealized gains related to our cash flow hedges included in accumulated OCI, net of taxes, were $7.6 million at September 30, 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.

There were no material amounts recorded in interest and other income, net, for the three or nine months ended September 30, 2011 and 2010 as a result of the discontinuance of cash flow hedges.

5. ACQUISITIONS

Arresto Biosciences, Inc.

In December 2010, we entered into an agreement to acquire Arresto for $225.0 million plus potential future payments based on the achievement of certain sales targets. 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. GS 6224 is currently being evaluated in several clinical studies evaluating its potential in idiopathic pulmonary fibrosis, oncology, myelofibrosis and liver fibrosis. We believe that Arresto’s pipeline and research and development expertise are well aligned with our 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.

The acquisition-date fair value of the total consideration transferred to acquire Arresto was $227.1 million, and consisted of cash paid at or prior to closing of $221.7 million and contingent consideration of $5.4 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at January 14, 2011 (in thousands):


IPR&D	$	117,000
Goodwill		134,482
Deferred tax assets		17,417
Deferred tax liabilities		(41,705	)
Other net liabilities assumed		(125	)

Total consideration transferred	$	227,069

IPR&D

Intangible assets associated with in-process research and development (IPR&D) projects relate to the GS 6224 product candidate. Management determined that the estimated acquisition-date fair value of intangible assets related to IPR&D was $117.0 million. The estimated fair value was determined using the income approach, which discounts expected future cash flows to present value. We estimated the fair value using a present value discount rate of 16%, which is based on the estimated weighted-average cost of capital for companies with profiles substantially similar to that of Arresto. This is comparable to the estimated internal rate of return for the acquisition and represents the rate that market participants would use to value the intangible assets. The projected cash flows from the IPR&D projects were based on key assumptions such as: estimates of revenues and operating profits related to each project considering its stage of development; the time and resources needed to complete the development and approval of the product candidate; the life of the potential commercialized product and associated risks, including the inherent difficulties and uncertainties in developing a product candidate such as obtaining marketing approval from the U.S. Food and Drug Administration (FDA) and other regulatory agencies; and risks related to the viability of and potential alternative treatments in any future

target markets. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.

Goodwill

The excess of the consideration transferred over the fair values assigned to the assets acquired and liabilities assumed is $134.5 million, which represents the goodwill amount resulting from the Arresto acquisition. Management believes that the goodwill mainly represents the synergies expected from combining our research and development operations as well as acquiring Arresto’s assembled workforce and other intangible assets that do not qualify for separate recognition. We recorded the goodwill as an intangible asset in our Condensed Consolidated Balance Sheet as of the acquisition date. Goodwill is tested for impairment on an annual basis as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the goodwill below its carrying amount.

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.

Calistoga Pharmaceuticals, Inc.

In February 2011, we entered into an agreement to acquire Calistoga for $375.0 million plus potential payments of up to $225.0 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.

The acquisition was accounted for as a business combination. Calistoga’s results of operations since April 1, 2011 have been included in our Condensed Consolidated Statement of Income and were not significant.

The acquisition-date fair value of the total consideration transferred to acquire Calistoga was $484.3 million, and consisted of cash paid at or prior to closing of $373.7 million and contingent consideration of $110.6 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at April 1, 2011 (in thousands):


IPR&D	$	149,200
Goodwill		336,951
Other net liabilities assumed		(1,853	)

Total consideration transferred	$	484,298

IPR&D

Intangible assets associated with IPR&D projects relate to the CAL-101 product candidate. Management determined that the estimated acquisition-date fair value of intangible assets related to IPR&D was $149.2 million. The estimated fair value was determined using the income approach, which discounts expected future cash flows to present value. We estimated the fair value using a present value discount rate of 11%, which considers both the estimated weighted-average cost of capital for companies with profiles substantially similar to that of Calistoga, as well as the acquirer’s estimated weighted-average cost of capital. We believe this is appropriate given the unique characteristics of this acquisition which included a competitive bidding process. This rate is comparable to the estimated internal rate of return for the acquisition and represents the rate that market participants would use to value the intangible assets. The projected cash flows from the IPR&D projects were based on key assumptions such as: estimates of revenues and operating profits related to each project considering its stage of development; the time and resources needed to complete the development and approval of the product candidate; the life of the potential commercialized product and associated risks, including the inherent difficulties and uncertainties in developing a product candidate such as obtaining marketing approval from the FDA and other regulatory agencies; and risks related to the viability of and potential alternative treatments in any future target markets. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. During the period the assets are considered indefinite-lived, they will not be amortized but will be tested for impairment on an annual basis as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the IPR&D projects below their respective carrying amounts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.

Goodwill

The excess of the consideration transferred over the fair values assigned to the assets acquired and liabilities assumed is $337.0 million, which represents the goodwill amount resulting from the Calistoga acquisition. Management believes that the goodwill mainly represents the synergies expected from combining our research and development operations as well as acquiring Calistoga’s assembled workforce and other intangible assets that do not qualify for separate recognition. We recorded the goodwill as an intangible asset in our Condensed Consolidated Balance Sheet as of the acquisition date. Goodwill is tested for impairment on an annual basis as well as between annual tests if we become aware of any events occurring or changes in circumstances that would indicate a reduction in the fair value of the goodwill below its carrying amount.

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

Oceanside Research and Clinical Manufacturing Facility

In August 2011, we entered into a definitive agreement to purchase a clinical biologics manufacturing facility and certain process development assets located in Oceanside, California from Genentech, a member of the Roche Group. We paid a total purchase price of $28.3 million in cash including transaction costs. We accounted for this transaction, which closed in September 2011, as an asset acquisition. The purchase price was allocated based on the fair value of the acquired tangible assets, which consisted primarily of property, plant and equipment.

The estimated fair value of the equipment and buildings was determined using the cost approach. The fair value of the equipment was based on the replacement cost less any related depreciation. The fair value of the buildings was based on the cost to construct a similar building less any related depreciation or economic obsolescence. The estimated fair value of the land was determined using the market approach, and was based on recent sales of comparable properties.

The acquired facility is currently designed and equipped to produce biologic compounds for toxicological, Phase 1 and Phase 2 clinical studies. Initially, we will use the facility for the process development and manufacture of GS 6624 (formerly AB0024), an investigational monoclonal antibody candidate in development for treatment of certain cancers and for fibrotic diseases, and another antibody which is currently in preclinical testing.

6. INVENTORIES

Inventories are summarized as follows (in thousands):


	September 30, 2011		December 31, 2010
Raw materials	$	866,413	$	408,015
Work in process		175,545		454,652
Finished goods		295,793		341,142

Total	$	1,337,751	$	1,203,809

As of September 30, 2011 and December 31, 2010, the joint ventures formed by Gilead and BMS, which are included in our Condensed Consolidated Financial Statements, held $971.9 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):


	September 30, 2011		December 31, 2010
Goodwill	$	1,004,102	$	532,669
Finite lived intangible assets		814,071		863,393
Indefinite lived intangible assets		292,830		29,530

Total	$	2,111,003	$	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 resulting from the acquisition of Arresto		134,482
Goodwill resulting from the acquisition of Calistoga		336,951

Balance at September 30, 2011	$	1,004,102

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


	September 30, 2011				December 31, 2010
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Intangible asset—Ranexa	$	688,400	$	86,523	$	688,400	$	54,795
Intangible asset—Lexiscan		262,800		63,287		262,800		43,979
Other		24,995		12,314		22,095		11,128

Total	$	976,195	$	162,124	$	973,295	$	109,902

Amortization expense related to intangible assets was $17.4 million and $52.2 million for the three and nine months ended September 30, 2011, respectively, and was recorded in cost of goods sold in our Condensed Consolidated Statements of Income. Amortization expense related to intangible assets was $14.9 million and $44.9 million for the three and nine months ended September 30, 2010, respectively, and was recorded in cost of goods sold in our Condensed Consolidated Statements of Income.

As of September 30, 2011, the estimated future amortization expense associated with our intangible assets for the remaining three months of 2011 and each of the five succeeding fiscal years are as follows (in thousands):


Fiscal Year	Amount
2011 (remaining three months)	$	17,407
2012		76,081
2013		82,391
2014		91,246
2015		100,952
2016		113,053

Total	$	481,130

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 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 September 30, 2011, we had indefinite-lived intangible assets of $292.8 million related to purchased IPR&D from our acquisitions of CGI, Arresto and Calistoga.

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 September 30, 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 September 30, 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 September 30, 2011 and December 31, 2010, total assets held by the joint venture were $1.33 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 September 30, 2011 and December 31, 2010, total liabilities held by the joint venture were $1.02 billion 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 September 30, 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 $40.0 million in research support and basic science infrastructure development during the initial four-year period, and will provide a total of up to $100.0 million over ten years should the collaboration be extended through that timeframe. We will have the first option to license any 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.

MicroDose Therapeutx, Inc.

In April 2011, we announced an exclusive worldwide license and collaboration agreement with MicroDose Therapeutx, Inc. (MicroDose) for the development and commercialization of MDT-637, MicroDose’s inhalable small molecule antiviral fusion inhibitor for the treatment of respiratory synctial virus. Under the terms of the agreement, we paid MicroDose an upfront payment of $8.0 million in the second quarter of 2011 which was recorded as part of research and development expenses on our Condensed Consolidated Statement of Income. We will also provide research funding to support MicroDose’s continued development of MDT-637 through Phase 2a clinical trials. We can assume full responsibility for clinical development following Phase 2a. MicroDose could also receive additional payments based upon the achievement of certain development, regulatory and commercial milestones, as well as development fees and royalties on future potential net sales.

9. LONG-TERM OBLIGATIONS

Financing Arrangements

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


	September 30, 2011		December 31, 2010
2011 convertible senior notes	$	—	$	638,991
2013 convertible senior notes		599,324		576,884
2014 convertible senior notes		1,174,494		1,153,805
2016 convertible senior notes		1,126,089		1,107,884
2021 senior unsecured notes		991,851		—

Total debt, net	$	3,891,758	$	3,477,564
Less current portion (2011 convertible senior notes)		—		638,991

Total long-term debt, net	$	3,891,758	$	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 $5.8 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.

Maturity of 2011 Convertible Senior Notes

In May 2011, our 2011 Notes matured and we repaid the aggregate principal balance of $650.0 million. We also paid $36.1 million in cash related to the conversion spread of the 2011 Notes, which represents the conversion value in excess of the principal amount, and received $36.1 million in cash from our convertible note hedges related to the 2011 Notes. Warrants related to our 2011 Notes expired in August 2011.

Credit Facility

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. 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 September 30, 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 September 30, 2011, we were in compliance with all such covenants.

10. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

In June 2011, we received a subpoena from the United States Attorney’s Office for the Northern District of California requesting documents related to the manufacture, and related quality and distribution practices, of Atripla, Emtriva, Hepsera, Letairis, Truvada, Viread and Complera. We have been cooperating and will continue to cooperate with this governmental inquiry. An estimate of a possible loss or range of losses cannot be determined given we are at the early stage of the inquiry.

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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Cost of goods sold	$	2,234		$	2,728		$	7,765		$	8,548
Research and development expenses		18,389			20,946			54,529			62,536
Selling, general and administrative expenses		25,897			28,128			83,821			75,606

Stock-based compensation expenses included in total costs and expenses		46,520			51,802			146,115			146,690
Income tax effect		(11,299	)		(13,990	)		(36,365	)		(40,070	)

Stock-based compensation expenses included in net income	$	35,221		$	37,812		$	109,750		$	106,620

12. STOCKHOLDERS’ EQUITY

Stock Repurchase Programs

During the three and nine months ended September 30, 2011, we retired a total of $883.6 million or 22.4 million shares of common stock and $2.16 billion or 54.2 million shares of common stock, respectively. We completed our May 2010, three-year, $5.00 billion stock repurchase program, which retired 135.5 million shares at an average purchase price of $36.89 per share. Upon completion of this repurchase program, we initiated purchases under our January 2011, three-year, $5.00 billion stock repurchase program. As of September 30, 2011, the remaining authorized amount of stock repurchases that may be made under our repurchase program was $4.82 billion.

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 nine months ended September 30, 2011, we reduced common stock and APIC by an aggregate of $168.2 million and charged $2.00 billion to retained earnings.

Comprehensive Income

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


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Net income	$	737,538		$	702,163		$	2,127,300		$	2,263,384
Other comprehensive income (loss):
Net foreign currency translation gain (loss)		(3,958	)		8,025			(1,122	)		(3,729	)
Net unrealized gain (loss) on available-for-sale securities, net of related tax effects		(27,442	)		8,813			(31,284	)		13,441
Net unrealized gain (loss) on cash flow hedges, net of related tax effects		149,138			(198,977	)		(14,048	)		3,531

Total other comprehensive income (loss)		117,738			(182,139	)		(46,454	)		13,243

Comprehensive income		855,276			520,024			2,080,846			2,276,627
Comprehensive loss attributable to noncontrolling interest		3,586			2,713			11,192			8,454

Comprehensive income attributable to Gilead	$	858,862		$	522,737		$	2,092,038		$	2,285,081

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 and nine months ended September 30, 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 September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Antiviral products:
Atripla	$	794,699	$	742,692	$	2,361,203	$	2,151,368
Truvada		744,727		668,741		2,129,139		1,968,222
Viread		192,887		184,263		546,999		541,121
Hepsera		35,631		47,519		112,383		156,977
Emtriva		7,667		6,696		20,975		20,597
Complera		19,044		—		19,044		—

Total antiviral products		1,794,655		1,649,911		5,189,743		4,838,285
AmBisome		82,241		75,132		249,372		230,355
Letairis		78,954		60,446		214,765		176,293
Ranexa		81,983		60,312		236,353		172,015
Other products		28,026		19,758		78,792		42,735

Total product sales	$	2,065,859	$	1,865,559	$	5,969,025	$	5,459,683

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 September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
United States	$	1,182,181	$	1,071,770	$	3,362,596	$	3,124,137
Outside of the United States:
Switzerland		32,846		53,535		141,467		414,618
France		154,684		126,485		437,602		376,564
Spain		127,102		101,421		376,409		338,706
United Kingdom		129,978		105,186		373,604		322,885
Italy		93,082		78,395		302,658		261,519
Germany		98,155		70,077		269,072		195,084
Other European countries		128,570		177,356		430,507		509,050
Other countries		175,062		153,431		491,092		408,170

Total revenues outside of the United States		939,479		865,886		2,822,411		2,826,596

Total revenues	$	2,121,660	$	1,937,656	$	6,185,007	$	5,950,733

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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Cardinal Health, Inc.		18	%		17	%		17	%		17	%
McKesson Corp.		15	%		14	%		15	%		14	%
AmerisourceBergen Corp.		13	%		13	%		13	%		12	%

14. INCOME TAXES

Our income tax rate of 24.4% and 24.9% for the three and nine months ended September 30, 2011, respectively, 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 the non-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 2008 and 2009 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 September 30, 2011, we believe it is reasonably possible that our unrecognized tax benefits will not significantly change in the next 12 months as we do not expect to have clarification from the IRS and other tax authorities around any of our uncertain tax positions. With respect to the remaining unrecognized tax benefits, we are 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 of our uncertain tax positions 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.

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 and nine months ended September 30, 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), Emtriva ^® (emtricitabine) and Complera ^® (emtricitabine 200 mg/rilpilvirine 25 mg/tenofovir disoproxil fumarate 300 mg) 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 ; 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 third quarter of 2011, we continued to grow our business with increased product sales of 11% over the same quarter in 2010 driven primarily by increased market demand across our therapeutic areas and geographies. We expanded our single-tablet regimen product offerings with the launch of Complera and advanced our clinical studies related to the “Quad”, announced the expansion of our global access program to provide accelerated access to our medicines for the treatment of HIV in the developing world and we acquired a clinical biologics facility in Oceanside, California to support and accelerate our biologics program.

HIV

In July 2011, we announced the expansion of our global access program in an effort to provide accelerated access to our medicines for the treatment of HIV/AIDS in the developing world. We were the first pharmaceutical company to enter a licensing agreement with the Medicines Patent Pool Foundation (the Pool). We also granted four of our Indian partners and the Pool future rights to elvitegravir, an investigational integrase inhibitor; cobicistat, an investigational antiretroviral boosting agent; and the Quad which combines four of our HIV medicines in a once-daily single-tablet regimen.

In August 2011, we received approval from the U.S. Food and Drug Administration (FDA) for Complera for the treatment of HIV-1 infection in treatment-naïve adults. Complera combines three antiretroviral medications in one daily tablet – Truvada, a fixed-dose combination of emtricitabine and tenofovir disoproxil fumarate, and rilpilvirine – marketed by Tibotec Pharmaceuticals. Complera represents our second complete single-tablet regimen for the treatment of HIV.

In September 2011, we announced that the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion on our Marketing Authorisation Application for Eviplera ^® , the trade name for the single-tablet regimen of Truvada and rilpilvirine, in the European Union. The CHMP’s positive recommendation will be reviewed by the European Commission, which has the authority to approve medicinal products for use in the 27 countries of the European Union. We expect the European Commission to issue its decision on the marketing authorization for Eviplera in the fourth quarter of 2011.

During the third quarter of 2011, we announced the Phase 3 clinical trial results from the pivotal Study 145 for elvitegravir, evaluated for the treatment of HIV-1 infection, which was non-inferior to the integrase inhibitor raltegravir after 48 weeks of therapy in treatment-experienced patients. Study 145 highlights the potential of elvitegravir as both a stand-alone product and as part of the Quad. We also announced that two pivotal Phase 3 clinical trials (Studies 102 and 103) of the Quad in treatment-naïve HIV-1 infected patients, each met their primary objective, which was non-inferiority at week 48. Study 102 compared the Quad and Atripla; Study 103 compared the Quad and ritonavir-boosted atazanavir plus Truvada.

In October 2011, we announced that we have submitted our new drug application (NDA) for U.S. regulatory approval for the fixed-dose regimen of elvitegravir, cobicistat and Truvada for the treatment of HIV in treatment-naïve patients.

Liver Disease

In September 2011, we announced, in consultation with the FDA, an amendment to the design of ongoing clinical trials to discontinue dosing of GS 9190 in hepatitis C-infected patients who are receiving the compound in combination with pegylated interferon and ribavirin, and another direct-acting antiviral agent. Studies that include GS 9190 but do not include pegylated interferon will continue as planned. Similarly, studies that include the combination of GS 9451 (an investigational protease inhibitor), GS 5885 (an investigational NS5A) and pegylated interferon and ribavirin will continue.

Oncology

In August 2011, we announced a definitive agreement to purchase a 70,000 square foot, clinical biologics manufacturing facility and certain process development assets located in Oceanside, California from Genentech, a member of the Roche Group. Initially, we will use the facility for the process development and manufacture of GS 6624 (formerly AB0024), an investigational monoclonal antibody candidate for treatment of certain cancers and for fibrotic diseases, and another antibody which is currently in preclinical testing.

Regulatory

In August 2011, we resolved all outstanding issues raised by the FDA in its Warning Letter dated September 2010 related to our San Dimas, California manufacturing facility. Our response and actions adopted and implemented at the San Dimas site have sufficiently addressed the FDA’s observations, which were primarily related to the manufacturing environment for AmBisome, as well as general observations related to systems, procedures and controls focused on ensuring product quality at the facility.

Financial Highlights

Total product sales were $2.07 billion for the third quarter of 2011, an increase of 11% over total product sales of $1.87 billion for the same period last year, driven primarily by antiviral market demand growth in Atripla and Truvada sales in Europe and the United States and by our expanding suite of antiviral treatment options with the launch of Complera in the United States.

In the third quarter of 2011, Atripla product sales increased 7% over the same period in 2010, primarily driven by sales volume growth in Europe and the United States, and contributed $794.7 million, or 44%, to our third quarter 2011 antiviral product sales. Truvada product sales increased 11% over the same period in 2010, primarily driven by sales volume growth in Europe and the United States, and contributed $744.7 million, or 41% to our third quarter 2011 antiviral product sales. Sequentially, our product sales increased 1% from $2.04 billion in the second quarter of 2011, driven by antiviral market demand growth in the United States which was partially offset by more conservative purchases by state AIDS Drug Assistance Programs (ADAPs) during the quarter and an unfavorable foreign currency exchange impact.

In the third quarter of 2011, product sales in the United States increased 10% compared to the same quarter in 2010, primarily driven by the continued sales volume growth in our antiviral franchise despite the conservative purchases by state ADAPs during the third quarter of 2011. In addition, the introduction of Complera to our antiviral franchise since its FDA approval in August 2011 contributed $19.0 million to our antiviral product sales. The increase also reflected sales growth in our respiratory and cardiovascular franchises. Ranexa sales in the United States contributed $79.6 million to our third quarter 2011 product sales, an increase of 38% over the same period in 2010. Letairis sales in the United States contributed $79.0 million to our third quarter 2011 product sales, an increase of 31% over the same period in 2010. Cayston contributed $20.1 million to our third

quarter 2011 product sales in the United States, an increase of 53% over the same period in 2010. Sequentially, product sales in the United States in the third quarter of 2011 increased 3% compared to the second quarter of 2011, driven by sales volume growth in our antiviral franchise.

In the third quarter of 2011, product sales in Europe increased 11% compared to the same quarter in 2010, primarily driven by market demand growth in our antiviral franchise, partially offset by the impact of austerity measures in certain European countries. Antiviral product sales in Europe totaled $677.0 million in the third quarter of 2011, an increase of 10% compared to $614.0 million in the third quarter of 2010, driven primarily by sales of Atripla and Truvada. Foreign currency exchange also had a favorable impact on our European product sales in the third quarter of 201l compared to the same quarter in 2010. Sequentially, product sales in Europe in the third quarter of 2011 decreased 2% compared to the second quarter of 2011 due to the impact of an unfavorable foreign currency exchange and seasonality of product buy-ins in the second quarter of 2011 in advance of the summer holidays.

Our research and development (R&D) and selling, general and administrative (SG&A) expenses increased by $105.0 million, or 22%, during the third quarter of compared to the same period in 2010. The increase was due primarily to costs related to clinical studies, the impact of higher headcount and expenses associated with acquisitions, collaborations and the ongoing growth of our business, and the pharmaceutical excise tax resulting from U.S. healthcare reform.

Cash, cash equivalents and marketable securities increased by $164.0 million during the nine months ended September 30, 2011, driven primarily by our operating cash flows of $2.66 billion and net proceeds of $987.4 million from the issuance of our 2021 senior unsecured notes (2021 Notes), partially offset by $588.6 million used to acquire Arresto Biosciences, Inc. (Arresto) and Calistoga Pharmaceuticals, Inc. (Calistoga), $650.0 million used to repay our convertible senior notes due in 2011 (2011 Notes) and repurchases of our common stock under our stock repurchase programs. During the quarter, we completed our May 2010, $5.00 billion stock repurchase program at which time we initiated purchases under our January 2011, $5.00 billion stock repurchase program. Under the completed May 2010 program, we repurchased and retired a total of 135.5 million shares of common stock at an average purchase price of $36.89 per share.

Critical Accounting Policies, Estimates and Judgments

There have been no material changes in our critical accounting policies, estimates and judgments during the nine months ended September 30, 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 and nine months ended September 30, 2011 were $2.12 billion and $6.19 billion, compared to $1.94 billion and $5.95 billion for the same periods in 2010. Increases in product sales of 11% and 9% for the three and nine months ended September 30, 2011, respectively, primarily driven by growth of Atripla and Truvada sales were partially offset by a decline in our Tamiflu royalties from Roche, which have decreased due to declining pandemic planning initiatives worldwide.

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, net of hedges, had a favorable impact of $19.9 million on our third quarter 2011 revenues compared to the third quarter of 2010 and a favorable impact of $42.9 million for the nine months ended September 30, 2011.

Product Sales

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


	Three Months Ended September 30,							Nine Months Ended September 30,
	2011		2010		Change			2011		2010		Change
Antiviral products:
Atripla	$	794,699	$	742,692		7	%	$	2,361,203	$	2,151,368		10	%
Truvada		744,727		668,741		11	%		2,129,139		1,968,222		8	%
Viread		192,887		184,263		5	%		546,999		541,121		1	%
Hepsera		35,631		47,519		(25	)%		112,383		156,977		(28	)%
Emtriva		7,667		6,696		15	%		20,975		20,597		2	%
Complera		19,044		—		100	%		19,044		—		100	%

Total antiviral products		1,794,655		1,649,911		9	%		5,189,743		4,838,285		7	%
AmBisome		82,241		75,132		9	%		249,372		230,355		8	%
Letairis		78,954		60,446		31	%		214,765		176,293		22	%
Ranexa		81,983		60,312		36	%		236,353		172,015		37	%
Other products		28,026		19,758		42	%		78,792		42,735		84	%

Total product sales	$	2,065,859	$	1,865,559		11	%	$	5,969,025	$	5,459,683		9	%

Antiviral Products

Antiviral product sales increased by 9% and 7% for the three and nine months ended September 30, 2011, respectively, compared to the same periods in 2010.

•

Atripla

Atripla sales increased by 7% and 10% for the three and nine months ended September 30, 2011, respectively, compared to the same periods in 2010, driven primarily by sales volume growth in Europe and the United States. Atripla sales include the efavirenz component which has a gross margin of zero. The efavirenz portion of our Atripla sales was $290.8 million and $863.0 million for the three and nine months ended September 30, 2011, and $273.5 million and $791.9 million for the three and nine months ended September 30, 2010, respectively. Atripla sales accounted for 44% and 45% of our total antiviral product sales for the three and nine months ended September 30, 2011, respectively.

•

Truvada

Truvada sales increased by 11% and 8% for the three and nine months ended September 30, 2011, respectively, compared to the same periods in 2010, driven primarily by sales volume growth in Europe and the United States. Truvada sales accounted for 41% of our total antiviral product sales for both the three and nine months ended September 30, 2011.

•

Other Antiviral Products

Other antiviral product sales, which include product sales of Viread, Hepsera, Emtriva and Complera increased by 7% for the three months ended September 30, 2011 compared to the same period in 2010, primarily driven by the introduction of Complera since its FDA approval in August 2011. For the nine months ended September 30, 2011, other antiviral product sales decreased by 3% compared to the same period in 2010, due primarily to decreased sales volume for Hepsera in Europe and the United States and for Viread in Latin America, partially offset by increased sales volume for Viread in Europe and the introduction of Complera in the United States since its FDA approval in August 2011.

AmBisome

Sales of AmBisome increased by 9% and 8% for the three and nine months ended September 30, 2011, respectively, compared to the same periods in 2010. The increases over both periods were driven primarily by

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 31% and 22% for the three and nine months ended September 30, 2011, respectively, compared to the same periods in 2010, driven primarily by sales volume growth.

Ranexa

Sales of Ranexa increased by 36% and 37% for the three and nine months ended September 30, 2011, respectively, compared to the same periods 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 September 30,							Nine Months Ended September 30,
	2011		2010		Change			2011		2010		Change
Royalty revenues	$	51,629	$	69,358		(26	)%	$	204,615	$	480,829		(57	)%

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 declined 26% and 57% for the three and nine months ended September 30, 2011 compared to the same periods in 2010, due to lower Tamiflu royalties from Roche. Tamiflu royalties were $3.7 million and $65.4 million for the three and nine months ended September 30, 2011, compared to $34.5 million and $364.6 million in the same three and nine month periods in 2010. Tamiflu royalties since the second quarter of 2010 have decreased due to declining pandemic planning initiatives worldwide.

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 September 30,									Nine Months Ended September 30,
	2011			2010			Change			2011			2010			Change
Total product sales	$	2,065,859		$	1,865,559			11	%	$	5,969,025		$	5,459,683			9	%
Cost of goods sold	$	531,989		$	477,584			11	%	$	1,539,963		$	1,373,539			12	%
Product gross margin		74	%		74	%					74	%		75	%

Our product gross margin for the three months ended September 30, 2011 was 74%, consistent with the same period in 2010. Our product gross margin for the nine months ended September 30, 2011 was 74%, a decrease of 1% compared to the same period in 2010, due primarily to higher royalty costs and changes in our product mix.

Research and Development Expenses

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


	Three Months Ended September 30,							Nine Months Ended September 30,
	2011		2010		Change			2011		2010		Change
Research and development	$	290,066	$	230,440		26	%	$	826,915	$	680,170		22	%

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 September 30, 2011 increased by $59.6 million, or 26%, compared to the same period in 2010, due primarily to a $31.2 million increase in clinical studies costs and a $21.5 million increase in other contract and professional services associated with contract research organizations as a result of our internal and collaborative R&D efforts associated with the ongoing growth of our business.

R&D expenses for the nine months ended September 30, 2011 increased by $146.7 million, or 22%, compared to the same period in 2010, due primarily to a $57.0 million increase in other contract and professional services associated with contract research organizations, a $41.0 million increase in clinical studies costs and a $22.1 million increase in compensation and benefits expenses related to higher headcount as a result of our internal and collaborative R&D efforts 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 September 30,							Nine Months Ended September 30,
	2011		2010		Change			2011		2010		Change
Selling, general and administrative	$	295,927	$	250,559		18	%	$	895,764	$	764,183		17	%

SG&A expenses for the three months ended September 30, 2011 increased by $45.4 million, or 18%, compared to the same period in 2010. This was due primarily to $11.8 million of estimated pharmaceutical excise tax charges resulting from U.S. healthcare reform, a $7.9 million increase in contract and professional services expenses, a $7.6 million increase in legal expenses, a $6.3 million increase in compensation and benefits expenses related to higher headcount to support our expanding commercial activities, and a $6.0 million increase in promotional costs.

SG&A expenses for the nine months ended September 30, 2011 increased by $131.6 million, or 17%, compared to the same period in 2010. This was due primarily to a $39.3 million increase in compensation and benefits expenses related to higher headcount to support our expanding commercial activities, $35.2 million of pharmaceutical excise tax charges resulting from U.S. healthcare reform and a $29.8 million increase in contract and professional expenses. We estimate that the impact of the pharmaceutical excise tax will result in approximately $50 million in SG&A expenses for the full year of 2011.

Interest and Other Income, Net

Interest and other income, net, for the three and nine months ended September 30, 2011 was $14.4 million and $40.2 million, a decrease of $1.2 million and $9.3 million, respectively, compared to the same periods in 2010. The decrease was due primarily to increased costs related to our hedging activities, partially offset by a favorable net foreign currency exchange impact and an increase in interest income.

Interest Expense

Interest expense for the three and nine months ended September 30, 2011 was $43.1 million and $130.4 million and increased by $9.5 million and $62.1 million, respectively, compared to the same periods in 2010. The increase was due primarily to the issuance of our 2014 and 2016 convertible senior notes (2014 and 2016 Notes) for $2.50 billion in July 2010 and the issuance of our 2021 Notes for $1.00 billion in March 2011, partially offset by a decrease in interest expense related to the maturity of our 2011 Notes which matured in May 2011.

Provision for Income Taxes

Our provision for income taxes was $237.4 million and $704.9 million for the three and nine months ended September 30, 2011, respectively, compared to $258.9 million and $850.6 million for the same periods in 2010, respectively. Our effective tax rate was 24.4% and 24.9% for the three and nine months ended September 30, 2011, respectively, compared to our effective tax rate of 26.9% and 27.3% for the same periods in 2010, respectively. The effective tax rates for the three and nine months ended September 30, 2011 were lower than the effective tax rates for the three and nine months ended September 30, 2010 as a result of higher earnings from non-U.S. subsidiaries that are considered indefinitely invested outside the United States as a percentage of total earnings, the federal research tax credit extension, resolution of certain tax positions with taxing authorities and lower state taxes, partially offset by the non-deductible pharmaceutical excise tax.

The effective tax rate for the three and nine months ended September 30, 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 the non-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 September 30, 2011		As of December 31, 2010
Cash, cash equivalents and marketable securities	$	5,482,116	$	5,318,071
Working capital	$	3,922,836	$	3,243,132


	Nine Months Ended September 30,
	2011			2010
Cash provided by (used in):
Operating activities	$	2,660,903		$	2,109,070
Investing activities	$	(850,491	)	$	(1,529,935	)
Financing activities	$	(1,763,051	)	$	(879,054	)

Cash, Cash Equivalents and Marketable Securities

Cash, cash equivalents and marketable securities totaled $5.48 billion at September 30, 2011, an increase of $164.0 million or 3% from December 31, 2010. This increase was primarily attributable to net cash provided by operations of $2.66 billion and $987.4 million of net proceeds from the issuance of our 2021 Notes, partially offset by $588.6 million used in our recent acquisitions of Arresto and Calistoga, $650.0 million used to repay our 2011 Notes and $2.16 billion used to repurchase common stock under our stock repurchase programs, including commissions.

Working Capital

Working capital was $3.92 billion at September 30, 2011, an increase of $679.7 million or 21% from working capital as of December 31, 2010. This increase was primarily attributable to:

•

an increase of $158.5 million in cash, cash equivalents and short-term marketable securities;

•

an increase of $245.1 million in accounts receivable, net, primarily driven by slower collections in southern European countries; and

•

a decrease of $644.8 million in the current portion of long-term debt and other obligations, net, due primarily to the repayment of the 2011 Notes upon maturity in May 2011.

This increase was partially offset by an increase of $260.7 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 $2.66 billion for the nine months ended September 30, 2011 primarily related to net income of $2.13 billion, adjusted for non-cash items such as $228.8 million of depreciation and amortization expenses, $145.8 million of stock-based compensation expenses and $43.4 million of deferred income taxes. This was partially offset by $72.1 million of net cash inflow related to changes in operating assets and liabilities and $30.3 million of excess tax benefits from stock option exercises.

Cash provided by operating activities of $2.11 billion for the nine months ended September 30, 2010 primarily related to net income of $2.26 billion, adjusted for non-cash items such as $146.7 million of stock-based compensation expenses, $188.0 million of depreciation and amortization expenses and $69.9 million of tax benefits from employee stock plans, partially offset by $513.4 million of net cash outflow related to changes in operating assets and liabilities, and $68.6 million of excess tax benefits from stock option exercises.

Cash Used in Investing Activities

Cash used in investing activities for the nine months ended September 30, 2011 was $850.5 million, consisting of $588.6 million used in our recent acquisitions of Arresto and Calistoga, a net use of $156.1 million in purchases of marketable securities and $105.8 million of capital expenditures.

Cash used in investing activities for the nine months ended September 30, 2010 was $1.53 billion, driven by a net use of $1.40 billion in purchases of marketable securities, $91.0 million used in our acquisition of CGI Pharmaceuticals, Inc. and $38.5 million of capital expenditures.

Cash Used in Financing Activities

Cash used in financing activities for the nine months ended September 30, 2011 was $1.76 billion, driven primarily by $2.16 billion used to repurchase common stock under our stock repurchase programs, including commissions. Additionally, we used $650.0 million to repay our 2011 Notes, which was partially offset by $987.4 million of net proceeds from the issuance of our 2021 Notes.

Cash used in financing activities for the nine months ended September 30, 2010 was $879.1 million, driven primarily by the $3.41 billion used to repurchase our common stock under our stock repurchase programs and $362.6 million used to purchase note hedges related to our 2014 and 2016 Notes. The cash outflows were partially offset by $2.46 billion in proceeds from the issuance of our 2014 and 2016 Notes, net of issuance costs, $155.4 million in proceeds from the sale of warrants related to our 2014 and 2016 Notes, and $166.8 million in proceeds from issuances of common stock under our employee stock plans.

Other Information

During the third quarter of 2011, we completed our May 2010, three-year, $5.00 billion stock repurchase program at which time we initiated purchases under our January 2011, three-year, $5.00 billion stock repurchase program. Under the completed program, we repurchased and retired a total of 135.5 million shares of our common stock at an average purchase price of $36.89 per share. As of September 30, 2011, the remaining authorized amount of stock repurchases that may be made under the repurchase program was $4.82 billion.

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 September 30, 2011, approximately $1.25 billion was available to be drawn down under this credit agreement.

In May 2011, our 2011 Notes matured. We repaid an aggregate principal balance of $650.0 million. We also paid $36.1 million in cash related to the conversion spread of the 2011 Notes, which represents the conversion value in excess of the principal amount, and received $36.1 million in cash from our convertible note hedges related to the 2011 Notes. Warrants related to our 2011 Notes expired in August 2011.

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

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in our market risk during the nine months ended September 30, 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 0.14% to 0.90%. As of September 30, 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 September 30, 2011, we received a total of $63.5 million in 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 September 30, 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 September 30, 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 September 30, 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 U.S. Food and Drug Administration (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, Bristol-Myers Squibb Company and Merck & Co., Inc. 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 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 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 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.

Information pertaining to certain of our other legal proceedings can be found in “Part I. Item 1. Condensed Consolidated Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 10. Commitments and Contingencies” to the interim Condensed Consolidated Financial Statements, and is incorporated by reference herein.

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 September 30, 2011, Atripla and Truvada product sales together were $1.54 billion, or 73% 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:

•

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.

•

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.

•

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.

•

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 (IPF). In April 2011, we announced our decision to terminate our Phase 3 clinical trial of aztreonam for inhalation solution for the treatment of cystic fibrosis (CF) in patients with Burkholderia spp . In

addition, our new drug application (NDA) for the fixed-dose regimen of elvitegravir, cobicistat and Truvada for the treatment of HIV in treatment-naïve patients may not be approved by the FDA. Further, even if marketing approval is granted, there may be significant limitations on its use.

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) of $2.5 billion for 2011, calculated based on select government sales during the 2009 calendar year as a percentage of total industry government sales.

Some 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.” We estimate the 2011 impact of the pharmaceutical excise tax to be approximately $50 million, which will be classified as selling, general and administrative (SG&A) expense. The amount of the industry fee imposed on the pharmaceutical industry as a whole will increase to $2.8 billion in 2012, with additional increases over the next several years to a peak of $4.1 billion per year in 2018, and then decrease to $2.8 billion in 2019 and thereafter. As the amount of the industry fee increases, we expect our portion of the exercise tax to increase as well. 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 experienced 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. As a result of this shift, revenue growth may be lower than prescription growth. 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. Due to the insufficiency of federal and state funds and as many states have reduced eligibility criteria, we have also seen and may continue to see an increase in the number of patients on state 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 43% 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 September 30, 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. In the second quarter of 2011, only a portion of the full year federal budget was provided to the ADAPs, which resulted in measured purchasing by individual state ADAPs during the quarter. 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, Truvada and Complera.

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 is available in Spain and Portugal, and recently received pricing approval in Italy. 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, Bristol-Myers Squibb Company (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 & Co., Inc. 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, Complera, 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, including those related to promotion and manufacturing, we could be subject to penalties including fines, suspensions of regulatory approvals, product recalls, seizure of products and criminal prosecution.

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 the 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 IPF 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 cobicistat, an investigational pharmacoenhancing or “boosting” agent that increases blood levels of certain HIV medicines, and elvitegravir, our novel HIV integrase inhibitor for the treatment of HIV infection, 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 drafted 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 U.S. and 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 $50.0 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. We do not expect the Brazilian government to purchase any of our HIV products in 2011.

As another example, under Indian civil procedure, several parties filed oppositions to the grant of our patent applications covering tenofovir disoproxil and tenofovir disoproxil fumarate. 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.

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.

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 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. In August 2011, the FDA notified us that we resolved all issues raised by the FDA in its Warning Letter.

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.

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, Emtriva and Complera) 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 Southern European customers that may adversely affect our results of operations.

Our European product sales to government-owned or supported customers in Southern Europe, specifically 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 days sales outstanding being significantly higher in these countries due to the average length of time that accounts receivables remain outstanding. As of September 30, 2011, our accounts receivables in these countries totaled approximately $1.11 billion of which, $565.7 million were past due greater than 120 days as follows (in thousands):


	September 30, 2011
	Greater than 120 days past due		Greater than 365 days past due
Spain	$	350,605	$	168,371
Portugal		103,701		36,106
Other Southern European countries		111,402		23,791

Total	$	565,708	$	228,268

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, in 2011, the Greek government settled substantially all of its outstanding receivables subject to the bond settlement with zero-coupon bonds that trade at a discount to face value. As of September 30, 2011, we received a total of $63.5 million in bonds. 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 134 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 112 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 112 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 have reduced and may continue to 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.

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.

In addition, in June 2011, we received a subpoena from the United States Attorney’s Office for the Northern District of California requesting documents related to the manufacture, and related quality and distribution practices, of Atripla, Emtriva, Hepsera, Letairis, Truvada, Viread and Complera.

The outcome of the lawsuits above, or any other lawsuits that may be brought against us, the investigation or any other investigations that may be initiated, 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 $50.0 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. We do 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 since the second quarter of 2010 have decreased due to declining pandemic planning initiatives worldwide.

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- deductible pharmaceutical excise tax, 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 2008 and 2009 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

Issuer Purchases of Equity Securities

The table below summarizes our stock repurchase activity for the three months ended September 30, 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
July 1 – July 31		6,189		$	41.97		6,168		$	447,940
August 1 – August 31		8,633		$	38.09		8,605		$	120,079
September 1 – September 30		7,591		$	39.12		7,589		$	4,823,172

Total		22,413	⁽¹⁾	$	39.51		22,362	⁽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

‡+(5)	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

+(5)	2.5	Amendment No. 1 to the Agreement and Plan of Merger, entered into as of March 24, 2011

(6)	3.1	Restated Certificate of Incorporation of Registrant, as amended through May 12, 2011

(7)	3.2	Certificate of Designation of the Series A Junior Participating Preferred Stock of Registrant

(8)	3.3	Certificate of Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of Registrant

(6)	3.4	Amended and Restated Bylaws of Registrant, as amended and restated on May 12, 2011

	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)

*(5)	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)


Exhibit Footnote	Exhibit Number	Description of Document
*(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)

*(5)	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)

*(5)	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

*(6)	10.66	Amended and Restated 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)


Exhibit Footnote	Exhibit Number	Description of Document
+(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

+(39)	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

+	10.83	First Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated May 19, 2005

+	10.84	Second Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated May 17, 2010

+	10.85	Third Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated July 5, 2011

+	10.86	Fourth Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated July 5, 2011
+(42)	10.87	License Agreement between Registrant (as successor to Myogen, Inc.) and Abbott Deutschland Holding GmbH dated October 8, 2001


Exhibit Footnote	Exhibit Number	Description of Document
+(42)	10.88	License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated March 27, 1996

+(43)	10.89	First Amendment to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated July 3, 1997

(43)	10.90	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)	10.91	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)	10.92	License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 16, 2009

+	10.93	Second Amendment to License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 1, 2011

+(46)	10.94	Master Clinical and Commercial Supply Agreement between Gilead World Markets, Limited, Registrant and Patheon Inc., dated January 1, 2003

+(40)	10.95	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama), Ltd., dated July 17, 2003

+(47)	10.96	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)	10.97	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated December 5, 2008

+(5)	10.98	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)	10.99	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and Ampac Fine Chemicals LLC, dated November 3, 2010

+(38)	10.100	Restated and Amended Toll Manufacturing Agreement between Gilead Sciences Limited, Registrant and Nycomed GmbH (formerly ALTANA Pharma Oranienburg GmbH), dated November 7, 2005

+(15)	10.101	Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Degussa AG, dated June 6, 2006

+(3)	10.102	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)	10.103	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


Exhibit Footnote	Exhibit Number	Description of Document
	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 September 30, 2011, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2011 and 2010, (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference.

(6)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 17, 2011, and incorporated herein by reference.

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

(8)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2006, 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: November 4, 2011		/s/ J OHN C. M ARTIN
		John C. Martin, Ph.D. Chairman and Chief Executive Officer (Principal Executive Officer)

Date: November 4, 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

‡+(5)	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

+(5)	2.5	Amendment No. 1 to the Agreement and Plan of Merger, entered into as of March 24, 2011

(6)	3.1	Restated Certificate of Incorporation of Registrant, as amended through May 12, 2011

(7)	3.2	Certificate of Designation of the Series A Junior Participating Preferred Stock of Registrant

(8)	3.3	Certificate of Amendment to Certificate of Designation of Series A Junior Participating Preferred Stock of Registrant

(6)	3.4	Amended and Restated Bylaws of Registrant, as amended and restated on May 12, 2011

	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)

*(5)	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)


Exhibit Footnote	Exhibit Number	Description of Document
*(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)

*(5)	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)

*(5)	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

*(6)	10.66	Amended and Restated 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)


Exhibit Footnote	Exhibit Number	Description of Document
+(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

+(39)	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

+	10.83	First Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated May 19, 2005

+	10.84	Second Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated May 17, 2010

+	10.85	Third Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated July 5, 2011

+	10.86	Fourth Amendment to License Agreement between Japan Tobacco Inc. and Registrant, dated July 5, 2011
+(42)	10.87	License Agreement between Registrant (as successor to Myogen, Inc.) and Abbott Deutschland Holding GmbH dated October 8, 2001


Exhibit Footnote	Exhibit Number	Description of Document
+(42)	10.88	License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated March 27, 1996

+(43)	10.89	First Amendment to License Agreement between Registrant (as successor to CV Therapeutics, Inc.) and Syntex (U.S.A.) Inc., dated July 3, 1997

(43)	10.90	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)	10.91	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)	10.92	License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 16, 2009

+	10.93	Second Amendment to License and Collaboration Agreement by and among Registrant, Gilead Sciences Limited and Tibotec Pharmaceuticals, dated July 1, 2011

+(46)	10.94	Master Clinical and Commercial Supply Agreement between Gilead World Markets, Limited, Registrant and Patheon Inc., dated January 1, 2003

+(40)	10.95	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama), Ltd., dated July 17, 2003

+(47)	10.96	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)	10.97	Addendum to Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and PharmaChem Technologies (Grand Bahama) Ltd., dated December 5, 2008

+(5)	10.98	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)	10.99	Tenofovir Disoproxil Fumarate Manufacturing Supply Agreement by and between Gilead Sciences Limited and Ampac Fine Chemicals LLC, dated November 3, 2010

+(38)	10.100	Restated and Amended Toll Manufacturing Agreement between Gilead Sciences Limited, Registrant and Nycomed GmbH (formerly ALTANA Pharma Oranienburg GmbH), dated November 7, 2005

+(15)	10.101	Emtricitabine Manufacturing Supply Agreement between Gilead Sciences Limited and Degussa AG, dated June 6, 2006

+(3)	10.102	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)	10.103	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


Exhibit Footnote	Exhibit Number	Description of Document
	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 September 30, 2011, formatted in Extensible Business Reporting Language (XBRL) includes: (i) Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010, (ii) Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2011 and 2010, (iii) Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2011, and incorporated herein by reference.

(6)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 17, 2011, and incorporated herein by reference.

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

(8)	Filed as an exhibit to Registrant’s Current Report on Form 8-K filed on May 11, 2006, 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 (CGI the 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.

≠

‡

*	Management contract or compensatory plan or arrangement.

***

Exhibit 10.83

[*] = C ERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT , MARKED BY BRACKETS , IS FILED WITH THE S ECURITIES AND E XCHANGE C OMMISSION PURSUANT TO R ULE 24 B -2 OF THE S ECURITIES E XCHANGE A CT OF 1934, AS AMENDED

FIRST AMENDMENT TO LICENSE AGREEMENT

This Amendment to License Agreement (“Amendment”) is made effective as of May 19. 2005 (the “Effective Date”) by and between Japan Tobacco Inc., a Japanese corporation having a principal place of business at JT Bldg. 2-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8422, Japan (hereinafter, “JT”), and Gilead Sciences, Inc., a corporation having a principal place business at 333 Lakeside Drive, Foster City, California, U.S.A. (hereinafter, “GILEAD”).

RECITALS

WHEREAS, JT and GILEAD have previously entered into a License Agreement dated March 22, 2005 relating to JTK-303 (the “Agreement”).

WHEREAS, JT and GILEAD desire to amend certain terms of the Agreement

NOW THEREFORE, based on the foregoing premises and the mutual covenants and obligations set forth below, the parties agree as follows:

1. Amendments

A. Section 6.4(a) Section 6.4(a) of the Agreement shall be amended and restated as follows:

“In the event that either Party obtains from a Third Party a license to Patents, Know-How and/or a trademark that is necessary for, or actually used during the Term in, the Party’s Development or Commercialization of a Product, such Party shall, subject to Section 6.4(b), use its commercially reasonable efforts to include in such license aright to grant a sublicense on the same terms and conditions to the other Party solely to support the license grants contained in Sections 6.1 and 6.2.”

B. Section 16.1 Section 16.1 of the Agreement shall be amended and restated as follows:

“16,1. Entire Agreement; Amendment.

(a) This Agreement, including the Schedules attached hereto and incorporated herein, sets forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties with respect to the subject matter hereof and supersedes and terminates all prior agreements and understandings between the Parties, except for the Confidential Disclosure Agreements and Material Transfer Agreements with respect to such subject matter, as amended pursuant to Section 16.1(b) hereof.

(b) The Confidential Disclosure Agreements (other than the Confidential Disclosure Agreement dated February 1, 2005 (Gilead as recipient with respect to JTK-403)) and the Material Transfer Agreements are hereby considered amended to the extent necessary to provide that, notwithstanding any provision in such agreements to the contrary, any information and materials provided by one Party to the other Party pursuant to the Confidential Disclosure Agreements or the Material Transfer Agreements may be used by a Party to fulfill any obligation or to pursue any rights such Party has under this Agreement, including without limitation for the Development of Products.

(c) Except for the Confidential Disclosure Agreements and Material Transfer Agreements, there are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties with respect to the subject matter hereof other than as are set forth in this Agreement. No subsequent alteration, amendment, change or addition to this Agreement shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.”

C. Section 16.6 Section 16.6 of the Agreement shall be amended and restated as follows:

“Neither Party may assign or transfer this Agreement or any rights or obligations hereunder without the prior written consent of the other Party, except that, subject to Section 16.7, a Party may make such an assignment or transfer without the other Party’s consent to the assigning Party’s Affiliates or to its successor to all or substantially all of the business of such Party in the field to which this Agreement relates (whether by merger, sale of stock, sale of assets or other transaction), provided that any such successor (other than an Affiliate) shall, in a writing reasonably acceptable to the other Party, expressly assume performance of such rights or obligations. The JT Technology and the Gilead Technology shall exclude any intellectual property held or developed by such a successor of the relevant Party not in connection with Compound or Products. Any such assignment shall be binding on the successors of the assigning Party. Any assignment or attempted assignment by either Party in violation of the terms of this Section 16.6 shall be null and void.”

2. The Parties have each designated the three representatives to serve on the Joint Committee, one representative to serve as Alliance Manager and the three representatives to serve on the IP subcommittee, respectively, named on Schedule 2.2, Schedule 2.3 and Schedule 9.2, attached hereto.

3. Defined Terms

Unless otherwise defined herein, all of the capitalized terms used in this Amendment shall have the respective meanings ascribed to them in the Agreement

4. Effect

Except as expressly amended by this Amendment, the Agreement remains in full force and effect.

5. Governing Law

This Amendment shall be governed and construed in accordance with the substantive laws of the State of New York and the federal law of the United States of America.

IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives as of the Effective Date.


JAPAN TOBACCO INC.		GILEAD SCIENCES, INC.

BY:	/s/ Noriaki Okubo	BY:	/s/ John F. Millingan

NAME: Noriaki Okubo		NAME: John F. Milligan, Ph.D.

TITLE: President, Pharmaceutical Business		TITLE: Executive Vice President & CFO

S CHEDULE 2.2

Members of the Joint Committee

Gilead:

[*]

JT:

[*]

S CHEDULE 2.3

Alliance Managers

Gilead:

[*]

JT:

[*]

S CHEDULE 9.2

IP subcommittee members

Gilead:

[*]

JT:

[*]


Execution Copy		Exhibit 10.84

SECOND AMENDMENT TO LICENSE AGREEMENT

THIS SECOND AMENDMENT (the “Amendment”) is made and entered into as of May 17, 2010 (the “Amendment Execution Date”) by and between JAPAN TOBACCO INC. , a Japanese corporation having its principal place of business at JT Building, 2-1 Toranomon, 2-chome, Minato-ku, Tokyo 105-8422, Japan (“JT”), and GILEAD SCIENCES, INC. , a Delaware corporation having its principal place of business at 333 Lakeside Drive, Foster City, CA 94404, United States (“Gilead”). JT and Gilead are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS , JT and Gilead have previously entered into a License Agreement dated March 22, 2005 which was amended on May 19, 2005 (such License Agreement, as amended previously and contemporaneously with this Amendment, the “EVG Agreement”) relating to a compound designated as JTK-303, which is now known as Elvitegravir (“EVG”);

WHEREAS , Gilead is developing a combination product containing EVG and known as the “Quad,” as defined below;

WHEREAS , Gilead and JT have previously entered into a Supply Agreement dated December 25, 2003 (as amended previously and contemporaneously with this Amendment, the “Supply Agreement”) for the supply by Gilead to JT of certain products; and

WHEREAS , JT and Gilead have previously entered into a License Agreement dated July 31, 2003 (such License Agreement, as amended previously and contemporaneously with this Amendment, the “VTE License”) relating to the development and commercialization of FTC, TDF and Truvada in the JT Territory.

NOW THEREFORE , based on the foregoing premises and the mutual covenants and obligations set forth below, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

Unless otherwise specified, capitalized terms not defined in this Amendment shall have the definitions set forth therefor in the EVG Agreement. The EVG Agreement is hereby amended by adding the following defined terms:

1.1 “ Component ” shall mean an API component of the Quad, namely, FTC, TDF, EVG or GS-9350.

1.2 “ FBC ” shall mean Fully Burdened Cost as defined in the Supply Agreement.

1.3 “ FBCFP ” shall mean Gilead’s FBC to manufacture the Quad formulated product (as delivered to JT pursuant to the Supply Agreement, for example, brite stock) from the TDF, FTC, GS-9350 and EVG APIs.

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1.4 “ FTC ” shall mean an enantiomeric mixture of emtricitabine (which is the (-) enantiomer of the chemical (2R-cis)-4-amino-5-fluoro-1-[2-(hydroxymethyl)-1,3-oxathiolan-5-yl]-2(1H)-pyrimidinone), in which the ratio of such (-) enantiomer to its (+) enantiomer is equal to or greater than ninety (90) to ten (10), including without limitation the ratio of such enantiomers being one hundred (100) to zero (0).

1.5 “ GS-9350 ” shall mean thiazol-5-ylmethyl (2R,5R)-5-((S)-2-(3-((2-isopropylthiazol-4-yl)methyl)-3-methylureido)-4-morpholinobutanamido)-1,6-diphenylhexan-2-ylcarbamate.

1.6 [*] .

1.7 “ Listed Price ” shall mean the drug price listed on the National Health Insurance price list issued by the Japan Ministry for Health Labor and Welfare, or any successor thereto, for Japanese health insurance reimbursement purposes.

1.8 “ Net Sales ” shall mean Net Sales as defined in Section 1.46 of the VTE License.

1.9 “ Quad ” shall mean a combination pharmaceutical product in oral formulation as developed by Gilead containing as its sole APIs FTC, TDF, EVG and GS-9350.

1.10 “ TDF ” shall mean tenofovir disoproxil fumarate, having the chemical formula (9-[(R)-2-[[bis [[isopropoxycarbonyl)oxy] methoxy] phosphinyl] methoxy] propyl] adenine fumarate).

1.11 “ Truvada ” shall mean the combination product sold in the JT Territory under the VTE License by JT containing both TDF and FTC as its sole APIs.

1.12 “ Truvada Share ” shall have the meaning set forth in Section 2.3 below.

1.13 “ TVD Component ” shall mean the TDF and FTC Components of the Quad.

ARTICLE 2

QUAD

2.1 Relationship to EVG License . The Parties agree that the Quad is a “Product” under the EVG Agreement and therefore the rights and obligations of the Parties with respect to the development and commercialization of the Quad in the JT Territory shall be as set forth in the EVG Agreement. The Parties further agree that with respect to the Quad, the last sentence of the definition of “Know-How” in Section 1.56 of the EVG Agreement shall not apply to the Quad. The definitions of “Gilead Know-How,” “JT Know-How,” and “Sublicensee Know-How” therefore shall, with respect to the Quad, be construed without application of the last sentence of Section 1.56 of the EVG Agreement.

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2.2 Supply of Quad . JT shall obtain its supply of the Quad for development and commercial purposes from Gilead and Gilead shall provide such supply, as set forth in an amendment to the Supply Agreement entered into with the same effective date as this Amendment. JT agrees that the Quad obtained under the Supply Agreement shall be sold only in the JT Territory.

2.3 Transfer Price for Quad . JT shall pay Gilead a transfer price for the Quad supplied by Gilead in accordance with the Supply Agreement. The transfer price for the Quad supplied for clinical trial use or development purposes shall be [*] for such supply. The transfer price for commercial supply of the Quad shall be the sum of the [*] . The transfer price for the EVG Component and the GS-9350 Component shall be [*] . The transfer price for the TVD Component shall be calculated using the following formula:

[*]

For clarification, the transfer price of the Quad shall not include [*] .

In the event that the [*] .

2.4 Transfer Price Change if JT Manufactures Quad from Gilead API . If JT manufactures the Quad finished product from API supplied by Gilead, then the transfer price JT shall owe for such API shall be reduced as follows:

The [*] and

If JT manufactures some of the Component APIs in the Quad, then [*] for any Component API manufactured by JT for the units manufactured and sold by JT, shall be deducted from the Transfer Price owed by JT.

For purposes of this Section 2.4 and Section 2.5, Gilead’s FBCFP and (if applicable) API FBC shall be determined as set forth in the Supply Agreement based on data used to compute the average per-unit FBC for the full calendar year preceding the transfer of manufacturing to JT. Gilead shall calculate such FBCFP and FBC and provide the resulting calculations to JT; such calculations to be subject to JT’s approval which shall not be unreasonably withheld.

2.5 Royalty if JT Manufactures Quad . If JT manufactures the Quad (including all its APIs), then JT shall pay Gilead a royalty on sales of the Quad manufactured by JT and sold in the JT Territory calculated using the following formula:

Royalty = [*]

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Agreement based on data used to compute the [*] for the full calendar year preceding the transfer of manufacturing to JT. Gilead shall calculate such FBC and provide the resulting calculations to JT; such calculations to be subject to JT’s approval which shall not be unreasonably withheld.

EXAMPLE:

JT (or its contract manufacturer) manufactures TDF and FTC APIs and manufactures the Quad from these APIs and from GS-9350 API and EVG API manufactured by Gilead. Gilead’s FBCFP is $5/unit and its FBC to manufacture TDF and FTC API is $20/unit. For the Quad units JT manufactures and sells, it will owe [*]

2.6 Net Sales Calculation and Transfer Price Payments . JT shall calculate Net Sales of the Quad using the methodologies and definitions in the VTE License, and not the methodologies and definitions therefor in the EVG Agreement. The provisions of Sections 8.6 through 8.12 of the VTE License shall apply to JT’s transfer price payments set forth in this Amendment.

2.7 [*]

2.8 [*] payments. [*]

2.9 Information Exchange / Regulatory Data. Gilead shall, upon reasonable request of JT, make available to JT as soon as practicable after such request, Gilead Know-How and Regulatory Information with respect to (i) the Quad, (ii) GS-9350 as a Component, and (iii) GS-9350 as a single agent or stand-alone product, which is Controlled by Gilead, and Gilead’s Affiliates or Sublicensees as a result of the performance of Gilead’s obligations under the EVG Agreement. For the avoidance of doubt, Regulatory Information about GS-9350 as a single agent or stand-alone product shall include that about combination use and drug-drug interactions of such GS-9350 single agent with other agents, provided that Gilead agrees that such information is required for Regulatory Approval of the Quad for the Licensed Indication in the JT Territory (such agreement not to be unreasonably withheld or delayed).

If the Regulatory Authority in the JT Territory request any material information, data (in final report form) or Know-How that is included in the Marketing Authorization Applications and INDs for the Quad or GS-9350 (including any combination products containing GS-9350) filed by Gilead or its Affiliates or licensees anywhere in the world for any indications (including those outside the Licensed Indication), and JT reasonably determines that the provision of such material information, data (in final report form) or Know-How is required for Regulatory Approval of the Quad for the Licensed Indication in the JT Territory, then JT shall notify Gilead in writing of such determination. If Gilead agrees with JT’s determination (such agreement not to be unreasonably withheld or delayed), then Gilead shall provide JT with such additional material information, data (in final report form) and Know-How (subject to Gilead’s obligations under its agreements with Third Parties), together with all material subsequent correspondence and data submissions relating to the foregoing, as soon as practicable. If Gilead does not agree with JT’s determination, then Gilead shall have no obligation to provide JT with such additional material information,

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data (in final report form) or Know-How if Gilead has not unreasonably withheld the needed agreement as provided in the prior sentence.

2.10 Exception for Termination. In case (i) that the EVG Agreement expires pursuant to Section 14.1 of the EVG Agreement or that Gilead terminates the EVG Agreement pursuant to Section 14.2 thereof for any reasons other than significant safety reasons with respect to GS-9350 and (ii) that EVG is approved either in the United States of America or the EU at that time and is not withdrawn from the market, if JT notifies Gilead that it wishes to continue to Develop and/or Commercialize the Quad in the JT Territory, the EVG Agreement shall be deemed to be still valid in the JT Territory with regard to the Quad as a Product under the EVG Agreement until [*] Upon the expiration of said term with respect to Development and/or Commercialization of the Quad in the JT Territory, if requested by JT, the Parties shall discuss in good faith extension or renewal of such term.

ARTICLE 3

MODIFICATIONS

3.1 Survival. With respect to the Product in the JT Territory, Sections 6.2 and 6.3 shall survive any termination or expiration of the EVG Agreement pursuant to Section 14.1 or 14.2 or termination by JT pursuant to Section 14.3 or 14.4; provided that if Gilead requests and if permitted by Regulatory Authority in the JT Territory, JT shall cease using “GILEAD” and other versions of Gilead’s corporate name or logo in connection with the marketing of the Product in the JT Territory.

ARTICLE 4

MISCELLANEOUS

4.1 Effect . Except as expressly amended by this Amendment, the EVG Agreement remains in full force and effect.

4.2 Governing Law . This Amendment shall be governed and construed in accordance with the substantive laws of the State of New York and the federal law of the United States of America without regard to its conflict of law rules that would require the application of the laws of a foreign state or country.

4.3 Entire Agreement; Amendment. This Amendment together with the EVG Agreement, Supply Agreement and the sections of the VTE License referred to herein, set forth the complete, final and exclusive agreement and all the covenants, promises, agreements, warranties, representations, conditions and understandings between the Parties with respect to the subject matter hereof and supersedes and terminates all prior agreements and understandings between the Parties. There are no covenants, promises, agreements, warranties, representations, conditions or understandings, either oral or written, between the Parties other than as are set forth in this Amendment. No subsequent alteration, amendment, change or addition to this Amendment shall be binding upon the Parties unless reduced to writing and signed by an authorized officer of each Party.

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4.4 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Amendment.

4.5 Headings. The headings for each Article and Section in this Amendment have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

4.6 Translations. This Amendment is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the Parties. All communications and notices to be made or given pursuant to this Amendment, and any dispute proceeding related to or arising hereunder, shall be in the English language. If there is a discrepancy between any Japanese translation of this Amendment and this Amendment, this Amendment shall prevail.

4.7 Counterparts. This Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument.

4.8 Change of the Mailing Address. The mailing addresses of JT set forth in Section 16.3 of the EVG Agreement shall be replaced with the following:

For JT:

Japan Tobacco Inc.

Pharmaceutical Division

JT Building, 2-1 Toranomon, 2-chome

Minato-ku, Tokyo 105-8422, Japan

Attention: Vice President, Business Development

Facsimile: [*]

With a copy to:

Holland & Knight LLP

31 West 52nd Street

New York NY 10019 USA

Attn: Neal Beaton, Esq.

Fax: 1-212-341-7103

IN WITNESS WHEREOF the Parties have executed this Amendment in duplicate originals by their duly authorized officers as of the Amendment Execution Date.


Gilead Sciences, Inc.		Japan Tobacco Inc.

By:	/s/ John F. Milligan	By:	/s/ Noriaki Okubo
Name: John F. Milligan, Ph.D.		Name: Noriaki Okubo
Title: President & Chief Operating Officer		Title: President, Pharmaceutical Business
Date: August 30, 2011		Date: August 30, 2011

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Execution Copy		Exhibit 10.85

THIRD AMENDMENT TO LICENSE AGREEMENT

THIS THIRD AMENDMENT (this “Amendment”) is made and entered into as of July 5, 2011 by and between JAPAN TOBACCO INC. , a Japanese corporation having its principal place of business at JT Building, 2-1 Toranomon, 2-chome, Minato-ku, Tokyo 105-8422, Japan (“JT”), and GILEAD SCIENCES, INC. , a Delaware corporation having its principal place of business at 333 Lakeside Drive, Foster City, CA 94404, United States (“Gilead”). JT and Gilead are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS , JT and Gilead have previously entered into a License Agreement dated March 22, 2005 which was amended on May 19, 2005 and May 17, 2010 (such License Agreement, as amended previously and contemporaneously with this Amendment, the “EVG Agreement”) relating to a compound designated as JTK-303, which is now known as Elvitegravir (“EVG”); and

WHEREAS , Gilead desires to arrange for a product containing EVG as the sole active pharmaceutical ingredient and the Quad (as defined below) to be made available in developing countries which cannot afford developed-world pricing for the products and JT desires to facilitate such Gilead efforts by agreeing to amend the EVG Agreement as set forth herein.

NOW THEREFORE , based on the foregoing premises and the mutual covenants and obligations set forth below, the Parties agree as follows:

ARTICLE 1

DEFINITIONS

1.1 “ Access Countries ” shall mean the Access Group A Countries, the Access Group B Countries and the Access Group C Countries.

1.2 “ Access Group A Countries ” shall mean the countries listed on Schedule 1.65 A attached to this Amendment which consists of (i) the countries of Sub-Saharan Africa defined by The World Bank on the date of this Amendment, (ii) countries classified as low-income economies by The World Bank on the date of this Amendment, and (iii) countries listed by United Nations Conference On Trade and Development as least developed countries. If on the Launch Date or at any time thereafter a country not on Schedule 1.65 A is classified as a low-income economy by The World Bank or a country listed by United Nations Conference On Trade and Development as least developed country, then Gilead may amend Schedule 1.65 A to add such country upon prior written notice to JT and in accordance with any applicable requirements set forth in Section 2.8 of this Amendment. If such added country is listed on any other Schedule of this Amendment, then such Schedule shall be amended to delete such country.

[*] = 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

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1.3 “ Access Group B Countries ” shall mean the countries listed on Schedule 1.65 B attached to this Amendment. If on the Launch Date or at any time thereafter a country not on Schedule 1.65 B is classified as a lower-middle-income economy (or lower classification than lower-middle-income economy) by The World Bank, then Gilead may amend Schedule 1.65 B to add such country upon prior written notice to JT and in accordance with any applicable requirements set forth in Section 2.8. If on the Launch Date or at any time thereafter a country not on Schedule 1.65 B is classified in higher class than lower–middle-income economy by The World Bank, then Gilead may only amend Schedule 1.65 B to add such country upon prior written approval by JT and in accordance with any other requirements, if applicable, set forth in Section 2.8 of this Amendment. If any such added country is listed on any other Schedule of this Amendment, then such Schedule shall be amended to delete such country.

1.4 “Access Group C Countries ” shall mean the countries listed on Schedule 1.65 C attached to this Amendment. Gilead may only amend Schedule 1.65 C to add such country upon prior written approval by JT and in accordance with any applicable requirements set forth in Section 2.8 of this Amendment.

1.5 “ B/C Countries ” shall mean all Access Group B Countries and the Access Group C Countries.

1.6 “ Branded Products ” shall mean the Products sold by Gilead or its Affiliates or Sublicensees other than Generic Versions.

1.7 “ Excluded Net Sales ” shall mean Net Sales of Branded Products sold by Gilead or its Affiliates or Sublicensees for distribution solely within Access Group A Countries and Net Sales of Generic Versions under Generic Licenses in the Generic Territory.

1.8 “ Generic License ” shall mean a sublicense by Gilead or its Affiliate of its rights granted under Article 6 of the EVG Agreement to a Generic Licensee to (i) sell Generic Versions solely within the Generic Territory, (ii) make Generic Versions in India (Republic of India) solely for the purpose of selling them in the Generic Territory, (iii) make Generic Versions in South Africa solely for sale in Sub-Saharan Africa, from EVG API made by a Generic Licensee in India (Republic of India) or made by a contract manufacturer that makes EVG API for Gilead’s Branded Product, (iv) make Generic Versions in Thailand solely for sale in Thailand, from EVG API made by a Generic Licensee in India (Republic of India) or made by a contract manufacturer that makes EVG API for Gilead’s Branded Product, and/or (v) make API of EVG in India (Republic of India) and sell such API of EVG to other Generic Licensees in India (Republic of India), Thailand or in South Africa, solely for the purpose of making Generic Versions pursuant to 1.8(ii) or 1.8(iii) or 1.8(iv) set forth above. For clarity, unless otherwise expressly provided in this Amendment, both of the sublicense granted by Gilead to MPPF as well as MPPF License shall be deemed to be included in Generic License.

1.9 “ Generic Licensee ” shall mean a Sublicensee of Gilead or its Affiliate that has been granted a Generic License to make and/or sell API of EVG and/or Generic Versions and that has been granted no other rights to Products, except that a Generic Licensee may be granted the right to distribute Branded Products solely within countries in the Generic Territory. For clarity, unless otherwise expressly provided in this Amendment, both of the MPPF and any

[*] = 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

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third party granted the sublicense from MPPF under Section 3.2 of this Amendment shall be deemed to be included in Generic Licensee.

1.10 “Generic Net Sales” shall mean the net sales of EVG Generic Versions in the Generic Territory as such net sales are defined in the applicable Generic License, and as reported by the applicable Generic Licensee. For products containing EVG and one or more other APIs, such net sales shall mean the portion of net sales allocated to the EVG component as set forth in section 4.2 of the Generic License templates attached as Attachments A and B to this Amendment, or as set forth the corresponding provision in a Generic Sublicense to TGPO. If such allocations are not reported by the Generic Licensee(s), then Gilead and JT shall agree on the allocation based on available data on net selling prices of applicable generic products in the Generic Territory.

1.11 “Generic Territory” shall mean the Access Group A Countries and the Access Group B Countries.

1.12 “ Generic Versions ” shall mean the Products manufactured by Generic Licensees that are not sold under any Regulatory Approvals obtained by or for Gilead or its Affiliate, and which are marketed and promoted using different product trademarks than the Trademark. For clarity, it is expected that Generic Versions will receive Regulatory Approvals based on reference to Regulatory Approvals obtained by or for Gilead for Branded Products.

1.13 “ JT Patent Expenses ” shall mean [*] expenses (including attorneys’ fees) actually incurred by JT to file, maintain, Prosecute or enforce any patents or patent applications in or for the Access Group A Countries which are licensed by JT to Gilead under EVG Agreement.

1.14 “ Launch Date ” shall mean the earliest date of Commercial Launch of a Branded Product.

1.15 “MPPF” shall mean the Medicines Patent Pool Foundation, at 150 route de Ferney, PO Box 2100, CH-1211 Geneva 2, Switzerland. The sublicense of the Generic License granted by Gilead to MPPF pursuant to Section 3.2 of this Amendment shall be referred to as the “ MPPF License ”.

1.16 “ Net Sales ” shall mean Net Sales as defined in Section 1.65 of the EVG Agreement and not as defined in section 1.8 of the Second Amendment dated May 10, 2010 to the EVG Agreement.

1.17 “Region” shall mean any one of Access Group A Countries, Access Group B Countries or Access Group C Countries.

1.18 “TGPO” shall mean The Government Pharmaceutical Organization, a state enterprise of the government of Thailand.

ARTICLE 2

ACCESS COUNTRIES AND NET SALES

[*] = 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

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2.1 Net Sales in Access Countries. “Net Sales” shall [*] provided, however, that annual net sales and unit sales volume of each of Branded Products and Generic Versions (including, but not limited to, Generic Version containing a combination of APIs that are different from any Product under development or being marketed by Gilead, as set forth in Section 3.3 of this Amendment) in the Access Countries shall be reported by Gilead to JT in writing on a country-by-country and product-by-product basis, within ninety (90) days after the end of each calendar year, to the extent such information is available to Gilead.

2.2 Amendment of Net Sales Definition . Section 1.65 (“Net Sales”) of the EVG Agreement hereby is amended by deleting the following words and replacing them by the following words:

Deleted Words: “Distribution to Global Access Programs. To the extent Gilead or its Affiliates distribute Product through government agencies, not-for-profit non-governmental organizations, physicians, pharmacies or patients in the countries listed in Schedule 1.65 at reduced rates (the “Gilead Global Access Program”), Net Sales for the purposes of determining royalties payable under this Agreement on Products distributed to a Gilead Global Access Program will be calculated by reducing the gross amount invoiced to the Global Access Program for such Product by Gilead’s Manufacturing Costs, including, to the extent not included as Manufacturing Costs, reasonable overhead and depreciated facilities expenses and administrative costs in direct support of the manufacturing of the Product and of Gilead’s Global Access Program in accordance with practices and procedures consistent with those of other relevant products in the Gilead Global Access Program, for the Product less all credits or allowances granted on account of rejections, returns, billing errors or retroactive price reductions, and duties, taxes and other governmental charges, provided that the total resulting amount shall not be reduced below zero after deduction of applicable credits and allowances.”

Replacement Words: “Adjustment for Combination Products.”

Schedule 1.65 attached to the EVG Agreement is hereby deleted.

2.3 Royalty Due to JT for Sales of Generic Versions . Gilead shall pay JT a royalty of [*] of Generic Net Sales only in Access Group B Countries of the Generic Territory. The provisions of Sections 8.4, 8.5, 8.6, 8.7, 8.8 and 8.9 of the EVG Agreement shall apply to such royalty payments, except that Gilead’s payment shall be due thirty (30) days after receipt of the royalty report from the Generic Licensee reporting such Generic Net Sales.

2.4 [*] shall be reported in the quarterly royalty reports to JT under Section 8.4 of the EVG Agreement.

2.5 Access Countries . Section 5.5 (“Global Access Program”) of the EVG Agreement hereby is amended to read as follows:

“5.5 Access Countries . In its program to provide Products in the Access Countries (either by itself or through Generic Licensees) Gilead shall undertake commercially reasonable efforts to seek to prevent adverse effects on Net Sales of Products in countries that are not in the Access Countries, which efforts are consistent with those Gilead uses with its other HIV products. Gilead will discuss in good faith with JT any such preventative efforts and

[*] = 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

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shall keep JT reasonably informed of actions taken in furtherance of such efforts to prevent adverse effects on Net Sales of Product in countries that are not Access Countries. In any Gilead press release announcing an expansion of the Gilead global access program with respect to the Product, Gilead shall comply with Section 13.3 of the EVG Agreement and also shall include a statement to the effect that JT has agreed to reduce or waive its right to a royalty on sales of the Product in the Access Countries.”

2.6 No Application of Certain Provisions to Access Countries. [*] .

2.7 JT Patent Expenses . JT Patent Expenses will be billed to Gilead quarterly and shall be paid by Gilead to JT within thirty (30) days from receipt of invoice, such invoice and payments to be in United States Dollars (converted from other currencies pursuant to JT’s central currency conversion system). The IP Subcommittee shall determine a reasonable strategy, including the [*] that would cause JT to incur JT Patent Expenses. If the IP Subcommittee agrees on the strategy for such proceeding or action, then Gilead will reimburse JT for such JT Patent Expenses. If the IP Subcommittee does not agree on a strategy for such proceeding or action at any time, then (a) JT will be entitled to pursue its own strategy for such proceeding or action, keeping Gilead reasonably informed, and (b) Gilead [*] for such proceeding or action. Any such failure by the IP Subcommittee to agree shall not be subject to further review under Section 9.2(c) or Article 15 of the EVG Agreement. For clarity, [*] even if Gilead does not agree on the strategy therefor.

2.8 Changes to Schedules 1.65 A, 1.65 B or 1.65 C . Gilead may remove a country from any of Schedules 1.65 A, 1.65 B or 1.65 C (the “ABC Schedules”) upon prior written notice to JT. If any country on an ABC Schedule (e.g., Sudan) is divided into two or more countries, then such countries automatically shall take the place, on such ABC Schedule, of the country which was divided. If Gilead wishes to add a country to an ABC Schedule and this Amendment does not permit Gilead to do so upon prior written notice to JT, then Gilead shall request the addition of such country to JT along with a justification for such addition, and such addition shall be subject to JT’s written consent. If the criteria (except routine adjustments to the threshold income levels) of categorization of a country’s economic situation by The World Bank or United Nations Conference On Trade and Development is changed, upon JT’s request, Gilead and JT shall discuss in good faith to modify the criteria to amend Schedules 1.65 A, 1.65 B or 1.65 C set out in Sections 1.2, 1.3 and 1.4.

ARTICLE 3

GENERIC LICENSES

3.1 JT Consent . JT consents to Gilead entering into Generic Licenses with Generic Licensees on the condition that: (i) the terms and conditions of Generic Licenses shall not be less favorable to JT than the agreement templates attached hereto as Attachment A for semi-exclusive license and Attachment B for non-exclusive license; and (ii) Gilead shall use reasonable efforts to cause each Generic Licensee to substantially fulfill all its obligations under Generic License and Gilead’s obligations under the EVG Agreement. Gilead shall not grant to Generic Licensee or any other entity the right to sublicense the Generic License to a third party. For clarity, Gilead may sell Branded Products in the Generic Territory. Any Generic License granted by Gilead to TGPO shall be subject to the prior written approval of JT and shall be subject to subsection 3.1(ii) above. For clarity, any Generic License granted by Gilead to sell

[*] = 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

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EVG API to TGPO shall be subject to the prior written approval of JT and shall be subject to subsection 3.1(ii) above.

3.2 MPPF License. Notwithstanding Section 3.1 of this Amendment, Gilead may grant the right to MPPF to issue single tier sublicenses to Generic Licensees under terms and conditions approved by JT in writing.

3.3 Generic Version of Different Combination. If a Generic Licensee proposes to commercialize a Generic Version which contains a combination of APIs that are different (including different dosages, other than of EVG) from any Product under development or being marketed by Gilead, then such commercialization shall be subject to prior review and approval by Gilead with regard to safety considerations.

3.4 Sharing of Generic License Agreement. Upon JT’s request, Gilead shall promptly provide to JT a list of the then-current Generic Licensees and a copy of the Generic License agreement (including any amendment thereto) with each Generic Licensee, and a copy of the MPPF License. Gilead may redact information pertaining only to products which are not Products.

3.5 Generic Licensee Know-How and Patents . JT understands that Gilead has obligations under Section 6.5 of the EVG Agreement with respect to sublicense of Gilead Sublicensee Know-How and Gilead Sublicensee Patents, and that [*] . Gilead will keep JT apprised of any Gilead Sublicensee Know-How and Gilead Sublicensee Patents of Generic Licensees that is provided or reported to Gilead by the Generic Licensees and sublicensable to JT, including [*] . For purposes of Section 9.3(c) (“Gilead Patents”) and 9.4(c) (“Infringement of Gilead Patents”) of the EVG Agreement, “Gilead Patents” shall not include Patents of Generic Licensees. For clarity, any inconsistent or additional obligations of Gilead to obtain rights to Sublicensee Know-How and Sublicensee Patents of Generic Licensees under the EVG Agreement are hereby superseded.

3.6 Generic Licensee Information and Regulatory Filings . JT acknowledges that it shall have no access to or rights to obtain, use or reference any Regulatory Information, records, regulatory filings, correspondence with Regulatory Authorities, Marketing Authorization Applications, INDs and post-approval Phase IIIB/IV data for Products or Regulatory Approvals of Generic Licensees with respect to Generic Versions, except as provided under Section 3.5 of this Amendment. Notwithstanding the foregoing, JT shall have the right to obtain, use or reference the above-mentioned data, documents and information, if and to the extent Gilead has the right to obtain, use or reference the above-mentioned data, documents and information.

3.7 Safety Data . JT agrees that Section 4.4 (“Adverse Event Reporting and Safety Data Exchange”) of the EVG Agreement shall not apply to Generic Versions. Notwithstanding the foregoing, JT shall have the right to obtain, use or reference such data, documents and information with respect to safety or adverse events, if and to the extent Gilead has the right to obtain, use or reference such data, documents and information with respect to safety or adverse events.

3.8 Promotional Materials . JT agrees that Section 5.3 (“Promotional Materials”) of the EVG Agreement shall not apply to Promotional Materials of Generic Licensees.

[*] = 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

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3.9 Trademark . Gilead and JT agree that the Trademark shall not be used with respect to the Generic Versions. The Generic Licenses shall prohibit the Generic Licensee from using the Trademark with respect to Generic Versions and shall require that the Generic Versions have a trade dress that is distinct from Branded Products.

3.10 Responsibility for Generic Licensees . JT acknowledges that enforcing legal rights in some or all of the Access Countries is more challenging than in countries that are not Access Countries. Therefore, JT agrees that if the actions or inactions of a Generic Licensee cause Gilead to be in breach of the EVG Agreement (including situations where the Generic Licensee acts in a manner inconsistent with the EVG Agreement under Section 16.9), then so long as Gilead is acting in good faith to remedy such breaches (including, without limitation, notifying JT of any material breach (e.g. (A) material quantity of leakage of (i) Generic Versions to the countries other than Access Group A Countries and Access Group B Countries or (ii) API to the countries other than India, Thailand or South Africa or (B) substantial deviation from Good Manufacturing Practices) of the EVG Agreement by Generic Licensees promptly after it is known to Gilead and, upon reasonable request by JT, terminating the Generic License with respect to Products in a timely manner in accordance with the relevant provisions of Generic License), then JT agrees that it will not terminate the EVG Agreement with respect to countries that are not Access Countries because of such breach. Gilead shall indemnify the JT Indemnitees from any losses or damages arising from any breach of the EVG Agreement due to the acts or omissions of Generic Licensees pursuant to Sections 11.2 and 11.4 of the EVG Agreement. Except as specifically set forth in this Section 3.10, nothing in this Amendment limits any rights or remedies of JT for any breach by Gilead of the EVG Agreement.

3.11 Amendment to Gilead’s Indemnification . The first sentence of Section 11.2 of the EVG Agreement is hereby amended to read as follows:

“Gilead hereby agrees to Indemnify JT and its Affiliates, agents, directors, officers and employees (the “JT Indemnitees”) from and against any and all Losses resulting from Third Party Claims arising directly or indirectly out of (i) a breach of any obligations of Gilead under this Agreement, including without limitation Gilead’s representation and warranties or covenants pursuant to Article 10; or (ii) the Development, manufacture (to the extent of any formulation work performed by Gilead pursuant to Article 7), storage, distribution, promotion, labeling, handling, use, sale, offer for sale or importation of Compound and/or Products by Gilead, its Affiliates or its Generic Licensees in the Gilead Territory (subject to Section 11.3).”

3.12 Audit of Generic Licensees . JT agrees that it shall not have the right to directly audit Generic Licensees under Section 12.1 (“Records; Audits”) of the EVG Agreement. Gilead shall secure the right to audit Generic Licensee in each Generic License. When Gilead has audited Generic Licensee(s), Gilead shall provide the portions of the audit result and report relevant to Products to JT within sixty (60) days from completion of each audit. If requested by JT, Gilead shall promptly audit a Generic Licensee in accordance with Gilead’s audit rights under the applicable Generic License. For clarity, nothing in this Section 3.8 affects JT’s right to audit Gilead or its Affiliates.

3.13 Alternate Dosage . Gilead shall obligate and require Generic Licensees not to manufacture or sell any Generic Versions formulated at a single dose concentration other than

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those dose concentrations approved by the FDA for such agents, without prior written consent of Gilead.

3.14 Generic Licensees’ Quarterly Reports . Gilead shall obligate and require Generic Licensees to provide Gilead with quarterly reports on manufacturing and sales as set forth in section 4.3 in Attachment A and Attachment B (and any similar provision in the Generic License to TGPO). Upon JT’s request, Gilead shall provide JT with copies of such quarterly reports; provided that Gilead may redact information which does not pertain to the Products.

3.15 Annual Reports on Different Combination or Alternate Dosage . Gilead shall make commercially reasonable efforts to determine, by itself or through Generic Licensees, the regulatory status in each country of the Generic Version (i) with different combination of APIs and (ii) with alternate dosage, for which Gilead give the approval or consent pursuant to Section 3.3 or 3.13 of this Amendment, respectively and shall annually report to JT thereon.

3.16 Third Party’s Infringement. If Gilead learns of any alleged or threatened infringement of the JT Patents in the Access Countries, Gilead shall promptly report same in writing to JT in accordance with Section 9.4(a)(i) of the EVG Agreement and shall cooperate and assist JT, by itself or through Generic Licensees, in the investigation and enforcement pertaining to such infringement.

3.17 JT Mark. Gilead shall obligate and require Generic Licensees not to use any JT’s trademark, trade name, logo or service mark (each, a “JT Mark”), or any word, logo or any expression that is similar to any JT Mark.

3.18 Consultation before disclosure of the EVG Agreement. Notwithstanding Section 13.3(c)(iv) of the EVG Agreement, if Gilead plans to disclose any or all of the contents of the EVG Agreement to any Generic Licensee that are not in public domain, Gilead shall give JT reasonable prior written notice thereof, in which case Gilead and JT shall discuss the necessity and the manner of such disclosure and no disclosure shall be made in the absence of agreement by the parties thereon.

3.19 Termination of Generic Licenses . If the EVG Agreement is terminated, Gilead shall terminate the Generic Licenses with respect to the Products as set forth in Section 10.3(b)(iv) in Attachment A, Attachment B (and any similar provision in the Generic License to TGPO) as well as shall terminate the MPPF License with respect to the Products.

ARTICLE 4

MISCELLANEOUS

4.1 Effect . Except as expressly amended by this Amendment, the EVG Agreement remains in full force and effect.

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4.3 Further Actions. Each Party agrees to execute, acknowledge and deliver such further instruments, and to do all such other acts, as may be necessary or appropriate in order to carry out the purposes and intent of this Amendment.

4.4 Headings. The headings for each Article and Section in this Amendment have been inserted for convenience of reference only and are not intended to limit or expand on the meaning of the language contained in the particular Article or Section.

4.5 Translations. This Amendment is in the English language only, which language shall be controlling in all respects, and all versions hereof in any other language shall be for accommodation only and shall not be binding upon the Parties. All communications and notices to be made or given pursuant to this Amendment, and any dispute proceeding related to or arising hereunder, shall be in the English language. If there is a discrepancy between any Japanese translation of this Amendment and this Amendment, this Amendment shall prevail.

4.6 Counterparts. This Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument.

IN WITNESS WHEREOF the Parties have executed this Amendment in duplicate originals by their duly authorized officers as of the date first set forth above.


Gilead Sciences, Inc.		Japan Tobacco Inc.


By:	/s/ John F. Millilgan	By:	/s/ Noriami Okubo
	Name: John F. Milligan, Ph.D.		Name: Noriaki Okubo

Title: President & Chief Operating Officer		Title: President, Pharmaceutical Business

[*] = 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

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SCHEDULE 1.65 A

List of Access A Countries set forth in Section 1.2.


1.	Afghanistan	44.	Nigeria
2.	Angola	45.	Rwanda
3.	Bangladesh	46.	Samoa
4.	Benin	47.	São Tomé and Principe
5.	Bhutan	48.	Senegal
6.	Botswana	49.	Seychelles
7.	Burkina Faso	50.	Sierra Leone
8.	Burundi	51.	Solomon Islands
9.	Cambodia	52.	Somalia
10.	Cameroon	53.	South Africa
11.	Cape Verde	54.	Sudan
12.	Central African Republic	55.	Swaziland
13.	Chad	56.	Tajikistan
14.	Comoros	57.	Tanzania
15.	Congo, Dem. Rep.	58.	Timor-Leste
16.	Congo, Rep.	59.	Togo
17.	Côte d’Ivoire	60.	Tuvalu
18.	Djibouti	61.	Uganda
19.	Equatorial Guinea	62.	Vanuatu
20.	Eritrea	63.	Yemen, Rep.
21.	Ethiopia	64.	Zambia
22.	Gabon	65.	Zimbabwe
23.	Gambia, The
24.	Ghana
25.	Guinea
26.	Guinea-Bissau
27.	Haiti
28.	Kenya
29.	Kiribati
30.	Kyrgyz Republic
31.	Lao PDR
32.	Lesotho
33.	Liberia
34.	Madagascar
35.	Malawi
36.	Mali
37.	Mauritania
38.	Mauritius
39.	Mozambique
40.	Myanmar
41.	Namibia
42.	Nepal
43.	Niger

[*] = 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

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SCHEDULE 1.65 B

List of Access B Countries set forth in Section 1.3.


	1.			Anguilla (UK)
	2.			Antigua and Barbuda
	3.			Armenia
	4.			Bahamas, The
	5.			Barbados
	6.			Belize
	7.			Bolivia
	8.			British Virgin Islands
	9.			Cuba
	10.			Dominica
	11.			Ecuador
	12.			El Salvador
	13.			Fiji
	14.			Georgia
	15.			Grenada
	16.			Guatemala
	17.			Guyana
	18.			Honduras
	19.			India
	20.			Indonesia
	21.			Jamaica
	22.			Kazakhstan
	23.			Maldives
	24.			Moldova
	25.			Mongolia
	26.			Nauru, Rep (UK)
	27.			Nicaragua
	28.			Pakistan
	29.			Palau
	30.			Papua New Guinea
	31.			Sri Lanka
	32.			St. Kitts and Nevis
	33.			St. Lucia
	34.			St. Vincent and the Grenadines
	35.			Suriname
	36.			Syrian Arab Republic
	37.			Thailand
	38.			Tonga
	39.			Trinidad and Tobago
	40.			Turkmenistan
	41.			Turks and Caicos Islands
	42.			Uzbekistan
	43.			Vietnam

SCHEDULE 1.65 C

List of Access C Countries set forth in Section 1.4.


		1. Algeria
		2. Dominican Republic
		3. Egypt, Arab Rep.
		4. Morocco
		5. Tunisia

ATTACHMENT A

A MENDED AND R ESTATED L ICENSE A GREEMENT ( TEMPLATE )

This A MENDED AND R ESTATED L ICENSE A GREEMENT (the “ Agreement ”) is made as of July , 2011 (the “ Effective Date ”) by and between Gilead Sciences, Inc. a Delaware corporation having its principal place of business at 333 Lakeside Drive, Foster City, California 94404, USA (“ Gilead ”), and a company registered under the laws of India, and having a registered office at , India (“ Licensee ”), and amends and restates in its entirety the License Agreement dated between Gilead and Licensee, as previously amended (the “ TDF License Agreement ”).

R E C I T A L S

W HEREAS , Gilead wishes to facilitate access to its antiviral agents to patients in the developing world to help satisfy unmet medical needs;

W HEREAS , to accomplish this goal, Gilead granted Licensee a non-exclusive license to manufacture Gilead’s proprietary agent TDF in India and sell such agent in India and elsewhere in the developing world pursuant to the TDF License Agreement;

W HEREAS , Gilead wishes to expand the scope of the TDF License Agreement to expand the licensed Territory and grant Licensee non-exclusive rights to Gilead’s proprietary agents elvitegravir and cobicistat, and including rights in Gilead’s proprietary fixed-dose single-tablet regimen referred to as the “Quad”, as specifically provided herein; and

W HEREAS , Licensee wishes to manufacture TDF, elvitegravir and cobicistat in India and sell products containing such agents in the Territory to help achieve the goal set forth above;

N OW , T HEREFORE , in consideration of the mutual covenants set forth herein and other good and valuable considerations, the receipt of which is hereby acknowledged, the parties hereto mutually agree to amend and restate the TDF License Agreement in its entirety, as follows:

1. Definitions

“ Active Pharmaceutical Ingredient ” or “ API ” shall mean one or more of the following active pharmaceutical ingredients: tenofovir disoproxil fumarate (“ TDF ”); elvitegravir (“ EVG ”), and cobicistat (“ COBI ”).

“ Alternate Dosage ” shall have the meaning set forth in Section 6.2(d).

“ COBI Combination Product” shall mean a formulated and finished pharmaceutical product containing COBI in combination with any other active pharmaceutical ingredient other than EVG, including combinations containing COBI together with TDF provided such combination does not also contain EVG (in each case subject to the restrictions set forth in Section 2.4(c)(ii)), including any co-formulation, co-packaged product, bundled product, or other type of combination product. For clarity, the Quad is not a COBI Combination Product.

“COBI Product” shall mean a formulated and finished pharmaceutical product containing COBI as its sole active pharmaceutical ingredient.

“ COBI Territory” shall mean those countries listed on Appendix 5.

“ Combination Products ” shall mean COBI Combination Products, EVG Combination Products, TDF Combination Products, and the Quad.

“ Confidential Information ” shall have the meaning set forth in Section 11.1.

“ Distributor ” shall mean a third party wholesaler or distributor that is not a Gilead Distributor and that is operating under an agreement with Licensee for the distribution and sale of Product in the Territory.

“ Emtricitabine Patents ” shall have the meaning set forth in Section 7.6.

“ EVG Combination Product ” shall mean a formulated and finished pharmaceutical product containing EVG in combination with any other active pharmaceutical ingredient (in each case subject to the restrictions set forth in Section 2.4(c)(iii)), including any co-formulation, co-packaged product, bundled product, or other type of combination product, but not including the Quad.

“EVG Product” shall mean a formulated and finished pharmaceutical product containing EVG as its sole active pharmaceutical ingredient.

“ EVG-Quad Territory ” shall mean those countries listed on Appendix 6.

“ FDA ” shall mean the United States Food and Drug Administration, and any successor agency thereto.

“ Field ” shall mean the treatment and prophylaxis of HIV infection, provided, however, that (a) for Product containing TDF as its sole active pharmaceutical ingredient, the Field shall include the treatment and prophylaxis of Hepatitis B Virus infection, and (b) for Product containing EVG or COBI, the Field shall include any use that is consistent with the label approved by the FDA or applicable foreign regulatory authority for the use of such Product containing EVG or COBI.

“ Gilead Distributor ” shall mean any third party distributor that is operating under an agreement with Gilead for the distribution and sale of Gilead’s branded product in the Territory. Gilead will provide Licensee with a list, which may be updated by Gilead from time to time, of the identity of the Gilead Distributors and their licensed territories.

“ Gilead Mark ” shall have the meaning set forth in Section 2.5(b).

“ Gilead Supplier ” shall mean PharmaChem Technologies (Grand Bahama), Ltd.

“ Improvements ” shall have the meaning set forth in Section 2.3.

“ Japan Tobacco ” shall mean Japan Tobacco Inc., a Japanese corporation, and its affiliates.

“ Japan Tobacco Agreement ” shall mean the License Agreement between Gilead and Japan Tobacco dated March 22, 2005, as amended from time to time.

“ JT Mark ” shall have the meaning set forth in Section 2.5(b).

“ Licensed API ” shall mean API that is either (a) made by Licensee pursuant to the license grant in Section 2.1; or (b) acquired by Licensee from a Gilead Supplier or from a Licensed API Supplier on the terms and conditions set forth in Section 3.

“ Licensed API Supplier ” shall mean an entity (other than Licensee) that is licensed by Gilead to manufacture and sell API to third parties in the Field in India.

“ Licensed Know-How ” shall have the meaning set forth in Section 5.5.

“ Licensed Product Supplier ” shall mean an entity (other than Licensee) located in India that is licensed by Gilead to make, use, sell, have sold, offer for sale and export Product in the Field in the Territory.

“ Licensed Technology ” shall mean the Patents and the Licensed Know-How.

“ Minimum Quality Standards ” shall have the meaning set forth in Section 6.2(a).

“ NCE Exclusivity ” shall mean five years of marketing exclusivity granted by FDA pursuant to its authority under 21 U.S.C. §§ 355(c)(3)(E)(ii) and 355(j)(5)(F)(ii).

“ Net Sales ” shall mean, with respect to a given calendar quarter, the total amount invoiced by Licensee for sales of Product in the Territory, less landed cost (including freight, insurance, packing, shipping and custom duty) of imported components, VAT/Indian excise tax, sales tax, packing for shipment and shipping costs actually incurred, to the extent consistent with Generally Accepted Accounting Principles as consistently applied across all products of Licensee. In no event shall the total deductions allowed exceed ten percent (10%) of the total amount invoiced by Licensee without Licensee providing Gilead with supporting documentation justifying such excess and obtaining Gilead’s written consent, not to be unreasonably withheld. Net Sales on Combination Products shall be calculated based on the portion of product Net Sales attributable to Licensed API, as set forth in Section 4.2.

“ Patents ” shall mean the patents described in Appendix 2 hereto and any other patents and patent applications (and resulting patents therefrom) (a) owned by Gilead during the term of this Agreement, or (b) exclusively licensed by Gilead from Japan Tobacco pursuant to the Japan Tobacco Agreement, in each case solely to the extent necessary for Licensee to practice the licenses granted in Section 2 hereof, and solely to the extent the claims in such patents and patent applications cover the manufacture, use or sale of API.

“ Pediatric Formulation ” shall have the meaning set forth in Section 6.2(e).

“ Product ” shall mean COBI Product, EVG Product, TDF Product, COBI Combination Product, EVG Combination Product, TDF Combination Product, and the Quad.

“ Quad ” or “ the Quad ” shall mean the finished pharmaceutical product containing TDF (300 mg), emtricitabine (200 mg), EVG and COBI (each at their dose concentration approved by the FDA or applicable regulatory authority) as its only active pharmaceutical ingredients, and that is manufactured and sold as a fixed-dose single-tablet regimen and not as a bundled or co-packaged product.

“ Quarterly Report ” shall have the meaning set forth in Section 4.3.

“ Royalty Term ” shall have the meaning set forth in Section 4.9.

“ Semi-Exclusive Territory ” shall mean those countries listed on Appendix 7.

“ TDF Combination Product ” shall mean a formulated and finished pharmaceutical product containing TDF in combination with any other active pharmaceutical ingredient other than EVG or COBI (in each case subject to the restrictions set forth in Section 2.4(c)(i)), including any co-formulation, co-packaged product, bundled product, or other type of combination product. For clarity, the Quad is not a TDF Combination Product.

“ TDF Product ” shall mean a formulated and finished pharmaceutical product containing TDF as its sole active pharmaceutical ingredient.

“ TDF Territory ” shall mean those countries listed on Appendix 1.

“ Territory ” shall mean the TDF Territory, the COBI Territory, the EVG-Quad Territory, and the Semi-Exclusive Territory.

“ Third-Party Resellers ” shall mean Licensed Product Suppliers, Distributors and Gilead Distributors.

2. License Grants

API in the Field and in India, solely for the purpose of offering to sell and selling API to Licensed Product Suppliers, or for Licensee’s own internal use. For clarity, the license granted in this Section 2.1 does not include, expressly or by implication, a license under any Gilead intellectual property right to manufacture, sell or distribute any active pharmaceutical ingredient owned or controlled by Gilead other than TDF, EVG and COBI.

2.2 Product License . Subject to the terms and conditions of this Agreement, Gilead hereby grants to Licensee the following licenses:

(a) a royalty-bearing, non-exclusive, non-sublicensable (except as set forth in Section 2.4(b)), non-transferable license under the Licensed Technology solely to make, use, sell, have sold, offer for sale, export from India and import (i) TDF Product and TDF Combination Products in the Field in the TDF Territory, (ii) COBI Product and COBI Combination Products in the Field in the COBI Territory, and (iii) EVG Product, EVG Combination Products and Quad in the Field in the EVG-Quad Territory; provided that in each case such Products shall be made only from Licensed API; and

(b) a royalty-bearing, semi-exclusive (as set forth in Section 2.6), non-sublicensable (except as set forth in Section 2.4(b)), non-transferable license under the Licensed Technology solely to make, use, sell, have sold, offer for sale, export from India and import COBI Product, COBI Combination Products, EVG Product, EVG Combination Products and Quad in the Field in the Semi-Exclusive Territory; provided that in each case such Products shall be made only from Licensed API.

For clarity, (a) the licenses granted in this Section 2.2 do not include, expressly or by implication, a license under any Gilead intellectual property right to manufacture, sell or distribute any product containing active pharmaceutical ingredients owned or controlled by Gilead other than Products containing TDF, EVG and COBI, and (b) notwithstanding the foregoing, the licenses granted under this Section 2.2 shall not extend to any active pharmaceutical ingredient included within a Product other than TDF, EVG and COBI.

2.3 License Grant to Gilead . Licensee hereby grants to Gilead a nonexclusive, royalty-free, worldwide, sublicensable license to all improvements, methods, modifications and other know-how developed by or on behalf of Licensee and relating to API or a Product (“ Improvements ”), subject to the restrictions on further transfer of Licensee’s technology by Gilead as set forth in Section 5.3.

2.4 Licensee Right to Sell Through Third Party Resellers.

(a) Licensed Product Suppliers. Licensee agrees that it will not sell or offer to sell API to any entity other than to Licensed Product Suppliers in India that have been approved by Gilead in accordance with Section 2.4(e).

(b) Product Sales . Licensee agrees that it will not sell, offer for sale, or assist third parties in selling Product except for the sale and offer for sale of (A) TDF Product

and TDF Combination Product for use in the Field and in the countries of the TDF Territory, (B) COBI Product and COBI Combination Product for use in the Field and in the countries of the COBI Territory and the Semi-Exclusive Territory, and (C) EVG Product, EVG Combination Product and Quad for use in the Field and in the countries of the EVG-Quad Territory and the Semi-Exclusive Territory.

(i) Licensee agrees that it will prohibit its Distributors from selling Product (A) to any other wholesaler or distributor, (B) outside the Territory for which Licensee is licensed for sale of such Product pursuant to Section 2.2, or (C) for any purpose outside the Field.

(ii) Licensee agrees that it will not administer the Quad to humans, or sell the Quad until Gilead has obtained marketing approval for the Quad from the FDA. Licensee agrees that it will not administer EVG to humans, or sell Products containing EVG until Gilead has obtained marketing approval for EVG from the FDA. Licensee agrees that it will not administer COBI to humans, or sell Products containing COBI until Gilead has obtained marketing approval for COBI from the FDA. If Gilead obtains marketing approval from the FDA for the Quad prior to obtaining marketing approval for a product containing EVG or COBI as a single agent, then Licensee will be allowed to administer the Quad to humans, and sell the Quad, but will not (A) administer to humans or sell Combination Products containing EVG other than the Quad until Gilead has obtained marketing approval from the FDA for EVG, or (B) administer to humans or sell Combination Products containing COBI other than the Quad until Gilead has obtained marketing approval from the FDA for COBI.

(i) Licensee will be allowed to manufacture and sell TDF in combination with other active pharmaceutical ingredients in the TDF Territory, provided in each case (A) Licensee has the legal right to manufacture and sell such other active pharmaceutical ingredients in the applicable country in the TDF Territory, and (B) such manufacture and sale is in accordance with the licenses granted herein.

(ii) Licensee will be allowed to manufacture and sell COBI in combination with other active pharmaceutical ingredients in the COBI Territory and the Semi-Exclusive Territory, provided in each case (A) Licensee has the legal right to manufacture and sell such other active pharmaceutical ingredients in the applicable country in the COBI Territory or Semi-Exclusive Territory, and (B) such manufacture and sale is in accordance with the licenses granted herein.

(iii) Licensee will be allowed to manufacture and sell EVG in combination with other active pharmaceutical ingredients in the EVG-Quad Territory and the Semi-Exclusive Territory, provided in each case (A) Licensee has the legal right to manufacture and sell such other active pharmaceutical ingredients in the applicable country in the EVG-Quad Territory or Semi-Exclusive Territory, (B) such manufacture and sale is in accordance with the licenses granted herein, and (C) Licensee has obtained Gilead’s prior written consent for the manufacture or sale of such product containing EVG, such consent not to be unreasonably withheld. For clarity, the requirement for Gilead’s prior consent set forth in the preceding clause (C) shall not apply to the Quad.

(d) Terms of Agreements with Third Party Resellers.

(i) Gilead Distributors . Licensee may elect to sell finished Product in the Territory to any Gilead Distributor, provided, however, that (A) Licensee may only sell and offer for sale TDF Product and TDF Combination Product to Gilead Distributors to sell in the TDF Territory, and may not sell or offer for sale TDF Product or TDF Combination Product outside the TDF Territory, (B) Licensee may only sell and offer for sale COBI Product and COBI Combination Product to Gilead Distributors in the COBI Territory and the Semi-Exclusive Territory, and may not sell or offer for sale COBI Product or COBI Combination Product outside the COBI Territory or the Semi-Exclusive Territory, and (C) Licensee may only sell and offer for sale EVG Product, EVG Combination Product and Quad to Gilead Distributors in the EVG-Quad Territory and the Semi-Exclusive Territory, and may not sell or offer for sale EVG Product, EVG Combination Product or Quad outside the EVG-Quad Territory or the Semi-Exclusive Territory, and (D) Licensee shall only sell to such Gilead Distributor those Products that are bioequivalent to the branded products Gilead has granted such Gilead Distributor the right to sell in such country of the applicable Territory. Licensee shall only allow such Gilead Distributor to sell such Product in the countries within the country of the applicable Territory for which such Gilead Distributor has the right to sell branded Gilead product. For example, Licensee shall not sell to a Gilead Distributor (X) a Product containing TDF, FTC and efavirenz, unless Gilead has granted such distributor the right to sell a branded product containing TDF, FTC and efavirenz in such country in the Territory, or (Y) a Product containing both TDF and 3TC.

(ii) Other Third Party Resellers . Licensee shall require any such Third Party Reseller to agree, in a written agreement with Licensee, (i) to comply with the applicable terms of this Agreement; and (ii) to report to Licensee such information, and allow Licensee to provide Gilead with the information described in Section 4.3 (and also to provide Japan Tobacco with such information to the extent it relates to EVG, EVG Product, EVG Combination Product or Quad). Gilead has the right to audit, on no less than thirty (30) days’ advance notice to Licensee, such records of Licensee solely to the extent necessary to verify such compliance. Gilead will bear the full cost of any such audit, and shall have the right to share the outcome of any such audit with Japan Tobacco to the extent such outcome relates to EVG, EVG Product, EVG Combination Product, or Quad.

(e) Gilead Approval of Third Party Reseller Agreements. Licensee shall not enter into any agreements with Third Party Resellers on terms inconsistent with this Agreement without obtaining Gilead’s prior written approval. If Licensee enters into an agreement with any Third Party Reseller, then Licensee shall notify Gilead in writing, and shall certify that its arrangement with such Third Party Reseller is consistent with the terms and conditions of this Agreement. Licensee shall provide Gilead with written copies of all agreements executed between Licensee and Third Party Resellers. Gilead shall have the right to review all such agreements to verify consistency with the terms and conditions of this Agreement. In the event that any inconsistency is found which had not been specifically discussed and agreed with Gilead, then Gilead shall have the right to require Licensee to terminate such agreement. To the extent any such agreements relate to EVG, EVG Product, EVG Combination Product, or Quad, Gilead shall also have the right to share such agreements with Japan Tobacco.

(f) Termination of Third Party Agreements by Licensee . Licensee shall immediately terminate its agreement(s) with a Third-Party Reseller in the event that such Third Party Reseller engages in material activities that Licensee is prohibited from performing under this Agreement, or that are inconsistent with Licensee’s covenants under this Agreement, including without limitation the unauthorized use, sale or diversion by such Third Party Reseller of API or Product outside the Field or the applicable Territory, or upon Licensee first reasonably believing that such Third-Party Reseller has engaged in such activities.

(g) Termination of Third Party Agreements by Gilead . Gilead may terminate the right of Licensee to sell Product to any Third-Party Reseller pursuant to this Section 2.4, if in Gilead’s reasonable belief the Third-Party Reseller is not acting in a way that is consistent with Licensee’s covenants under this Agreement, or if Licensee does not terminate Licensee’s agreement with such Third-Party Reseller under the circumstances described in Section 2.4(e) or Section 2.4(f).

2.5 License Limitations.

(a) Gilead Retained Rights . Licensee hereby acknowledges that Gilead retains all rights in API and Products except as otherwise provided in this Agreement, and that Gilead may license or otherwise convey to third parties its rights in API and Products as it wishes without obligation or other accounting to Licensee.

(b) Gilead Marks . The licenses granted hereunder do not include any license or other right to use any Gilead trademark, trade name, logo or service mark (each, a “ Gilead Mark ”) or any word, logo or any expression that is similar to or alludes to any Gilead Mark, except as provided in Section 6.5. Licensee agrees not to use any Japan Tobacco trademark, trade name, logo or service mark (each, a “ JT Mark ”), or any word, logo or any expression that is similar to any JT Mark.

(c) Sublicensed Technology . The licenses relating to EVG, EVG Product, EVG Combination Product and Quad granted to Licensee under this Agreement include sublicenses of intellectual property rights from Japan Tobacco, and remain subject to the terms and conditions of the Japan Tobacco Agreement. Gilead and Licensee shall not permit any action to be taken or event to occur, in each case to the extent within such party’s reasonable control, that would give Japan Tobacco the right to terminate the Japan Tobacco Agreement. If either party is notified or otherwise becomes aware that Licensee’s activities may constitute a material breach of the Japan Tobacco Agreement, it shall promptly notify the other party. The parties shall confer regarding an appropriate manner for curing any such alleged breach. Licensee shall cure such alleged breach as promptly as possible, and in any case within the time allotted under the Japan Tobacco Agreement. Gilead shall remain responsible for EVG Product, EVG Combination Product, and Quad royalties owed to Japan Tobacco pursuant to the Japan Tobacco Agreement.

(d) No Other Licenses .

(i) Licensee agrees that it shall not use any contract manufacturers without obtaining Gilead’s prior written consent, or grant any sublicenses hereunder.

(ii) Except as expressly set forth in this Agreement, Gilead does not grant any license under any of its intellectual property rights (including, without limitation, Patents or rights to any proprietary compounds or drug substances other than API) to Licensee.

2.6 Licensee Rights in the Semi-Exclusive Territory .

(a) Licensee shall have the right to market and sell EVG Product, EVG Combination Product, COBI Product, COBI Combination Product, and Quad in the Semi-Exclusive Territory on a semi-exclusive basis in accordance with the terms and conditions of this Agreement. As such, during the Semi-Exclusive Term, Gilead agrees not to grant any third party the right to sell (i) any generic pharmaceutical product containing EVG, whether as a single agent or in combination with other active pharmaceutical ingredients (including generic versions of the Quad) in the Semi-Exclusive Territory, and (ii) any generic pharmaceutical product containing COBI, whether as a single agent or in combination with other active pharmaceutical ingredients (including generic versions of the Quad) in the Semi-Exclusive Territory, provided Licensee remains compliant with the terms and conditions of this Agreement. Gilead retains the right to sell branded versions of the Quad and other branded products containing EVG and COBI by itself or through use of its own distributors and licensees in the Semi-Exclusive Territory.

(b) [*]

(c) Licensee’s semi-exclusive rights in the Semi-Exclusive Territory shall have a term of 5 years commencing on the date Licensee first launches its first COBI Product, COBI Combination Product, EVG Product, EVG Combination Product, or Quad in the Semi-Exclusive Territory (the “ Semi-Exclusive Term ”). The Semi-Exclusive Term may be extended due to Licensee’s development of a Pediatric Formulation pursuant to Section 6.2(e). Once the Semi-Exclusive Term expires, or if Gilead terminates Licensee’s rights in the Semi-Exclusive Territory due to Licensee’s non-compliance with this Agreement, then the semi-exclusive license granted in Section 2.2(b) shall terminate, and Gilead in its sole discretion may authorize other Licensed Product Suppliers to register and sell COBI Product, COBI Combination Product, EVG Product, EVG Combination Product, and/or Quad in such territory.

3. Sourcing of API

its arrangement with such Gilead Supplier or Licensed API Supplier, as applicable, is consistent with the terms and conditions of this Agreement. Licensee shall provide Gilead with written copies of all agreements between Licensee and such Gilead Supplier or Licensed API Supplier upon execution. To the extent any such agreements relate to EVG, Gilead shall have the right to share such agreements with Japan Tobacco. In the event that any inconsistency is found which had not been specifically discussed and agreed with Gilead, Gilead shall have the right to require Licensee to terminate such agreement with such Gilead Supplier or Licensed API Supplier.

3.2 Gilead Assistance with Gilead Suppliers . Upon receipt of a notice described in Section 3.1 of Licensee’s intention to obtain Licensed API from a Gilead Supplier, Gilead shall use commercially reasonable efforts to assist Licensee in procuring supply of API from such Gilead Supplier. Gilead shall not be obligated to assist Licensee in procuring any supply of API from a Licensed API Supplier.

3.3 Conditions of Supply from Gilead Suppliers . Gilead shall be a party to any agreement between Licensee and a Gilead Supplier that provides for the supply of API to Licensee from such Gilead Supplier. Any such agreement between Gilead, Licensee and a Gilead Supplier shall include and be subject to the following conditions:

(a) Gilead Supply Needs . Licensee shall not obtain API from the Gilead Supplier until Gilead has received confirmation in writing from the Gilead Supplier of its ability to continue to supply Gilead with Gilead’s forecasted requirements of API, as reflected in Gilead’s then-current twelve (12) month forecast for API provided to the Gilead Supplier.

(b) Consistency with Agreement . The Gilead Supplier shall be permitted to supply API to Licensee only to the extent that any such supply does not (A) adversely affect its ability to meet Gilead’s forecasted requirements or (B) adversely affect the Gilead Supplier’s ability to supply Gilead’s requirements, whether or not such requirements are consistent with Gilead’s twelve (12) month forecast. Gilead shall have the right to terminate any such agreement if such supply adversely affects Gilead as set forth in this Section 3.3(b).

3.4 No Other Arrangements . Licensee agrees that it shall not enter into any agreements, nor amend any existing agreements, for the supply of intermediates or API the terms of which would be inconsistent with this Agreement without Gilead’s prior written approval as provided for in this Section 3.

3.5 Supply of other components . The obligations set forth in Sections 3.1, 3.2 and 3.3 with respect to Licensee’s supply of API shall not apply to active pharmaceutical ingredients other than API that Licensee may incorporate into Combination Products.

4. Consideration/Payment Terms/Audit

4.1 Royalty . As consideration for the licenses granted in Section 2, Licensee shall pay Gilead the following royalties on Net Sales of Product in the Territory for the duration of the Royalty Term:

(a) 5% of TDF Product Net Sales in the TDF Territory.

(b) 5% of the portion of TDF Combination Product Net Sales attributable to the TDF component of such TDF Combination Product in the TDF Territory as determined in accordance with Section 4.2.

(c) 5% of the portion of Quad Net Sales attributable to the TDF, EVG and COBI components of the Quad in the EVG-Quad Territory as determined in accordance with Section 4.2.

(d) 5% of EVG Product Net Sales in the EVG-Quad Territory.

(e) 5% of COBI Product Net Sales in the COBI Territory.

(f) 5% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the EVG component of such EVG Combination Product in the EVG-Quad Territory as determined in accordance with Section 4.2. In addition, (i) to the extent any such EVG Combination Product also contains TDF, Licensee will also pay Gilead 5% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the TDF component of such EVG Combination Product in the EVG-Quad Territory as determined in accordance with Section 4.2. and (ii) to the extent any such EVG Combination Product also contains COBI, Licensee will also pay Gilead 5% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the COBI component of such EVG Combination Product in the EVG-Quad Territory as determined in accordance with Section 4.2.

(g) 5% of the portion of COBI Combination Product (other than the Quad) Net Sales attributable to the COBI component of such COBI Combination Product in the COBI Territory, as determined in accordance with Section 4.2. In addition, to the extent any such COBI Combination Product also contains TDF, Licensee will also pay Gilead 5% of the portion of COBI Combination Product (other than the Quad) Net Sales attributable to the TDF component of such COBI Combination Product in the COBI Territory, as determined in accordance with Section 4.2.

(h) 10% of the portion of Quad Net Sales attributable to the TDF, EVG and COBI components of the Quad in the Semi-Exclusive Territory as determined in accordance with Section 4.2.

(i) 15% of EVG Product Net Sales in the Semi-Exclusive Territory.

(j) 15% of COBI Product Net Sales in the Semi-Exclusive Territory.

(k) 15% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the EVG component of such EVG Combination Product in the Semi-Exclusive Territory as determined in accordance with Section 4.2. In addition, (i) to the extent any such EVG Combination Product also contains TDF, Licensee will also pay Gilead 15% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the TDF component of such EVG Combination Product in the Semi-Exclusive Territory as determined in accordance with Section 4.2., and (ii) to the extent any such EVG Combination Product also contains COBI, Licensee will also pay Gilead 15% of the portion of EVG Combination Product (other than the Quad) Net Sales attributable to the COBI component of such EVG Combination Product in the Semi-Exclusive Territory as determined in accordance with Section 4.2.

(l) 15% of the portion of COBI Combination Product (other than the Quad) Net Sales attributable to the COBI component of such COBI Combination Product in the Semi-Exclusive Territory as determined in accordance with Section 4.2. In addition, to the extent any such COBI Combination Product also contains TDF, Licensee will also pay Gilead 15% of the portion of COBI Combination Product (other than the Quad) Net Sales attributable to the TDF component of such COBI Combination Product in the Semi-Exclusive Territory as determined in accordance with Section 4.2.

(m) No royalties will be owed on Pediatric Formulations developed and sold by Licensee in accordance with Section 6.2(e).

(n) No royalties will be owed on the emtricitabine component of any Combination Product.

(o) No royalties will be owed on Licensee’s sale of API to other Licensed Product Suppliers, provided such Licensed Product Supplier has executed an agreement with Gilead requiring such Licensed Product Supplier to pay Gilead royalties on finished Product containing such API.

(p) Royalties on sales of Product to Gilead Distributors will be based on Licensee’s invoice price to such Gilead Distributor.

(q) Royalties will only be owed once on each royalty-bearing API of a Combination Product. By means of example, if Licensee pays royalties on the Quad pursuant to Section 4.1(c) or 4.1(h), then Licensee will not also have to pay additional royalties on the TDF component for the sale of the Quad pursuant to Section 4.1(a) or (b), the EVG component pursuant to Section 4.1(d), (f), (i) or (k), or the COBI component pursuant to Section 4.1(e), (g), (j) or (l).

Product in such country by the fraction A/(A+B), where A is the invoice price of such Product if sold separately in such country, and B is the total invoice price of the other active pharmaceutical ingredient(s) in the combination if sold separately in such country. If, on a country-by-country basis, such other active pharmaceutical ingredient or ingredients in the Combination Product are not sold separately in such country, but the Product component of the Combination Product is sold separately in such country, Net Sales for the purpose of determining royalties due to Gilead for the Combination Product will be calculated by multiplying actual Net Sales of such Combination Product by the fraction A/C, where A is the invoice price of such Product component if sold separately, and C is the invoice price of the Combination Product. If, on a country-by-country basis, such Product component is not sold separately in such country, Net Sales for the purposes of determining royalties due to Gilead for the Combination Product will be D/(D+E), where D is the fair market value of the portion of the Combination Products that contains the Product, and E is the fair market value of the portion of the Combination Products containing the other active pharmaceutical ingredient(s) or delivery device included in such Combination Product, as such fair market values are determined by mutual agreement of the Parties, which shall not be unreasonably withheld.

4.3 Reports . Within sixty (60) days after the end of each calendar quarter, Licensee shall (a) provide Gilead with a detailed report of amounts of API and Product produced, API and Product on stock, total invoiced sales, Net Sales, the deductions used to determine Net Sales, number of units of Product sold, each of which shall be reported on a Product-by-Product and country-by-country basis, adjustments for combination products (pursuant to Section 4.2) including calculations showing the Net Sales of the EVG component of any EVG Combination Product, total royalties owed for the calendar quarter, the countries to which the Product has been sent and in what quantities, the Third Party Resellers, if any, to which Licensee has provided Product and in what quantities, and Net Sales by each Third-Party Reseller, and, in the case of the sale of any API to third-party manufacturers of Product, the identity of such third parties and quantities of API sold to each such third party (the “ Quarterly Report ”); (b) provide Gilead with a written certification of the accuracy of the contents of the Quarterly Report, signed by an appropriate Licensee senior officer; and (c) pay royalties due to Gilead for the calendar quarter on a Product-by-Product and country-by-country basis. Additionally, together with each Quarterly Report, Licensee shall provide Gilead with a Regulatory Report as set forth in Section 6.3. Licensee shall provide Quarterly Reports and Regulatory Reports to Gilead at the address listed below. Licensee shall pay royalties to Gilead by wire transfer to the bank account indicated by Gilead from time to time. To the extent such Quarterly Reports relate to EVG, EVG Product, EVG Combination Product, or Quad, Gilead will have the right to share such Quarterly Reports with Japan Tobacco.

4.4 Payment Terms . Licensee shall make all payments to Gilead in US Dollars. With regard to sales in currencies other than US Dollars, conversion from local currency into US Dollars shall be at the rate of exchange of the local currency to the US Dollar on the day of payment as reported by the Reserve Bank of India.

4.5 Records . Licensee shall keep complete and accurate records of API and Product produced and sold in sufficient detail to enable Licensee to determine the amount of royalties due, the parties to whom Product or API was sold, and the countries in which sales occurred.

4.6 Audit . Gilead has the right to engage an independent public accountant to perform, on no less than thirty (30) days’ advance notice to Licensee, an audit, conducted in accordance with generally accepted auditing standards, of such books and records of Licensee that are deemed necessary by such public accountant to report amounts of API and Product produced, gross sales, Net Sales for the periods requested and accrued royalties. Gilead will bear the full cost of any such audit unless such audit discloses a difference of more than five percent (5%) from the amount of royalties due. In such case, Licensee shall promptly pay Gilead any underpayment and shall bear the full cost of such audit. To the extent relevant to EVG, EVG Product, EVG Combination Product, or Quad, Gilead will have the right to disclose such audit results to Japan Tobacco.

4.7 Interest . Any amount payable hereunder by Licensee, which is not paid on a timely basis, shall bear a pro rata monthly interest rate of one percent (1%) subject to any necessary approvals that may be required.

4.8 Taxes

(a) Withholding Taxes . Licensee shall promptly pay the withholding tax for and on behalf of Gilead to the proper governmental authority and shall promptly furnish Gilead with the tax withholding certificate furnished by the Licensee. Licensee shall be entitled to deduct the withholding tax actually paid from such payment due Gilead. Each party agrees to assist the other party in claiming exemption from such withholdings under double taxation or similar agreement or treaty from time to time in force and in minimizing the amount required to be so withheld or deducted.

(b) Other Taxes . Except as provided in this Section 4.8, all taxes or duties in connection with payments made by Licensee shall be borne by Licensee.

4.9 Royalty Term . Royalty payments shall be paid to Gilead by Licensee on a Product-by-Product and country-by-country basis starting on the date of the first commercial sale of a Product in a country and continuing until the last to occur of the following:

(a) the expiration of the last-to-expire Patent containing a valid claim covering the manufacture, use, import, offer for sale or sale of API or the Product in such country; or

(b) the date of expiration of the last-to-expire Patent containing a valid claim covering the manufacture, use, import, offer for sale or sale of API or the Product in India (the “ Royalty Term ”).

5. Intellectual Property

5.1 Maintenance of Patents . Gilead shall use commercially reasonable efforts to maintain and enforce the Patents in India and in the Semi-Exclusive Territory (including with respect to the exercise of back-up rights to maintain and enforce Patents relating to EVG, EVG Product, EVG Combination Product or Quad in India and the Semi-Exclusive Territory that are subject to the Japan Tobacco Agreement), but shall not be obligated to maintain or enforce the Patents in the remainder of the Territory.

5.2 Cooperation . If either party becomes aware of a suspected infringement of any Patent, such party will notify the other party promptly, and following such notification, the parties will confer. Gilead (except in the case of Patents relating to EVG, EVG Product, EVG Combination Product or Quad that are subject to the Japan Tobacco Agreement and controlled by Japan Tobacco) will have the right, but not the obligation, to bring an infringement action at its own expense, in its own name, and entirely under its own direction and control. Licensee will reasonably assist Gilead (or, where applicable, Japan Tobacco) in such actions or proceedings if so requested, and will lend its name to such actions or proceedings if required by law in order for Gilead (or Japan Tobacco) to bring such action.

5.3 Reporting of Improvements . Licensee shall provide Gilead with an annual report, in writing and in reasonable detail that sets forth any Improvements, including any patent applications claiming Improvements. Licensee shall transfer to Gilead, upon request by Gilead and at Gilead’s expense, any know-how owned or controlled by Licensee relating to such Improvements. Any failure to report any such Improvements to Gilead in accordance with the terms of this Agreement shall constitute a breach of this Agreement and shall provide Gilead with the right to terminate this Agreement pursuant to Section 10.3(b). Gilead shall not transfer any Improvements obtained from Licensee to any third party, provided, however, that (a) Gilead may transfer Improvements to Gilead’s own affiliates and suppliers, provided such affiliates and suppliers utilize such Improvements solely for the benefit of Gilead and/or Japan Tobacco, and (b) Gilead may transfer Improvements relating to EVG, EVG Product, EVG Combination Product, or Quad to Japan Tobacco in accordance with the Japan Tobacco Agreement for use solely for the benefit of Japan Tobacco, including the transfer and use of such Improvements to Japan Tobacco’s suppliers for the benefit of Japan Tobacco.

5.4 Trademarks

(a) Any Product offered for sale or sold shall have a different trade dress, including a distinct color, shape and trade name, than the comparable product sold by Gilead and, where applicable, the comparable product sold by Japan Tobacco. For clarity, Licensee’s non-performance of the obligations set forth in this Section 5.4(a) shall constitute a material breach of Licensee’s material obligation under this Agreement.

(b) Licensee shall provide to Gilead, prior to any regulatory submissions for any Product, or selling or offering for sale any Product, samples of the Product and any packaging, labeling information or marketing materials (including, but not limited to, advertisement and promotional materials) to be used with the Product to permit Gilead to review and approve the Product and packaging as consistent with the requirements of Section 5.4(a). If Gilead reasonably objects to the trade dress or other aspects of the Product or product packaging based on the requirements of Section 5.4(a), the parties shall discuss in good faith the changes to be made to the Product or packaging to address Gilead’s concerns.

5.5 Technology Transfer . Licensee acknowledges that following execution of the TDF License Agreement Gilead provided to Licensee, and Licensee received, a one-time technology transfer of know-how relating to TDF and TDF Product. Promptly following Gilead’s receipt of marketing approval from the FDA (and on a Product-by-Product basis), Gilead shall make a one-time technology transfer of know-how (a) owned or controlled by Gilead as of the Effective Date, or (b) exclusively licensed by Gilead from Japan Tobacco pursuant to the Japan Tobacco Agreement, relating to the manufacture of EVG, COBI and the Quad to the extent and in the manner specified in Appendix 3 hereto (such TDF, EVG, COBI and Quad know-how, the “ Licensed Know-How ”). Such Licensed Know-How shall be sufficient to enable Licensee to manufacture TDF and TDF Product, EVG and COBI, EVG Product, COBI Product and Quad, at commercial-scale quantities. Gilead shall have no further obligation to transfer any other know-how to Licensee.

6. Manufacturing and Commercialization of Product

6.1 Promotion of Sales in the Territory. The parties hereto agree that an important purpose of this Agreement is to increase patient access to the Products licensed under this Agreement in the Territory. Except as otherwise provided in this Agreement, Licensee shall have the sole discretion to manage its own commercial strategy to promote and sell the Product in the Territory, provided, however, that Licensee shall not engage in activities that are inconsistent with the first sentence of this Section 6.1. By means of example and without limitation, Licensee agrees that Licensee shall not accept patient orders that Licensee does not have the capacity to fill, and shall not obtain API or Product without having the means, either directly or through the use of permitted third parties, to manufacture such API into Product and/or distribute such Product to patients within the Territory.

6.2 Manufacturing Requirements

(a) Minimum Standards . Licensee agrees that it shall manufacture API and Product in a manner consistent with (i) the applicable Indian manufacturing standards; (ii) either World Health Organization (“ WHO ”) pre-qualification standards, standards of the European Medicines Agency (“ EMA ”), or United States Food and Drug Administration (“ FDA ”) tentative approval standards (“ Minimum Quality Standards ”); and (iii) on a country-by-country basis, any applicable national, regional or local standards as may be required by the specific country where Product is sold. Licensee shall apply for WHO pre-qualification or FDA conditional approval for (1) at least one TDF Product or TDF Combination Product no later than the first anniversary of the Effective Date, (2) at least one COBI Product or COBI Combination Product no later than the first anniversary of the FDA approval date for COBI (if COBI is approved), (3) at least one EVG Product or EVG Combination Product no later than the first anniversary of the FDA approval date for EVG (if EVG is approved), and (4) the Quad no later than the first anniversary of the FDA approval date for the Quad (if the Quad is approved).

(b) Audit Right . Licensee hereby agrees to allow Gilead reasonable access to Licensee’s books and records, facilities and employees solely for the purpose and to the extent required for Gilead to audit Licensee’s compliance with the requirements of this Section 6.2. Gilead agrees to provide at least thirty (30) days prior notice of the proposed audit, and agrees that such audits shall not be conducted more than once a year unless circumstances outside the ordinary course of business warrant such an audit (such as an investigation or other government action). To the extent any such audit relates to EVG, EVG Product, EVG Combination Product, or Quad, Gilead will have the right to share reports from any such audit with Japan Tobacco.

(c) Remedy for Failure . If Licensee fails at any time to meet the Minimum Quality Standards or has not received either WHO pre-qualification or FDA conditional approval, as applicable, by the second anniversary of the Effective Date, Gilead may elect, in its sole discretion and notwithstanding Section 10.2 or 10.3 hereof, to suspend the effectiveness of the licenses granted hereunder until such time Gilead has determined that Licensee has corrected any such failure to Gilead’s reasonable satisfaction. During any such suspension, Gilead and Licensee shall coordinate with each other to provide for the supply of API or Product, as appropriate, to ensure that end-user patient requirements are not disrupted as a result of such suspension.

concentrations approved by the FDA for such agents (each an “ Alternate Dosage ”), without prior written consent from Gilead, provided, however, that in the case of TDF and COBI, Licensee may manufacture or sell TDF Product, TDF Combination Product, COBI Product, or COBI Combination Product consisting of an Alternate Dosage if such Alternate Dosage has been approved for use in the Field by the appropriate regulatory authority having jurisdiction over such Product. By means of example, dosage concentrations of TDF lower than 300 milligrams in tablet form will be allowed for pediatric administrations only if such lower dosage has been approved by the FDA or the appropriate foreign regulatory authority for such administration.

(e) Pediatric Formulations. Licensee agrees to use reasonable efforts to develop a TDF Product, TDF Combination Product, EVG Product, EVG Combination Product, COBI Product or COBI Combination Product as either a liquid or dispersible tablet formulation for use in pediatric patients less than 12 years of age (each, a “ Pediatric Formulation ”), provided, however, that with respect to EVG Product and EVG Combination Product, Licensee agrees not to develop any such Pediatric Formulation without Gilead’s prior written consent, not to be unreasonably withheld. Licensee may seek regulatory approval for Pediatric Formulations anywhere in the Territory.

(i) If Licensee has used reasonable efforts to develop a Pediatric Formulation, then the Semi-Exclusive Term in the Semi-Exclusive Territory will be extended for an additional 5 years. The determination of whether Licensee has used reasonable efforts with respect to such Pediatric Formulation will be at Gilead’s sole discretion, however , if Licensee either (A) commences a human clinical trial of a Pediatric Formulation under an approved US investigational new drug application, or (B) commercializes a Pediatric Formulation in the Territory under an approved US Abbreviated New Drug Application, then Licensee will be deemed to have satisfied the reasonable efforts requirement set forth in this Section 6.2(e)(i) and the Semi-Exclusive Term in the Semi-Exclusive Territory will be extended for an additional 5 years.

(ii) If Licensee is granted regulatory approval to market such Pediatric Formulation, then Licensee will use reasonable efforts to make such Pediatric Formulation available (A) if such Pediatric Formulation is a TDF Product or a TDF Combination Product, throughout the TDF Territory, (B) if such Pediatric Formulation is a COBI Product or a COBI Combination Product, throughout the COBI Territory and the Semi-Exclusive Territory, or (C) if such Pediatric Formulation is an EVG Product or EVG Combination Product, throughout the EVG-Quad Territory and the Semi-Exclusive Territory (for purposes of this Section 6.2(e), “ Licensee’s Applicable Territory ”), unless the Semi-Exclusive Term is expired or terminated and Licensee no longer has rights in the Semi-Exclusive Territory. Gilead would agree to waive any royalty Gilead otherwise would be entitled to receive for sale of such Pediatric Formulation pursuant to Section 4.1, provided such Pediatric Formulation is sold for use in pediatric populations under age 12 and not in adult populations.

(iii) Licensee will further agree either to license such Pediatric Formulation to Gilead or to other Licensed Product Suppliers, or to manufacture and supply such Pediatric Formulation to one or more Gilead Distributors, for sale (a) in territories that either are outside the scope of Licensee’s Applicable Territory but within the scope of the licensed territory

of such designated Licensed Product Supplier or Gilead Distributor, or (b) in territories that are within Licensee’s Applicable Territory but in which Licensee is not able to make such Pediatric Formulation available. Licensee will be entitled to receive compensation for any such license or sale of such Pediatric Formulation to Gilead, a Licensed Product Supplier or Gilead Distributor that would be commensurate with (and not in excess of) the compensation Licensee would receive if Licensee itself sold such Pediatric Formulation in Licensee’s Applicable Territory.

(iv) If Gilead, in its sole discretion, is interested in pursuing the regulatory approval or marketing of such Pediatric Formulation in countries outside Licensee’s Applicable Territory, or in facilitating access to such Pediatric Formulation to countries within Licensee’s Applicable Territory where Licensee has not made such Pediatric Formulation available, then Gilead and Licensee will negotiate a separate agreement relating to such Pediatric Formulation, with such agreement including appropriate compensation for Licensee for such Pediatric Formulation. Gilead shall have the right to sublicense such Pediatric Formulation to Japan Tobacco for use in Japan in accordance with the Japan Tobacco Agreement.

6.3 Regulatory Filings and Inspections . Except as provided otherwise herein, Licensee shall be responsible for obtaining and maintaining all applicable regulatory or other approvals or authorizations to carry out its activities under this Agreement and shall provide Gilead with a quarterly written report setting forth (a) a list of countries within the Territory for which such regulatory approvals or authorization have been obtained for any Product and (b) a description of activities performed by Licensee, its designee or, to its knowledge any other third party, with respect to the filing, obtaining or maintaining of such regulatory approvals or authorizations within the Territory for any Product (each such report, a “ Regulatory Report ”). Gilead may, in its discretion, elect to file for regulatory or other approval or authorization to make and sell API and Product anywhere in the Territory. Upon either party’s request, the other party shall provide non-proprietary data that the other party perceives is reasonably necessary to obtain any such approvals, authorizations, permits or licenses. Licensee shall obtain, have and maintain all required registrations for its manufacturing facilities. Licensee shall allow appropriate regulatory authorities to inspect such facilities to the extent required by applicable law, rule or regulation. Gilead agrees to provide Licensee with NCE Exclusivity or other regulatory exclusivity waivers as may be required by the applicable regulatory authorities in order to manufacture or sell Product in the Territory, provided such manufacture and sale by Licensee is compliant with the terms and conditions of this Agreement. Licensee agrees not to pursue or obtain regulatory exclusivity on any Product in any country within the Territory.

6.4 Marketing Materials . Any marketing materials (including, but not limited to, advertisement and promotional materials) used by Licensee and its Third-Party Resellers shall not contain any misstatements of fact, shall be fully compliant with the applicable laws, rules and regulations, and shall be distinct from, and not cause any confusion with, any marketing materials or Products used or sold by Gilead, or any marketing materials or products sold by Japan Tobacco. Any statements made in such marketing materials regarding Gilead, including without limitation statements made in reference to Licensee’s collaboration with Gilead, require Gilead’s prior written approval.

6.5 Product Labeling . The labeling of all Products sold or offered for sale under this Agreement shall expressly state that the Product is manufactured under a license from Gilead.

7. Representations, Warranties and Covenants

7.1 Ability to Perform. Gilead and Licensee each represent and warrant that

(a) they are duly organized, validly existing and in good standing under the laws of the jurisdiction of their incorporation and have full corporate power and authority to enter into this Agreement and to carry out the provisions hereof;

(b) this Agreement has been duly executed and delivered, and constitutes a legal, valid, binding obligation, enforceable against it in accordance with the terms hereof; and

(c) the execution, delivery and performance of this Agreement does not conflict with any agreement, instrument or understanding, oral or written, to which it is a party or by which it is bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having jurisdiction over such Party

7.2 Diversion of Product and Technology . Licensee covenants and agrees that it shall not: (i) divert or allow the diversion of API, or any intermediates or other chemical entities generated during the process of manufacturing API, outside of India, (ii) divert or allow the diversion of TDF Product or TDF Combination Product outside the TDF Territory, (iii) divert or allow the diversion of COBI Product or COBI Combination Product outside the COBI Territory or the Semi-Exclusive Territory, (iv) divert or allow the diversion of EVG Product, EVG Combination Product or Quad outside the EVG-Quad Territory or the Semi-Exclusive Territory, (v) divert or allow the diversion of Licensed Technology to any third party, except as expressly permitted under this Agreement, or (vi) assist or support, directly or indirectly, any third party in the conduct of the activities described in clauses (i)—(v).

7.3 Access Promotion . Licensee covenants and agrees that it shall not engage in activities that are contrary to the goal of promoting patient access to Product to satisfy unmet medical needs within the Territory.

7.4 Law Compliance

India), marketing authorizations, permits and licenses, at Licensee’s expense for the manufacture and sale of the API and/or Product and any other Licensee activities contemplated hereby.

(b) FCPA and UK Bribery Act . Licensee covenants and agrees that it shall provide to Gilead on the Effective Date and within thirty (30) days after the beginning of each calendar year thereafter, certification in writing by Licensee of Licensee’s compliance with the United States Foreign Corrupt Practices Act of 1977 and with the UK Bribery Act of 2010.

(c) Conflicts . Neither party shall be required to take any action or perform any obligation under this Agreement to the extent that such action or obligation is in direct conflict with any applicable law, rule or regulation, provided, however, that both Licensee and Gilead are in agreement regarding (i) the requirements of such law, rule or regulation, and (ii) the affect that such law, rule or regulation has on such action or obligation required under this Agreement.

7.5 Patent Infringement . Licensee covenants and agrees that it shall not infringe the Patents outside the scope of the licenses granted to it pursuant to Section 2, and shall not infringe the Emtricitabine Patents outside the scope of the covenant not to sue set forth in Section 7.6.

7.6 Covenant Concerning Certain Gilead Patents. Gilead covenants and agrees that it shall not, at any time during the term of this Agreement, bring any claim or proceeding of any kind or nature against Licensee in relation to any of the pending and issued patents identified in Appendix 4 hereto (the “ Emtricitabine Patents ”) to the extent that Licensee decides to make, use, sell, have sold and export any Product in the Territory that may infringe any claims covering the manufacture, use and sale of emtricitabine contained in such Emtricitabine Patents.

7.7 EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, GILEAD DOES NOT GIVE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF NON-INFRINGEMENT IN THE TERRITORY. Gilead also does not give any warranty, express or implied, with regard to the safety or efficacy of API or the Product and it shall be the sole responsibility of the Licensee to ensure such safety or efficacy.

8. Liability and Indemnity

becomes legally obligated to pay because of any claim against it (i) arising out of any breach by Licensee of the terms and conditions of this Agreement, or (ii) for any product liability, liability for death, illness, personal injury or improper business practice, or any other statutory liability or any other liability under any law or regulation, to the extent that such claim or claims are due to reasons caused by or on behalf of Licensee related to API or Product (including, without limitation, their manufacture, use or sale). The indemnification obligations of Licensee stated in this Section 8(a) shall apply only in the event that Gilead provides Licensee with prompt written notice of such claims, grants Licensee the right to control the defense or negotiation of settlement, and makes available all reasonable assistance in defending the claims. Licensee shall not agree to any final settlement or compromise with respect to any such claim that adversely affects Gilead without obtaining Gilead’s consent.

(b) Product Liability . Licensee shall be solely responsible in respect of any product liability or any other statutory liability under any regulation, in respect of API or the Product.

(c) Gilead Liability . NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, IN NO EVENT SHALL GILEAD BE LIABLE TO LICENSEE FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR INCIDENTAL DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF BUSINESS OR PROFITS) RELATED TO THIS AGREEMENT, AND SHALL NOT HAVE ANY RESPONSIBILITIES OR LIABILITIES WHATSOEVER WITH RESPECT TO API OR PRODUCT, EVEN IF, IN ANY SUCH CASE, ADVISED OF THE POSSIBILITY OF SUCH CLAIMS OR DEMANDS, REGARDLESS OF THE FORM OF ACTION OR LEGAL THEORY WHETHER UNDER CONTRACT LAW, TORT LAW (INCLUDING WITHOUT LIMITATION NEGLIGENCE), STRICT LIABILITY, STATUTE, WARRANTY OR OTHERWISE.

9. Insurance

Within thirty (30) days prior to the first commercial launch by Licensee of a Product, and each year thereafter for so long as this Agreement is in effect, Licensee shall provide to Gilead certificates of insurance by insurers acceptable to Gilead evidencing comprehensive general liability coverage, including products liability, with a combined limit of no less than one million dollars ($1,000,000.00) for bodily injury, including personal injury, and property damage. Gilead shall have the right to provide any such certificate to Japan Tobacco. Licensee shall not cancel any such policy without at least sixty (60) days prior written notice to Gilead, and agrees that such policy shall be maintained (or have an extended reporting period) of at least seven (7) years after the termination of this Agreement.

10. Term and Termination

particular country in the Territory, subject to the terms and conditions herein with respect to such Product and such country, the license and sublicense granted in Article 2 to Licensee shall become a perpetual, irrevocable, fully paid-up, royalty free license under the Licensed Know-How to develop, make, have made, use, sell, have sold, offer for sale, import and distribute such Product in the Field in such country.

10.2 Termination for Breach . A party (“non-breaching party”) shall have the right to terminate this Agreement in the event the other party (“breaching party”) is in material breach of any of its material obligations under this Agreement. The non-breaching party shall provide written notice to the breaching party. The breaching party shall have a period of thirty (30) days after such written notice is provided to cure such breach. If such breach is not cured within the thirty day period, this Agreement shall effectively terminate.

10.3 Gilead Right to Terminate

(a) Gilead shall have the right to terminate this Agreement and/or one or both of the licenses granted pursuant to Section 2.1 or Section 2.2 (whether or not such event constitutes a right of termination pursuant to Section 10.2), immediately if in the reasonable opinion of Gilead, control (through ownership or otherwise) of Licensee changes.

(b) Gilead shall have the right to terminate this Agreement and/or one or both of the licenses granted pursuant to Section 2.1 or Section 2.2 or the covenant contained in Section 7.6 (whether or not such event constitutes a right of termination pursuant to Section 10.2), if:

(i) Gilead reasonably determines that a material quantity of API or Product made and/or sold by Licensee has been diverted to countries outside the Territory, whether or not by any fault or action or inaction of Licensee;

(ii) Gilead reasonably determines that, due to material deficiencies in Licensee’s compliance, or repeated failure to comply, with the Minimum Quality Standards, Licensee is unable to reliably and consistently manufacture API or Product in accordance with the Minimum Quality Standards;

(iii) Gilead reasonably determines that Licensee has obtained material quantities of API from sources outside the Territory, or in ways that are inconsistent with the terms and conditions of Section 3; or

(iv) Gilead’s rights to EVG terminate due to the termination of the Japan Tobacco Agreement, provided, however, that in such event, such termination would only apply on a Product-by-Product basis and with respect to Products containing EVG that are subject to the sublicense granted by Gilead under the Japan Tobacco Agreement.

Gilead shall give Licensee written notice of any such event and provide Licensee with a period of thirty (30) days after such notice to demonstrate that the conditions giving rise to Gilead’s determination no longer exist to Gilead’s reasonable satisfaction. If Licensee is unable to do so, this Agreement shall be terminated effective upon the thirtieth (30 ^th ) day following such notice.

10.4 Insolvency . In the event that Licensee becomes insolvent, makes an assignment to the benefit of creditors, or has a petition in bankruptcy filed for or against it, Gilead shall have the right to treat such event as a material breach.

10.5 Waiver . The waiver by either party of any breach of any term or condition of this Agreement shall not be deemed a waiver as to any subsequent or similar breach.

10.6 Survival . Sections 2.3, 2.5(b), 4.5, 5.3, 5.4(a), 6.2(e)(iii), 7.7, 8, 9, 10.1, 10.6, 11 and 12 shall survive termination or expiry of this Agreement.

11. Confidentiality and Publications

11.1 Confidential Information . All technology and know-how disclosed by one party (the “ Disclosing Party ”) to the other party (the “ Receiving Party ”) hereunder (“ Confidential Information ”) shall be used solely and exclusively by Receiving Party in a manner consistent with the licenses granted hereunder and the purposes of this Agreement as stated in the preamble and recitals hereto; maintained in confidence by the Receiving Party; and shall not be disclosed to any non-party or used for any purpose except to exercise its rights and perform its obligations under this Agreement without the prior written consent of the Disclosing Party, except to the extent that the Receiving Party can demonstrate by competent written evidence that such information: (a) is known by the Receiving Party at the time of its receipt and, not through a prior disclosure by the Disclosing Party, as documented by the Receiving Party’s business records; (b) is in the public domain other than as a result of any breach of this Agreement by the Receiving Party; (c) is subsequently disclosed to the Receiving Party on a non-confidential basis by a third party who may lawfully do so; or (d) is independently discovered or developed by the Receiving Party without the use of Confidential Information provided by the Disclosing Party, as documented by the Receiving Party’s business records. Within thirty (30) days after any expiration or termination of this Agreement, Receiving Party shall destroy (and certify to the Disclosing Party such destruction) or return all Confidential Information provided by the Disclosing Party except as otherwise set forth in this Agreement. One (1) copy of the Confidential Information may be retained in the Receiving Party’s files solely for archival purposes as a means of determining any continuing or surviving obligations under this Agreement. The confidential obligations under this Agreement shall survive this Agreement for a period of five (5) years. To the extent Gilead receives any Confidential Information from Licensee relating to EVG, EVG Product, EVG Combination Product or Quad, Gilead will have the right to disclose such Confidential Information to Japan Tobacco, provided such disclosure remains

subject to the obligations of confidentiality and non-disclosure set forth in the Japan Tobacco Agreement.

11.2 Press Release . Each party may disclose to third parties or make public statements, by press release or otherwise, regarding the existence of this Agreement, the identity of the parties, the terms, conditions and subject matter of this Agreement, or otherwise in reference to this Agreement, provided such disclosures or statements are accurate and complete with respect to the subject matter thereof and the information disclosed therein.

11.3 Use of Name . Except as provided for under Section 11.2, neither party shall use the other party’s name, logo or trademarks for any purpose including without limitation publicity or advertising, except with the prior written consent of the other party. Licensee agrees not to use Japan Tobacco’s name, logo or trademarks for any purpose except with the prior written consent of Japan Tobacco.

12. Miscellaneous

12.1 Agency . Neither party is, nor will be deemed to be, an employee, agent or representative of the other party for any purpose. Each party is an independent contractor, not an employee or partner of the other party. Neither party shall have the authority to speak for, represent or obligate the other party in any way without prior written authority from the other party.

12.2 Entire Understanding . This Agreement embodies the entire understanding of the parties with respect to the subject matter hereof and supersedes all previous communications, representations or understandings, and agreements, whether oral or written, between the parties relating to the subject matter hereof. Gilead and Licensee hereby expressly agree that this Agreement amends and restates in its entirety the TDF License Agreement as of the Effective Date.

12.3 Severability . The parties hereby expressly state that it is not their intention to violate any applicable rule, law or regulation. If any of the provisions of this Agreement are held to be void or unenforceable with regard to any particular country by a court of competent jurisdiction, then, to the extent possible, such void or unenforceable provision shall be replaced by a valid and enforceable provision which will achieve as far as possible the economic business intentions of the Parties. The provisions held to be void or unenforceable shall remain, however, in full force and effect with regard to all other countries. All other provisions of this Agreement shall remain in full force and effect.

12.4 Notices

(a) Any notice or other communication to be given under this Agreement, unless otherwise specified, shall be in writing and shall be deemed to have been provided when delivered to the addressee at the address listed below (i) on the date of delivery if delivered in person or (ii) three days after mailing by registered or certified mail, postage paid:

In the case of Gilead:

Gilead Sciences, Inc.

333 Lakeside Drive

Foster City, CA 94404

Attention: General Counsel

Facsimile: (650) 522-5537

In the case of Licensee:

[Insert Address]

Attention:

Facsimile:

(b) Either party may change its address for communications by a notice in writing to the other party in accordance with this Section 12.4.

12.5 Governing Law . This Agreement is made in accordance with and shall be governed and construed under the laws of England, without regard to its choice of law principles.

12.6 Arbitration

(a) All disputes arising out of or in connection with the present Agreement shall be finally settled under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators.

(b) Each party shall nominate one arbitrator. Should the claimant fail to appoint an arbitrator in the Request for Arbitration within thirty (30) days of being requested to do so, or if the respondent should fail to appoint an arbitrator in its Answer to the Request for Arbitration within thirty (30) days of being requested to do so, the other party shall request the ICC Court to make such appointment.

(c) The arbitrators nominated by the parties shall, within thirty (30) days from the appointment of the arbitrator nominated in the Answer to the Request for Arbitration, and after consultation with the parties, agree and appoint a third arbitrator, who will act as a chairman of the Arbitral Tribunal. Should such procedure not result in an appointment within the thirty (30) day time limit, either party shall be free to request the ICC Court to appoint the third arbitrator.

(d) London, England shall be the seat of the arbitration.

(e) The language of the arbitration shall be English. Documents submitted in the arbitration (the originals of which are not in English) shall be submitted together with an English translation.

(f) This arbitration agreement does not preclude either party seeking conservatory or interim measures from any court of competent jurisdiction including, without limitation, the courts having jurisdiction by reason of either party’s domicile. Conservatory or interim measures sought by either party in any one or more jurisdictions shall not preclude the Arbitral Tribunal granting conservatory or interim measures. Conservatory or interim measures sought by either party before the Arbitral Tribunal shall not preclude any court of competent jurisdiction granting conservatory or interim measures.

(g) In the event that any issue shall arise which is not clearly provided for in this arbitration agreement the matter shall be resolved in accordance with the ICC Arbitration Rules.

12.7 Assignment . Gilead is entitled to transfer and assign this Agreement and the rights and obligations under this Agreement on prior notice to Licensee. Licensee is not entitled to transfer or assign this Agreement or the rights and obligations under this Agreement.

12.8 Amendment . No amendment or modification hereof shall be valid or binding upon the parties unless made in writing and signed by both parties.

[signatures appear on following page]

I N W ITNESS W HEREOF , the parties hereto have executed this Amended and Restated License Agreement as of the Effective Date.

G ILEAD :


Gilead Sciences, Inc.

By
Name:
Title:

L ICENSEE :


[Licensee]

By
Name:
Title:

Appendix 1

Countries in the TDF Territory

1. Afghanistan

2. Angola

3. Anguilla

4. Antigua and Barbuda

5. Armenia

6. Aruba

7. Bahamas

8. Bangladesh

9. Barbados

10. Belize

11. Benin

12. Bhutan

13. Bolivia

14. Botswana

15. British Virgin Islands

16. Burkina Faso

17. Burundi

18. Cambodia

19. Cameroon

20. Cape Verde

21. Central African Republic

22. Chad

23. Comoros

24. Congo, Rep

25. Congo, Dem. Rep. of the

26. Côte d’Ivoire

27. Cuba

28. Djibouti

29. Dominica

30. Dominican Republic

31. Ecuador

32. El Salvador

33. Equatorial Guinea

34. Eritrea

35. Ethiopia

36. Fiji Islands

37. Gabon

38. Gambia

39. Georgia

40. Ghana

41. Grenada

42. Guatemala

43. Guinea

44. Guinea-Bissau

45. Guyana

46. Haiti

47. Honduras

48. India

49. Indonesia

50. Jamaica

51. Kazakhstan

52. Kenya

53. Kiribati

54. Kyrgyzstan

55. Lao, People’s Dem. Rep.

56. Lesotho

57. Liberia

58. Madagascar

59. Malawi

60. Maldives

61. Mali

62. Mauritania

63. Mauritius

64. Moldova, Rep. of

65. Mongolia

66. Montserrat

67. Mozambique

68. Myanmar

69. Namibia

70. Nauru

71. Nepal

72. Nicaragua

73. Niger

74. Nigeria

75. Pakistan

76. Palau

77. Papua NewGuinea

78. Rwanda

79. Saint Kitts and Nevis

80. Saint Lucia

81. Saint Vincent & the Grenadines

82. Samoa

83. São Tomé and Príncipe

84. Senegal

85. Seychelles

86. Sierra Leone

87. Solomon Islands

88. Somalia

89. South Africa

90. Sri Lanka

91. Sudan

92. Surinam

93. Swaziland

94. Syrian Arab Republic

95. Tajikistan

96. Tanzania, U. Rep. of

97. Thailand

98. Timor-Leste

99. Togo

100. Tonga

101. Trinidad and Tobago

102. Turkmenistan

103. Turks and Caicos

104. Tuvalu

105. Uganda

106. Uzbekistan

107. Vanuatu

108. Vietnam

109. Yemen

110. Zambia

111. Zimbabwe

[*] = 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

Appendix 2

1. TDF Patents

Gilead either owns or has exclusive rights to the TDF Patents.

2. EVG Patents

TITLE: 4-OXOQUINOLINE COMPOUNDS AND UTILIZATION THEREOF AS HIV INTEGRASE

INHIBITORS


Country	Filing Date	Serial Number	Patent Number	Grant Date
Bolivia	18-Nov-2003	SP-230265
India	20-Nov-2003	01316/CHENP/2004	245833	3-Feb-2011
Indonesia	20-Nov-2003	W00/200401542	P0023507	1-Jun-2009
Nigeria	19-Nov-2003	424/2003	RP.15779	20-Oct-2004
South Africa	20-Nov-2003	2004/4537	2004/4537	31-Aug-2005
Thailand	20-Nov-2003	086853
Viet Nam	20-Nov-2003	1-2004-00605

TITLE: STABLE CRYSTAL OF 4-OXOQUINOLINE COMPOUND


Country	Filing Date	Serial Number	Patent Number	Grant Date
Bolivia	19-May-2005	SP-250121
India	19-May-2005	357/CHENP/2010
South Africa	19-May-2005	2006/10647	2006/10647	25-Jun-2008
Thailand	19-May-2005	100718

TITLE: METHOD FOR PRODUCING 4-OXOQUINOLINE COMPOUND


Country	Filing Date	Serial Number	Patent Number	Grant Date
African Regional Industrial Property Organization (ARIPO)	6-Mar-2007	AP/P/2008/004621
Eurasian Patent Organization (EAPO)	6-Mar-2007	200870321
India	6-Mar-2007	5341/CHENP/2008
African Union Territories (OAPI)	6-Mar-2007	1200800317	14280	31-Mar-2009
South Africa	6-Mar-2007	2008/07547	2008/07547	25-Nov-2009
Viet Nam	6-Mar-2007	1-2008-02431

TITLE: PROCESS FOR PROUDCTION OF 4-OXOQUINOLINE COMPOUND


Country	Filing Date	Serial Number	Patent Number	Grant Date
India	6-Mar-2007	5344/CHENP/2008

TITLE: PROCESS AND INTERMEDIATES FOR PREPARING INTEGRASE INHIBITORS (I)


Country	Filing Date	Serial Number	Patent Number	Grant Date
African Regional Industrial Property Organization (ARIPO)	11-Sep-2007	AP/P/2009/004831
Eurasian Patent Organization (EAPO)	11-Sep-2007	200900441
India	11-Sep-2007	1808/DELNP/2009
Indonesia	11-Sep-2007	W00/200900634
African Union Territories (OAPI)	11-Sep-2007	1200900070
Thailand	11-Sep-2007	0701004583
Viet Nam	11-Sep-2007	1-2009-00636
South Africa	11-Sep-2007	2009/01576

TITLE: PROCESS AND INTERMEDIATES FOR PREPARING INTEGRASE INHIBITORS (II)


Country	Filing Date	Serial Number	Patent Number	Grant Date
African Regional Industrial Property Organization (ARIPO)	11-Sep-2008	AP/P/2010/005187
Eurasian Patent Organization (EAPO)	11-Sep-2008	201070256
India	11-Sep-2008	1615/DELNP/2010
Indonesia	11-Sep-2008	W00/201000759
African Union Territories (OAPI)	11-Sep-2008	1201000093
Thailand	11-Sep-2008	0801004676
Viet Nam	11-Sep-2008	1-2009-00636
South Africa	11-Sep-2008	1-2010-00483

For purposes of this Appendix 2, references to “OAPI,” “EAPO” and “ARIPO” shall not be construed or interpreted to grant rights to Licensee in any country other than those countries expressly included within the licenses granted to Licensee in Sections 2.1 and 2.2 of this Agreement.

[Gilead may only delete some of the patents in the above list if necessary.]

3. COBI Patents

Gilead either owns or has exclusive rights to the COBI Patents.

Appendix 3

Terms for Technology Transfer

Gilead shall provide Licensee with the following information to fully enable Licensee to manufacture TDF, EVG, COBI, TDF Product, EVG Product, COBI Product and Quad at commercial-scale quantities and in compliance with Gilead’s required quality specifications:

Manufacturing process descriptions, specifications and methods;

Stability data;

Analytical method validation; and

Discussion of impurities.

Confidential

Appendix 4

Emtricitabine Patents

Gilead either owns or has exclusive rights to the Emtricitabine Patents.

Confidential

Appendix 5

Countries in the COBI Territory

1. Afghanistan

2. Angola

3. Anguilla

4. Antigua and Barbuda

5. Armenia

6. Aruba

7. Bahamas

8. Bangladesh

9. Barbados

10.

Belize

11.

Benin

12.

Bhutan

13.

Bolivia

14.	British Virgin Islands

15.	Burkina Faso

16.

Burundi

17.

Cambodia

18.

Cameroon

19.	Cape Verde

20.	Central African Republic

21.

Chad

22.

Comoros

23.	Congo, Rep

24.	Congo, Dem. Rep. of the

25.	Côte d’Ivoire

26.

Cuba

27.

Djibouti

28.

Dominica

29.	Dominican Republic

30.	Equatorial Guinea

31.

Eritrea

32.

Ethiopia

33.	Fiji Islands, Rep. of the

34.

Gabon

35.

Gambia

36.

Georgia

37.

Ghana

38.

Grenada

39.

Guatemala

40.

Guinea

41.	Guinea-Bissau

42.

Guyana

43.

Haiti

44.

Honduras

45.

India

46.

Jamaica

47.

Kenya

48.

Kiribati

49.	Kyrgyzstan

50.	Lao People’s Dem. Rep.

51.

Lesotho

52.

Liberia

53.	Madagascar

54.

Malawi

55.

Maldives

56.

Mali

57.	Mauritania

58.

Mauritius

59.	Moldova, Rep. of

60.

Mongolia

61.	Montserrat

62.	Mozambique

63.

Myanmar

64.

Nauru

65.

Nepal

66.

Nicaragua

67.

Niger

68.

Nigeria

69.

Pakistan

70.

Palau

71.	Papua New Guinea

72.

Rwanda

73.	Saint Kitts and Nevis

74.	Saint Lucia

75.	Saint Vincent & the Grenadines

76.

Samoa

77.	São Tomé and Príncipe

78.

Senegal

79.	Seychelles

80.	Sierra Leone

81.	Solomon Islands

82.

Somalia

83.	South Africa

84.

Sudan

85.

Suriname

86.

Swaziland

87.	Syrian Arab Republic

88.	Tajikistan

89.	Tanzania, U. Rep. of

90.	Timor-Leste

91.

Togo

92.

Tonga

93.	Trinidad and Tobago

94.	Turks and Caicos

95.

Tuvalu

96.

Uganda

97.	Uzbekistan

98.

Vanuatu

99.

Vietnam

100.

Yemen

101.

Zambia

102.

Zimbabwe

Confidential

Appendix 6

Countries in the EVG-Quad Territory

1. Afghanistan

2. Angola

3. Anguilla

4. Antigua and Barbuda

5. Armenia

6. Bahamas

7. Bangladesh

8. Barbados

9. Belize

10.

Benin

11.

Bhutan

12.

Bolivia

13.	British Virgin Islands

14.	Burkina Faso

15.

Burundi

16.

Cambodia

17.

Cameroon

18.	Cape Verde

19.	Central African Republic

20.

Chad

21.

Comoros

22.	Congo, Rep

23.	Congo, Dem. Rep. of the

24.	Côte d’Ivoire

25.

Cuba

26.

Djibouti

27.

Dominica

28.	Equatorial Guinea

29.

Eritrea

30.

Ethiopia

31.	Fiji Islands, Rep. of the

32.

Gabon

33.

Gambia

34.

Georgia

35.

Ghana

36.

Grenada

37.

Guatemala

38.

Guinea

39.	Guinea-Bissau

40.

Guyana

41.

Haiti

42.

Honduras

43.

India

44.

Jamaica

45.

Kenya

46.

Kiribati

47.	Kyrgyzstan

48.	Lao People’s Dem. Rep.

49.

Lesotho

50.

Liberia

51.	Madagascar

52.

Malawi

53.

Maldives

54.

Mali

55.	Mauritania

56.

Mauritius

57.	Moldova, Rep. of

58.

Mongolia

59.	Mozambique

60.

Myanmar

61.

Nauru

62.

Nepal

63.

Nicaragua

64.

Niger

65.

Nigeria

66.

Pakistan

67.

Palau

68.	Papua New Guinea

69.

Rwanda

70.	Saint Kitts and Nevis

71.	Saint Lucia

72.	Saint Vincent & the Grenadines

73.

Samoa

74.	São Tomé and Príncipe

75.

Senegal

76.	Seychelles

77.	Sierra Leone

78.	Solomon Islands

79.

Somalia

80.	South Africa

81.

Sudan

82.

Suriname

83.

Swaziland

84.	Syrian Arab Republic

85.	Tajikistan

86.	Tanzania, U. Rep. of

87.	Timor-Leste

88.

Togo

89.

Tonga

90.	Trinidad and Tobago

91.	Turks and Caicos

92.

Tuvalu

93.

Uganda

94.	Uzbekistan

95.

Vanuatu

96.

Vietnam

97.

Yemen

98.

Zambia

99.

Zimbabwe

Appendix 7

Countries in the Semi-Exclusive Territory

1. Sri Lanka

2. Thailand

3. Botswana

4. Namibia

5. El Salvador

6. Ecuador

7. Indonesia

8. Kazakhstan

9. Turkmenistan

A TTACHMENT B

A MENDED AND R ESTATED N ON -E XCLUSIVE L ICENSE A GREEMENT (TEMPLATE)

This A MENDED AND R ESTATED N ON -E XCLUSIVE L ICENSE A GREEMENT (the “ Agreement ”) is made as of July __, 2011 (the “ Effective Date ”) by and between Gilead Sciences, Inc. a Delaware corporation having its principal place of business at 333 Lakeside Drive, Foster City, California 94404, USA (“ Gilead ”), and ________________________ a company registered under the laws of India, and having a registered office at _______________________________________________________, India (“ Licensee ”), and amends and restates in its entirety the License Agreement dated _________________ between Gilead and Licensee, as previously amended (the “ TDF License Agreement ”).

R E C I T A L S

W HEREAS , Gilead wishes to facilitate access to its antiviral agents to patients in the developing world to help satisfy unmet medical needs;

W HEREAS , Licensee wishes to manufacture TDF, elvitegravir and cobicistat in India and sell products containing such agents in the Territory to help achieve the goal set forth above;

1.	Definitions

“ Alternate Dosage ” shall have the meaning set forth in Section 6.2(d).

“COBI Product” shall mean a formulated and finished pharmaceutical product containing COBI as its sole active pharmaceutical ingredient.

“ COBI Territory ” shall mean those countries listed on Appendix 5.

“ Combination Products ” shall mean COBI Combination Products, EVG Combination Products, TDF Combination Products and the Quad.

“ Confidential Information ” shall have the meaning set forth in Section 11.1.

“ Emtricitabine Patents ” shall have the meaning set forth in Section 7.6.

“EVG Product” shall mean a formulated and finished pharmaceutical product containing EVG as its sole active pharmaceutical ingredient.

“ EVG-Quad Territory ” shall mean those countries listed on Appendix 6.

“ FDA ” shall mean the United States Food and Drug Administration, and any successor agency thereto.

(b) for Product containing EVG or COBI, the Field shall include any use that is consistent with the label approved by the FDA or applicable foreign regulatory authority for the use of such Product containing EVG or COBI.

“ Gilead Mark ” shall have the meaning set forth in Section 2.5(b).

“ Gilead Supplier ” shall mean PharmaChem Technologies (Grand Bahama), Ltd.

“ Improvements ” shall have the meaning set forth in Section 2.3.

“ Japan Tobacco ” shall mean Japan Tobacco Inc., a Japanese corporation, and its affiliates.

“ Japan Tobacco Agreement ” shall mean the License Agreement between Gilead and Japan Tobacco dated March 22, 2005, as amended from time to time.

“ JT Mark ” shall have the meaning set forth in Section 2.5(b).

“ Licensed API Supplier ” shall mean an entity (other than Licensee) that is licensed by Gilead to manufacture and sell API to third parties in the Field in India.

“ Licensed Know-How ” shall have the meaning set forth in Section 5.4.