Gilead Sciences
GILD
#106
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S$229.01 B
Marketcap
S$184.70
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

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

COMMISSION FILE NO. 0-19731

GILEAD SCIENCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 94-3047598
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 LAKESIDE DRIVE, FOSTER CITY, 94404
CALIFORNIA
(Address of principal executive offices) (Zip Code)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 650-574-3000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

COMMON STOCK $.001 PAR VALUE
(TITLE OF CLASS)

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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant based upon the closing price of the Common Stock on the Nasdaq Stock
Market on February 27, 1998 was $804,097,418.*

The number of shares outstanding of the Registrant's Common Stock was
30,131,484 as of February 27, 1998.

DOCUMENTS INCORPORATED BY REFERENCE

Registrant's annual report to security holders furnished to the Securities
and Exchange Commission (the "Commission") pursuant to Rule 14a-3(b) in
connection with Registrant's 1998 Annual Meeting of Stockholders to be held on
May 27, 1998 (the "1998 Annual Meeting") is attached hereto as Exhibit 13.1 and
portions are incorporated herein by reference into Part II of this Report.

Portions of Registrant's Definitive Proxy Statement filed with the
Commission pursuant to Regulation 14A in connection with the 1998 Annual Meeting
are incorporated herein by reference into Part III of this Report.

Certain Exhibits filed with the Registrant's Registration Statements on Form
S-1 (Registration Nos. 33-44534 and 33-55680), as amended, the Registrant's
Registration Statement on Form S-3 (No. 333-868), as amended, the Registrant's
Registration Statement on Form S-8 (Registration Nos. 33-46058), the
Registrant's Annual Reports on Form 10-K for the fiscal periods ended March 31,
1994, December 31, 1995 and December 31, 1996, and the Registrant's Quarterly
Reports on Form 10-Q for the fiscal quarters ended September 30, 1993, September
30, 1994, December 31, 1994, June 30, 1996, September 30, 1996 and September 30,
1997 are incorporated herein by reference into Part IV of this Report.
- ------------------------
* Based on a closing price of $35.8125 per share. Excludes 7,678,502 shares of
the Registrant's Common Stock held by executive officers, directors and
stockholders whose ownership exceeds 5% of the Common Stock outstanding at
February 27, 1998. Exclusion of such shares should not be construed to
indicate that any such person possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of the Registrant
or that such person is controlled by or under common control with the
Registrant.

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PART I

ITEM 1. BUSINESS

THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS RELATING TO
CLINICAL AND REGULATORY DEVELOPMENTS (INCLUDING ANTICIPATED TRIAL COMMENCEMENT
AND FDA FILING AND APPROVAL DATES), MARKETING AND SALES MATTERS, FUTURE EXPENSE
LEVELS AND FINANCIAL RESULTS. THESE STATEMENTS INVOLVE INHERENT RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE
SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK
FACTORS," PARTICULARLY THOSE RELATING TO THE DEVELOPMENT, APPROVAL AND MARKETING
OF PHARMACEUTICAL PRODUCTS.

GENERAL

Gilead Sciences, Inc. ("Gilead" or the "Company") is an independent
biopharmaceutical company that seeks to provide accelerated solutions for
patients and the people who care for them. The Company discovers, develops, and
commercializes proprietary therapeutics for important viral diseases, including
the currently marketed product, VISTIDE-Registered Trademark- (cidofovir
injection), for the treatment of cytomegalovirus ("CMV") retinitis, a
sight-threatening viral infection in patients with acquired immune deficiency
syndrome ("AIDS"). In addition, the Company is developing products to treat
diseases caused by human immunodeficiency virus ("HIV"), hepatitis B virus
("HBV") and influenza virus.

The successful development and commercialization of the Company's products
will require substantial and ongoing efforts at the forefront of the life
sciences industry. The Company is pursuing preclinical or clinical development
of a number of product candidates. Even if these product candidates appear
promising during various stages of development, they may not reach the market
for a number of reasons. Such reasons include the possibilities that the
potential products will be found ineffective or cause harmful side effects
during preclinical or clinical trials, fail to receive necessary regulatory
approvals, be difficult or uneconomical to manufacture on a commercial scale,
fail to achieve market acceptance or be precluded from commercialization by
proprietary rights of third parties.

The Company faces significant challenges and risks in an industry undergoing
rapid change, including the risks inherent in its research and development
programs, uncertainties in obtaining and enforcing patents, the lengthy and
expensive regulatory approval process, reliance on third party manufacturers,
intense competition from pharmaceutical and biotechnology companies, dependence
on collaborative relationships, increasing pressure on pharmaceutical pricing
from payors, patients and government agencies, and uncertainties associated with
the market acceptance of any of the Company's products in development.

The Company was incorporated in Delaware in 1987. The Company's principal
executive offices are located at 333 Lakeside Drive, Foster City, California
94404 and its telephone number is (650) 574-3000, or (800) GILEAD5
(800-445-3235).

FOR A MORE DETAILED DISCUSSION OF THE RISK FACTORS RELATING TO THE COMPANY
SUMMARIZED ABOVE, SEE "RISK FACTORS" AT THE END OF THIS ITEM 1 (PAGES 21 THROUGH
26 OF THIS REPORT). STOCKHOLDERS AND PROSPECTIVE INVESTORS IN THE COMPANY SHOULD
CAREFULLY CONSIDER THESE RISK FACTORS.

OVERVIEW OF NUCLEOTIDES

Nucleotides exist in every human cell and are the building blocks of the
nucleic acids DNA and RNA. A single nucleotide is called a mononucleotide, and
several nucleotides linked together are called an oligonucleotide. Nucleotides
are involved in the metabolism and regulation of certain activities of cells and
microorganisms. Oligonucleotides are the material containing genetic
information.

2
Natural oligonucleotides are coupled to one another in a specific manner to
form DNA or RNA strands. The specific sequences of nucleotides that compose each
strand of DNA contain the genetic codes for the different proteins produced by
the cell. Proteins perform most of the normal physiologic functions of humans,
viruses and other organisms. However, when the production or activity of
proteins becomes aberrant, numerous diseases, such as vascular disease,
inflammatory disease or cancer, can result. Diseases may also result from a
foreign organism, such as a virus, which directs a cell to produce proteins
necessary for viral replication.

Natural nucleotides are a versatile class of compounds that can be
chemically modified to inhibit the production or activity of disease-causing
proteins. Natural nucleotides have three molecular components: a sugar, a
phosphate group and a base. Every nucleotide in DNA has the same sugar and
phosphate group but a different base. Nucleotide analogues designed to be
therapeutic compounds can work by a number of different mechanisms.
Mononucleotides can be designed to interfere with the metabolism of cells or
with the replication of viruses. Oligonucleotides can be designed to interfere
with transcription or translation by binding to DNA or RNA.

The Company believes that the precise interaction of nucleotides in binding
to DNA, RNA and proteins provides the chemical basis for the development of
therapeutic products with high specificity and potency and long duration of
action. Many of the Company's products or products in development are nucleotide
analogues, including VISTIDE-Registered Trademark- (cidofovir injection),
PREVEON-TM- (adefovir dipivoxil) and PMPA.

3
PRODUCT PIPELINE

The following table summarizes Gilead's products and product candidates.
This table is qualified in its entirety by reference to the more detailed
descriptions elsewhere in this Report.

<TABLE>
<CAPTION>
WORLDWIDE
PRODUCT/CANDIDATE TARGET INDICATIONS DEVELOPMENT STATUS(1) RIGHTS
- ------------------------------------- ---------------------------- ---------------------- ---------------
<S> <C> <C> <C>
VISTIDE-Registered Trademark- CMV Retinitis Launched in U.S. Gilead
(cidofovir injection)
Launched in E.U. Pharmacia &
Upjohn
- ------------------------------------------------------------------------------------------------------------
PREVEON-TM- (adefovir dipivoxil) HIV-AIDS Phase II/III and Gilead
Expanded Access
GS 4104 (Ro64-0796) Oral Influenza Virus (Treatment) Phase II/III Roche
Influenza Virus Phase II/III Roche
(Prophylaxis)
Adefovir Dipivoxil Hepatitis B Virus Phase II Gilead
PMPA Oral Prodrug HIV-AIDS Phase II Gilead
PMPA I.V. HIV-AIDS Phase I/II Gilead
(maternal/fetal
transmission)
PMPA Topical Gel HIV-AIDS (Prophylaxis) Clinical Candidate Gilead
VISTIDE-Registered Trademark- PML-CNS Infection Phase I/II Pending Gilead
(cidofovir injection)
Cidofovir Topical Ophthalmic Viral Keratoconjunctivitis Phase II Storz
- ------------------------------------------------------------------------------------------------------------
Protease Inhibitors HIV-AIDS Research Gilead
Hepatitis C Virus Research Gilead
Adenosine Receptor Regulators Stroke Preclinical/Research Gilead/NIH
CRADA
Antisense Research Cancer Research Gilead/Glaxo
Wellcome
</TABLE>

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(1) See "Government Regulation" for a description of the phases of clinical
testing and the regulatory approval process.

VISTIDE

In June 1996, Gilead received U.S. Food and Drug Administration ("FDA")
clearance to market its first product, VISTIDE-Registered Trademark- (cidofovir
injection) for the treatment of cytomegalovirus ("CMV") retinitis in patients
with AIDS. The active ingredient in VISTIDE is cidofovir, a mononucleotide
analogue that has demonstrated activity in preclinical studies and clinical
trials against several viruses in the herpesvirus family. In addition to
VISTIDE, cidofovir is under evaluation for other indications. See "Clinical
Development Programs."

Cytomegalovirus is one of the most common opportunistic infections in
patients with AIDS. CMV is a systemic viral infection that may infect several
sites in the body, including the retina, gastrointestinal tract, lungs, liver
and central nervous system. Retinitis is the most frequent manifestation of CMV
infection in patients with AIDS. The incidence of CMV retinitis in AIDS patients
declined by more than 30% from 1996 to 1997 as a result of more effective
therapeutics for AIDS, as well as the use of oral ganciclovir for CMV
prophylaxis. The Company anticipates that this decline will continue.

4
VISTIDE was cleared for marketing by the FDA based on the results of three
pivotal clinical trials. These trials demonstrated that VISTIDE has a
statistically significant effect in delaying the progression of CMV retinitis
lesions in newly diagnosed patients, and in previously treated patients who had
failed other therapies. In addition, these studies indicate a more convenient
dosing regimen than the other intravenous CMV treatments. VISTIDE is
administered by intravenous infusion once per week for the first two weeks as
induction therapy, and then once every other week as maintenance therapy until
progression of the disease or intolerance to the therapy. Other intravenous
treatments must be administered once or multiple times per day and often require
the surgical implantation of a chronic catheter in the patient's chest for the
daily infusions.

Renal toxicity is the primary dose-limiting side effect of VISTIDE
administration. Prior to each administration, patients must be monitored for
urinary protein and serum creatinine (laboratory markers of renal toxicity). In
addition, patients receive intravenous saline hydration and oral probenecid on
each treatment day, to mitigate the potential for toxicity. VISTIDE is
contraindicated in patients receiving other agents with nephrotoxic potential,
and patients are required to undergo a "wash out" period of seven days after
completing therapy with such agents and before receiving VISTIDE. In certain
animal studies, cidofovir, the active ingredient in VISTIDE, was carcinogenic.

VISTIDE is marketed and sold in the United States by Gilead's sales force of
antiviral specialists. This group currently consists of 26 sales representatives
and three regional directors who call directly on physicians, hospitals,
clinics, pharmacies and other healthcare providers involved in the treatment of
patients with CMV retinitis. VISTIDE is sold by Gilead to wholesalers and
specialty distributors, who in turn sell the product to hospitals, home
healthcare companies, pharmacies and other healthcare providers. See "Marketing
and Sales."

In August 1996, Gilead licensed commercial rights to Pharmacia & Upjohn S.A.
("Pharmacia & Upjohn") to market and sell VISTIDE in all territories outside of
the United States. In April 1997, the European Commission granted marketing
approval for VISTIDE for all the member countries in the European Union under
the centralized procedure of the European Medicines Evaluation Agency ("EMEA").
Subsequently, VISTIDE was approved for marketing in Switzerland, Australia and
Brazil, and applications for approval are pending in several other countries.
Pharmacia & Upjohn has launched the product in most major European countries,
and expects to launch the product in additional countries as pricing and
reimbursement approvals are obtained. Pharmacia & Upjohn is paying Gilead a
royalty on its net sales of VISTIDE, on a trailing, quarterly basis. See
"Collaborative Relationships--Pharmacia & Upjohn."

There are several approved therapies that compete with VISTIDE in the CMV
retinitis market. Ganciclovir, marketed by Roche Laboratories, is the most
widely used treatment for CMV retinitis. Ganciclovir is available in intravenous
and oral formulations, and the oral formulation is approved for both prophylaxis
and maintenance treatment of CMV retinitis. A ganciclovir ocular implant,
marketed by Bausch & Lomb Incorporated, provides local therapy to an affected
eye and is implanted through a surgical procedure. Astra U.S.A. markets
foscarnet, the other approved intravenous therapy for CMV retinitis. There are
also several products in clinical development for the treatment of CMV
retinitis. Although the Company believes that VISTIDE has competitive advantages
over these products, particularly with regard to dosing convenience and
efficacy, there can be no assurance that the Company will be successful in
maintaining or increasing VISTIDE's share of the CMV retinitis treatment market.
See "Competition."

CLINICAL DEVELOPMENT PROGRAMS

Gilead is developing small molecule nucleotide analogues that are intended
to treat viral infections by selectively interfering with proteins essential for
viral replication. Numerous disease processes, particularly viral infections,
require precise interactions between cellular or viral proteins and nucleotides
or

5
oligonucleotides. For example, many viruses depend upon certain proteins known
as enzymes to synthesize their own DNA. This dependence of the virus upon
specific interactions between proteins and nucleic acids provides opportunities
for the development of therapeutic products that disrupt these crucial
interactions. Preclinical and clinical studies have demonstrated that small
molecule nucleotide analogues can selectively interrupt these interactions.

The Company believes that small molecule nucleotide analogues offer several
potential advantages as therapeutics. First, these molecules may have a long
duration of action, permitting less frequent and therefore more convenient
dosing. Second, because certain nucleotides can be active in both infected and
uninfected cells, these molecules may provide prophylactic protection of
uninfected cells. Third, when compared to existing antiviral drugs, viruses may
be less likely to develop resistance to these analogues. In addition, these
analogues may be active against viral strains that have developed resistance to
existing antiviral drugs. Finally, the low molecular weight of these analogues,
or prodrug derivatives of them, may permit their development into drugs suitable
for oral administration.

A major portion of the Company's operating expenses to date has been related
to the research and development of products on its own behalf. During the years
ended December 31, 1997 and December 31, 1996 and the nine month period ended
December 31, 1995, the Company's research and development expenses were $59.2
million, $41.9 million and $25.7 million, respectively.

PREVEON

PREVEON-TM- (adefovir dipivoxil) is a mononucleotide analogue developed as
an oral prodrug of adefovir (also known as GS 393 or PMEA), the Company's first
HIV clinical candidate. A prodrug is a modified version of a parent compound
designed to enhance delivery characteristics. PREVEON has demonstrated
preclinical and clinical activity against HIV, CMV and hepatitis B virus. See
"Adefovir Dipivoxil for HBV." PREVEON has been generally well tolerated in
clinical trials. The most common adverse events have been dose-related
gastrointestinal effects, including nausea and anorexia. Elevations in liver
transaminases and serum creatinine, and decreases in serum carnitine levels,
have also been reported during therapy with PREVEON. The Company is developing
PREVEON in a series of Phase II/ III clinical trials as a potential oral
treatment for HIV. In clinical trials, PREVEON is administered as a single oral
tablet once per day, along with a single oral tablet of L-carnitine, a
nutritional supplement. L-carnitine is administered to counteract the decrease
of natural serum carnitine which can be caused by PREVEON administration.

A number of products with different mechanisms of action have been approved
for the treatment of HIV. The first generation of approved HIV drugs are reverse
transcriptase inhibitors, including nucleoside and non-nucleoside compounds.
Several protease inhibitors have recently been approved for marketing, and
others are in clinical development. Combination therapy with reverse
transcriptase inhibitors and protease inhibitors is proving to be effective for
many people with AIDS, in some cases lowering the patient's viral load (level of
virus in the blood) to undetectable levels for prolonged periods of time. The
Company believes, however, that there is still substantial room for improvement
in AIDS drug therapy. Many patients are developing resistance or become
intolerant to combination therapy, and require new combinations for therapy to
be effective. Patients would benefit from AIDS drugs that are better tolerated,
more convenient to dose and less prone to develop significant resistance.

PREVEON is a reverse transcriptase inhibitor that is currently being tested
in a series of Phase II/III clinical trials sponsored by Gilead, as well as by
the National Institutes of Health ("NIH") and other government organizations. In
these trials, PREVEON is being evaluated in combination with most approved and
investigational antiretroviral agents in a variety of patient populations at
different stages of disease. Trials are ongoing in the United States, several
European countries and Australia. In one of Gilead's pivotal trials, Study 408,
442 patients with HIV infection received either PREVEON (one tablet per day) or
placebo, in addition to continuing their current antiretroviral therapy. Gilead
anticipates

6
unblinding the data from Study 408 and presenting the data at a scientific forum
in 1998. If the results from Study 408 are positive, Gilead intends to file a
new drug application ("NDA") with the FDA for PREVEON, seeking approval for use
of the product in combination with other antiretroviral agents for the treatment
of HIV and AIDS. The NDA would be supplemented by results from the Phase I/II
program for PREVEON, as well as efficacy and safety data from other Phase II/III
trials currently underway. There can be no assurance as to when or whether
Gilead will file an NDA for approval of PREVEON. Moreover, even if the NDA is
filed, there can be no assurance as to the timing or the ultimate approval of
the NDA by the FDA.

PREVEON is also available in the United States under an expanded access
program for patients with limited treatment options. This program began in
December 1997 and has enrolled approximately 1,000 patients through March 1998.

HIV is the causative agent of AIDS. HIV infects an estimated 30 million
people worldwide. There were an estimated 240,000 people with AIDS in the United
States in 1997. A number of therapeutics are currently marketed or are in
advanced stages of clinical development for the treatment of HIV infection and
AIDS, including 12 products currently marketed in the United States. See
"Competition."

The Company has an exclusive, worldwide license to patent rights and related
technology for adefovir, which is the parent compound of adefovir dipivoxil,
from the Institute of Organic Chemistry and Biochemistry of the Academy of
Sciences of the Czech Republic and the REGA Stichting Research Institute in
Belgium (collectively, "IOCB/REGA"), and would be obligated to pay a royalty to
IOCB/ REGA on any net sales of adefovir dipivoxil. See "Collaborative
Relationships--IOCB/REGA."

GS 4104

In September 1996, Gilead researchers announced the discovery of GS 4104
(Ro64-0796 under the Roche identification system), an orally active
neuraminidase inhibitor that inhibits the replication of influenza virus in a
variety of animal models. In these experiments, the parent compound of GS 4104
was well tolerated and demonstrated antiviral activity against multiple strains
of influenza A and B.

Based on these data, Gilead and F. Hoffmann-La Roche ("Roche") entered into
an exclusive, worldwide development and commercialization collaboration covering
Gilead's neuraminidase inhibitors. Gilead and Roche are jointly conducting
research and development of neuraminidase inhibitors for the prevention and
treatment of influenza, with Roche funding the efforts of both parties. Roche
has exclusive commercial rights to GS 4104 and to any other products developed
under the collaboration. Roche is obligated to pay Gilead cash payments upon
achievement of development milestones and royalties on net sales of any products
developed under the collaboration. See "Collaborative Relationships--Hoffmann-La
Roche."

During 1997, Roche completed Phase I studies of GS 4104, and Gilead
completed Phase II placebo-controlled challenge studies of GS 4104 in both
treatment and prevention. In the Phase II studies, volunteers were artificially
infected with influenza virus, before administration of the drug (treatment), or
after administration of the drug (prevention). GS 4104 was administered as an
oral tablet once or twice a day, at several dosage levels. The Company presented
the results of these studies in September 1997, indicating that GS 4104 had a
statistically significant effect in reducing viral load and the duration of
influenza symptoms in the treatment study, and prevented infection in the
prevention study.

Based on the results of the Phase II studies, in December 1997 Gilead and
Roche initiated a series of four placebo-controlled Phase II/III studies of GS
4104, each designed to enroll up to 750 adult patients. Two of these studies are
evaluating treatment in naturally infected patients, with a five-day course of
therapy. The other two studies will evaluate prevention in healthy volunteers,
with a six-week course of drug administration. In addition to these studies,
Roche and Gilead anticipate conducting a series of smaller studies in children
and the elderly, as well as drug interaction studies, during 1998.

7
Glaxo Wellcome, in collaboration with Biota Holdings Limited, is also
pursuing development of a neuraminidase inhibitor to treat influenza. This
compound, delivered as a dry powder inhaler or nasal spray, is in advanced
clinical trials and represents significant potential competition for GS 4104.
See "Competition."

ADEFOVIR DIPIVOXIL FOR HBV

Gilead is also developing adefovir dipivoxil for the potential treatment of
hepatitis B virus ("HBV"), in a lower dosage form than PREVEON for HIV.
Approximately 300 million people worldwide are chronically infected with HBV,
primarily in Asian countries. HBV can lead to cirrhosis and cancer of the liver.
A vaccine is available that can prevent the transmission of HBV; however, it has
no activity in those already infected with the virus. Alpha interferon is
approved for the treatment of HBV, is administered by injection and is not
always successful in controlling the disease.

In 1996, Gilead completed a Phase I/II placebo-controlled trial of adefovir
dipivoxil for the treatment of hepatitis B infection at multiple centers in the
United Kingdom, enrolling 20 patients. Data from this trial indicate that
adefovir dipivoxil was well tolerated and resulted in a statistically
significant decline in HBV DNA levels in treated patients compared to placebo.
Gilead recently completed enrollment in multinational Phase II trials of
adefovir dipivoxil for the treatment of HBV, evaluating the drug as a single
oral tablet once per day at three dose levels. The Company anticipates
presenting the data from these Phase II trials at a scientific forum in 1998,
and initiating a series of Phase III trials in HBV infected patients before the
end of 1998.

Glaxo Wellcome, in collaboration with Biochem Pharma, is pursuing
development of a nucleoside analogue to treat HBV infection. This compound is in
advanced clinical trials and represents significant potential competition for
adefovir dipivoxil for HBV. See "Competition."

The Company has exclusive, worldwide license to patent rights and related
technology for adefovir, which is the parent compound of adefovir dipivoxil,
from IOCB/REGA, and would be obligated to pay a royalty to IOCB/REGA on any net
sales of adefovir dipivoxil. See "Collaborative Relationships--IOCB/ REGA."

PMPA AND PMPA PRODRUG

The Company is evaluating PMPA, a nucleotide analogue with structural
similarities to adefovir dipivoxil, as a potential therapeutic for HIV and AIDS.
PMPA has shown significant activity against simian immunodeficiency virus
("SIV") in a variety of preclinical treatment and prevention models. SIV causes
an AIDS-like syndrome in primates. In these experiments, primates treated with
injections of PMPA either before or after exposure to SIV were completely
protected from infection. In another primate study, a topical gel form of PMPA
also provided protection against SIV transmission when applied intravaginally.

Gilead has conducted placebo-controlled Phase I/II studies of PMPA in both
intravenous and oral formulations (PMPA Prodrug). In both studies, PMPA was well
tolerated and had a statistically significant effect in reducing viral load
relative to placebo after short-term dosing. In February 1998, the Company
presented data from a Phase I/II study of PMPA Prodrug, indicating that highest
dose of the drug tested reduced viral load by a median of more than 90% after
one month of dosing. In this study, PMPA Prodrug was administered as a single
oral tablet once per day. Based on these results, the Company intends to
initiate a program of Phase II studies of PMPA Prodrug, in combination with
other anti-retroviral therapies, during 1998.

The Company anticipates that the NIH will initiate clinical studies of a
topical version of PMPA, for the prevention of sexual transmission of HIV,
during 1998. The NIH is also evaluating possible applications of intravenous
PMPA in the prevention of maternal-fetal HIV transmission.

8
The Company has an exclusive, worldwide license to patent rights and related
technology for PMPA from IOCB/REGA, and would be obligated to pay a royalty to
IOCB/REGA on any net sales of PMPA. See "Collaborative
Relationships--IOCB/REGA."

CIDOFOVIR

Cidofovir is a mononucleotide analogue that has demonstrated activity in
preclinical studies and clinical trials against several viruses in the
herpesvirus family. Cidofovir is the active ingredient in the Company's
commercial product VISTIDE (cidofovir injection). See "VISTIDE." Gilead is
currently evaluating cidofovir in different formulations for the potential
treatment of certain infectious diseases caused by herpesviruses. In addition, a
collaborative partner of Gilead, Storz Instrument Company, is conducting
clinical trials of topical ophthalmic cidofovir, an eye drop formulation, for
the potential treatment of adenovirus and herpes simplex virus, which can cause
external infections of the eye.

The side effect profiles of the drugs under development based on cidofovir
have not yet been fully characterized. Renal toxicity is the primary
dose-limiting side effect of VISTIDE administration. In addition, in certain
animal studies, cidofovir was carcinogenic. There can be no assurance that the
Company will be successful in developing or commercializing any therapeutic
products, other than VISTIDE, based on cidofovir.

The Company has developed a topical formulation of cidofovir called
FORVADE-TM- (cidofovir gel). This compound has been evaluated in a variety of
preclinical models and clinical trials for the potential treatment of herpes
simplex virus ("HSV") lesions and genital warts caused by human papillomavirus
("HPV"). FORVADE has demonstrated clinical benefit in Phase I/II studies for
both of these indications. In late 1996, Gilead filed an NDA with the FDA
seeking marketing approval for FORVADE for the treatment of HSV lesions
unresponsive to therapy with acyclovir, in patients with AIDS. The NDA was based
on the results from a single Phase I/II trial in 30 patients, demonstrating a
statistically significant treatment effect in healing these lesions. In May
1997, the FDA determined that Gilead's NDA for FORVADE was not approvable
without additional clinical information. The Company is not actively pursuing
development or approval of FORVADE for any indication at this time, and does not
anticipate doing so in the future without the support of a corporate partner.

In 1994, Gilead entered into a license agreement Storz Instrument Company
("Storz"). Storz is developing an eye drop formulation of cidofovir for the
potential treatment of certain viruses that cause external eye infections,
including adenovirus, which is the leading cause of viral conjunctivitis, or
"pink eye." Storz was a subsidiary of American Cyanamid and then American Home
Products, until its sale to Bausch & Lomb Incorporated in late 1997. The license
to Storz is limited to topical ophthalmic use for external viral eye disease,
and excludes any treatment requiring injection and any treatment for other eye
diseases such as CMV retinitis. Storz commenced clinical testing of topical
ophthalmic cidofovir in December 1995 and is currently completing Phase II
trials. See "Collaborative Relationships--Storz."

Preclinical studies have demonstrated that cidofovir is active against a
variety of viruses that cause disease in people with AIDS, including molluscum
contagiosum, which causes disfiguring skin lesions, Kaposi's sarcoma, an
AIDS-related malignancy, and progressive multifocal leukoencephalopathy ("PML"),
a rapidly progressive, often fatal brain disease. An intravenous formulation of
cidofovir is in early clinical testing for the potential treatment of PML.

The Company has an exclusive, worldwide license to patent rights and related
technology for cidofovir from IOCB/REGA, and is obligated to pay a royalty to
IOCB/REGA on the net sales of VISTIDE, as well as on any other future products
containing cidofovir. See "VISTIDE" "Collaborative Relationships-- IOCB/REGA."

9
RESEARCH

Gilead's research efforts are conducted by a scientific team with the
multi-disciplinary skills that the Company believes are critical for the
discovery and preclinical development of therapeutics based on nucleotides or
other small molecules. The primary therapeutic targets of the Company's research
program are viral diseases, cancer and cardiovascular diseases.

NUCLEOTIDE ANALOGUES

The Company has an extensive library of proprietary nucleotide compounds
that it is evaluating for antiviral and antiproliferative activity. Among the
primary targets of this screening activity are HIV, herpesviruses, hepatitis B
virus and poxviruses. In addition, Gilead is evaluating novel nucleotide
prodrugs with the potential for enhanced pharmaceutical properties, including
better bioavailability and longer half-life. Several nucleotide analogues are
also being evaluated for activity against cancer in animal models.

PROTEASE INHIBITORS

Through its structure-based drug design program, the Company has synthesized
a number of small molecule compounds with IN VITRO activity against HIV protease
or hepatitis C virus ("HCV") protease. Gilead has evaluated several HIV protease
inhibitors in animal models. The current focus of this program is to enhance the
pharmacological properties and cross-resistance profile of these compounds
before conducting further preclinical development.

GS 522 AND DERIVATIVES

Gilead is evaluating derivatives of GS 522, a thrombin inhibitor, in
preclinical testing for potential use as anticoagulants in cardiopulmonary
bypass surgery. Preclinical studies performed by the Company have demonstrated
that GS 522 is an effective anticoagulant during cardiopulmonary bypass
procedures in animals. Continuous infusions of GS 522 during surgery in animals
have demonstrated rapid onset, dose-related anticoagulant activity and rapid
return to normal clotting times after discontinuation of infusion. However,
animal models do not necessarily predict effectiveness in humans.

PROTEIN C ACTIVATOR

In order to exploit the potent antithrombotic activity of
naturally-occurring Protein C, the Company developed a modified version of
thrombin which does not stimulate thrombosis, but retains the ability to
activate Protein C and thereby inhibit thrombosis. Gilead has named this novel
recombinant protein Protein C Activator ("PCA"). Gilead has performed animal
studies which demonstrate that PCA causes potent, dose-dependent anticoagulation
without increased bleeding time. These results suggest that administration of
PCA may result in effective inhibition of thrombosis, while not increasing the
risk of intracerebral hemorrhage or stroke. However, animal models do not
necessarily predict effectiveness in humans.

ADENOSINE RECEPTOR REGULATORS

Gilead is working with the National Institute of Diabetes, Digestive and
Kidney Diseases at the NIH to study adenosine receptor agonists and antagonists
in the treatment and prevention of neurodegenerative disorders, particularly
stroke. Independent research has implicated adenosine receptors in the
regulation of neurodegeneration, inflammation and allergic disorders. NIH
researchers have synthesized a series of novel small molecule adenosine agonist
and antagonist compounds and have identified several compounds with A3 receptor
agonist and antagonist activity which exhibit protective effects in an animal
model of stroke. These compounds also have potential utility in the treatment of
inflammatory and allergic conditions. In collaboration with the NIH, Gilead is
currently evaluating several compounds with A3

10
receptor antagonist or agonist activity in animal models of stroke, and also
intends to evaluate the anti-inflammatory and antiallergic properties of these
compounds.

GENETIC CODE BLOCKERS

The Company is conducting research on oligonucleotide analogues that are
designed to act inside the cell to block or regulate the production of
disease-causing proteins. The Company is focusing on two types of code blocker
compounds: antisense compounds that interfere with the function of RNA and
triple helix compounds that inhibit gene expression by binding to the DNA double
helix. The Company's therapeutic targets in its code blocker program include
cancer (particularly the cell cycle genes implicated in cancer) and viral
infections. The Company believes that its code blocker technology may also have
utility as a drug discovery tool in the field of genomics. The Company's ability
to selectively inhibit the activity of specific genes within cells provides a
rapid method of determining the function of a gene that has a known sequence.

The Company's collaborative relationship with Glaxo Wellcome covers the
research and development of code blocker compounds for all potential diagnostic
and therapeutic applications, and has been the exclusive funding source for the
code blocker program since 1990. In March 1996, Glaxo Wellcome and Gilead
extended the existing collaboration for a period of five years. Glaxo Wellcome
has the right to terminate the collaboration at any time, without prior notice
beginning in June 1998. There can be no assurance that additional sources of
funding will be available, or that Gilead would continue the code blocker
program, if the collaboration is terminated by Glaxo Wellcome. See
"Collaborative Relationships--Glaxo Wellcome."

COLLABORATIVE RELATIONSHIPS

As part of its business strategy, Gilead establishes collaborations with
pharmaceutical companies to assist in the clinical development and/or
commercialization of certain of its products and product candidates, and to
provide support for research programs. The Company is also evaluating
opportunities for in-licensing products and technologies complementary to its
business, although no negotiations regarding any such opportunities are
currently in progress. The Company's existing collaborative relationships are as
follows:

PHARMACIA & UPJOHN

In August 1996, Gilead and Pharmacia & Upjohn entered into an agreement
providing Pharmacia & Upjohn with exclusive rights to market and sell VISTIDE in
all countries outside of the United States. Under the terms of the agreement,
Pharmacia & Upjohn paid Gilead an initial license fee of $10.0 million. In June
1997, after VISTIDE was approved for marketing in the European Union, Gilead
received an additional cash milestone payment of $10.0 million. In addition,
Pharmacia & Upjohn purchased 1,133,786 newly issued shares of Series B Preferred
Stock at $35.28 per share, equal to 145% of the average closing price of
Gilead's Common Stock over the 30 trading days prior to public announcement of
the European approval, for a total purchase price of $40.0 million. The Series B
Preferred Stock is not publicly registered, votes together with Gilead's Common
Stock and is convertible at any time into an equal number of shares of Common
Stock at Pharmacia & Upjohn's option. Pharmacia & Upjohn is restricted in its
ability to sell the Series B Preferred Stock (or underlying Common Stock), or
purchase any additional stock of the Company, for a period of five years from
the original purchase, until June 2002. Gilead is entitled to royalty payments
on a quarterly basis on the net sales of VISTIDE by Pharmacia & Upjohn. Gilead
is recognizing royalties on a delayed basis, one quarter after the Pharmacia &
Upjohn sales that generated the royalties. Pharmacia & Upjohn has the right to
terminate the agreement at any time beginning in August 1998, upon six months
notice. See "VISTIDE."

11
HOFFMANN-LA ROCHE

In September 1996, Gilead and Roche entered into a collaboration agreement
to develop and commercialize therapies to treat and prevent viral influenza.
Under the agreement, Roche received exclusive worldwide rights to Gilead's
proprietary influenza neuraminidase inhibitors, including GS 4104. Gilead and
Roche are jointly conducting the clinical development of GS 4104. In October
1996, Roche made an initial license fee payment to Gilead of $10.3 million and
Gilead is entitled to additional cash milestone payments of up to $40.0 million
upon achievement of development milestones, $6.0 million of which were
recognized in 1997. Roche is funding its own and Gilead's research and
development costs and will pay Gilead royalties on the net sales on GS 4104 and
any other products developed under the collaboration. Roche has the right to
terminate the agreement at any time upon 12 months notice. See "Clinical
Development Programs--GS 4104."

In September 1996, Gilead and Roche entered into an agreement to co-promote
Roche's Roferon-Registered Trademark--A (Interferon alfa-2a, recombinant) for
the treatment of chronic hepatitis C infection in the United States. The
agreement continues until December 31, 1999, unless earlier terminated by either
party as of December 31, 1998. Under the agreement, Gilead's antiviral specialty
sales force is obligated to make a fixed number of calls to promote Roferon-A in
each year. Roche paid Gilead a $150,000 one-time fee in 1996. Roche is obligated
to pay Gilead a royalty based on the net product sales in 1997 and thereafter
during the term of the agreement. See "Marketing and Sales."

GLAXO WELLCOME

In July 1990, Gilead entered into a research and development agreement with
Glaxo Wellcome. Concurrent with the signing of the agreement Glaxo Wellcome made
an $8.0 million equity investment in Gilead, and currently holds 889,911 shares
of the Company's outstanding Common Stock. The collaboration with Glaxo Wellcome
has been modified and extended on several occasions since 1990. In March 1996,
Gilead and Glaxo Wellcome entered into a new collaborative research agreement,
extending for five years the existing collaboration between the parties. Under
the terms of the 1996 agreement, Glaxo Wellcome will fund Gilead's ongoing
research in the code blocker field for five years, subject to its termination
rights. Each party has a worldwide license to the other party's patent rights to
research, develop, manufacture and sell products based on code blocker
technology for all applications. Glaxo Wellcome will have the primary right to
develop any products identified during the collaboration. Gilead is entitled to
payments for achievement of development milestones, as well as royalties on any
product sales. The agreement was amended in December 1997 to provide Glaxo
Wellcome with the right to terminate the collaborative research and funding at
any time, without prior notice beginning in June 1998. In the event of
termination, Gilead could develop code blocker technology independently or with
a third party, subject to Glaxo Wellcome's ownership rights to joint technology.
There can be no assurance that additional sources of funding will be available,
or that Gilead will continue the code blocker program, if the collaboration is
terminated by Glaxo Wellcome.

STORZ

In August 1994, the Company entered into a license and supply agreement with
American Cyanamid Company, pursuant to which the Storz Instrument Company
("Storz") will develop and have the right to market an eye drop formulation of
cidofovir for the potential treatment of topical ophthalmic viruses. American
Cyanamid was later acquired by American Home Products, who sold Storz to Bausch
& Lomb Incorporated in late 1997. The field of the exclusive, worldwide license
to Storz is limited to topical ophthalmic use for external viral eye disease,
and specifically excludes any treatment requiring injection, and any treatment
for other eye diseases such as CMV retinitis. In December 1995, Storz commenced
human clinical trials of topical ophthalmic cidofovir and is currently
completing Phase II trials. Gilead is entitled to receive a fee each year until
Storz files an NDA under the agreement. In addition, Storz is obligated to make
a series of payments based on the achievement of development milestones in
different

12
countries during the term of the agreement. Gilead is responsible for supplying
bulk cidofovir to Storz, and Storz is obligated to make royalty payments to
Gilead based on net sales of any products developed under the agreement. Storz
may terminate this agreement at any time on three months notice.

IOCB/REGA

In 1991 and 1992, the Company entered into agreements with IOCB/REGA
regarding a class of nucleotide compounds, including cidofovir, adefovir (the
parent compound of adefovir dipivoxil) and PMPA. Under these agreements and
later amendments, Gilead received from IOCB/REGA an exclusive license to
manufacture, use and sell the compounds covered by issued United States patents
and patent applications plus foreign counterparts throughout the world, subject
to an obligation to pay royalties on product sales to IOCB/REGA. The Company is
currently paying IOCB/REGA quarterly royalties on sales of VISTIDE, and will be
obligated to pay additional royalties upon any future sales of adefovir
dipivoxil or PMPA. IOCB/REGA may terminate the licenses under these agreements
with respect to any particular product, in specified countries, if the Company
does not make any sales of such product in such countries within 12 months after
regulatory approval. Under one of these agreements, the Company has an option to
receive an exclusive license to any new developments by IOCB/REGA during the
term of this agreement. Such agreement may be terminated by either party on six
months notice.

ACADEMIC AND CONSULTING RELATIONSHIPS

To supplement its research and development efforts, the Company collaborates
with and has licensed certain patents and patent applications from a number of
universities and medical research institutions.

MANUFACTURING

The Company generally relies on third parties for the manufacture of bulk
drug substance and drug product for clinical and commercial purposes, including
cidofovir (VISTIDE), adefovir dipivoxil (PREVEON) and PMPA. In the case of GS
4104, Gilead's influenza neuraminidase inhibitor in clinical development, Roche
is responsible for the manufacture of clinical and any commercial supplies of
drug substance and drug product. Pursuant to these relationships, the Company
depends on such third parties to perform their manufacturing obligations
effectively and on a timely basis. There can be no assurance that such parties
will perform and any failures by third parties may delay clinical trials or the
submission of products for regulatory approval, impair the Company's ability to
deliver commercial products on a timely basis, or otherwise impair the Company's
competitive position, which could have a material adverse effect on the Company.

The Company has qualified a sole source supplier with the FDA for the bulk
drug substance used in VISTIDE and another sole source supplier for the final
drug product. Gilead has established a second source of bulk drug substance
supply for VISTIDE, and is in the process of qualifying this supplier with the
FDA. The use of any alternative suppliers will require FDA approval, which will
be time consuming. The Company anticipates including two suppliers of bulk drug
substance and one supplier of drug product for PREVEON in the NDA it intends to
file in 1998. PMPA drug substance is manufactured at Gilead and at a contract
manufacturer, and PMPA drug product for clinical trials is manufactured at two
contract manufacturing sites. In the event that supplies from any of Gilead's
suppliers were interrupted for any reason, the Company's ability to complete its
clinical trials or ship its products could be impaired, which would have a
material adverse effect on the Company.

Gilead has developed in-house capabilities to synthesize and purify
nucleotides and oligonucleotides, and believes that it has a base of proprietary
technologies, including patent applications and trade secrets, for the
manufacture of these compounds. Gilead has established a pilot-scale, bulk
chemical facility, which operates in compliance with the FDA's current Good
Manufacturing Practices ("cGMP"), to meet its current preclinical and limited
early-stage clinical requirements. The Company believes that it has or will

13
be able to develop, acquire or contract for sufficient supply capacity to meet
its additional clinical and commercial manufacturing requirements, although
there can be no assurance that it will be able to do so. Gilead currently has no
commercial-scale cGMP manufacturing facilities for either the production of bulk
drug substance or final drug product, and no current plans to establish such
capacity.

The manufacture of sufficient quantities of new drugs can be an expensive,
time-consuming and complex process and may require the use of materials with
limited availability or require dependence on sole source suppliers. If the
Company is unable to develop manufacturing capabilities internally or contract
for large scale manufacturing with third parties on acceptable terms, the
Company's ability to conduct preclinical studies and clinical trials, and/or
meet demand for commercial products, will be adversely affected. This could
prevent or delay commercial shipment, submission of products for regulatory
approval and initiation of new development programs, which would have a material
adverse effect on the Company.

The production of the Company's compounds is based in part on technology
that the Company believes to be proprietary. Gilead has licensed this technology
to contract manufacturers to enable them to manufacture compounds for the
Company. There can be no assurance that such manufacturers will abide by any use
limitations or confidentiality restrictions in licenses with the Company. In
addition, any such manufacturer may develop process technology related to its
work for Gilead, which could increase the Company's reliance on such
manufacturer or require the Company to obtain a license from such manufacturer
in order to have its products manufactured elsewhere. There can be no assurance
that such license, if required, would be available on terms acceptable to the
Company, if at all.

For certain of its potential products, the Company will need to develop
further its production technologies for use on a larger scale in order to
conduct clinical trials and produce such products for commercial sale at an
acceptable cost. There can be no assurance that the Company or its partners will
be able to implement any of these developments successfully.

MARKETING AND SALES

In connection with the launch of VISTIDE in 1996, Gilead established a sales
force of antiviral specialists in the United States. This group currently
consists of 26 sales representatives and three regional directors who call
directly on physicians, hospitals, clinics, pharmacies and other healthcare
providers involved in the treatment of AIDS patients with CMV retinitis. VISTIDE
is sold by Gilead to wholesalers and specialty distributors, who in turn sell
the product to hospitals, home healthcare companies, pharmacies and other
healthcare providers. Gilead's sales force also promotes Roferon-Registered
Trademark--A (Interferon alfa-2a, recombinant), Roche's product for the
treatment of hepatitis C in the United States, pursuant to a co-promotion
agreement with Roche entered into in September 1996. See "Collaborative
Relationships-- Hoffmann-La Roche." Gilead's sales force is supplemented by a
marketing and sales staff of approximately 15 people based at the Company's
headquarters in Foster City, California.

The Company anticipates that it will expand its existing sales force in
order to promote PREVEON in the United States, if that product receives
marketing clearance from the FDA. A larger sales force and additional marketing
resources will be required to reach the broader market of healthcare
professionals treating patients infected with HIV. If any of the Company's other
products in development for specialty markets receive marketing clearance in the
United States, or if the Company obtains marketing rights to such a product from
a third party, Gilead's current intention would be to market and sell such a
product directly, supplementing its existing marketing and sales staff as
appropriate. Gilead has not established a marketing and sales capacity in Europe
or any other country outside of the United States. Pharmacia & Upjohn has
exclusive commercial rights to VISTIDE outside the United States, and Roche has
exclusive commercial rights to GS 4104 on a worldwide basis. Gilead is
evaluating the establishment of a direct European marketing and sales capacity
in connection with the potential launch of PREVEON in Europe for the treatment
of HIV and AIDS, if that product receives marketing approval. The Company does
not currently intend to directly market and sell any product outside of the
United States and Europe.

14
The revenues received by Gilead for its products subject to commercial
collaborations, including VISTIDE outside of the United States, and GS 4104 on a
worldwide basis, are dependent to a large degree on the efforts of third
parties. There can be no assurance that such efforts will be successful, that
the interests of the Company and its partners will not be in conflict or that
any of the Company's partners will not terminate their relationship with the
Company. See "Collaborative Relationships."

PATENTS AND PROPRIETARY RIGHTS

Gilead has a proprietary portfolio of patent rights and exclusive licenses
to patents and patent applications related to its products and technologies. The
Company has filed patent applications directed to the compositions of matter,
methods of preparation and uses of novel compounds on the commercial market,
under research or in development. Patent applications have been filed which
encompass compounds that are relevant to many of the targets the Company is
currently researching, as well as other targets that may be of interest to
Gilead in the future. Gilead intends to file additional patent applications,
when appropriate, relative to improvements in its technologies and to specific
products that it develops.

Patents covering cidofovir (the active ingredient in VISTIDE) and adefovir
dipivoxil, including composition of matter claims, have been issued or allowed
in the United States, Western Europe and other jurisdictions. The Company has
exclusive licenses from third parties covering these patents and other patent
applications. See "Collaborative Relationships--IOCB/REGA." The Company does not
have patent filings covering adefovir dipivoxil in China or in other certain
other Asian countries, although it does have an application pending in Japan.
Asia is a major market for hepatitis B therapies, one of the potential
indications for adefovir dipivoxil. In addition, patents on certain of the
Company's compounds may issue many years before marketing approval is obtained,
limiting the ultimate commercial value of the product. However, patent term
extensions for cidofovir have been applied for or granted in the United States
and a number of European countries, compensating in part for delays in obtaining
marketing approval.

The Company is the holder of, or is a licensee with respect to, patents and
patent applications in the United States and abroad relating to certain basic
aspects of code blocker technology, and is the holder of patent applications
relating to neuraminidase inhibitors and their use in the treatment and
prevention of influenza. The Company is aware that others have patents or
pending applications that relate to its own in these fields. The Company cannot
predict whether its patent or license rights or those of third parties will
result in a significant position in these fields, whether its patents or those
of third parties will be issued, whether its patents or those of third parties
will provide significant proprietary protection, or whether they will be
dominated, circumvented or invalidated.

The commercial success of the Company will also depend in part on not
infringing patents or proprietary rights of others and not breaching the
licenses granted to the Company. There can be no assurance that the Company will
be able to obtain a license to any third-party technology that it may require to
conduct its business or that, if obtainable, such technology can be licensed at
a reasonable cost. Failure by the Company to obtain a license to any technology
that it may require to commercialize its technologies or products may have a
material adverse effect on the Company.

The patent positions of pharmaceutical, biopharmaceutical and biotechnology
firms, including Gilead, are generally uncertain and involve complex legal and
factual questions. Consequently, even though Gilead is currently prosecuting its
patent applications with the United States and foreign patent offices, the
Company does not know whether any of its pending applications will result in the
issuance of any patents or, if any patents are issued, whether they will provide
significant proprietary protection. Since patent applications in the United
States are maintained in secrecy until patents are issued, and since publication
of discoveries in the scientific or patent literature tend to lag behind actual
discoveries by several months, Gilead cannot be certain that it has rights as
the first inventor of technologies covered by pending patent applications or
that it was the first to file patent applications for such inventions.

15
The Company also relies upon unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators,
employees, consultants and vendors. There can be no assurance that these
agreements will not be breached, that the Company would have adequate remedies
for any breach, or that the Company's trade secrets will not otherwise become
known or be independently discovered by competitors.

Gilead's practice is to require its corporate partners, collaborators,
employees, consultants and vendors to execute a confidentiality agreement upon
the commencement of a relationship with the Company. The agreements provide that
all confidential information developed or made known to an individual during the
course of the relationship shall be kept confidential and not disclosed to third
parties except in specified circumstances. In the case of employees, the
agreements provide that all inventions conceived by the individual while
employed by the Company shall be the exclusive property of the Company. There
can be no assurance, however, that these agreements will provide meaningful
protection for the Company's trade secrets in the event of unauthorized use or
disclosure of such information.

COMPETITION

The Company's products and development programs target a number of diseases
and conditions, including viral infections, cardiovascular disease and cancer.
Even if the Company is successful in developing products to treat any of these
diseases or conditions, there can be no assurance that any product that receives
marketing clearance will achieve significant commercial acceptance. There are
many commercially available products for these diseases, and a large number of
companies and institutions are conducting well-funded research and development
activities directed at developing additional treatments for these diseases.

Ganciclovir, marketed in intravenous and oral formulations by Roche
Laboratories and as an ocular implant by Bausch & Lomb Incorporated, and
foscarnet, marketed by Astra U.S.A., are commercially available for the
treatment of CMV retinitis. These products are directly competitive with
VISTIDE. Several other potential CMV retinitis therapeutics are being developed
by other companies. A number of therapeutics are currently marketed or are in
advanced stages of clinical development for the treatment of HIV infection and
AIDS, including 12 products currently marketed in the United States. These
products represent significant potential competition for PREVEON and PMPA. Among
the companies with significant commercial presence in the AIDS market are Glaxo
Wellcome, Bristol-Myers Squibb, Hoffmann-La Roche, Agouron Pharmaceuticals and
Merck & Co.

Glaxo Wellcome, in collaboration with Biota Holdings Limited, is pursuing
development of a neuraminidase inhibitor to treat influenza. This compound is in
late-stage clinical trials and represents significant potential competition for
GS 4104. In addition, Glaxo Wellcome, in collaboration with Biochem Pharma, is
pursuing development of a nucleoside analogue to treat HBV infection. This
compound is also in advanced clinical trials and represents significant
potential competition for adefovir dipivoxil for HBV.

The Company believes that its products and product candidates have potential
competitive advantages over many of these products, particularly with regard to
dosing convenience and the potential for resistance development. However, there
can be no assurance that any of the Company's products or products in
development will compete successfully with other available products.

A number of companies are pursuing the development of technologies
competitive with the Company's research programs. These competing companies
include specialized pharmaceutical firms and large pharmaceutical companies
acting either independently or together with biopharmaceutical 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 and programs.

16
Gilead anticipates that it will face increased competition in the future as
new products enter the market and advanced technologies become available. There
can be no assurance that existing products or new products developed by the
Company's competitors will not be more effective, or more effectively marketed
and sold, than any that may be developed by the Company. Competitive products
may render Gilead's technology and products obsolete or noncompetitive prior to
the Company's recovering research, development or commercialization expenses
incurred with respect to any such products.

Many of the Company's existing or potential competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, many of these competitors have
significantly greater experience than the Company in undertaking research,
preclinical studies and clinical trials of new pharmaceutical products,
obtaining FDA and other regulatory approvals, and manufacturing, marketing and
selling such products. Accordingly, the Company's competitors may succeed in
commercializing the products more rapidly or more effectively than the Company,
which would have a material adverse effect on the Company.

The Company's competition will be determined in part by the potential
indications for which the Company's compounds are developed and ultimately
approved by regulatory authorities. For certain of the Company's potential
products, an important competitive factor may be the timing of market
introduction of its products or competitive products. Accordingly, the relative
speed with which Gilead can develop products, complete the clinical trials and
approval processes, and supply commercial quantities of the products to the
market are expected to be important competitive factors. The Company expects
that competition among products approved for sale will be based, among other
things, on product efficacy, safety, dosing convenience, availability, price and
patent position.

The Company's competitive position also depends upon its ability to attract
and retain qualified personnel, obtain patent protection or otherwise develop
proprietary products or processes, and secure sufficient capital resources for
the often substantial period between technological conception and commercial
sales.

GOVERNMENT REGULATION

The production and marketing of the Company's products and its research and
development activities are subject to regulation for safety, efficacy and
quality by numerous government authorities in the United States and other
countries. In the United States, drugs are subject to rigorous FDA regulation.
The Federal Food, Drug and Cosmetic Act, as amended ("FFDCA") and the
regulations promulgated thereunder, and other federal and state statutes and
regulations, govern, among other things the testing, manufacture, safety,
efficacy, labeling, storage, record keeping, approval, advertising and promotion
of the Company's products. Product development and approval within this
regulatory framework, and under equivalent regulations in other countries, takes
a number of years and involves the expenditure of substantial resources.

The steps required before a pharmaceutical agent may be marketed in the
United States include (i) preclinical laboratory tests, IN VIVO preclinical
studies and formulation studies, (ii) the submission to the FDA of an
investigational new drug application ("IND"), which must become effective before
clinical trials commence, (iii) adequate and well-controlled clinical trials to
establish the safety and efficacy of the drug, (iv) the submission of a new drug
application ("NDA") to the FDA and (v) the FDA approval of the NDA, prior to any
commercial sale or shipment of the drug. In addition to obtaining FDA approval
for each product, each drug manufacturing establishment must be registered with,
and approved by, the FDA. Domestic manufacturing establishments, including third
party contract manufacturers producing a drug sponsor's products, are subject to
periodic inspections by the FDA and must comply with cGMP. To supply products
for use in the United States, foreign manufacturing establishments must comply
with cGMP and are subject to periodic inspection by the FDA or by regulatory
authorities in certain of such countries

17
under reciprocal agreements with the FDA. Drug product and drug substance
manufacturing establishments located in California also must be licensed by the
State of California in compliance with local regulatory requirements.

The FDA has implemented accelerated approval procedures for pharmaceutical
products that treat serious or life-threatening diseases and conditions, if
those products have the potential to address unmet medical needs. Under the Food
and Drug Modernization Act of 1997, effective in February 1998, such products
may be designated as "fast track" products, and may be approved on the basis of
surrogate as well as clinical endpoints. Drug sponsors are generally required to
conduct post-marketing clinical trials of drugs that have been approved under
the FDA's accelerated approval procedures, in order to further characterize the
drug's safety and efficacy profile. The Company believes that PREVEON and
certain of its other products in development may qualify as fast track products
and be eligible for accelerated approval. The Company cannot predict the
ultimate impact, however, of the FDA's accelerated approval procedures on the
timing or likelihood of approval of any of its potential products or those of
any competitor.

Preclinical tests include laboratory evaluation of product chemistry and
formulation, as well as animal studies to assess the potential safety and
efficacy of the product. Compounds must be formulated according to cGMP and
preclinical safety tests must be conducted by laboratories that comply with FDA
regulations regarding current Good Laboratory Practices ("GLP"). The results of
the preclinical tests are submitted to the FDA as part of an IND and are
reviewed by the FDA prior to the commencement of clinical trials. Additional
pharmacology and toxicology studies are generally conducted concurrently with
clinical trials.

Clinical trials involve the administration of the investigational new drug
to healthy volunteers or to patients, under the supervision of qualified
principal investigators. Clinical trials are conducted in accordance with Good
Clinical Practices under protocols that detail the objectives of the study, the
parameters to be used to monitor safety and the efficacy criteria to be
evaluated. Each protocol must be submitted to the FDA as part of the IND.
Further, each clinical trial must be conducted under the auspices of an
independent Institutional Review Board ("IRB") at the institution at which the
study will be conducted. The IRB will consider, among other things, ethical
factors, the safety of human subjects and the possible liability of the
institution.

Clinical trials are typically conducted in three sequential phases, but the
phases often overlap. In Phase I, the initial introduction of the drug into
healthy human subjects, the drug is tested for safety (adverse effects), dosage
tolerance, metabolism, distribution, excretion and pharmacodynamics (clinical
pharmacokinetics and pharmacology). Phase II involves studies in a limited
patient population to (i) determine the efficacy of the drug for specific,
targeted indications, (ii) determine dosage tolerance and optimal dosage and
(iii) identify possible adverse effects and safety risks. When a compound
appears to be effective and to have an acceptable safety profile in Phase II
clinical trials, Phase III clinical trials are undertaken to further evaluate
and confirm clinical efficacy and to further test for safety within an expanded
patient population at geographically dispersed clinical study sites. There can
be no assurance that Phase I, Phase II or Phase III clinical trials will be
completed successfully within any specified time period, if at all, with respect
to any of the Company's products subject to such testing. Furthermore, the
Company or the FDA may delay or suspend clinical trials at any time if it is
felt that the subjects or patients are being exposed to an unacceptable health
risk.

The results of the preclinical studies and clinical trials are submitted to
the FDA in the form of an NDA for approval of the marketing and commercial
shipment of the drug. The testing and approval process is likely to require
substantial time and effort and there can be no assurance that any approval will
be granted on a timely basis, if at all. The FDA may deny an NDA if applicable
regulatory criteria are not satisfied, require additional testing or
information, require significant improvements to manufacturing facilities or
require extensive post-marketing testing and surveillance to monitor the safety
or efficacy of

18
the Company's products if they do not view the NDA as containing adequate
evidence of the quality, safety and efficacy of the drug. Notwithstanding the
submission of such data, the FDA may ultimately decide that the application does
not satisfy its regulatory criteria for approval. Moreover, if regulatory
approval of a drug is granted, such approval may entail limitations on the
indicated uses for which it may be marketed. Finally, product approvals may be
withdrawn if compliance with regulatory standards is not maintained or if
problems occur following initial marketing.

Among the conditions for NDA approval is the requirement that the
prospective manufacturer's quality control and manufacturing procedures conform
to cGMP, which must be followed at all times. In complying with standards set
forth in these regulations, manufacturers (including a drug sponsor's third-
party contract manufacturers) must continue to expend time, money and effort in
the area of production and quality control to ensure full technical compliance.

In addition to regulations enforced by the FDA, the Company also is subject
to regulation under the Occupational Safety and Health Act, the Environmental
Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other federal, state or local regulations. The Company's
research and development involves the controlled use of hazardous materials,
chemicals, viruses and various radioactive compounds. Although the Company
believes that its safety procedures for handling and disposing of such materials
comply with the standards prescribed by state and federal regulations, the risk
of accidental contamination or injury from these materials cannot be completely
eliminated. In the event of such an accident, the Company could be held liable
for significant damages or fines.

In the European Community, human pharmaceutical products are also subject to
extensive regulation. The European Community Pharmaceutical Directives govern,
among other things, the testing, manufacture, safety, efficacy, labeling,
storage, record keeping, advertising and promotion of human pharmaceutical
products. Effective in January 1995, the European Community enacted regulations
providing for a centralized licensing procedure, which is mandatory for certain
kinds of products, as well as a decentralized (country by country) procedure. A
license granted under the centralized procedure authorizes marketing of the
product in all of the member states of the European Community. Under the
decentralized procedure, a license granted in one member state can be extended
to additional member states pursuant to a simplified application process. In the
centralized procedure, the EMEA coordinates a scientific review by one or more
rapporteurs chosen from among the membership of the Committee for Proprietary
Medical Products ("CPMP"), which represent the medicine authorities of the
member states. The final approval is granted by a decision of the Commission or
Council of the European Community, based on the opinion of the CPMP.

PRICING AND REIMBURSEMENT

The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain foreign markets pricing or profitability of
prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in many countries of the
European Community, even if approval to market the drug under the EMEA's
centralized procedure is obtained. In the United States, there have been, and
the Company expects that there will continue to be, a number of federal and
state proposals to implement similar government control. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase the pressure on pharmaceutical pricing. While the Company cannot
predict whether any such legislative or regulatory proposals will be adopted or
the effect such proposals or managed care efforts may have on its business, the
announcement of such proposals or efforts could have a material adverse effect
on the trading price of the Company's Common Stock, and the adoption of such
proposals or efforts could have a material adverse effect on the Company.
Further, to the extent that such proposals or efforts have a material adverse
effect on other pharmaceutical companies that are prospective corporate partners
for the Company, the Company's ability to establish a strategic alliance may be
adversely affected.

19
In addition, in both the United States and elsewhere, sales of prescription
pharmaceuticals are dependent in part on the availability of reimbursement to
the consumer from third-party payors, such as government and private insurance
plans that mandate rebates or predetermined discounts from list prices. For
example, a significant proportion of VISTIDE sales is subject to reimbursement
by government agencies, resulting in significant discounts from list price and
rebate obligations. The Company expects that PREVEON and several of its other
products in development, particularly for AIDS indications, will have a similar
reimbursement profile. In addition, third-party payors are increasingly
challenging the prices charged for medical products and services. If the Company
succeeds in bringing one or more additional products to the market, there can be
no assurance that these products will be considered cost effective and that
reimbursement will be available or will be sufficient to allow the Company to
sell its products on a competitive basis.

HUMAN RESOURCES

As of December 31, 1997, Gilead employed 289 people full-time, of whom 75
hold Ph.D. and/or M.D. degrees and 50 hold other advanced degrees. Approximately
180 employees are engaged in research and development activities and 109 are
employed in finance, sales and marketing, corporate development, legal and
general administrative positions. Gilead believes that it maintains good
relations with its employees.

SCIENTIFIC ADVISORY BOARD

The Company's Scientific Advisory Board is composed of individuals with
expertise in fields related to the Company's programs. This Board holds formal
meetings with scientists from the Company at least once a year. In some cases,
individual members of this Board consult and meet informally with the Company on
a more frequent basis. Each of the members of this Board has a consulting
agreement with the Company.

The members of Gilead's Scientific Advisory Board are as follows:

DANIEL L. AZARNOFF, M.D., has been a member of Gilead's Scientific Advisory
Board since January 1990. He headed G.D. Searle & Co.'s research and development
from 1979 through 1985, and previously was Professor of Medicine and
Pharmacology at the University of Kansas. Dr. Azarnoff is a member of the
Institute of Medicine of the National Academy of Sciences.

JACQUELINE K. BARTON, PH.D., has been a member of Gilead's Scientific
Advisory Board since January 1989. She is a Professor of Chemistry at the
California Institute of Technology ("Cal Tech"), a member of the American
Academy of Arts and Sciences and a recipient of a MacArthur Foundation
Fellowship.

PETER B. DERVAN, PH.D., has been a member of Gilead's Scientific Advisory
Board since September 1987. He is Bren Professor of Chemistry at Cal Tech and a
member of the National Academy of Sciences and the American Academy of Arts and
Sciences.

MICHAEL J. GAIT, PH.D., has been a member of Gilead's Scientific Advisory
Board since July 1989. He is a Senior Staff Scientist with the Medical Research
Council in Cambridge, England.

RALPH F. HIRSCHMANN, PH.D., has been a member of Gilead's Scientific
Advisory Board since October 1989. He is a Research Professor of Chemistry at
the University of Pennsylvania. Previously, Dr. Hirschmann was employed by Merck
& Co., most recently as Senior Vice President of Basic Research and Chemistry.
Dr. Hirschmann is a member of the American Academy of Arts and Sciences.

LAWRENCE L.-K. LEUNG, M.D., has been a member of Gilead's Scientific
Advisory Board since September 1994. He is Chief of the Division of Hematology
at the Stanford University Medical School. Dr. Leung was previously Director of
Cardiovascular Biology and Medicine at Gilead.

20
RISK FACTORS

IN THIS SECTION, THE COMPANY SUMMARIZES CERTAIN RISKS THAT SHOULD BE
CONSIDERED BY STOCKHOLDERS AND PROSPECTIVE INVESTORS IN THE COMPANY. THESE RISKS
ARE DISCUSSED IN DETAIL BELOW, AND ARE DISCUSSED IN CONTEXT IN OTHER SECTIONS OF
THIS REPORT.

RAPIDLY CHANGING ENVIRONMENT FOR AIDS THERAPEUTICS

Several of the Company's products and products in development address AIDS
or AIDS-related conditions, including VISTIDE for CMV retinitis, PREVEON for HIV
and AIDS and PMPA for HIV and AIDS. The medical, regulatory and commercial
environment for AIDS therapies is changing at a rapid pace, often in
unpredictable ways. For example, medical opinion on appropriate treatment
regimens for people with AIDS is evolving and is often in conflict. This
evolution can have a dramatic impact on the regulatory requirements for the
approval of AIDS therapies as well as the commercial prospects of individual
therapies. In addition, improvements in AIDS therapy reduce the potential
commercial market for therapies to treat AIDS-related conditions such as CMV
retinitis, and make clinical trials for new AIDS therapies more difficult to
design, enroll and complete. As a participant in the development and marketing
of AIDS therapies, Gilead is subject to dramatic changes in the regulatory and
commercial environment in which it operates, which could have a material adverse
impact on the Company. See "VISTIDE" and "Clinical Development Programs."

NO ASSURANCE OF REGULATORY APPROVAL; GOVERNMENT REGULATION

The Company's preclinical studies and clinical trials, as well as the
manufacturing and marketing of its potential products, are subject to extensive
regulation by numerous federal, state and local government authorities in the
United States. Similar regulatory requirements exist in Europe and in other
countries where the Company intends to test and market its potential products.
The Company anticipates filing for marketing approval of PREVEON and several
additional products over the next several years. There can be no assurance that
PREVEON or any of the Company's other products in development will receive
marketing approval in any country on a timely basis, or at all.

The regulatory process, which includes preclinical studies and clinical
trials of each compound to establish its safety and efficacy, takes many years
and requires the expenditure of substantial resources. Moreover, if regulatory
approval of a drug is granted, such approval may entail limitations on the
indicated uses for which it may be marketed. Failure to comply with applicable
regulatory requirements can, among other things, result in fines, suspension of
regulatory approvals, product recalls, seizure of products, operating
restrictions and criminal prosecutions. Further, FDA policy may change and
additional government regulations may be established that could prevent or delay
regulatory approval of the Company's potential products. In addition, a marketed
drug and its manufacturer are subject to continual review, and later discovery
of previously unknown problems with a product or manufacturer may result in
restrictions on such product or manufacturer, including withdrawal of the
product from the market. See "Government Regulation."

UNCERTAINTIES RELATED TO CLINICAL TRIALS

Before obtaining regulatory approvals for the commercial sale of any of its
products under development, the Company must demonstrate through preclinical
studies and clinical trials that the product is safe and efficacious for use in
each target indication. The Company anticipates announcing clinical data from
Phase II or Phase II/III trials for PREVEON, adefovir dipivoxil for HBV and GS
4104 during 1998. The results from preclinical studies and early clinical trials
may not be predictive of results that will be obtained in large-scale testing,
and there can be no assurance that the Company's clinical trials will
demonstrate the safety and efficacy of any products or will result in marketable
products. A number of companies in the

21
biotechnology industry have suffered significant setbacks in advanced clinical
trials, despite promising results in earlier trials.

The rate of completion of the Company's clinical trials is dependent upon
the rate of patient accrual. Patient accrual is a function of many factors,
including the size of the patient population, the nature of the protocol, the
proximity of patients to clinical sites and the eligibility criteria for the
study. In addition, recent improvements in AIDS drug therapy have made clinical
trials for new AIDS therapies more difficult to enroll. Delays in planned
patient enrollment can result in increased costs and delays. In addition, if the
Company is unable to successfully complete its clinical trials, its business
could be materially adversely affected. See "Clinical Development Programs."

DEPENDENCE ON COLLABORATIVE RELATIONSHIPS

The Company has established a number of significant collaborative
relationships with major pharmaceutical companies, including Pharmacia & Upjohn,
Hoffmann-La Roche and Glaxo Wellcome. The Company is dependent to a large degree
on its collaborative partners with respect to research funding, clinical
development and/or sales and marketing performance. There can be no assurance
that the efforts of the Company's collaborative partners will be successful,
that the interests of the Company and its partners will not be in conflict or
that any of the Company's partners will not terminate their relationship with
the Company. All of the Company's collaborative partners have termination
rights, with limited or no notice required. In addition, a significant portion
of the Company's revenues have historically come from collaborative
relationships, and the Company expects this to be the case in future periods.
Although the Company has established contractual relationships with each of its
collaborative partners, there can be no assurance that these contracts will
provide significant protection or can be effectively enforced if one of these
partners fails to perform. The Company cannot control whether its corporate
partners will devote sufficient resources to the Company's programs or products.
The Company anticipates seeking collaborative relationships for certain of its
programs in the future, and there can be no assurance that such relationships
will be available on acceptable terms, if at all. See "Collaborative
Relationships."

LOSS HISTORY AND ACCUMULATED DEFICIT; QUARTERLY FLUCTUATIONS; UNCERTAINTY OF
FUTURE PROFITABILITY

Gilead has incurred net losses since its inception. At December 31, 1997,
the Company's accumulated deficit was approximately $162.5 million. Such losses
have resulted principally from expenses incurred in the Company's research and
development programs and commercialization efforts, as well as administrative
expenses. The Company's revenues to date have been generated primarily from
collaborative arrangements rather than product revenues. The Company's current
product revenues are derived solely from sales of VISTIDE and from the
co-promotion of Roche's Roferon-A for hepatitis C. Both of these products have
limited sales potential relative to most pharmaceutical products. Gilead expects
to incur substantial losses at least in 1998 and 1999, due primarily to the
expansion of its research and development programs, including preclinical
studies, clinical trials and manufacturing, as well as increasing
commercialization expenses. The Company expects that losses will fluctuate from
quarter to quarter and that such fluctuations may be substantial. There can be
no assurance that the Company will successfully develop, receive regulatory
approval for, commercialize, manufacture, market and sell any additional
products, or achieve or sustain or profitability.

TECHNOLOGICAL UNCERTAINTY

The development of new pharmaceutical products is highly uncertain and is
subject to a number of significant risks. Potential products that appear to be
promising at various stages of development may not reach the market for a number
of reasons. Such reasons include the possibilities that the potential products
will be found ineffective or cause harmful side effects during preclinical
studies or clinical trials, fail to receive necessary regulatory approvals, be
difficult or uneconomical to manufacture on a commercial scale,

22
fail to achieve market acceptance or be precluded from commercialization by
proprietary rights of third parties.

There are a number of technological challenges the Company must address to
successfully develop commercial products in each of its development programs.
Certain of the Company's potential products will require significant additional
research and development efforts, including process development and significant
additional clinical testing, prior to any commercial use. There can be no
assurance that the Company will successfully address any of these technological
challenges, or others that may arise in the course of development. See "Clinical
Development Programs."

NO ASSURANCE OF MARKET ACCEPTANCE

VISTIDE has achieved limited market acceptance in a small commercial market
with significant competition. There can be no assurance that any of Gilead's
products in development, if approved for marketing, will achieve market
acceptance. The degree of market acceptance depends upon a number of factors,
including the receipt and scope of regulatory approvals, the establishment and
demonstration in the medical and patient advocacy community of the clinical
efficacy and safety of the Company's product candidates and their potential
advantages over competitive products, and reimbursement policies of government
and third-party payors. There can be no assurance that physicians, patients,
patient advocates, payors or the medical community in general will accept and
utilize any products that may be developed by the Company. See "VISTIDE,"
"Clinical Development Programs" and "Competition."

INTENSE COMPETITION

The Company's products and development programs target a number of diseases
and conditions, including viral infections, cancer and cardiovascular disease.
Even if the Company is successful in developing products to treat any of these
diseases or conditions, there can be no assurance that any product that receives
marketing clearance will achieve significant commercial acceptance. There are
many commercially available products for these diseases, and a large number of
companies and institutions are conducting well-funded research and development
activities directed at developing treatments for these diseases.

Gilead anticipates it will face increased competition in the future as new
products enter the market and advanced technologies become available. There can
be no assurance that existing products or new products developed by the
Company's competitors will not be more effective, or be more effectively
marketed and sold, than any that may be developed by the Company. Competitive
products may render Gilead's technology and products obsolete or noncompetitive
prior to the Company's recovery of research, development or commercialization
expenses incurred with respect to any such products.

Many of the Company's existing or potential competitors, particularly large
pharmaceutical companies, have substantially greater financial, technical and
human resources than the Company. In addition, many of these competitors have
significantly greater experience than the Company in undertaking research,
preclinical studies and clinical trials of new pharmaceutical products,
obtaining FDA and other regulatory approvals, and manufacturing, marketing and
selling such products. Accordingly, the Company's competitors may succeed in
commercializing products more rapidly or effectively than the Company, which
would have a material adverse effect on the Company. See "Competition."

UNCERTAINTY OF PHARMACEUTICAL PRICING AND REIMBURSEMENT

The business and financial condition of pharmaceutical and biotechnology
companies will continue to be affected by the efforts of government and
third-party payors to contain or reduce the cost of health care through various
means. For example, in certain foreign markets, pricing or profitability of
prescription pharmaceuticals is subject to government control. In particular,
individual pricing negotiations are often required in many countries of the
European Community, even if approval to market the drug under the

23
EMEA's centralized procedure is obtained. In the United States, there have been,
and the Company expects that there will continue to be, a number of federal and
state proposals to implement similar government control. In addition, an
increasing emphasis on managed care in the United States has and will continue
to increase the pressure on pharmaceutical pricing. While the Company cannot
predict whether any such legislative or regulatory proposals will be adopted or
the effect such proposals or managed care efforts may have on its business, the
announcement of such proposals or efforts could have a material adverse effect
on the trading price of the Company's Common Stock, and the adoption of such
proposals or efforts could have a material adverse effect on the Company.
Further, to the extent that such proposals or efforts have a material adverse
effect on other pharmaceutical companies that are prospective corporate partners
for the Company, the Company's ability to establish corporate collaborations may
be adversely affected. In addition, in both the United States and elsewhere,
sales of prescription pharmaceuticals are dependent in part on the availability
of reimbursement to the consumer from third-party payors, such as government and
private insurance plans that mandate rebates or predetermined discounts from
list prices. For example, a significant proportion of VISTIDE sales is subject
to reimbursement by government agencies, resulting in significant discounts from
list price and rebate obligations. The Company expects that PREVEON and several
of its other products in development, particularly for AIDS indications, will
have a similar reimbursement profile. In addition, third-party payors are
increasingly challenging the prices charged for medical products and services.
If the Company succeeds in bringing one or more additional products to the
market, there can be no assurance that these products will be considered cost
effective and that reimbursement will be available or will be sufficient to
allow the Company to sell its products on a competitive basis. See "Pricing and
Reimbursement."

UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS

The Company's success will depend in part on its ability to obtain and
enforce patent protection for its products both in the United States and other
countries. No assurance can be given that patents will issue from any pending
applications or that, if patents do issue, the claims allowed will be
sufficiently broad to protect the Company's technology. In addition, no
assurance can be given that any patents issued to or licensed by the Company
will not be challenged, invalidated, infringed or circumvented, or that the
rights granted thereunder will provide competitive advantages to the Company.
The Company does not have patent filings covering adefovir dipivoxil in China or
in certain other Asian countries, although it does have an application pending
in Japan. Asia is a major market for hepatitis B therapies, one of the potential
indications for adefovir dipivoxil. In addition, patents on certain of the
Company's compounds may issue many years before marketing approval is obtained,
limiting the commercial value of the product.

The commercial success of the Company will also depend in part on not
infringing patents or proprietary rights of others and not breaching the
licenses granted to the Company. There can be no assurance that the Company will
be able to obtain a license to any third-party technology that it may require to
conduct its business or that, if obtainable, such technology can be licensed at
a reasonable cost. Failure by the Company to obtain a license to any technology
that it may require to commercialize its technologies or products may have a
material adverse effect on the Company.

Litigation, which could result in substantial cost to the Company, may also
be necessary to enforce any patents issued to the Company or to determine the
scope and validity of other parties' proprietary rights. If the outcome of any
such litigation is adverse to the Company, the Company's business could be
adversely affected. To determine the priority of inventions, the Company may
have to participate in interference proceedings declared by the United States
Patent and Trademark Office, which could result in substantial cost to the
Company.

The Company also relies on unpatented trade secrets and improvements,
unpatented know-how and continuing technological innovation to develop and
maintain its competitive position, which it seeks to protect, in part, by
confidentiality agreements with its corporate partners, collaborators,
employees, consultants and vendors. There can be no assurance that these
agreements will not be breached, that the

24
Company would have adequate remedies for any breach, or that the Company's trade
secrets will not otherwise become known or be independently discovered by
competitors. See "Patents and Proprietary Rights."

RELIANCE ON THIRD PARTY MANUFACTURERS

The Company generally relies on third parties for the manufacture of bulk
drug substance and drug product for clinical and commercial purposes, including
cidofovir (VISTIDE), adefovir dipivoxil (PREVEON) and PMPA. In the case of GS
4104, Gilead's influenza neuraminidase inhibitor in clinical development, Roche
is responsible for the manufacture of clinical and any commercial supplies of
drug substance and drug product. Pursuant to these relationships, the Company
depends on such third parties to perform their manufacturing obligations
effectively and on a timely basis. There can be no assurance that such parties
will perform and any failures by third parties may delay clinical trials or the
submission of products for regulatory approval, impair the Company's ability to
deliver commercial products on a timely basis, or otherwise impair the Company's
competitive position, which could have a material adverse effect on the Company.

The Company has qualified a sole source supplier with the FDA for the bulk
drug substance used in VISTIDE and another sole source supplier for the final
drug product. Gilead has established a second source of bulk drug substance
supply for VISTIDE, and is in the process of qualifying this supplier with the
FDA. The use of any alternative suppliers will require FDA approval, which will
be time consuming. The Company anticipates including two suppliers of bulk drug
substance and one supplier of final drug product for PREVEON in the NDA it
intends to file in 1998. PMPA drug substance is manufactured at Gilead and at a
contract manufacturer, and PMPA drug product for clinical trials is manufactured
at two contract manufacturing sites. In the event that supplies from any of
Gilead's suppliers were interrupted for any reason, the Company's ability to
complete its clinical trials or ship its products could be impaired, which would
have a material adverse effect on the Company.

For certain of its potential products, the Company will need to develop
further its production technologies for use on a larger scale in order to
conduct clinical trials and produce such products for commercial sale at an
acceptable cost. There can be no assurance that the Company or its partners will
be able to implement any of these developments successfully. See
"Manufacturing."

PRODUCT LIABILITY EXPOSURE AND INSURANCE

The commercial use of VISTIDE or any other product approved for marketing,
and use of any of the Company's potential products in clinical trials, exposes
the Company to product liability claims. These claims might be made directly by
patients, health care providers or by pharmaceutical companies or others selling
such products. Gilead has obtained product liability insurance coverage for its
commercial products and clinical trials. There can be no assurance that such
coverage will be adequate for any liability arising from the use of commercial
or clinical products of the Company. Moreover, no assurance can be given that
the Company will be able to maintain insurance coverage at a reasonable cost or
in sufficient amounts to protect the Company against losses due to liability.
There can also be no assurance that the Company will be able to obtain
commercially reasonable product liability insurance for any future clinical
trials or products approved for marketing. A successful product liability claim
or series of claims could have a material adverse effect on the Company.

HAZARDOUS MATERIALS

The Company's research and development involves the controlled use of
hazardous materials, chemicals, viruses and various radioactive compounds.
Although the Company believes that its safety procedures for handling and
disposing of such materials comply with the standards prescribed by state and
federal regulations, the risk of accidental contamination or injury from these
materials cannot be

25
completely eliminated. In the event of such an accident, the Company could be
held liable for significant damages or fines.

VOLATILITY OF STOCK PRICE

The market prices for securities of biopharmaceutical companies, including
Gilead, have historically been highly volatile, and the market has from time to
time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. Factors such as fluctuations
in the Company's operating results, announcements of technological innovations
or new therapeutic products by the Company or its competitors, clinical trial
results, government actions or regulation, developments in patent or other
proprietary rights, public concern as to the safety of drugs developed by the
Company or others and general market conditions can have an adverse effect on
the market price of the Common Stock. In particular, the realization of any of
the risks described in these "Risk Factors" could have a dramatic and adverse
impact on such market price.

ANTITAKEOVER PROVISIONS

The Company has adopted a number of provisions that could have antitakeover
effects. In November 1994, the Company's Board of Directors adopted a Preferred
Share Purchase Rights Plan, commonly referred to as a "poison pill." The
Company's Restated Certificate of Incorporation (the "Restated Certificate")
does not permit cumulative voting. The Board of Directors has the authority,
without further action by the stockholders, to fix the rights and preferences
of, and issue shares of, preferred stock. These provisions and other provisions
of the Restated Certificate and Delaware corporate law may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, including transactions in which stockholders might
otherwise receive a premium for their shares over then current market prices.

ITEM 2. PROPERTIES

Gilead's administrative offices and research laboratories are located in
Foster City, California. The Company leases approximately 145,800 square feet of
space in six adjacent buildings. The leases on this space expire March 31, 2006,
and the Company has an option to renew the leases for two additional five year
periods. The Company believes that it will need to expand its facilities in the
future to support any significant growth in its operations. Gilead anticipates
it will be able to expand its facilities in nearby locations. There can be no
assurance, however, that such space will be available on favorable terms, if at
all.

ITEM 3. LEGAL PROCEEDINGS

Not Applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS

Not Applicable.

26
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

The information required by this Item is incorporated by reference to page
51 of the Registrant's annual report to security holders furnished to the
Commission pursuant to Rule 14a-3(b) in connection with the 1998 Annual Meeting
attached hereto as Exhibit 13.1 (the "Annual Report").

ITEM 6. SELECTED FINANCIAL DATA

The information required by this Item is incorporated by reference to page
27 of the Annual Report attached hereto as Exhibit 13.1.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The information required by this Item is incorporated by reference to pages
28 through 31 of the Annual Report attached hereto as Exhibit 13.1.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following consolidated financial statements of the Company and the
related report of independent auditors are incorporated herein by reference to
pages 32 through 50 of the Annual Report attached here as to Exhibit 13.1:

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders' Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Ernst & Young LLP, Independent Auditors

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL
DISCLOSURE

Not applicable.

27
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS

The information required by this Item concerning the Company's directors and
executive officers is incorporated by reference to pages 2 through 5 of
Registrant's Definitive Proxy Statement filed with the Commission pursuant to
Regulation 14A in connection with the 1998 Annual Meeting (the "Proxy
Statement") under the headings "Nominees" and "Executive Officers."

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The information required by this Item is incorporated by reference to page
16 of the Proxy Statement under the heading "Compliance with Section 16(a) of
the Securities Exchange Act of 1934."

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to pages
17 through 20 of the Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to pages
15 through 16 of the Proxy Statement under the heading "Security Ownership of
Certain Beneficial Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference to page
24 of the Proxy Statement under the heading "Certain Transactions" and by
reference to pages 17 through 20 of the Proxy Statement under the heading
"Executive Compensation."

28
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS FORM 10-K:

(1) Index to Consolidated Financial Statements. The following Consolidated
Financial Statements of Gilead Sciences, Inc. are filed as part of this
Form 10-K and are included in the Annual Report attached hereto as
Exhibit 13.1 and incorporated herein by reference.

Report of Ernst & Young LLP, Independent Auditors

Consolidated Balance Sheets at December 31, 1997 and 1996

Consolidated Statements of Operations for the years ended December 31,
1997 and 1996 and the nine months ended December 31, 1995

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996 and the nine months ended December 31, 1995

Consolidated Statements of Cash Flows for the years ended December 31,
1997 and 1996 and the nine months ended December 31, 1995

Notes to Consolidated Financial Statements

All schedules are omitted because they are not required or the required
information is included in the financial statements or notes thereto.

(2) Exhibits

<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
(1) 3.1 Amended and Restated Certificate of Incorporation of the Registrant.
(2) 3.2 Amended and Restated By-laws of the Registrant.
(3) 3.3 Certificate of Amendment of Restated Certificate of Incorporation.
4.1 Reference is made to Exhibits 3.1, 3.2, and 3.3.
(4) 4.2 Rights Agreement, dated as of November 21, 1994, between Registrant and First Interstate Bank,
with exhibits.
(4) 4.3 Form of letter sent to Gilead Sciences, Inc. stockholders, dated December 14, 1994.
(3) 10.1 Form of Indemnity Agreement entered into between the Registrant and its directors and
executive officers.
(5) 10.3 Form of Employee Proprietary Information and Invention Agreement entered into between
Registrant and certain of its officers and key employees.
(2) 10.4 Registrant's 1987 Incentive Stock Option Plan and related agreements.
(2) 10.5 Registrant's 1987 Supplemental Stock Option Plan and related agreements.
10.7 Registrant's Employee Stock Purchase Plan, as amended January 22, 1998.
10.8 Registrant's 1991 Stock Option Plan, as amended January 22, 1998.
(2) 10.11 Series C Preferred Stock Purchase Agreement, dated as of July 26, 1990, by and between
Registrant and Glaxo Inc.
(2) 10.13 Registration Rights Agreement, dated as of June 28, 1991, by and among Registrant and the
investors identified on Schedule 1 attached thereto.
(2) 10.15 Form of Non-Qualified Stock Option issued to certain executive officers and directors in 1991.
</TABLE>

29
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
(2) 10.16 Relocation Loan Agreement, dated as of November 1, 1990 among Registrant, John C. Martin and
Rosemary Martin.
(2) 10.17 Vintage Park Research and Development Net Lease by and between Registrant and Vintage Park
Associates dated March 27, 1992 for premises located at 344B, 346 and 353 Lakeside Drive,
Foster City, California with related addendum, exhibits and amendments.
(2) 10.21 Letter Agreement, dated as of September 23, 1991 between Registrant and IOCB/ REGA, with
exhibits with certain confidential information deleted.
(6) 10.23 Vintage Park Research and Development Net Lease by and between Registrant and Vintage Park
Associates dated September 16, 1993 for premises located at 335 Lakeside Drive, Foster City,
California with related exhibits.
(7) 10.26 Amendment Agreement, dated October 25, 1993 between Registrant and IOCB/ REGA, and related
license agreements and exhibits with certain confidential information deleted.
(7) 10.28 Loan Agreement among Registrant and The Daiwa Bank, Limited dated May 17, 1994 with certain
confidential information deleted.
(8) 10.29 License and Supply agreement between Registrant and American Cyanamid Company dated August 1,
1994 with certain confidential information deleted.
(4) 10.30 Loan Agreement, dated as of October 1, 1994 among Registrant and Mark L. Perry and Melanie P.
Pena.
(3) 10.33 Registrant's 1995 Non-Employee Directors' Stock Option Plan and related form of stock option
grant.
(9) 10.34 Collaborative Research Agreement, dated as of March 25, 1996, by and between Registrant and
Glaxo Wellcome Inc. with certain confidential information deleted.
(10) 10.36 Vintage Park Research and Development Lease by and between Registrant and WCB Sixteen Limited
Partnership dated June 24, 1996 for premises located at 333 Lakeside Drive, Foster City,
California.
(10) 10.37 Amendment No. 1 to Vintage Park Research and Development Lease by and between Registrant and
WCB Seventeen Limited Partnership dated June 24, 1996 for premises located at 335 Lakeside
Drive, Foster City, California.
(10) 10.38 Amendment No. 2 to Vintage Park Research and Development Lease by and between Registrant and
WCB Seventeen Limited Partnership dated June 24, 1996 for premises located at 344B, 346 and
353 Lakeside Drive, Foster City, California.
(11) 10.40 License and Supply Agreement between Registrant and Pharmacia & Upjohn S.A. dated August 7,
1996 with certain confidential information deleted.
(11) 10.41 Series B Preferred Stock Purchase Agreement between Registrant and Pharmacia & Upjohn S.A.
dated August 7, 1996.
(11) 10.42 Development and License Agreement between Registrant and F. Hoffmann-La Roche Ltd and
Hoffmann-La Roche Inc dated September 27, 1996 with certain confidential information deleted.
(12) 10.44 Agreement among Registrant and Michael L. Riordan, M.D.
(13) 10.45 Amended and Restated Copromotion Agreement between Registrant and Roche Laboratories, Inc.
dated September 12, 1997 with certain confidential information deleted.
</TABLE>

30
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
FOOTNOTE NUMBER DESCRIPTION OF DOCUMENT
- ----------- ----------- ----------------------------------------------------------------------------------------------
<C> <C> <S>
10.46 Amendment No. 1 to Collaborative Research Agreement, dated as of December 22, 1997, between
Registrant and Glaxo Wellcome Inc.
13.1 Registrant's Annual Report to Stockholders for the year ended December 31, 1997.
23.1 Consent of Ernst & Young LLP, Independent Auditors. Reference is made to page 34.
24.1 Power of Attorney. Reference is made to page 32.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>

- ------------------------

(1) Filed as an exhibit to Registrant's Registration Statement on Form S-8 (No.
33-46058) and incorporated herein by reference.

(2) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
33-44534) or amendments thereto and incorporated herein by reference.

(3) Filed as an exhibit to Registrant's Registration Statement on Form S-3 (No.
333-868) or amendments thereto and incorporated herein by reference.

(4) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1994 and incorporated herein by reference.

(5) Filed as an exhibit to Registrant's Registration Statement on Form S-1 (No.
33-55680) or amendments thereto and incorporated herein by reference.

(6) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993 and incorporated herein by reference.

(7) 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.

(8) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and incorporated herein by reference.

(9) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the nine
month period ended December 31, 1995.

(10) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 and incorporated herein by reference.

(11) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996 and incorporated herein by reference.

(12) Filed as an exhibit to Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996 and incorporated herein by reference.

(13) Filed as an exhibit to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997 and incorporated herein by reference.

(B) REPORTS ON FORM 8-K

There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of the fiscal year ended December 31, 1997.

31
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ JOHN C. MARTIN
-----------------------------------------
John C. Martin
PRESIDENT AND CHIEF EXECUTIVE OFFICER

Date: March 30, 1998

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints John C. Martin and Mark L. Perry, and each of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place, and stead, in
any and all capacities, to sign any and all amendments to this Report, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming that all said attorneys-in-fact
and agents, or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

32
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ --------------------

<C> <S> <C>
/s/ JOHN C. MARTIN President and Chief Executive
--------------------------------- Officer, Director (Principal March 30, 1998
(John C. Martin) Executive Officer)

Senior Vice President, Chief
/s/ MARK L. PERRY Financial Officer and
--------------------------------- General Counsel (Principal March 30, 1998
(Mark L. Perry) Financial and Accounting
Officer)

/s/ DONALD H. RUMSFELD
--------------------------------- Chairman of the Board of March 30, 1998
(Donald H. Rumsfeld) Directors

/s/ ETIENNE F. DAVIGNON
--------------------------------- Director March 30, 1998
(Etienne F. Davignon)

/s/ JAMES M. DENNY, SR.
--------------------------------- Director March 30, 1998
(James M. Denny, Sr.)

/s/ GORDON E. MOORE
--------------------------------- Director March 30, 1998
(Gordon E. Moore)

/s/ MICHAEL L. RIORDAN
--------------------------------- Director March 30, 1998
(Michael L. Riordan)

/s/ GEORGE P. SHULTZ
--------------------------------- Director March 30, 1998
(George P. Shultz)
</TABLE>

33
EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form
10-K) of Gilead Sciences, Inc. of our report dated January 23, 1998, included in
the 1997 Annual Report to Stockholders of Gilead Sciences, Inc. for the year
ended December 31, 1997.

We also consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-46058) pertaining to the Gilead Sciences, Inc. 1987
Incentive Stock Option Plan, 1987 Supplemental Stock Option Plan, 1991 Stock
Option Plan, Employee Stock Purchase Plan, and Officer, Director and Key
Employee Nonqualified Stock Options, the Registration Statement (Form S-8 No.
33-62060) pertaining to the Gilead Sciences, Inc. 1991 Stock Option Plan, and
the Registration Statement (Form S-8 No. 33-81670) pertaining to the Gilead
Sciences, Inc. Employee Stock Purchase Plan, of our report dated January 23,
1998, with respect to the consolidated financial statements incorporated by
reference in the Annual Report (Form 10-K) of Gilead Sciences, Inc. for the year
ended December 31, 1997.

ERNST & YOUNG LLP

Palo Alto, California
March 30, 1998

34