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Employee Benefits | 12 Months Ended
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Dec. 31, 2021
Share-based Payment Arrangement [Abstract] |
Employee Benefits | EMPLOYEE BENEFITS Equity Incentive Plans In May 2004, our stockholders approved and we adopted the Gilead Sciences, Inc. 2004 Equity Incentive Plan (as amended, the “2004 Plan”). The 2004 Plan authorized the issuance of a total of 309 million shares of common stock. As part of the Forty Seven acquisition, we assumed the Forty Seven, Inc. 2018 Equity Incentive Plan, which we subsequently amended and restated as the Gilead Sciences, Inc. 2018 Equity Incentive Plan (as amended and restated, the “2018 Plan”). The aggregate amount of shares that may be issued under the 2018 Plan on or after the assumption date will not exceed 12 million shares. As part of the Immunomedics acquisition, we assumed the Immunomedics Amended and Restated 2014 Long-Term Incentive Plan (the “Immunomedics Plan” and referred together with the 2004 Plan and 2018 Plan as the “Plans”), which we subsequently merged into the 2004 Plan. The aggregate amount of shares that may be issued under the Immunomedics Plan on or after the assumption date will not exceed 26 million shares. See Note 6. Acquisitions for additional information on the settlement of stock awards. The Plans are broad based incentive plans that provide for the grant of equity-based awards, including stock options, restricted stock units, restricted stock awards and performance share awards, to employees, directors and consultants. As of December 31, 2021, a total of 82 million shares remain available for future grant under the Plans. Stock Options The Plans provide for option grants designated as either non-qualified or incentive stock options. All stock options granted after January 1, 2006 have been non-qualified stock options. Employee stock options generally vest over three or four years. All options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options are issued and are granted at prices not less than the fair market value of our common stock on the grant date. Stock option exercises are settled with common stock from the Plans’ previously authorized and available pool of shares. The following table summarizes activity and related information under our stock option plans. All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date:
|  | Shares (in millions) |  | Weighted- Average Exercise Price (in dollars) |  | Weighted-Average Remaining Contractual Term (years) |  | Aggregate Intrinsic Value (in millions)
Outstanding as of December 31, 2020 |  | 16.6 |  |  | $ | 69.40 |  |  |  |  |
Granted |  | 3.8 |  |  | $ | 64.77 |  |  |  |  |
Forfeited |  | (0.9) |  |  | $ | 67.67 |  |  |  |  |
Expired |  | (1.1) |  |  | $ | 82.11 |  |  |  |  |
Exercised |  | (1.6) |  |  | $ | 37.46 |  |  |  |  |
Outstanding as of December 31, 2021 |  | 16.8 |  |  | $ | 70.60 |  |  | 5.34 |  | $ | 101 |
Exercisable as of December 31, 2021 |  | 11.2 |  |  | $ | 72.43 |  |  | 3.67 |  | $ | 68 |
Expected to vest, net of estimated forfeitures as of December 31, 2021 |  | 5.3 |  |  | $ | 67.01 |  |  | 8.61 |  | $ | 32 |
Aggregate intrinsic value represents the value of our closing stock price on the last trading day of the year in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. Total intrinsic value of options exercised was $48 million, $179 million and $209 million for 2021, 2020 and 2019, respectively. The weighted-average grant date fair value of the stock options granted was $10.05 per share, $11.69 per share and $12.15 per share for 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $47 million of unrecognized compensation cost related to stock options, which is expected to be recognized over an estimated weighted-average period of 2.3 years. Restricted Stock and Performance Share Awards We grant time-based RSUs to certain employees as part of our annual employee equity compensation review program as well as to new hire employees and to non-employee members of our Board. RSUs are share-based awards that entitle the holder to receive freely tradable shares of our common stock upon vesting. RSUs generally vest over three or four years from the date of grant. The fair value of an RSU is equal to the closing price of our common stock on the grant date. We grant PSUs which vest upon the achievement of specified market or performance goals, which could include achieving a total shareholder return compared to a pre-determined peer group or achieving revenue targets. The actual number of common shares ultimately issued is calculated by multiplying the number of PSUs by a payout percentage ranging from 0% to 200%, and these awards generally vest only when a committee (or subcommittee) of our Board has determined that the specified market and performance goals have been achieved. The fair value of each PSU is estimated at the date of grant or when performance objectives are defined for the grants. Depending on the terms of the award, fair value on the date of grant is determined based on either the Monte Carlo valuation methodology or the closing stock price on the date of grant. In addition, we have also granted other PSUs to certain of our employees under the 2004 Plan. The vesting of these awards is subject to the achievement of specified individual performance goals, typically within a one to two year period. The fair value of such an award is equal to the closing price of our common stock on the grant date. The following table summarizes our RSU and PSU activity and related information:
|  | RSUs |  | PSUs
(in millions, except per share amounts) |  | Shares |  | Weighted- Average Grant Date Fair Value Per Share |  | Shares(1) |  | Weighted- Average Grant Date Fair Value Per Share(1)
Outstanding as of December 31, 2020 |  | 19.5 |  |  | $ | 69.80 |  |  | 0.6 |  |  | $ | 84.87 |
Granted |  | 11.9 |  |  | $ | 65.42 |  |  | 0.3 |  |  | $ | 71.31 |
Vested |  | (7.0) |  |  | $ | 70.30 |  |  | (0.1) |  |  | $ | 88.36 |
Forfeited |  | (3.5) |  |  | $ | 67.77 |  |  | (0.1) |  |  | $ | 78.37 |
Outstanding as of December 31, 2021 |  | 20.9 |  | $ | 67.48 |  |  | 0.7 |  | $ | 79.13 |
________________________________ (1) Weighted-average grant-date fair value per share excludes shares related to grants that currently have no grant date as the performance objectives have not yet been defined. The weighted-average grant date fair value of RSUs granted was $65.42 per share, $70.94 per share and $64.31 per share for 2021, 2020 and 2019, respectively. The weighted-average grant date fair value of PSUs granted was $71.31 per share, $83.64 per share and $68.30 per share for 2021, 2020 and 2019, respectively. The total grant date fair value of our vested RSUs and PSUs was $503 million, $479 million and $450 million for 2021, 2020 and 2019, respectively, and total fair value as of the respective vesting dates was $471 million, $459 million and $372 million for 2021, 2020 and 2019, respectively. As of December 31, 2021, there was $917 million of unrecognized compensation cost related to unvested RSUs and PSUs, which is expected to be recognized over a weighted-average period of 2.2 years. Employee Stock Purchase Plan Under our Employee Stock Purchase Plan and the International Employee Stock Purchase Plan (together, as amended, the “ESPP”), employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of our common stock on the offering date or the purchase date. The ESPP offers a six-month look-back feature as well as an automatic reset feature that provides for an offering period to be reset to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period. ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares. During 2021, 2 million shares were issued under the ESPP for $111 million. A total of 79 million shares of common stock have been authorized for issuance under the ESPP, and there were 5 million shares available for issuance under the ESPP as of December 31, 2021. Stock-Based Compensation The following table summarizes total stock-based compensation expenses included on our Consolidated Statements of Income:
|  | Year Ended December 31,
(in millions) |  | 2021 |  | 2020 |  | 2019
Cost of goods sold |  | $ | 40 |  |  | $ | 109 |  |  | $ | 48 |
Research and development expenses |  | 287 |  |  | 462 |  |  | 289 |
Selling, general and administrative expenses |  | 308 |  |  | 505 |  |  | 299 |
Stock-based compensation expense included in total costs and expenses(1) |  | 635 |  |  | 1,076 |  |  | 636 |
Income tax effect(2) |  | (100) |  |  | (222) |  |  | 2 |
Stock-based compensation expense, net of tax |  | $ | 535 |  |  | $ | 854 |  |  | $ | 638 |
________________________________ (1) Pre-tax stock-based compensation expense for the year ended December 31, 2020 of $1.1 billion included $643 million non-cash stock-based expense and $289 million and $144 million of accelerated post-acquisition stock-based expense related to the acquisitions of Immunomedics and Forty Seven, respectively. See Note 6. Acquisitions for additional information. (2) Income tax effect for the year ended December 31, 2019 included a $114 million income tax expense following the U.S. Court of Appeals decision in Altera Corp v. Commissioner, which requires related parties in an intercompany cost sharing arrangement to share expenses related to stock-based compensation. Stock-based compensation is recognized as expense over the requisite service periods on our Consolidated Statements of Income using the straight-line expense attribution approach, reduced for estimated forfeitures. We estimate forfeitures based on our historical experience. The requisite service period could be shorter than the vesting period if an employee is retirement eligible. Valuation Assumptions Fair value of options granted under our Plans and purchases under our ESPP were estimated at grant or purchase dates using a Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including expected stock price volatility and expected award life. We used the following assumptions to calculate the estimated fair value of the awards:
|  | Year Ended December 31,
|  | 2021 |  | 2020 |  | 2019
Expected volatility: |  |  |  |  |  |
Stock options |  | 29 | % |  | 29 | % |  | 27 | %
ESPP |  | 25 | % |  | 28 | % |  | 27 | %
Expected term in years: |  |  |  |  |  |
Stock options |  | 5.0 |  | 5.0 |  | 5.5
ESPP |  | 0.5 |  | 0.5 |  | 0.5
Risk-free interest rate: |  |  |  |  |  |
Stock options |  | 0.8 | % |  | 0.8 | % |  | 2.3 | %
ESPP |  | 0.1 | % |  | 0.6 | % |  | 1.8 | %
Expected dividend yield |  | 4.4 | % |  | 4.0 | % |  | 3.6 | %
The fair value of stock options granted was calculated using the single option approach. We use a blend of historical volatility along with implied volatility for traded options on our common stock to determine our expected volatility. The expected term of stock-based awards represents the weighted-average period the awards are expected to remain outstanding. We estimate the weighted-average expected term based on historical cancellation and historical exercise data related to our stock options as well as the contractual term and vesting terms of the awards. The risk-free interest rate is based upon observed interest rates appropriate for the term of the stock-based awards. The dividend yield is based on our history and expectation of dividend payouts. Deferred Compensation We maintain a retirement saving plan under which eligible U.S. employees may defer compensation for income tax purposes under Section 401(k) of the Internal Revenue Code (the Gilead Sciences 401k Plan). In certain foreign subsidiaries, we maintain defined benefit plans as required by local regulatory requirements. Our total matching contribution expense under the Gilead Sciences 401k Plan and other defined benefit plans was $166 million, $144 million and $110 million during 2021, 2020 and 2019, respectively. We maintain a deferred compensation plan under which our directors and key employees may defer compensation. Amounts deferred by participants are deposited into a rabbi trust. The total assets and liabilities associated with the deferred compensation plan were $261 million and $218 million as of December 31, 2021 and 2020, respectively.

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