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Acquisition, Collaborations and Other Arrangements | 6 Months Ended
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Jun. 30, 2020
Acquisition, Collaborations and Other Arrangements [Abstract] |
Acquisition, Collaborations and Other Arrangements | ACQUISITION, COLLABORATIONS AND OTHER ARRANGEMENTS We continue to pursue acquisitions, licensing and strategic collaborations and other similar arrangements including equity investments with third parties for the development and commercialization of certain products and product candidates. These arrangements may include non-refundable upfront payments, expense reimbursements or payments by us for options to acquire certain rights, contingent obligations by us for potential development and regulatory milestone payments and/or sales-based milestone payments, royalty payments, revenue or profit-sharing arrangements and cost-sharing arrangements. Acquisition Forty Seven, Inc. (“Forty Seven”) On April 7, 2020, we acquired all of the then issued and outstanding common stock of Forty Seven, a clinical-stage immuno-oncology company focused on developing therapies targeting cancer immune evasion pathways and specific cell targeting approaches, for a price of $95.50 per share in cash, for total consideration of $4.7 billion, net of acquired cash. As a result, Forty Seven became our wholly-owned subsidiary. Forty Seven’s lead program, magrolimab, is an investigational monoclonal antibody in clinical development for the treatment of myelodysplastic syndrome, acute myeloid leukemia, non-Hodgkin lymphoma and solid tumors. We accounted for the transaction as an asset acquisition since the lead asset, magrolimab, represented substantially all the fair value of the gross assets acquired. At the acquisition date, we recorded a $4.5 billion charge representing an acquired IPR&D asset with no alternative future use in Acquired in-process research and development expenses on our Condensed Consolidated Statements of Operations. In connection with this acquisition, we recorded $202 million of assets acquired primarily consisting of deferred tax assets. Liabilities assumed were not material. During the three months ended June 30, 2020, we also recorded share-based compensation expense of $144 million related to the cash settlement of unvested Forty Seven employee stock awards attributable to post-acquisition services, which was primarily recorded in Research and development expenses on our Condensed Consolidated Statements of Operations. Collaborations and Other Arrangements Arcus Biosciences, Inc. (“Arcus”) On May 29, 2020, we acquired 2.2 million shares of the common stock of Arcus, a publicly traded oncology-focused biopharmaceutical company, for approximately $61 million in a secondary equity offering. Separately, on May 27, 2020, we entered into a transaction with Arcus, which included entry into an option, license and collaboration agreement (the “Collaboration Agreement”) and a common stock purchase agreement and an investor rights agreement (together, the “Stock Purchase Agreements”). Subsequently, on July 13, 2020, we closed the transaction with Arcus. Upon closing, we made an upfront payment of $175 million and acquired approximately 6 million additional shares of Arcus’ common stock for $200 million in accordance with the terms of the Collaboration Agreement and the Stock Purchase Agreements. We owned a total of approximately 13% of the outstanding voting stock of Arcus immediately following the closing of the transaction. The upfront payment will be reflected in Acquired in-process research and development expenses on our Condensed Consolidated Statements of Operations during the three months ended September 30, 2020. We will account for our equity investment in Arcus at fair value with changes in fair value recognized in Other income (expense), net for each reporting period. Gilead has the right to opt-in to all current and future investigational product candidates that emerge from Arcus’ research portfolio for the ten years following the closing of the transaction. Upon our exercise of an option for a program, unless Arcus opts out according to the terms of the Collaboration Agreement, the companies will co-develop and share global development costs and will co-commercialize and share profits in the U.S. We will obtain exclusive rights to commercialize any optioned programs outside of the U.S., subject to any rights of Arcus’ existing partners, for which we will pay to Arcus tiered royalties ranging from the high teens to the low twenties. We are required to pay up to $400 million to Arcus as ongoing research and development support over the 10-year collaboration term. Under the Collaboration Agreement, we will potentially provide up to $1.2 billion in opt-in and milestone payments with respect to current clinical product candidates, if and when such payments are triggered under the Collaboration Agreement. Under the Stock Purchase Agreements, we have the right to purchase additional shares of Arcus over the next five years, up to a maximum of 35% of the outstanding voting stock. We are subject to a three-year standstill restricting our ability to acquire voting stock of Arcus exceeding more than 35% of the then issued and outstanding voting stock of Arcus. Additionally, we agreed not to dispose of any equity securities of Arcus prior to the second anniversary of the closing of the Stock Purchase Agreements without the prior consent of Arcus, subject to certain exceptions. Pionyr Immunotherapeutics, Inc. (“Pionyr”) On June 19, 2020, we entered into a transaction with Pionyr, a privately held company pursuing novel biology in the field of immuno-oncology, which included entry into two separate merger agreements, one contemplating the initial acquisition of 49.9% equity interest in Pionyr, and the other providing that we will have the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Pionyr (together, the “Merger and Option Agreements”) and a research and development service agreement. Subsequently, on July 13, 2020, we closed the transaction with Pionyr. We will pay $275 million in cash, subject to certain customary adjustments, to Pionyr’s shareholders in accordance with the terms of the Merger and Option Agreements. Our investment in Pionyr will be accounted for using the equity method of accounting. From the first anniversary of the closing date, we may choose to exercise our option to purchase the remaining equity interest from Pionyr’s current shareholders for a $315 million option exercise fee and up to $1.2 billion in potential future milestone payments upon achievement of certain development and regulatory milestones, in each case subject to certain negotiated adjustments. Such option to purchase will expire following the earliest occurrence of specified events, including the delivery of data following completion of certain Phase 1b trials by Pionyr. Under the research and development service agreement, we will make an initial cash funding of $80 million and will provide additional payments of up to $115 million to Pionyr upon achievement of certain development milestones. Tizona Therapeutics, Inc. (“Tizona”) In an event subsequent to the second quarter of 2020, on July 17, 2020, we entered into a transaction with Tizona, a privately held company developing cancer immunotherapies, which included entry into two separate merger agreements, one contemplating the initial acquisition of a 49.9% equity interest in Tizona, and the other providing that we will have the exclusive option, subject to certain terms and conditions, to acquire the remaining outstanding capital stock of Tizona (together, the “Merger and Option Agreements”) and a development agreement. The transaction is expected to close in the third quarter of 2020 and is subject to antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions. We will pay $300 million in cash, subject to certain customary adjustments, to Tizona’s shareholders in accordance with the terms of the Merger and Option Agreements. Our investment in Tizona will be accounted for using the equity method of accounting. From the first anniversary of the closing date, we may choose to exercise our option to purchase the remaining equity interest from Tizona’s current shareholders for up to $1.3 billion, including an option fee and potential future milestone payments, in each case subject to certain negotiated adjustments. Such option to purchase will expire following the earliest occurrence of specified events, including the delivery of data following completion of certain Phase 1b trials by Tizona. Under the development agreement, we will also provide funding to support Tizona’s ongoing research and development to advance its novel pipeline. Other Arrangements During the three and six months ended June 30, 2020 and 2019, we entered into several collaborative and other similar arrangements, including equity investments and licensing arrangements, that we do not consider to be individually material. We recorded upfront collaboration expenses related to these arrangements of $25 million and $122 million for the three and six months ended June 30, 2020, respectively, and $165 million and $291 million for the three and six months ended June 30, 2019, respectively, within Acquired in-process research and development expenses on our Condensed Consolidated Statements of Operations. Cash payments made related to our equity investments for the three and six months ended June 30, 2020 were not material, and totaled $48 million and $104 million for the three and six months ended June 30, 2019, respectively, which were primarily recorded within Prepaid and other current assets and Other long-term assets on our Condensed Consolidated Balance Sheets. Under the financial terms of these arrangements, we may be required to make payments upon achievement of developmental, regulatory and commercial milestones, which could be significant. Future milestone payments, if any, will be reflected in our Condensed Consolidated Statements of Operations when the corresponding events become probable. In addition, we may be required to pay significant royalties on future sales if products related to these arrangements are commercialized. The payment of these amounts, however, is contingent upon the occurrence of various future events, which have a high degree of uncertainty of occurrence.

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