Acquisition of Pharmasset, Inc.

In November 2011, we entered into a definitive agreement to acquire Pharmasset for $11.1 billion through a cash tender offer and subsequent merger. This transaction closed on January 17, 2012, at which time Pharmasset became a wholly-owned subsidiary. We financed the transaction with approximately $5.2 billion in cash on hand, $2.2 billion in bank debt and $3.7 billion in senior unsecured notes issued in December 2011.

Pharmasset was a clinical-stage pharmaceutical company located in Princeton, New Jersey, committed to discovering, developing and commercializing novel drugs to treat viral infections. Pharmasset's primary focus was the development of oral therapeutics for the treatment of HCV infection. Pharmasset's research and development efforts were focused on nucleoside/tide analogs, a class of compounds which act as alternative substrates for the viral polymerase, thus inhibiting viral replication. We believe the acquisition will provide us with an opportunity to complement our existing HCV portfolio and help advance our effort to develop all-oral regimens for the treatment of HCV.

Pharmasset's lead compound was a nucleotide analog in HCV-infected individuals across genotypes now known as GS-7977. GS-7977 is being evaluated in Phase 2 and 3 clinical studies. During 2012, we expect to receive a significant amount of data from clinical trials evaluating GS-7977. On February 17, 2012, we announced that data indicates that GS-7977 with ribavirin for the treatment of genotype 1 patients with a prior "null" response to an interferon-containing regimen for 12 weeks will not be sufficient to cure their disease. We are currently conducting additional Phase 2 studies in HCV infected genotype 1 patients, including treatment-naïve patients, the results of which we expect at the end of the first quarter, in the second quarter and early in the third quarter of 2012.

We are currently in the process of valuing the assets acquired and liabilities assumed in the business combination. Upon the completion of the valuation analysis, we expect to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed.

Bank Debt

On January 12, 2012, in conjunction with our acquisition of Pharmasset, we entered into a five-year $1.25 billion revolving credit facility credit agreement (the Five-Year Revolving Credit Agreement), a $750.0 million short-term revolving credit facility credit agreement (the Short-Term Revolving Credit Agreement) and a $1.00 billion Term Loan Facility (the Term Loan Credit Agreement). We borrowed $750.0 million under the Five-Year Revolving Credit Agreement, $400.0 million under the Short-Term Revolving Credit Agreement and $1.00 billion under the Term Loan Credit Agreement, upon the close of the acquisition.

Loans under the Five-Year Revolving Credit Agreement, Short-Term Revolving Credit Agreement and Term Loan Credit Agreement will bear interest at either (i) the Eurodollar Rate plus the Applicable Margin or (ii) the Base Rate plus the Applicable Margin, each as defined in the applicable credit agreement. We may reduce the commitments and may prepay loans under any of these agreements in whole or in part at any time without premium or penalty.

The Five-Year Revolving Credit Agreement was inclusive of a $30.0 million swing line loan sub-facility and a $25.0 million letter of credit sub-facility. The Five-Year Revolving Credit Agreement will terminate and all amounts owing thereunder shall be due and payable on January 12, 2017. The Short-Term Revolving Credit Agreement will terminate and all amounts owing thereunder shall be due and payable on January 10, 2013; however, we may request that the maturity date be extended until January 9, 2014. All principal repayment installments under the Term Loan Credit Agreement will be due and payable as specified in the Term Loan Credit Agreement, with the final principal installment payment due and payable on January 12, 2015.