The action alleges that, in an effort to allow Gilead insiders to sell their Gilead stock at artificially inflated prices, the defendants falsely represented that strong sales of Viread, the company's HIV drug, during the second quarter of 2003 was due to an increase in prescriptions and not, as some analysts had cautioned, due to inventory build-up by distributors stocking up ahead of a price increase. Allegedly, these statements were materially false and misleading because, as the defendants knew or recklessly disregarded, a material portion of the second quarter Viread sales were attributable to distributors stocking up ahead of a price increase.

Gilead insiders sold a total of 303,981 shares in August 2003 at artificially inflated prices, reaping gross proceeds of $19,365,998. On October 28, 2003, Gilead announced that sales of Viread in the third quarter of 2003 would be materially less than expected because distributors would meet end-user demand for Viread by selling off overstock they accumulated in the second quarter. In reaction to this announcement, the price of Gilead common stock plummeted, falling $7.46 in one day, from a close of $59.46 per share on October 28, 2003 to $52 per share on October 29.