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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gsk Plc | LSE:GSK | London | Ordinary Share | GB00BN7SWP63 | ORD 31 1/4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.50 | -0.03% | 1,640.00 | 1,639.50 | 1,640.00 | 1,647.00 | 1,634.00 | 1,638.50 | 662,662 | 12:25:36 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Pharmaceutical Preparations | 30.33B | 4.93B | 1.1970 | 13.65 | 67.29B |
TIDMGSK
RNS Number : 3482M
GlaxoSmithKline PLC
06 May 2015
Hot Features
Premium
Issued: Wednesday, 6 May 2015, London U.K.
GSK sets out prospects for newly shaped Group and expectations for improvements in performance
2016-2020
GSK reports Q1 sales of GBP5.6 billion; Core EPS of 17.3p (-16%) CER
Summary
-- Group revenue expected to grow at a CAGR of low-to-mid single
digits over the five year period 2016-2020 on CER basis:
- Vaccines sales expected to grow at a CAGR of mid-to-high
single digits
- Pharmaceuticals sales expected to grow at a CAGR of low single
digits with the possible introduction of generic Advair in
the US factored into this assessment
- Consumer Healthcare sales expected to grow at a CAGR of mid
single digits
-- Decision taken to retain existing holding in ViiV Healthcare
reflecting updated strong positive outlook
-- Transaction cost savings programme to be accelerated with over
50% of total synergies of GBP1 billion now expected in 2016
(vs 2017), with programme broadly complete by end of 2017 (vs
2019)
-- Total annual benefits of GBP3 billion from combination of existing
restructuring and synergy programmes, now expected to be largely
delivered by end of 2017 within existing cost estimates but
with an accelerated rate of expenditure
-- Group core EPS expected to grow at CAGR of mid-to-high single
digits over the five year period 2016-2020 on a CER basis:
- 2015 core EPS expected to decline at a percentage rate in
the high teens (CER) primarily due to continued pricing pressure
on Advair in US/Europe, the dilutive effect of the transaction
and inherited cost base of the Novartis businesses
- Significant recovery anticipated in 2016 with core EPS percentage
growth expected to reach double digits (CER)
-- Group reaffirms commitment to current credit ratings
-- Capital allocation strategy reviewed. Use of cash to be prioritised
for ordinary dividends and accelerated investments to realise
synergies; as well as providing flexibility to respond to potential
put options associated with ViiV Healthcare and Consumer Healthcare;
and to accommodate possible introduction of generic Advair
in the US
-- Group expects to pay annual ordinary dividend of 80p for each
of the next three years (2015-2017)
-- Return of transaction net proceeds to be reduced to GBP1 billion,
paid as special dividend with Q4 2015 ordinary dividend
-- R&D Investor Day confirmed for 3 November 2015
-- Reported Q1 sales GBP5.6 billion, +1% CER with growth in Vaccines
(+10%), Consumer Healthcare (+24%) offset by Pharmaceuticals
(-7%):
- Pro-forma sales by business: Vaccines +3%; Consumer Healthcare
+8% benefiting from launch of Flonase OTC and strong Oral
health performance; Pharmaceuticals -5% with HIV sales +42%
offset by continued sales declines in Advair and Established
Products
-- Q1 Core EPS of 17.3p (-16%) CER due to mix pressures on Pharmaceuticals
margin and dilutive impact of the transaction, partly offset
by ongoing cost reductions and lower core tax rate (20%):
- Q1 dividend of 19 pence
-- Q1 Total EPS of 167.8p benefit from pre-tax transaction gain
of GBP9.3 billion
All expectations and targets regarding future performance should
be read together with the "2015 Guidance", "2016-2020 Outlook" and
"Assumptions and cautionary statement regarding forward looking
statements" sections.
The full results are presented under 'Income Statement' on page
28 and Core results reconciliations are presented on pages 40 to
41.
For explanations of the measures 'Core results', 'Pro-forma results'
and 'CER', see page 26.
New GSK Group
Through application of the strategy set out in 2008 and the recently
completed transaction with Novartis, GSK has created a new balanced
group of world-leading businesses in Vaccines, Pharmaceuticals and
Consumer Healthcare, which has broadened GSK's scope to improve
human health. In an update to investors today, GSK set out prospects
for the newly shaped Group.
The Company also reported its results for the first quarter ended
31 March 2015.
Sir Andrew Witty, Chief Executive Officer, GSK said:
"With the completion of the Novartis transaction, we have reviewed
future prospects for the newly shaped Group, including the opportunities
offered through the integration and our cash allocation strategy.
"We have done so recognising that our operating environment is shifting
radically, particularly in relation to pricing and that we must
be prepared for specific uncertainties, including the possible introduction
of generic Advair in the US and the potential exercise of put options
from partners in ViiV Healthcare and our Consumer Healthcare Business.
"Having done so, and with the substantial growth and synergy opportunities
we have going forward, we are today setting out to shareholders
our expectations for the Group over the medium-term and announcing
a series of decisions which support delivery of this performance
and future shareholder returns.
"For 2015, our financial performance will be impacted by the dilutive
effect of the transaction and flow through of headwinds encountered
in 2014. We then expect to see a sustained improvement in performance
with revenues and earnings expected to grow in CAGR terms over the
five year period 2016 to 2020 on a CER basis.
"We believe the Group's new composition strengthens our ability
to offer cost effective healthcare options to payors and governments
and enables us to increase access for patients and consumers to
our products.
"The importance of R&D to all three global businesses is demonstrated
by the launch of Flonase OTC, the approval of Breo for asthma, the
filing of a gene therapy to treat a rare disease and the publication
of positive phase III data for Shingrix, all seen in the last few
months.
"Driven by science-led innovation and a clear determination to realise
the volume opportunities in the broad healthcare markets of the
world, we believe GSK's three businesses are well placed to deliver
significant future value to patients, consumers and shareholders."
Three World-leading Businesses
GSK's product portfolio is now well diversified with 10 products
generating annual revenues of more than GBP500 million per year.
As a result of the transaction, total annual revenues are increased
by GBP1.2 billion on a full-year 2014 historic pro-forma basis,
and the Group is more balanced with revenues split across Pharmaceuticals
59%, Consumer Healthcare 25% and Vaccines 16% on the same basis.
The Group is positively exposed to broad areas of future healthcare
demand and growth and present in more than 150 markets around the
world. The transaction has significantly strengthened GSK's positions
in the US, Russia, Germany and a number of emerging markets, including
China.
With three world leading businesses, GSK believes the Group is strongly
positioned to meet the challenges of increasing demand for healthcare
and sustained pressure to reduce prices of new medicines.
Specifically, the Group expects volume demand for its products to
increase, particularly in Emerging Markets, and as governments and
payors focus on cost effective interventions to support healthcare
needs, such as Vaccines and OTC medicines. At the same time, the
breadth of the Group's overall portfolio provides substantial opportunities
to develop flexible pricing responses to fluctuating economic pressures.
R&D innovation underpins all three of GSK's global businesses. The
Group has a pipeline of around 40 NMEs (drugs and vaccines) in phase
II/III development and more than 80% of pre-clinical to phase-II
NME projects can be classified as having novel mechanism of action.
All three businesses are also supported by proprietary technologies
and manufacturing capabilities in areas such as devices, adjuvants,
bio-electronics and formulations. The Group will profile many of
these opportunities at an R&D event for investors on 3 November
2015.
Revenue and Portfolio Opportunities
With the newly acquired products from Novartis, GSK has the most
comprehensive Vaccines portfolio in the industry offering paediatric,
adolescent, adult, elderly and travel vaccines. Prevention of meningitis
represents one of the most significant new opportunities for GSK,
with the acquisition of Bexsero and Menveo. The new portfolio will
benefit GSK in many markets, notably with the ability to offer the
ex-Novartis vaccines in Emerging Markets and expand the portfolio
GSK can offer in the US. Since completion, GSK has announced the
establishment of a new global Vaccines R&D and Commercial centre
in Rockville, Maryland.
The company sees significant opportunity in the Group's new vaccines
pipeline. The most advanced is Shingrix, for prevention of shingles.
Phase III data for the vaccine which has been published in the NEJM
demonstrated overall efficacy of 97.2% in adults over 50 years which
did not diminish in older age groups. Altogether, the Group has
more than 20 new vaccines in development including potential vaccines
to protect against, hepatitis C, RSV, typhoid, Group B strep and
MenABCWY.
Within Pharmaceuticals, GSK remains confident of maintaining its
global leadership in respiratory well into the next decade. The
company continues to expect sales of Advair to decline, but with
the ongoing transition to newer products, total respiratory sales
are expected to return to growth in 2016. By 2020, the Group expects
total respiratory sales to be at or above the level of sales in
2015, whether or not there is generic competition to Advair in the
US in the period, with more than 90% of revenues generated from
nine products (compared to four products currently).
HIV is the other key therapeutic franchise in the current pharmaceutical
portfolio. Five years ago, GSK created ViiV Healthcare, a standalone
global HIV business that has become a highly successful venture
with equity partners Pfizer and Shionogi. The recent launches of
Tivicay and Triumeq have continued to surpass expectations and there
is clear scope to develop multiple dolutegravir-based regimens for
treatment of HIV over the next few years. Progress has also been
made to develop ViiV Healthcare's pipeline with several promising
assets in development including the long-acting integrase inhibitor,
cabotegravir.
Having reviewed this very positive outlook, GSK has concluded that
retaining its full, existing holding in ViiV Healthcare is in the
best interests of the Group and GSK will not now be initiating an
IPO of a minority stake.
In addition to the Respiratory and HIV businesses, the balance of
the Pharmaceuticals business, including the Established Pharmaceuticals
Portfolio, represents 2014 sales of GBP6.6 billion and includes
over 15 products generating sales of at least GBP100 million. This
portfolio provides a broad and cash generative business for the
Group, with particular strength and growth opportunities in Emerging
Markets driven by brands such as Augmentin and Zinnat. Approximately
60% of this portfolio is being promoted to drive volume whilst 40%
is being managed to generate cash for reinvestment into other parts
of the Pharmaceuticals portfolio.
GSK Consumer Healthcare is now the world's largest supplier of over-the-counter
(OTC) medicines, and holds category leading positions in Wellness
(pain relief, respiratory, GI), Oral health, Nutrition and Skin
health. The business has strengthened its positions in multiple
markets through the transaction, particularly in Eastern Europe
and emerging markets.
GSK will concentrate global development on seven power brands: Sensodyne,
Voltaren, Theraflu, Poligrip, Panadol, Otrivin, and Paradontax,
which have a strong track record of innovation success and the potential
to grow well ahead of respective category growth. 12 core brands,
such as Horlicks, will be invested and developed on a regional basis.
Innovation is expected to contribute more than 10% of revenues per
year, with an R&D pipeline built around consumer insight and science.
Switch of pharmaceutical products to OTC will also be an important
component of growth for the business.
Restructuring
The Group has three major restructuring programmes now underway:
the transaction integration; restructure of its global pharmaceuticals
business; and the Group-wide major change programme, started in
2012.
GSK continues to expect to deliver total transaction synergies of
GBP1 billion annually. Following closure of the transaction in March
and having reviewed the businesses acquired, GSK has identified
opportunities to accelerate delivery of the overall programme. As
a result, over 50% of total savings are now expected in 2016 (versus
2017) and the programme is expected to be substantially complete
in 2017 (versus 2019).
In Consumer Healthcare, cost savings of GBP400 million are expected
as a result of the transaction and together with supply chain efficiencies,
are expected to drive profitability improvements. GSK is targeting
a Consumer Healthcare operating profit margin of at least 20% by
2020 which would place it in the top quartile of comparable businesses.
In Vaccines, transaction cost savings of GBP400 million are expected
with volume improvements also expected to benefit cost of sales.
Following completion of the transaction, it is clear that the inherited
vaccines business has a higher than anticipated cost base. GSK is
confident it can address this as part of the overall integration
programme. GSK is targeting a Vaccines operating profit margin of
at least 30% by 2020.
As previously announced, the Group has commenced restructuring of
its global Pharmaceuticals business with approximately GBP1 billion
of annual cost savings to be delivered by 2017. Approximately 50%
of savings are expected in 2016. These costs savings will help to
mitigate ongoing changes to the Group's Pharmaceutical margin and
support investment in recent and new launches.
In total, the Group expects all restructuring (transaction, pharmaceuticals
and major change) to deliver annual cost savings benefits of GBP3
billion. The total cash charges to deliver these benefits are expected
to be approximately GBP3.65 billion and the non-cash charges up
to GBP1.35 billion. Charges to-date are GBP1.3 billion, predominantly
cash. The delivery of the GBP3 billion of annual benefits is expected
to be largely complete by the end of 2017. Going forward, the Group
will report its restructuring as a single programme.
2015 Guidance
In 2015, core EPS is expected to decline at a percentage rate in
the high teens on a CER basis, primarily due to continued pricing
pressure on Advair in US/Europe, the dilutive effect of the transaction
and the inherited cost base of the Novartis businesses.
2016-2020 Outlook
In 2016, GSK expects to see a significant recovery in Core EPS with
percentage growth expected to reach double-digits on a CER basis
as the adverse impacts seen in 2015 diminish and the sales and the
synergy benefits of the transaction contribute more meaningfully.
The new balance of the Group provides a better basis for generating
long-term sustainable growth. GSK expects annual Group revenues
to grow at a CAGR of low-to-mid single digits on a CER basis over
the five year period 2016-2020.
New product launches, the timing of vaccine tender agreements, pharmaceutical
genericisation (in particular a possible US generic Advair) and
overall market conditions will lead to revenue growth variances
year to year.
Over the same financial period 2016-2020 and on a CER basis, GSK
expects Vaccines sales to grow at a CAGR of mid-to-high single digits
and Consumer Healthcare at a CAGR of mid single digits. Pharmaceutical
sales are expected to grow at a CAGR of low single digits.
New Pharmaceutical and Vaccine products, recently launched and which
are expected to be launched over the next five years are expected
to generate sales of at least GBP6 billion per annum by 2020 on
a CER basis.
GSK expects earnings to grow faster than sales with Group core EPS
expected to grow at a CAGR of mid-to-high single digits on a CER
basis over the five year period 2016-2020.
In outlining these expectations for the five year period 2016-2020,
the Group has made certain assumptions about the healthcare sector,
the different markets in which the Group operates and the delivery
of revenues and financial benefits from its current portfolio, pipeline
and restructuring programmes.
The Group continues to expect the next several years to be challenging
for the healthcare industry with continued pressure on pricing of
pharmaceuticals. For the Group specifically, over the period to
2020 GSK expects further declines in sales of Seretide/Advair. The
introduction of a generic alternative to Advair in the US has been
factored into the Group's assessment of its future performance.
The Group assumes no premature loss of exclusivity for other key
products over the period. The Group's expectation of at least GBP6
billion of revenues per annum on a CER basis by 2020 from products
launched in the last three years includes contributions from current
pipeline assets mepoluzimab and Shingrix. The Group also expects
volume demand for its products to increase, particularly in Emerging
Markets.
The assumptions for the Group's revenue and earnings expectations
assume no material mergers, acquisitions, disposals, litigation
costs or share repurchases for the Company; and no change in the
Group's shareholdings in ViiV Healthcare or Consumer Healthcare.
The Group's expectations assume successful delivery of the Group's
integration and restructuring plans over the period 2016-2020. Material
costs for investment in new product launches and R&D have been factored
into the expectations given. The expectations are given on a constant
currency basis and assumes no material change to the Group's effective
tax rate.
Shareholder Returns and Capital Investments
Since the completion of the transaction and receipt of the first
monthly results from the former Novartis businesses during April,
the Group has reviewed in detail its integration plans and has developed
a five year outlook for the Group, which includes an updated view
of ViiV Healthcare. In doing so, GSK has also reviewed its capital
allocation strategy. The Group's commitment to its current credit
ratings has been a key consideration in this review.
Going forward, GSK has decided to prioritise use of cash for return
of ordinary dividends and accelerated investment to support more
rapid delivery of synergy benefits and other new growth opportunities
identified in the portfolio.
As a result of the review, GSK is announcing that it expects to
pay an annual ordinary dividend of 80p for each of the next three
years (2015-2017).
The Group wishes to ensure that it maintains the flexibility to
deploy capital in response to certain events, which may or may not
occur in the next five years, including the potential exercise of
'put' options by partners in ViiV Healthcare and Consumer Healthcare;
and the possible introduction of a generic version of Advair in
the US. The Group has also factored into its view the impact of
a continued low interest rate environment on pensions, other employee
related liabilities and potential company contributions.
Accordingly, the Group has decided to reduce the planned return
to shareholders from the net proceeds generated from the Novartis
transaction. GSK now plans to return approximately GBP1 billion
(20p per share) to shareholders via a special dividend to be paid
alongside GSK's Q4 2015 ordinary dividend payment.
Any future returns to shareholders of surplus capital will be subject
to the Group's strategic progress, visibility on the put options
and other capital requirements.
Q1 2015
For the quarter, reported Group sales increased 1% to GBP5.6 billion
with positive contributions from Vaccines, +10% and Consumer Healthcare,
+24% offsetting a decline in Total Pharmaceuticals of 7%. Total
Pharmaceutical turnover represents a combination of very strong
growth from ViiV Healthcare +42% offset by Oncology divestments
and sales declines in Advair and Established Products.
Advair/Seretide sales continued to decline given sustained price
pressure in the US and Europe and generic competition in Europe.
Transition of the portfolio continues with an additional indication
for use of Breo to treat adults with asthma from the FDA.
Pro-forma sales for Vaccines were up 3% and Consumer Healthcare
up 8%. Consumer Healthcare benefited particularly from the launch
of Flonase OTC in the quarter and strong Oral health performance.
In R&D, in addition to positive phase III data for Shingrix published
in the quarter, GSK yesterday filed a regulatory submission to the
European Medicines Agency seeking approval for a gene therapy (GSK2696273)
to treat patients with the rare disease adenosine deaminase severe
combined immunodeficiency syndrome (ADA-SCID).
Core EPS for the quarter was 17.3p (-16%) CER, declining primarily
as a result of mix pressures on the Pharmaceuticals margin and the
dilutive impact of the transaction. The decline was partly offset
by ongoing cost reductions and a lower tax rate (20%). Q1 2015 total
EPS of 167.8p benefited from the pre-tax transaction gain of GBP9.3
billion.
A Q1 2015 dividend of 19 pence has been declared by the Group.
Assumptions and cautionary statement regarding forward-looking statements
The Group's management believes that the assumptions outlined above
are reasonable, and that the aspirational targets described in this
report are achievable based on those assumptions. However, given
the longer term nature of these expectations and targets, they are
subject to greater uncertainty, including potential material impacts
if the above assumptions are not realised, and other material impacts
related to foreign exchange fluctuations, macroeconomic activity,
changes in regulation, government actions or intellectual property
protection, actions by our competitors, and other risks inherent
to the industries in which we operate.
This document contains statements that are, or may be deemed to
be, "forward-looking statements". Forward-looking statements give
the Group's current expectations or forecasts of future events.
An investor can identify these statements by the fact that they
do not relate strictly to historical or current facts. They use
words such as 'anticipate', 'estimate', 'expect', 'intend', 'will',
'project', 'plan', 'believe', 'target' and other words and terms
of similar meaning in connection with any discussion of future operating
or financial performance. In particular, these include statements
relating to future actions, prospective products or product approvals,
future performance or results of current and anticipated products,
sales efforts, expenses, the outcome of contingencies such as legal
proceedings, and financial results. Other than in accordance with
its legal or regulatory obligations (including under the UK Listing
Rules and the Disclosure and Transparency Rules of the Financial
Conduct Authority), the Group undertakes no obligation to update
any forward-looking statements, whether as a result of new information,
future events or otherwise. The reader should, however, consult
any additional disclosures that the Group may make in any documents
which it publishes and/or files with the SEC. All readers, wherever
located, should take note of these disclosures. Accordingly, no
assurance can be given that any particular expectation will be met
and investors are cautioned not to place undue reliance on the forward-looking
statements.
Forward-looking statements are subject to assumptions, inherent
risks and uncertainties, many of which relate to factors that are
beyond the Group's control or precise estimate. The Group cautions
investors that a number of important factors, including those in
this document, could cause actual results to differ materially from
those expressed or implied in any forward-looking statement. Such
factors include, but are not limited to, those discussed under Item
3.D 'Risk factors' in the Group's Annual Report on Form 20-F for
2014 and those discussed in Part 2 of the Circular to Shareholders
and Notice of General Meeting furnished to the SEC on Form 6-K on
24 November 2014. Any forward looking statements made by or on behalf
of the Group speak only as of the date they are made and are based
upon the knowledge and information available to the Directors on
the date of this report.
A number of adjusted measures are used to report the performance
of our business. These measures are defined on page 26 and a reconciliation
of core results to total results is set out on page 40.
Q1 2015 Results
Core results
Q1 2015 Growth
------------
GBPm CER% GBP%
-------- ----- -----
Turnover 5,622 1 -
Core operating profit 1,305 (14) (15)
Core earnings per share 17.3p (16) (18)
Total results
Q1 2015 Growth
------------
GBPm CER% GBP%
-------- ----- -----
Turnover 5,622 1 -
Operating profit 9,216 >100 >100
Earnings per share 167.8p >100 >100
Contents Page
Group performance 8
Segmental performance 17
Research and development 23
Definitions 26
Contacts 27
Income statement - three months ended 31 March 2015 28
Statement of comprehensive income 29
Global Pharmaceuticals, ViiV Healthcare and Vaccines turnover
- three months ended 31 March 2015 30
Balance sheet 31
Statement of changes in equity 32
Cash flow statement - three months ended 31 March 2015 33
Segment information 34
Legal matters 36
Taxation 36
Additional information 37
Reconciliation of cash flow to movements in net debt 39
Core results reconciliations 40
Auditors' review report 42
Brand names and partner acknowledgements
Brand names appearing in italics throughout this document are trademarks of GSK or associated companies or used under licence by the Group.
Group performance
The Novartis transaction completed on 2 March 2015 and so GSK's
reported results include one month's turnover of the former Novartis
Vaccines and Consumer Healthcare products and exclude sales of the
former GSK Oncology products from 2 March. The Group has restated
its segment information for the change in its segments described
on page 34. In addition, the Group has presented pro-forma growth
rates for turnover, core operating profit and core operating profit
by business. Pro-forma growth rates are calculated comparing reported
turnover and core operating profit for Q1 2015 with the turnover
and core operating profit for Q1 2014 adjusted to include the equivalent
one month's sales of the former Novartis Vaccines and Consumer Healthcare
products and exclude sales of the former GSK Oncology products for
March 2014.
Group turnover by business and geographic region
Group turnover by business Q1 2015 Q1 2015
----------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
------ --------- ----------
Global Pharmaceuticals 3,077 (12) (10)
ViiV Healthcare 446 42 42
------ --------- ----------
Total Pharmaceuticals 3,523 (7) (5)
Vaccines 699 10 3
Consumer Healthcare 1,381 24 8
------ --------- ----------
5,603 1 (1)
Corporate and other unallocated turnover 19 (9) (19)
------ --------- ----------
Group turnover 5,622 1 (1)
------ --------- ----------
Group turnover by geographic region Q1 2015 Q1 2015
----------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
------ --------- ----------
US 1,795 (5) (4)
Europe 1,557 5 1
International 2,270 2 (1)
------ --------- ----------
Group turnover 5,622 1 (1)
------ --------- ----------
Turnover - Q1 2015
Group turnover for Q1 2015 increased 1% on a reported basis to GBP5,622
million, with Total Pharmaceuticals down 7%, Vaccines up 10% and
Consumer Healthcare up 24%, all three businesses reflecting the
impact of the Novartis transaction. Within Total Pharmaceuticals,
Global Pharmaceuticals turnover fell 12% and ViiV Healthcare turnover
grew 42%. On a pro-forma basis, Group turnover declined 1%, with
Total Pharmaceuticals down 5%, Vaccines up 3% and Consumer Healthcare
up 8%.
Total Pharmaceuticals
Global Pharmaceuticals turnover was GBP3,077 million, down 12% on
a reported basis, primarily reflecting a 9% decline in Respiratory
sales and a 20% decline in sales of Established Products. Sales
of Oncology products in the first two months, prior to the disposal
to Novartis, amounted to GBP216 million, an 18% reduction compared
with the three months of Q1 2014 (+25% on a pro-forma basis). Adjusting
for the impact of the disposal of Oncology products, pro-forma turnover
was down 10%.
US Pharmaceuticals turnover of GBP1,019 million declined 23% in
the quarter and 21% on a pro-forma basis. This decline primarily
reflected a 22% fall in Respiratory sales and a 42% fall in Established
Products sales. Within Respiratory, Advair sales were down 21% to
GBP392 million and Flovent sales declined 38% to GBP83 million.
Breo Ellipta and Anoro Ellipta sales were GBP14 million and GBP9
million, respectively, in the quarter. The primary driver of the
decline in Established Products was Lovaza, which was down 75% to
GBP28 million following the launch of generic competition in April
2014.
In Europe, Pharmaceuticals turnover declined 7% to GBP815 million
and was down 3% on a pro-forma basis. Respiratory sales declined
4% to GBP392 million as an 11% decline in Seretide was partly offset
by Relvar Ellipta sales of GBP16 million in the quarter. Established
Products sales were down 14% to GBP132 million reflecting the increased
generic competition and supply constraints to a number of products.
International Pharmaceuticals sales were GBP1,243 million, down
5% on a reported basis and down 4% on a pro-forma basis driven by
a decline of 3% (-1% pro-forma) in Emerging Markets and a 9% decline
in Japan. Emerging Markets saw continued growth in Respiratory,
up 7%, including Seretide, up 6%, but this was more than offset
by a decline in Established Products (-12%), and Dermatology products,
both of which were impacted by supply constraints given recent strong
volume growth, particularly in anti-infectives. The decline in Japan
in Pharmaceutical sales reflected a high comparator in Q1 2014,
which was boosted by stocking ahead of a VAT increase in April last
year, as well as the impact on Adoair of increasing competition
and the continued transition of the Respiratory portfolio despite
encouraging take up of Relvar Ellipta since the lifting of the 'Ryotan'
restrictions in November. Total Respiratory sales in Japan were
up 1% for the quarter.
ViiV Healthcare turnover increased 42% to GBP446 million, with the
US up 66%, Europe up 35% and International up 9%. The growth in
all three regions was driven by the strong performances of both
Tivicay and Triumeq, with sales of GBP112 million and GBP81 million,
respectively in the quarter. Epzicom/Kivexa sales increased 2% to
GBP176 million, benefiting from use in combination with Tivicay.
Vaccines
Vaccines turnover of GBP699 million grew 10% on a reported basis,
benefiting from the first month's sales of GBP34 million of the
newly acquired products from Novartis, and 3% on a pro-forma basis.
In the US, reported growth of 14% (11% pro-forma) primarily reflected
strong growth in Hepatitis vaccines although this was mainly attributable
to favourable stocking patterns. This was partly offset by lower
sales of Infanrix/Pediarix as a result of the return to the market
of a competitor vaccine during 2014.
In Europe, sales grew 4% on a reported basis, benefiting from one
month's sales of the former Novartis vaccines. The 3% pro-forma
decline in sales was largely attributable to lower Infanrix/Pediarix
sales, which were impacted by the introduction of a competitor vaccine
in 2014 and the phasing of shipments in several countries.
In International, sales grew 13% to GBP258 million on a reported
basis. The 3% pro-forma growth in the region primarily reflected
the net benefit of the phasing of tenders of a number of products
relative to those falling in Q1 2014.
Consumer Healthcare
Consumer Healthcare turnover grew 24% on a reported basis and 8%
on a pro-forma basis to GBP1,381 million. Growth was driven by volume
gains of 6% and price increases of 2%.
US turnover increased 47% to GBP330 million (33% pro-forma growth),
primarily benefiting from the strong launch
of Flonase OTC, with sales of GBP65 million in the quarter and
double digit growth on Sensodyne. Sales of GBP364 million in Europe
grew 32% (4% pro-forma), primarily reflecting an 8% increase in
Oral health sales. International sales of GBP687 million grew 12%
(2% pro-forma). Strong growth in Oral health products and Skin health
products was partly offset by a decline in Panadol sales, reflecting
increased competitive pressures and a tough comparator, together
with slower Nutrition sales as Horlicks was impacted by stocking
patterns.
Corporate and other unallocated turnover
The Corporate and unallocated turnover of GBP19 million represented
sales of several Vaccines and Consumer Healthcare products, which
are being held for sale in a number of markets. GSK is required
to dispose of these products in specific markets in order to meet
the requirements of anti-trust approval for the Novartis transaction.
Core operating profit and margin
Core operating profit Q1 2015 Q1 2015
------------------------------- ----------
Reported Pro-forma
% of growth growth
GBPm turnover CER% CER%
-------- ---------- --------- ----------
Turnover 5,622 100 1 (1)
Cost of sales (1,739) (30.9) 13 8
Selling, general and administration (1,866) (33.2) 4 1
Research and development (789) (14.0) (2) (4)
Royalty income 77 1.3 13 5
-------- ---------- --------- ----------
Core operating profit 1,305 23.2 (14) (12)
-------- ---------- --------- ----------
Core profit before tax 1,156 (14)
Core profit after tax 925 (12)
Core profit attributable to
shareholders 834 (16)
-------- ---------
Core earnings per share 17.3p (16)
-------- ---------
Core operating profit by business Q1 2015 Q1 2015
----------------------------- ----------
Reported Pro-forma
% of growth growth
GBPm turnover CER% CER%
------ ---------- --------- ----------
Global Pharmaceuticals 1,256 40.8 (20) (18)
ViiV Healthcare 318 71.3 55 55
Pharmaceuticals R&D (581) (1) 2
Total Pharmaceuticals 993 28.2 (17) (15)
Vaccines 161 23.0 (31) (24)
Consumer Healthcare 182 13.2 53 35
------ ---------- --------- ----------
1,336 23.8 (13) (11)
Corporate & other unallocated
costs (31) 9 9
------ ---------- --------- ----------
Core operating profit 1,305 23.2 (14) (12)
------ ---------- --------- ----------
Core operating profit - Q1 2015
Core operating profit was GBP1,305 million, 14% lower than in Q1
2014 in CER terms on a turnover increase of 1%. The core operating
margin of 23.2% was 4.1 percentage points lower than in Q1 2014.
Currency had no material overall impact on the Group margin. The
Novartis transaction reduced the operating margin by 1.2 percentage
points reflecting the disposal of GSK's higher margin Oncology business
and the acquisition of lower margin Vaccines and Consumer Healthcare
businesses from Novartis. On a pro-forma basis the operating margin
declined 2.9 percentage points which primarily reflected an increase
in cost of sales as a percentage of turnover in the underlying business
performance of the reshaped Group.
Cost of sales as a percentage of turnover was 30.9%, 3.1 percentage
points higher than in Q1 2014. On a pro-forma basis the cost of
sales percentage increased 2.3 percentage points. This reflected
adverse price and mix movements, particularly from the decline in
Pharmaceuticals sales in the US, the negative impact of supply chain
disruption in 2014 on products sold in the quarter, increased investments
in Vaccines to improve the reliability and capacity of the supply
chain and an adverse comparison to the reduced cost of sales in
Vaccines in Q1 2014, which benefited from a number of inventory
adjustments, partly offset by the benefit of the Group's ongoing
cost reduction programmes across all three businesses.
SG&A costs as a percentage of sales were 33.2%, 1.0 percentage point
higher than in Q1 2014 as SG&A increased 4% on the reported increase
in turnover of 1%. On a pro-forma basis, SG&A increased 1% on a
pro-forma turnover decline of 1%, resulting in an increase of 0.5
percentage points in SG&A as a percentage of sales. This reflected
investments in Consumer Healthcare, partly offset by declines in
SG&A in Vaccines and Total Pharmaceuticals, including the initial
benefits of the Pharmaceuticals cost reduction programme.
R&D expenditure declined 2% CER to GBP789 million (14.0% of turnover)
compared with GBP784 million (14.0% of turnover) in Q1 2014. On
a pro-forma basis R&D expenditure declined 4% reflecting the phasing
of ongoing project spending as well as the completion of a number
of programmes and continuing cost management benefits.
Royalty income was GBP77 million (Q1 2014: GBP70 million).
Core operating profit by business - Q1 2015
Following the completion of the transaction with Novartis, GSK has
reorganised the Group to reflect the greater balance between its
Pharmaceuticals, Vaccines and Consumer Healthcare businesses and
responsibilities for some parts of these respective businesses have
been realigned. GSK is now reporting these three businesses separately
with corporate costs reallocated to each accordingly so that the
profitability of each business is reflected more accurately.
Total Pharmaceuticals core operating profit was GBP993 million,
17% lower than in Q1 2014 in CER terms on a turnover decrease of
7%. The core operating margin of 28.2% was 4.3 percentage points
lower than in Q1 2014. Net of currency effects, the margin declined
3.3 percentage points on both a reported and a pro-forma basis,
which reflected an increase in cost of sales as a percentage of
turnover primarily due to adverse price movements and the impact
of the disposal of the Oncology business, together with pro-forma
declines in SG&A, down 0.7%, and R&D, down 2.4%, on a pro-forma
turnover decline of 5.0%, reflecting investment behind new launches.
Vaccines operating profit was GBP161 million, 31% lower than in
Q1 2014 in CER terms on a turnover increase of 10%. The core operating
margin of 23.0% was 9.4 percentage points lower than in Q1 2014.
Excluding currency effects, the operating margin declined 12.1%
of which 5.1 percentage points resulted from the acquisition of
the former Novartis Vaccines business. The pro-forma margin declined
7.0 percentage points which primarily reflected an increase in cost
of sales as a percentage of turnover due to mix changes in the quarter,
additional supply chain investments and the benefit to Q1 2014 of
a number of inventory adjustments that are non recurring.
Consumer Healthcare core operating profit was GBP182 million, 53%
higher than in Q1 2014 in CER terms on a turnover increase of 24%.
The core operating margin of 13.2% was 2.0 percentage points higher
than in Q1 2014. Net of currency effects, the operating margin improved
2.6 percentage points and on a pro-forma basis the operating margin
increased 2.8 percentage points. This was due to a significant improvement
in gross margin, reflecting benefits from both improved supply and
pricing. This benefit, together with tight overhead cost control,
enabled higher brand investment in the quarter.
Core profit after tax and core earnings per share - Q1 2015
Net finance expense was GBP156 million compared with GBP161 million
in Q1 2014, reflecting GSK's on-going strategy to improve the funding
profile of the Group.
The share of profits of associates and joint ventures was GBP7 million
(Q1 2014: GBP1 million). In March 2015, GSK reduced its shareholding
in its one significant associate, Aspen Pharmacare Holdings Limited,
from 12.4% to 6.2% of the issued share capital. As a result, GSK
will no longer account for Aspen as an associate and the contribution
from associates and joint ventures in 2015 is expected to be minimal.
Tax on core profit amounted to GBP231 million and reflected an effective
core tax rate of 20.0% (Q1 2014: 22.0%) reflecting the continuing
benefit of matters settled at the end of 2014.
The allocation of earnings to non-controlling interests amounted
to GBP91 million (Q1 2014: GBP62 million). GSK has two businesses
with material non-controlling interests, namely ViiV Healthcare
and the newly created Consumer Healthcare Joint Venture with Novartis
in which Novartis has a 36.5% share. The Consumer Healthcare non-controlling
interest allocation in the quarter was GBP12 million following its
creation on 2 March 2015.
Core EPS of 17.3p decreased 16% in CER terms compared with a 14%
decline in the operating profit as a result of an increase in the
ViiV Healthcare non-controlling interest charge, partly offset by
financial efficiencies.
Guidance for 2015
Core EPS for 2015 is expected to decline at a percentage rate in
the high teens (CER) primarily due to continued pricing pressure
on Advair in US/Europe, the dilutive effect of the Novartis transaction
and the inherited cost base of the Novartis businesses.
Currency impact
The Q1 2015 results are based on average exchange rates, principally
GBP1/$1.52, GBP1/EUR1.34 and GBP1/Yen 182. Comparative exchange
rates are given on page 36. The period-end exchange rates were GBP1/$1.48,
GBP1/EUR1.38 and GBP1/Yen 178.
In the quarter, turnover increased 1% CER but was flat at actual
exchange rates. Core EPS of 17.3p was down 16% in CER terms and
18% at actual rates. The negative currency impact reflected the
strength of Sterling against the majority of the Group's trading
currencies relative to Q1 2014 partly offset by a weakening of Sterling
against the US Dollar. Losses on settled intercompany transactions
had no material effect on the negative currency impact of 2 percentage
points on core EPS.
If exchange rates were to hold at the Q1 2015 period-end rates for
the rest of 2015, it is estimated that there would be no material
currency impact on 2015 Sterling turnover or core EPS.
Core adjustments
The adjustments that reconcile core operating profit, profit after
tax and earnings per share to total results are as follows:
Q1 2015 Q1 2014
--------------------------- ---------------------------
Profit Profit
Operating after Operating after
profit tax EPS profit tax EPS
GBPm GBPm p GBPm GBPm p
---------- ------- ------ ---------- ------- ------
Core results 1,305 925 17.3 1,530 1,069 21.0
Intangible asset amortisation (151) (114) (2.4) (170) (126) (2.7)
Intangible asset impairment (102) (77) (1.6) (48) (39) (0.8)
Major restructuring costs (366) (266) (5.5) (79) (61) (1.3)
Legal costs (85) (85) (1.8) (108) (86) (1.8)
Acquisition accounting
and other 8,615 7,655 161.8 (59) (38) (0.5)
---------- ------- ------ ---------- ------- ------
7,911 7,113 150.5 (464) (350) (7.1)
---------- ------- ------ ---------- ------- ------
Total results 9,216 8,038 167.8 1,066 719 13.9
---------- ------- ------ ---------- ------- ------
Full reconciliations between core results and total results are set
out on pages 40 to 41 and the definition of core results is set out
on page 26.
Total operating profit and total earnings per share - Q1 2015
Total operating profit was GBP9,216 million compared with GBP1,066
million in Q1 2014. The non-core items resulted in a net credit of
GBP7,911 million (Q1 2014: net charge of GBP464 million), primarily
reflecting the impact of the Novartis transaction.
The intangible asset amortisation decreased to GBP151 million from
GBP170 million in Q1 2014, which included accelerated amortisation
on Lovaza.
Intangible asset impairments of GBP102 million (Q1 2014: GBP48 million)
included impairments of several R&D and commercial assets.
Major restructuring charges of GBP366 million (Q1 2014: GBP79 million)
included GBP181 million under the Major Change programme, GBP63 million
under the new Pharmaceuticals restructuring programme and GBP110 million
related to the Novartis transaction.
The Major Change programme focuses on opportunities to simplify our
supply chain processes, build the Group's capabilities in manufacturing
and R&D, and restructure our European Pharmaceuticals business. The
programme is expected to cost GBP1.5 billion, of which non-cash charges
are expected to be GBP350 million. It has delivered approximately GBP0.8
billion of annual savings and remains on track to complete delivery
of annual pre-tax savings of at least GBP1.0 billion by 2016.
The new Pharmaceuticals restructuring programme, announced in October
2014, will rescale commercial operations, global support functions
and the relevant R&D/manufacturing operations across Pharmaceuticals.
The programme is expected to cost GBP1.5 billion, predominantly in
cash charges. It has delivered approximately GBP0.1 billion of annual
savings and remains on track to deliver approximately GBP1 billion
of annual cost savings over the next three years, with around 50% delivered
in 2016.
The Novartis transaction is expected to deliver approximately GBP1
billion of annual cost savings, the majority of which will be delivered
in three years at a cost of approximately GBP2 billion. Approximately
50% of the costs will be cash charges.
Going forward these programmes will be reported together as a total
GBP3 billion programme, for which the total cash charges to deliver
these benefits are expected to be approximately GBP3.65 billion and
the non-cash charges up to GBP1.35 billion. Charges to date are GBP1.3
billion, predominantly cash. The delivery of the GBP3 billion of benefits
is expected to be largely complete by the end of 2017.
Legal charges of GBP85 million (Q1 2014: GBP108 million) included settlement
of existing anti-trust matters and higher litigation costs.
Acquisition accounting and other adjustments resulted in a net credit
of GBP8,615 million (Q1 2014: charge of GBP59 million). This included
the profit on disposal of the Oncology business to Novartis of GBP9,262
million, partly offset by a further increase in the liability for the
contingent consideration for the acquisition of the former Shionogi-ViiV
Healthcare joint venture of GBP706 million following the continuation
of the improved sales performances of Tivicay and Triumeq.
Other items also included equity investment and asset disposals, one-off
required regulatory charges in R&D and certain other adjusting items.
A profit on disposal of associates of GBP843 million was recognised
in the quarter, comprising GBP386 million from the disposal of half
of GSK's investment in Aspen Pharmacare and a gain of GBP457 million
arising from the remeasurement of the remaining holding to market value
on its reclassification to equity investments.
The charge for taxation on total profits amounted to GBP1,885 million
and represented a total effective tax rate of 19.0% (Q1 2014: 20.4%),
reflecting the differing tax effects of the various non-core items.
See 'Taxation' on page 36 for further details.
Total EPS was 167.8p, compared with 13.9p in Q1 2014, primarily reflecting
the profits on disposal of the Oncology business and the Aspen Pharmacare
shares, partly offset by the increase in the liability for the contingent
consideration for the acquisition of the former Shionogi-ViiV Healthcare
joint venture.
Cash generation and conversion
Cash flow and net debt
Q1 2015 Q1 2014
--------- --------
Net cash inflow from operating activities
(GBPm) 370 927
Adjusted net cash inflow from operating
activities* (GBPm) 532 968
Free cash flow* (GBPm) (69) 467
Adjusted free cash flow* (GBPm) 93 508
Free cash flow growth (%) >(100)% (40)%
Free cash flow conversion* (%) 1% 67%
Net debt (GBPm) 8,098 13,660
--------- --------
* Adjusted net cash inflow from operating activities, free cash
flow, adjusted free cash flow and free cash flow conversion are
defined on page 26.
The net cash inflow from operating activities for the quarter was
GBP370 million (Q1 2014: GBP927 million). Excluding legal settlements
of GBP162 million (Q1 2014: GBP41 million), the adjusted net cash
inflow from operating activities was GBP532 million (Q1 2014: GBP968
million), a 45% decrease compared with 2014. This primarily reflected
the combined impact of lower operating profits and increased cash
outflows on restructuring items.
Free cash flow was GBP(69) million for the quarter. Excluding legal
payments, adjusted free cash flow was GBP93 million (Q1 2014: GBP508
million). The decrease primarily reflected the combined impact of
lower operating profits and increased cash outflows on restructuring
items. The Group paid dividends to shareholders of GBP924 million.
Free cash flow conversion was impacted by the profits on disposal
of the Oncology business and the Aspen stake.
At 31 March 2015, net debt was GBP8.1 billion, compared with GBP14.4
billion at 31 December 2014, comprising gross debt of GBP18.5 billion
and cash and liquid investments of GBP10.4 billion. The decrease
in net debt reflected the impact of the Novartis transaction in
which GSK sold its Oncology business for net cash proceeds of GBP10.1
billion and paid GBP3.3 billion to acquire the Novartis businesses.
Tax liabilities on the transaction are yet to be settled. In addition,
GSK sold 6.2% of its shareholding in Aspen for cash proceeds of
GBP564 million, reducing the shareholding from 12.4% to 6.2%. At
31 March 2015, GSK had short-term borrowings (including overdrafts)
repayable within 12 months of GBP3,240 million with no loans repayable
in the subsequent year.
Working capital
31 March 31 December 30 September 30 June 31 March
2015 2014 2014 2014 2014
--------- ------------ ------------- -------- ---------
Working capital conversion
cycle* (days) 215 209 216 208 205
Working capital percentage
of turnover (%) 24 22 24 22 22
--------- ------------ ------------- -------- ---------
* Working capital conversion cycle is defined on page 26.
During the quarter, working capital was significantly impacted by
the Novartis transaction which increased the working capital conversion
cycle by 11 days. This principally resulted from inventory acquired
with the former Novartis Vaccines business. The increase was partly
offset by a six day reduction in the cycle from favourable exchange
effects. The conversion cycle of the underlying businesses increased
by one day from the position at 31 December 2014.
Returns to shareholders
GSK expects to pay an annual ordinary dividend of 80p for each of
the next three years (2015-2017).
GSK also plans to return approximately GBP1 billion (20p per share)
to shareholders via a special dividend to be paid alongside GSK's
Q4 2015 ordinary dividend payment.
Any future returns to shareholders of surplus capital will be subject
to the Group's strategic progress, visibility on the put options
associated with ViiV Healthcare and the Consumer Healthcare joint
venture and other capital requirements.
Quarterly dividends
The Board has declared a first interim dividend of 19 pence per
share (Q1 2014: 19 pence per share).
Payment of dividends
The equivalent interim dividend receivable by ADR holders will be
calculated based on the exchange rate on 7 July 2015. With effect
from and including this dividend, an annual fee of $0.02 per ADS
(or $0.005 per ADS per quarter) will be charged by the Depositary.
The ex-dividend date will be 14 May 2015 (13 May 2015 for ADR holders),
with a record date of 15 May 2015 and a payment date of 9 July 2015.
Paid/ Pence per
payable share GBPm
---------------- ---------- ------
2015
First interim 9 July 2015 19 918
2014
First interim 10 July 2014 19 916
Second interim 2 October 2014 19 918
Third interim 8 January 2015 19 924
Fourth interim 9 April 2015 23 1,114
---------- ------
80 3,872
---------- ------
GSK made no share repurchases during the quarter. The company issued
2.0 million shares under employee share schemes amounting to GBP28
million (Q1 2014: GBP81 million).
The weighted average number of shares for Q1 2015 was 4,820 million,
compared with 4,802 million in Q1 2014.
Segmental performance
Global Pharmaceuticals Q1 2015 Q1 2015
----------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
------ --------- ----------
US 1,019 (23) (21)
Europe 815 (7) (3)
International 1,243 (5) (4)
3,077 (12) (10)
------ --------- ----------
Q1 2015
---------------
Growth
GBPm CER%
------ -------
Respiratory 1,408 (9)
Oncology 216 (18)
Cardiovascular, metabolic and urology 218 (8)
Immuno-inflammation 60 19
Other pharmaceuticals 525 (9)
Established Products 650 (20)
------ -------
3,077 (12)
------ -------
Respiratory
Q1 2015 (GBP1,408 million; down 9%)
Respiratory sales in the quarter declined 9% to GBP1,408 million.
Seretide/Advair sales were down 14% to GBP898 million, Flixotide/Flovent
sales decreased 22% to GBP153 million and Ventolin sales fell 9%
to GBP161 million. Relvar/Breo Ellipta recorded sales of GBP41 million
and Anoro Ellipta, now launched in the US, Europe and Japan, recorded
sales of GBP12 million in the quarter.
In the US, Respiratory sales declined 22% to GBP583 million in the
quarter (1% volume growth and a 23% negative impact of price and
mix). The negative price and mix impact reflects new contracts agreed
in 2014 in response to competitive pressures in both the ICS/LABA
combination market, where Advair and Breo Ellipta compete, and also
the LABA/LAMA combination market, where Anoro Ellipta is marketed.
Sales of Advair were down 21% (3% volume decline and an 18% negative
impact of price and mix). Flovent sales were down 38% to GBP83 million
and Ventolin sales fell 24%. The reported declines for both Flovent
and Ventolin reflected the net negative impact of true up adjustments
to accruals for returns and rebates recorded in both Q1 2014 and
Q1 2015. Excluding the impact of true up adjustments and stocking
patterns, on an estimated underlying basis Flovent sales declined
6% while Ventolin grew 13%. Breo Ellipta recorded sales of GBP14
million, and Anoro Ellipta, launched in Q2 2014, recorded sales
of GBP9 million in the quarter.
European Respiratory sales were down 4% to GBP392 million, with
Seretide sales down 11% to GBP291 million (4% decline in volume
and a 7% negative impact of price), reflecting increasing competitive
pressures and the transition of the Respiratory portfolio to the
newer products. Relvar Ellipta, approved in Europe for both COPD
and asthma, recorded sales of GBP16 million in the quarter, while
Anoro Ellipta, with launches now underway in many countries throughout
the region, recorded sales of GBP2 million.
Respiratory sales in the International region grew 5% to GBP433
million with Emerging Markets up 7% and Japan up 1%. In Emerging
Markets, sales of Seretide increased 6% to GBP125 million, while
Ventolin grew 8% to GBP46 million. In Japan, the sales of Relvar
Ellipta of GBP9 million in the quarter, together with strong growth
in Veramyst and Xyzal sales, more than offset the 27% decline in
Adoair as a result of comparison with a strong Q1 2014 which benefited
from wholesaler stocking.
Oncology
Q1 2015 (GBP216 million; down 18%)
Oncology sales for the first two months were GBP216 million, down
18% on a reported basis compared with Q1 2014, but up 25% on a pro-forma
basis.
Cardiovascular, metabolic and urology
Q1 2015 (GBP218 million; down 8%)
Sales in the category fell 8% to GBP218 million. The Avodart franchise
fell 7% to GBP179 million, with 13% growth in sales of Duodart/Jalyn
offset by a 15% decline in sales of Avodart. Sales of Prolia decreased
33% to GBP9 million, due to the agreement in Q2 2014 with Amgen
to terminate the joint commercialisation in a number of European
markets, Mexico and Russia.
Immuno-inflammation
Q1 2015 (GBP60 million; up 19%)
Immuno-inflammation sales grew 19% to GBP60 million. Benlysta turnover
in the quarter was GBP51 million, up 23%. In the US, Benlysta sales
were GBP46 million, up 26%.
Other pharmaceuticals
Q1 2015 (GBP525 million; down 9%)
Sales in other therapy areas fell 9% to GBP525 million. Augmentin
sales declined 3% to GBP140 million and Dermatology sales declined
11% to GBP109 million both impacted by supply constraints due to
capacity limitations. Relenza sales were down 25% to GBP30 million
in the quarter reflecting Japanese government stockpiling in Q1
2014 which was not repeated in Q1 2015. Sales of products for Rare
diseases declined 10% to GBP91 million, primarily as a result of
generic competition to Mepron in the US.
Established Products
Q1 2015 (GBP650 million; down 20%)
Established Products turnover fell 20% to GBP650 million. Sales
in the US were down 42% to GBP163 million, primarily attributable
to a 75% fall in sales of Lovaza to GBP28 million, due to generic
competition which began in April 2014 and has intensified during
2015.
Europe was down 14% to GBP132 million with Seroxat sales falling
33% to GBP8 million, reflecting increased generic competition to
a number of other products and a number of supply constraints. International
was down 8% to GBP355 million, primarily reflecting lower sales
of Seroxat/Paxil due to generic competition in Japan and some supply
constraints, together with the impact of competitive and price pressures
to Zeffix and Hepsera in China.
ViiV Healthcare Q1 2015 Q1 2015
Reported Pro-forma
growth growth
GBPm CER% CER%
----- --------- ----------
US 229 66 66
Europe 154 35 35
International 63 9 9
446 42 42
----- --------- ----------
Q1 2015
--------------
Growth
GBPm CER%
----- -------
Epzicom/Kivexa 176 2
Selzentry 30 (9)
Tivicay 112 >100
Triumeq 81 -
Other 47 (33)
446 42
----- -------
Q1 2015 (GBP446 million; up 42%)
ViiV Healthcare sales increased 42% in the quarter, with the US
up 66%, Europe up 35% and International up 9%. The growth in all
three regions was driven by Tivicay and Triumeq.
The ongoing roll-out of Tivicay resulted in sales of GBP112 million
and Triumeq, now launched in the US and much of Europe recorded
sales of GBP81 million in the quarter. Epzicom/Kivexa, which benefited
from use in combination with Tivicay, increased 2% to GBP176 million,
but Selzentry sales fell 9% to GBP30 million. There were also continued
declines in the mature portfolio, mainly driven by generic competition
to both Combivir, down 38% to GBP10 million, and Lexiva, down 27%
to GBP16 million.
Vaccines Q1 2015 Q1 2015
---------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
----- --------- ----------
US 217 14 11
Europe 224 4 (3)
International 258 13 3
699 10 3
----- --------- ----------
Q1 2015 Q1 2015
---------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
----- --------- ----------
Rotarix 98 14 14
Synflorix 60 7 7
Fluarix, FluLaval 4 (63) (63)
Bexsero 7 - >100
Menveo 11 - -
Boostrix 66 7 7
Infanrix, Pediarix 186 (6) (6)
Hepatitis 143 17 17
Cervarix 28 (14) (14)
Other 96 38 (2)
699 10 3
----- --------- ----------
Q1 2015 (GBP699 million; up 10%)
Vaccines sales grew 10% to GBP699 million with the US up 14%, Europe
up 4% and International up 13%. The business benefited from one
month of sales of the former Novartis products, and pro-forma growth
for the quarter was 3%.
In the US, reported growth of 14% (11% pro-forma) primarily reflected
strong growth in Hepatitis vaccines which benefited from variations
in CDC stockpile shipments and the replenishment of wholesaler inventory
levels. Rotarix sales, up 12%, also benefited from the replenishment
of wholesaler inventory levels in the quarter. This growth was partly
offset by lower sales of Infanrix/Pediarix as a result of the return
to the market of a competitor vaccine during 2014.
In Europe, sales grew 4% on a reported basis to GBP224 million,
but declined 3% on a pro-forma basis. This was largely attributable
to a 9% fall in Infanrix/Pediarix sales, which were impacted by
the introduction of a competitor vaccine in 2014 and the phasing
of shipments in several countries. Sales of Hepatitis vaccines declined
4% and Cervarix sales were down 27% in part due to the phasing of
shipments. These declines were partly offset by a 27% increase in
Boostrix sales driven by better supply in comparison with Q1 2014.
International sales of GBP258 million grew 13% on a reported basis
and 3% pro-forma, benefiting from the phasing of shipments of a
number of products in both Q1 2015 and Q1 2014. Synflorix sales
grew 12%, primarily reflecting the phasing of tender shipments.
Hepatitis vaccines grew 20% mainly driven by the phasing of Havrix
sales in the Middle East, but Boostrix sales fell 25%, reflecting
the phasing of tender shipments in Brazil and the Middle East. Fluarix/FluLaval
sales declined 75% due to the phasing of shipments in Brazil and
Asia Pacific.
Consumer Healthcare
Turnover Q1 2015 Q1 2015
----------------- ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
------ --------- ----------
US 330 47 33
Europe 364 32 4
International 687 12 2
------
Total 1,381 24 8
------
Turnover Q1 2015 Q1 2015
------------------ ----------
Reported Pro-forma
growth growth
GBPm CER% CER%
------ --------- ----------
Wellness 593 46 11
Oral health 485 9 9
Nutrition 182 2 (1)
Skin health 121 42 8
------
Total 1,381 24 8
------
Q1 2015 (GBP1,381 million; up 24%)
The Consumer Healthcare business represents the Consumer Healthcare
Joint Venture with Novartis together with the GSK Consumer Healthcare
businesses in India and Nigeria, which are excluded from the Joint
Venture.
Turnover grew 24% to GBP1,381 million, benefiting significantly
from the first month's sales of the former Novartis products included
in the Joint Venture. On a pro-forma basis, growth was 8%, primarily
reflecting strong growth in the US following the launch of Flonase
OTC. Estimated global market growth was 6% in the quarter versus
rolling 12 month growth of 4%. The uptick was primarily driven by
a strong seasonal demand for cold and flu products, and OTC switches
in the US market. Sales from new GSK innovations (product introductions
within the last three years on a rolling basis) represented approximately
15% of Q1 2015 sales. This reflected a particularly strong contribution
in the quarter from the Flonase launch in the US and consequently
is several points higher than annualised expectations. Other 2015
launches to date include Fenbid Chewable in China, Sensodyne Repair
and Protect Whitening in the US and Germany, and the roll out of
Sensodyne Mouthwash.
US sales grew 47% on a reported basis to GBP330 million, and 33%
on a pro-forma basis. Flonase was the region's primary growth driver
and the brand currently holds an 11% estimated market share after
only 10 weeks. Oral health sales were driven by Sensodyne which
continued its strong performance with growth of 14% and approximately
a one percentage point of share gain in the quarter, helped by the
launch of Sensodyne Repair and Protect Whitening. Skin health delivered
strong growth helped by 27% growth of Abreva, boosted by stocking
patterns. Niquitin Minis and alli returned to the market but Tums
supply has seen some disruption during the quarter.
Sales in Europe grew 32% on a reported basis to GBP364 million and
grew 4% pro-forma. Oral health products reported growth of 8%, reflecting
strong performances from both Sensodyne and Aquafresh following
an improved supply position, new advertising in key markets, and
the roll out of Sensodyne True White in the UK, Sensodyne Repair
and Protect in Germany, and Sensodyne Mouthwash across a number
of markets. On a pro-forma basis, Wellness registered mid single
digit growth, as regional Respiratory brands Beechams and Coldrex
benefited from the stronger cold and flu season. Nutrition and Skin
health sales both declined reflecting disruption from stocking patterns
and some supply shortages.
International sales of GBP687 million grew 12% on a reported basis
and 2% pro-forma. China, India and Turkey all reported double digit
pro-forma growth, and Oral health (+12%) and Skin health (+11%)
performed well across the region. Wellness growth was impacted by
a decline in Panadol sales. This was primarily due to a challenging
competitive environment in Australia and a tough comparative quarter
in Latin America as the brand annualised against prior year growth
of over 50% following supply improvements. In Nutrition, Horlicks
was up 4%, with strong consumption growth in India partly offset
by some retailer destocking in the quarter.
Sales from new Pharmaceutical, ViiV Healthcare and Vaccine launches
Q1 2015
--------------
Growth
GBPm CER%
----- -------
Global Pharmaceuticals
Respiratory Relvar/Breo 41 >100
Ellipta
Anoro Ellipta 12 -
Incruse Ellipta 1 -
CVMU Eperzan/Tanzeum 4 -
Immuno-inflammation Benlysta 51 23
Other pharmaceuticals Potiga/Trobalt 1 -
ViiV Healthcare Tivicay 112 >100
Triumeq 81 -
303 >100
----- -------
New products are those launched in the last five years (2011 to
2015 inclusive). Sales of new products were GBP303 million, grew
in excess of 100% in the quarter and represented 7% of Global Pharmaceutical,
ViiV Healthcare and Vaccine turnover.
Research and development
GSK remains focused on delivering an improved return on its investment
in R&D. Sales contribution, reduced attrition and cost reduction
are all important drivers of an improving internal rate of return.
R&D expenditure is not determined as a percentage of sales but instead
capital is allocated using strict returns based criteria depending
on the pipeline opportunities available.
The operations of Pharmaceuticals R&D are broadly split into Discovery
activities (up to the completion of phase IIa trials) and Development
work (from phase IIb onwards) each supported by specific and common
infrastructure and other shared services where appropriate. R&D
expenditure for Q1 2015 is analysed below.
Q1 2015 Q1 2014
GBPm GBPm
-------- --------
Discovery 188 170
Development 314 333
Facilities and central support functions 108 124
-------- --------
Pharmaceuticals R&D 610 627
Vaccines 124 119
Consumer Healthcare 55 38
-------- --------
Core R&D 789 784
Amortisation and impairment of intangible assets 34 56
Major restructuring costs 32 4
Acquisition accounting and other 12 15
Total R&D 867 859
-------- --------
GSK's Phase III/Registration Pharmaceuticals and Vaccines pipeline
The table below is provided as part of our quarterly update to show
events and changes to the late-stage pipeline during the quarter
and up to the date of this announcement. There were several news
events for late-stage pipeline assets in this quarter and these
are listed in the table below. The Oncology products and Nimenrix
have been removed from the table following the completion of the
deal with Novartis. Retosiban has been added to the table as it
entered Ph III during the quarter.
Since Q4 2014 results, the following pipeline milestones have been
achieved:
-- Announced positive Overall Survival results from Ph III COMBI-d
study of Tafinlar and Mekinist combination in metastatic melanoma;
-- Announced start of second Ph III (FULFIL) study for once daily
closed triple ICS/LABA/LAMA vs Symbicort in patients with COPD;
-- Announced start of Ph III study for retosiban in spontaneous pre-term
labour;
-- FDA AdCom recommended US approval of Breo Ellipta in adult patients
with asthma;
-- Triumeq approved in Japan for HIV;
-- Encruse Ellipta approved in Japan for COPD;
-- Synflorix approved in Japan for invasive pneumococcal disease;
-- Duac approved in Japan for acne vulgaris;
-- US approval of Flolan reformulation;
-- Three year Ph III data for Mosquirix RTS,S malaria vaccine published
in The Lancet;
-- Publication of full data from ZOE-50 Ph III study of Zoster vaccine
in NEJM;
-- US approval of Breo Ellipta for adult patients with asthma;
-- EU filing of ex-vivo stem cell gene therapy for ADA-SCID.
Respiratory US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
Relvar/Breo Ellipta Asthma Approved Approved Approved by FDA for
(FF/VI) April Nov 2013 adult asthma in US on
2015 30 April 2015
--------------------- --------------------- ---------- ----------- ---------------------------
vilanterol COPD Ph III Ph III
(VI)
--------------------- --------------------- ---------- ----------- ---------------------------
mepolizumab Severe eosinophilic Filed Filed
asthma Nov 2014 Nov 2014
--------------------- --------------------- ---------- ----------- ---------------------------
COPD Ph III Ph III
--------------------- --------------------- ---------- ----------- ---------------------------
FF+UMEC+VI COPD Ph III Ph III Start of FULFIL Ph III
study vs Symbicort on
9 February 2015
--------------------- --------------------- ---------- ----------- ---------------------------
Vaccines US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
MAGE-A3 Melanoma Ph III Ph III
---------------------
HZ/su herpes Shingles prophylaxis Ph III Ph III ZOE-50 data published
zoster in NEJM on 28 April
2015
--------------------- --------------------- ---------- ----------- ---------------------------
Mosquirix (RTS,S) Malaria prophylaxis n/a Filed Ph III data published
July 2014 in The Lancet on 24
April 2015
--------------------- --------------------- ---------- ----------- ---------------------------
Cardiovascular & Metabolic US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
losmapimod Acute coronary Ph III Ph III
syndrome (ACS)
--------------------- --------------------- ---------- ----------- ---------------------------
retosiban Spontaneous pre-term Ph III Ph III Start of Ph III study
labour on 17 March 2015
--------------------- --------------------- ---------- ----------- ---------------------------
Immuno-inflammation US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
Benlysta (s.c.) Systemic lupus Ph III Ph III
erythematosus
--------------------- --------------------- ---------- ----------- ---------------------------
Benlysta (i.v.) vasculitis Ph III Ph III
--------------------- --------------------- ---------- ----------- ---------------------------
sirukumab Rheumatoid arthritis Ph III Ph III
--------------------- --------------------- ---------- ----------- ---------------------------
Rare diseases US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
2696273 Adenosine deaminase Ph II/III Filed Filed in EU on 5 May
severe combined 2015
immune deficiency
(ADA-SCID)
(Ex-vivo stem May 2015
cell gene therapy)
--------------------- --------------------- ---------- ----------- ---------------------------
mepolizumab Eosinophilic Ph III Ph III
granulomatosis
with polyangiitis
(EGPA)
--------------------- --------------------- ---------- ----------- ---------------------------
Infectious Diseases US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
tafenoquine Treatment and Ph III n/a
relapse prevention
of Plasmodium
vivax malaria
--------------------- --------------------- ---------- ----------- ---------------------------
Dermatology US EU News update in the quarter
-------------------------------------------- ---------- ----------- ---------------------------
ofatumumab Pemphigus vulgaris Ph III Ph III
(s.c.)
--------------------- --------------------- ---------- ----------- ---------------------------
Definitions
Core results
Core results exclude the following items from total results: amortisation
and impairment of intangible assets (excluding computer software)
and goodwill; major restructuring costs, including those costs following
material acquisitions; legal charges (net of insurance recoveries)
and expenses on the settlement of litigation and government investigations;
other operating income other than royalty income; disposals of associates,
products and businesses, and acquisition accounting adjustments
for material acquisitions, together with the tax effects of all
of these items. GSK believes this approach provides a clearer view
of the underlying performance of the core business and should make
the Group's results more comparable with the majority of its peers.
CER growth
In order to illustrate underlying performance, it is the Group's
practice to discuss its results in terms of constant exchange rate
(CER) growth. This represents growth calculated as if the exchange
rates used to determine the results of overseas companies in Sterling
had remained unchanged from those used in the comparative period.
All commentaries are presented in terms of CER growth, unless otherwise
stated.
Pro-forma growth
The Novartis transaction completed on 2 March 2015 and so GSK's
reported results include one month of results of the former Novartis
Vaccines and Consumer Healthcare businesses and exclude the results
of the former GSK Oncology products from 2 March. Pro-forma growth
rates are calculated comparing reported turnover for Q1 2015 with
the turnover for Q1 2014 adjusted to include the equivalent one
month of results of the former Novartis Vaccines and Consumer Healthcare
businesses and to exclude the results of the former GSK Oncology
products from 2 March 2014.
Full-year 2014 pro-forma results
Pro-forma results for the full-year 2014, where provided, include
the following major adjustments: (i) the exclusion of Oncology,
(ii) the inclusion of 12 months of the acquired Novartis Consumer
and Vaccines businesses, (iii) reallocation of most corporate costs
to more accurately reflect the profitability of each segment and
(iv) the reallocation of divestments required to Corporate and other
unallocated costs. Pro-forma 2014 Corporate and other unallocated
operating profit includes a structural benefit of GBP219 million
realised in Q3 2014. See "Cautionary statement regarding unaudited
pro-forma financial information" below.
Free cash flow
Free cash flow is the net cash inflow from operating activities
less capital expenditure, interest and dividends paid to non-controlling
interests plus proceeds from the sale of property, plant and equipment
and dividends received from joint ventures and associated undertakings.
It is used by management for planning and reporting purposes and
in discussions with and presentations to investment analysts and
rating agencies. Free cash flow growth is calculated on a reported
basis.
Adjusted free cash flow
Adjusted free cash flow excludes payments made to settle legal disputes.
Free cash flow conversion
Free cash flow conversion is free cash flow as a percentage of earnings
excluding after-tax legal charges and legal settlements.
Adjusted net cash inflow from operating activities
Adjusted net cash inflow from operating activities excludes payments
made to settle legal disputes.
Working capital conversion cycle
The working capital conversion cycle is calculated as the number
of days sales outstanding plus days inventory outstanding, less
days purchases outstanding.
Cautionary statement regarding unaudited pro-forma financial information
The unaudited pro-forma financial information in this release has
been prepared to illustrate the effect of (i) the disposal of the
oncology assets, (ii) the Consumer Healthcare joint venture (i.e.
the acquisition of the Novartis OTC Business), and (iii) the acquisition
of the Vaccines business (which excludes the Influenza Vaccines
business) on the results of the Group as if they had taken place
as at 1 January 2014.
The unaudited pro-forma financial information has been prepared
for illustrative purposes only and, by its nature, addresses a hypothetical
situation and, therefore, does not represent the Group's actual
financial position or results. The unaudited pro-forma financial
does not purport to represent what the Group's financial position
actually would have been if the disposal of the Oncology assets,
the Consumer Healthcare joint venture and the Vaccines acquisition
had been completed on the dates indicated; nor does it purport to
represent the financial condition at any future date. In addition
to the matters noted above, the unaudited pro-forma financial information
does not reflect the effect of anticipated synergies and efficiencies
associated with the Oncology disposal, the Consumer Healthcare joint
venture and the Vaccines acquisition.
The unaudited pro-forma financial information does not constitute
financial statements within the meaning of Section 434 of the Companies
Act 2006. The unaudited pro-forma financial information in this
release should be read in conjunction with the financial statements
included in (i) the Group's Q1 2015 earnings report dated 6 May
2015 and furnished to the SEC on Form 6-K, (ii) the Group's Annual
Report on Form 20-F for 2014 and (iii) the Circular to Shareholders
and Notice of General Meeting furnished to the SEC on Form 6-K on
24 November 2014.
Contacts
GSK - one of the world's leading research-based pharmaceutical and
healthcare companies - is committed to improving the quality of
human life by enabling people to do more, feel better and live longer.
For further information please visit www.gsk.com.
GSK enquiries:
UK Media enquiries: David Mawdsley +44 (0) 20 8047 (London)
5502
Simon Steel +44 (0) 20 8047 (London)
5502
David Daley +44 (0) 20 8047 (London)
5502
Catherine Hartley +44 (0) 20 8047 (London)
5502
Sarah Spencer +44 (0) 20 8047 (London)
5502
Claire Brough +44 (0) 20 8047 (London)
5502
US Media enquiries: Stephen Rea +1 215 751 4394 (Philadelphia)
Mary Anne Rhyne +1 919 483 0492 (North Carolina)
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Analyst/Investor enquiries: Ziba Shamsi +44 (0) 20 8047 (London)
5543
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2406
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Registered Office:
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TW8 9GS
Financial information
Income statement
Q1 2015 Q1 2014
GBPm GBPm
-------- --------
TURNOVER 5,622 5,613
Cost of sales (2,103) (1,743)
-------- --------
Gross profit 3,519 3,870
Selling, general and administration (2,225) (1,971)
Research and development (867) (859)
Royalty income 77 70
Other operating income/(expense) 8,712 (44)
-------- --------
OPERATING PROFIT 9,216 1,066
Finance income 32 18
Finance expense (191) (182)
Profit on disposal of associates 843 -
Share of after tax profits of associates and
joint ventures 23 1
-------- --------
PROFIT BEFORE TAXATION 9,923 903
Taxation (1,885) (184)
Tax rate % 19.0% 20.4%
-------- --------
PROFIT AFTER TAXATION FOR THE PERIOD 8,038 719
-------- --------
(Loss)/profit attributable to non-controlling
interests (51) 51
Profit attributable to shareholders 8,089 668
-------- --------
8,038 719
-------- --------
EARNINGS PER SHARE 167.8p 13.9p
-------- --------
Diluted earnings per share 166.4p 13.7p
-------- --------
Statement of comprehensive income
Q1 2015 Q1 2014
GBPm GBPm
-------- --------
Profit for the period 8,038 719
Items that may be reclassified subsequently to
income statement:
Exchange movements on overseas net assets and net
investment hedges (332) (17)
Fair value movements on available-for-sale investments 241 (30)
Reclassification of fair value movements on available-for-sale
investments (262) (1)
Deferred tax on fair value movements on available-for-sale
investments (24) (19)
Deferred tax reversed on reclassification of available-for-sale 2 -
investments
Fair value movements on cash flow hedges (6) (1)
Deferred tax on fair value movements on cash flow 1 -
hedges
Reclassification of cash flow hedges to income
statement 3 2
Share of other comprehensive expense of associates
and joint ventures (77) 13
-------- --------
(454) (53)
-------- --------
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling
interests 20 5
Remeasurement losses on defined benefit plans (328) (177)
Deferred tax on remeasurement losses on defined
benefit plans 75 42
-------- --------
(233) (130)
-------- --------
Other comprehensive expense for the period (687) (183)
-------- --------
Total comprehensive income for the period 7,351 536
-------- --------
Total comprehensive income for the period attributable
to:
Shareholders 7,382 480
Non-controlling interests (31) 56
-------- --------
7,351 536
-------- --------
Global Pharmaceuticals, ViiV Healthcare and Vaccines turnover
Three months ended 31 March 2015
Total US Europe International
--------------- --------------- --------------- ----------------
Growth Growth Growth Growth
GBPm CER% GBPm CER% GBPm CER% GBPm CER%
------ ------- ------ ------- ------ ------- ------- -------
Respiratory 1,408 (9) 583 (22) 392 (4) 433 5
Anoro Ellipta 12 - 9 - 2 - 1 -
Avamys/Veramyst 71 7 6 (25) 17 6 48 14
Flixotide/Flovent 153 (22) 83 (38) 27 (3) 43 15
Relvar/Breo Ellipta 41 >100 14 >100 16 >100 11 >100
Seretide/Advair 898 (14) 392 (21) 291 (11) 215 (4)
Ventolin 161 (9) 78 (24) 32 6 51 11
Other 72 5 1 - 7 - 64 4
Cardiovascular,
metabolic and
urology (CVMU) 218 (8) 83 (8) 68 (9) 67 (8)
Avodart 179 (7) 56 (14) 66 3 57 (12)
Other 39 (14) 27 4 2 (90) 10 22
Immuno-inflammation 60 19 55 21 4 33 1 (50)
Benlysta 51 23 46 26 4 33 1 (50)
Other 9 - 9 - - - - -
Oncology 216 (18) 93 (22) 70 (20) 53 (5)
Other pharmaceuticals 525 (9) 42 (17) 149 1 334 (12)
Dermatology 109 (11) 12 (15) 37 (5) 60 (14)
Augmentin 140 (3) - (100) 51 (3) 89 (2)
Other anti-bacterials 47 (16) 1 - 16 (14) 30 (17)
Rare diseases 91 (10) 12 (54) 32 6 47 -
Other 138 (9) 17 >100 13 60 108 (21)
------ ------- ------ ------- ------ ------- ------- -------
Innovative Pharmaceuticals 2,427 (9) 856 (18) 683 (5) 888 (4)
Established Products 650 (20) 163 (42) 132 (14) 355 (8)
Coreg 27 (22) 27 (22) - - - -
Hepsera 22 (9) - - - - 22 (9)
Imigran/Imitrex 38 (15) 18 (29) 13 (7) 7 14
Lamictal 127 (2) 63 - 23 (11) 41 2
Lovaza 28 (75) 28 (75) - - - -
Requip 22 (14) 1 (67) 7 (18) 14 -
Serevent 23 (15) 10 - 10 (23) 3 (20)
Seroxat/Paxil 43 (18) - - 8 (33) 35 (14)
Valtrex 42 19 5 (17) 6 (14) 31 38
Zeffix 39 (16) - (100) 2 - 37 (14)
Other 239 (17) 11 (52) 63 (13) 165 (15)
------ ------- ------ ------- ------ ------- ------- -------
Global Pharmaceuticals 3,077 (12) 1,019 (23) 815 (7) 1,243 (5)
------ ------- ------ ------- ------ ------- ------- -------
ViiV Healthcare 446 42 229 66 154 35 63 9
Combivir 10 (38) 3 (16) 3 (52) 4 (36)
Epzicom/Kivexa 176 2 60 (9) 82 9 34 2
Lexiva/Agenerase 16 (27) 10 (19) 4 (35) 2 (37)
Selzentry 30 (9) 14 - 12 (12) 4 (23)
Tivicay 112 >100 72 >100 29 >100 11 >100
Triumeq 81 - 62 - 18 - 1 -
Trizivir 7 (36) 2 (46) 4 (31) 1 (40)
Other 14 (33) 6 (56) 2 (33) 6 (43)
------ ------- ------ ------- ------ ------- ------- -------
Total Pharmaceuticals 3,523 (7) 1,248 (15) 969 (2) 1,306 (4)
------ ------- ------ ------- ------ ------- ------- -------
Vaccines 699 10 217 14 224 4 258 13
Bexsero 7 - - - 6 - 1 -
Boostrix 66 7 37 13 17 27 12 (25)
Cervarix 28 (14) 1 - 10 (27) 17 (5)
Fluarix, FluLaval 4 (63) 3 - - - 1 (75)
Hepatitis 143 17 64 36 41 (4) 38 20
Infanrix, Pediarix 186 (6) 69 (13) 77 (9) 40 13
Menveo 11 - 7 - 1 - 3 -
Rabipur/Rabivert 5 - 3 - 1 - 1 -
Rotarix 98 14 32 12 17 - 49 21
Synflorix 60 7 - - 9 (17) 51 12
Other 91 31 1 100 45 32 45 29
------ ------- ------ ------- ------ ------- ------- -------
4,222 (5) 1,465 (12) 1,193 (1) 1,564 (2)
------ ------- ------ ------- ------ ------- ------- -------
Balance sheet
31 March 31 December
2015 2014
GBPm GBPm
----------- ------------
ASSETS
Non-current assets
Property, plant and equipment 9,642 9,052
Goodwill 5,212 3,724
Other intangible assets 17,084 8,320
Investments in associates and
joint ventures 82 340
Other investments 1,729 1,114
Deferred tax assets 2,669 2,688
Other non-current assets 714 735
----------- ------------
Total non-current assets 37,132 25,973
----------- ------------
Current assets
Inventories 4,578 4,231
Current tax recoverable 116 138
Trade and other receivables 5,496 4,600
Derivative financial instruments 102 146
Liquid investments 73 69
Cash and cash equivalents 10,290 4,338
Assets held for sale 209 1,156
----------- ------------
Total current assets 20,864 14,678
----------- ------------
TOTAL ASSETS 57,996 40,651
----------- ------------
LIABILITIES
Current liabilities
Short-term borrowings (3,240) (2,943)
Trade and other payables (8,592) (7,958)
Derivative financial instruments (115) (404)
Current tax payable (2,696) (945)
Short-term provisions (1,143) (1,045)
----------- ------------
Total current liabilities (15,786) (13,295)
----------- ------------
Non-current liabilities
Long-term borrowings (15,221) (15,841)
Deferred tax liabilities (1,774) (445)
Pensions and other post-employment
benefits (3,696) (3,179)
Other provisions (450) (545)
Derivative financial instruments (8) (9)
Other non-current liabilities (9,653) (2,401)
----------- ------------
Total non-current liabilities (30,802) (22,420)
----------- ------------
TOTAL LIABILITIES (46,588) (35,715)
----------- ------------
NET ASSETS 11,408 4,936
----------- ------------
EQUITY
Share capital 1,339 1,339
Share premium account 2,787 2,759
Retained earnings 1,107 (2,074)
Other reserves 2,201 2,239
----------- ------------
Shareholders' equity 7,434 4,263
Non-controlling interests 3,974 673
----------- ------------
TOTAL EQUITY 11,408 4,936
----------- ------------
Statement of changes in equity
Share- Non-
Share Share Retained Other holder's controlling Total
capital premium earnings reserves equity interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2015 1,339 2,759 (2,074) 2,239 4,263 673 4,936
Profit for the
period 8,089 8,089 (51) 8,038
Other
comprehensive
(expense)/income
for the
period (668) (39) (707) 20 (687)
------------ ------------ ------------ ------------ ------------
Total comprehensive
income/(expense)
for the period 7,421 (39) 7,382 (31) 7,351
------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (41) (41)
Dividends to
shareholders (924) (924) (924)
Gain on transfer of
net
assets into
Consumer joint
venture 2,878 2,878 2,878
Consumer Healthcare
joint
venture
put option (6,204) (6,204) (6,204)
Changes in
non-controlling
interests 3,373 3,373
Shares issued - 28 28 28
Shares acquired by
ESOP
Trusts (63) (63) (63)
Write-down on
shares held
by ESOP
Trusts (64) 64 - -
Share-based
incentive plans 74 74 74
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 2015 1,339 2,787 1,107 2,201 7,434 3,974 11,408
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2014 1,336 2,595 913 2,153 6,997 815 7,812
Profit for the
period 668 668 51 719
Other
comprehensive
(expense)/income
for the
period (140) (48) (188) 5 (183)
------------ ------------ ------------ ------------ ------------
Total comprehensive
income/(expense)
for the period 528 (48) 480 56 536
------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (47) (47)
Dividends to
shareholders (910) (910) (910)
Changes in
non-controlling
interests (33) (33) (9) (42)
Shares issued 1 80 81 81
Forward contract
relating
to non-controlling
interest 21 21 21
Ordinary shares
purchased
and held as
Treasury shares (28) (28) (28)
Shares acquired by
ESOP
Trusts (74) (74) (74)
Write-down on
shares held
by ESOP Trusts (74) 74 - -
Share-based
incentive plans 82 82 82
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 2014 1,337 2,675 478 2,126 6,616 815 7,431
------------ ------------ ------------ ------------ ------------ ------------ ------------
Cash flow statement
Three months ended 31 March 2015
Q1 2015 Q1 2014
GBPm GBPm
-------- --------
Profit after tax 8,038 719
Tax on profits 1,885 184
Share of after tax profits of associates and
joint ventures (23) (1)
Profit on disposal of interest in associates (843) -
Net finance expense 159 164
Profit on disposal of Oncology business (9,262) -
Depreciation and other adjusting items 387 573
Increase in working capital (177) (157)
Increase/(decrease) in other net liabilities 350 (325)
-------- --------
Cash generated from operations 514 1,157
Taxation paid (144) (230)
-------- --------
Net cash inflow from operating activities 370 927
-------- --------
Cash flow from investing activities
Purchase of property, plant and equipment (245) (201)
Proceeds from sale of property, plant and equipment 14 9
Purchase of intangible assets (120) (148)
Proceeds from sale of intangible assets - 8
Purchase of equity investments (26) (21)
Proceeds from sale of equity investments 255 11
Purchase of businesses, net of cash acquired (3,435) -
Disposal of businesses 10,055 -
Investment in associates and joint ventures (2) (3)
Proceeds from disposal of associates and joint 564 -
ventures
Interest received 30 11
-------- --------
Net cash inflow/(outflow) from investing activities 7,090 (334)
-------- --------
Cash flow from financing activities
Issue of share capital 28 81
Shares acquired by ESOP Trusts (63) (74)
Shares purchased and held as Treasury shares - (28)
Purchase of non-controlling interests - (669)
Repayment of short-term loans (645) (894)
Net repayment of obligations under finance leases (6) (6)
Interest paid (77) (84)
Dividends paid to shareholders (924) (910)
Distributions to non-controlling interests (41) (47)
Other financing items (54) 42
-------- --------
Net cash outflow from financing activities (1,782) (2,589)
-------- --------
Increase/(decrease) in cash and bank overdrafts
in the period 5,678 (1,996)
-------- --------
Cash and bank overdrafts at beginning of the
period 4,028 5,231
Exchange adjustments 128 (2)
Increase/(decrease) in cash and bank overdrafts 5,678 (1,996)
-------- --------
Cash and bank overdrafts at end of the period 9,834 3,233
-------- --------
Cash and bank overdrafts at end of the period
comprise:
Cash and cash equivalents 10,290 3,514
Overdrafts (456) (281)
-------- --------
9,834 3,233
-------- --------
Segment information
Operating segments are reported based on the financial information
provided to the Chief Executive Officer and the responsibilities
of the Corporate Executive Team (CET). The completion of the Novartis
transaction on 2 March 2015 has changed the balance of the Group
and GSK has changed its segment reporting to reflect this. With
effect from 1 January 2015, GSK is reporting results under five
segments: Global Pharmaceuticals, ViiV Healthcare, Pharmaceuticals
R&D, Vaccines and Consumer Healthcare and individual members of
the CET are responsible for each segment. Comparative information
has been restated accordingly.
The Group's management reporting process allocates intra-Group profit
on a product sale to the market in which that sale is recorded,
and the profit analyses below have been presented on that basis.
The Pharmaceuticals R&D segment is the responsibility of the Head
of Research & Development and is reported as a separate segment.
Corporate and other unallocated costs include the results of several
Vaccines and Consumer Healthcare products which are being held for
sale in a number of markets in order to meet anti-trust approval
requirements, together with the costs of corporate functions.
Turnover by segment
Q1 2014
Q1 2015 (restated) Growth
GBPm GBPm CER%
-------- ------------- -------
Global Pharmaceuticals 3,077 3,507 (12)
ViiV Healthcare 446 311 42
-------- ------------- -------
Total Pharmaceuticals 3,523 3,818 (7)
Vaccines 699 651 10
Consumer Healthcare 1,381 1,121 24
-------- ------------- -------
Segment turnover 5,603 5,590 1
Corporate and other unallocated turnover 19 23 (9)
-------- ------------- -------
Total turnover 5,622 5,613 1
-------- ------------- -------
Operating profit by segment
Q1 2014
Q1 2015 (restated) Growth
GBPm GBPm CER%
-------- ------------- -------
Global Pharmaceuticals 1,256 1,596 (20)
ViiV Healthcare 318 204 55
Pharmaceuticals R&D (581) (559) (1)
-------- ------------- -------
Total Pharmaceuticals 993 1,241 (17)
Vaccines 161 211 (31)
Consumer Healthcare 182 125 53
-------- ------------- -------
Segment profit 1,336 1,577 (13)
Corporate and other unallocated costs (31) (47) 9
-------- ------------- -------
Core operating profit 1,305 1,530 (14)
Non-core items 7,911 (464)
-------- ------------- -------
Total operating profit 9,216 1,066 >100
Finance income 32 18
Finance costs (191) (182)
Profit on disposal of associates 843 -
Share of after tax profits of associates
and joint ventures 23 1
-------- ------------- -------
Profit before taxation 9,923 903 >100
-------- ------------- -------
Legal matters
The Group is involved in significant legal and administrative proceedings,
principally product liability, intellectual property, tax, anti-trust
and governmental investigations as well as related private litigation,
which are more fully described in the 'Legal Proceedings' note in
the Annual Report 2014.
At 31 March 2015, the Group's aggregate provision for legal and
other disputes (not including tax matters described under 'Taxation'
below) was GBP0.5 billion (31 December 2014: GBP0.5 billion). The
Group may become involved in significant legal proceedings in respect
of which it is not possible to make a reliable estimate of the expected
financial effect, if any, that could result from ultimate resolution
of the proceedings. In these cases, the Group would provide appropriate
disclosures about such cases, but no provision would be made.
The ultimate liability for legal claims may vary from the amounts
provided and is dependent upon the outcome of litigation proceedings,
investigations and possible settlement negotiations. The Group's
position could change over time, and, therefore, there can be no
assurance that any losses that result from the outcome of any legal
proceedings will not exceed by a material amount the amount of the
provisions reported in the Group's financial accounts.
There have been no significant developments since the date of the
Annual Report 2014.
Developments with respect to tax matters are described in 'Taxation'
below.
Taxation
There have been no material changes to historical tax matters since
the publication of the Annual Report. Issues relation to taxation
are described in the 'Taxation' note in the Annual Report 2014.
The Group's tax payable liability of GBP2,696 million at 31 March
2015 includes taxation payable on the Oncology disposal. The Group
continues to believe it has made adequate provision for the liabilities
likely to arise from periods which are open and not yet agreed by
tax authorities. The ultimate liability for such matters may vary
from the amounts provided and is dependent upon the outcome of agreements
with relevant tax authorities.
In the quarter, tax on core profits amounted to GBP231 million and
represented an effective core tax rate of 20.0% (Q1 2014: 22.0%).
The charge for taxation on total profits amounted to GBP1,885 million
and represented an effective tax rate of 19.0% (Q1 2014: 20.4%).
The core tax rate for the full year is also expected to be around
20%. The Group's balance sheet at 31 March 2015 included a tax payable
liability of GBP2,696 million and a tax recoverable asset of GBP116
million.
Additional information
Accounting policies and basis of preparation
This unaudited Results Announcement contains condensed financial
information for the three months ended 31 March 2015, and should
be read in conjunction with the Annual Report 2014, which was prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union. This Results Announcement has been
prepared applying consistent accounting policies to those applied
by the Group in the Annual Report 2014, except that an amendment
to IAS 19 'Defined benefit plans: Employee contribution' has been
implemented from 1 January 2015. This revision has not had a material
impact on the results or financial position of the Group.
In addition, the segment information for 2014 has been restated
to reflect changes made to segments in 2015 as set out under 'Segment
information' above.
This Results Announcement does not constitute statutory accounts
of the Group within the meaning of sections 434(3) and 435(3) of
the Companies Act 2006. The full Group accounts for 2014 were published
in the Annual Report 2014, which has been delivered to the Registrar
of Companies and on which the report of the independent auditors
was unqualified and did not contain a statement under section 498
of the Companies Act 2006.
Exchange rates
GSK operates in many countries, and earns revenues and incurs costs
in many currencies. The results of the Group, as reported in Sterling,
are affected by movements in exchange rates between Sterling and
other currencies. Average exchange rates, as modified by specific
transaction rates for large transactions, prevailing during the
period, are used to translate the results and cash flows of overseas
subsidiaries, associates and joint ventures into Sterling. Period-end
rates are used to translate the net assets of those entities. The
currencies which most influenced these translations and the relevant
exchange rates were:
Q1 2015 Q1 2014 2014
-------- -------- -----
Average rates:
US$/GBP 1.52 1.66 1.65
Euro/GBP 1.34 1.21 1.24
Yen/GBP 182 171 175
Period-end rates:
US$/GBP 1.48 1.67 1.56
Euro/GBP 1.38 1.21 1.29
Yen/GBP 178 172 187
During Q1 2015, average sterling exchange rates were stronger against
the Euro and the Yen, but weaker against the US Dollar, compared
with the same period in 2014. Similarly, period-end sterling exchange
rates were stronger against the Euro and the Yen, but weaker against
the US Dollar.
Weighted average number of shares
Q1 2015 Q1 2014
millions millions
---------- ----------
Weighted average number of shares - basic 4,820 4,802
Dilutive effect of share options and share awards 41 64
---------- ----------
Weighted average number of shares - diluted 4,861 4,866
---------- ----------
At 31 March 2015, 4,830 million shares were in free issue (excluding
Treasury shares and shares held by the ESOP Trusts). This compares
with 4,814 million shares at 31 March 2014.
Net assets
The book value of net assets increased by GBP6,472 million from
GBP4,936 million at 31 December 2014 to GBP11,408 million at 31
March 2015. This primarily reflects the impact of the profit arising
from the disposal of the Group's oncology business to Novartis and
the gain on the sale of part of its shareholding in Aspen, partly
offset by the ongoing remeasurement of the ViiV Healthcare contingent
consideration and the dividend paid in the quarter.
The carrying value of investments in associates and joint ventures
at 31 March 2015 was GBP82 million, with a market value of GBP138
million. Assets held for sale amounted to GBP209 million at 31 March
2015 (31 December 2014: GBP1,156 million). The decrease in the period
primarily reflected the realisation of the assets sold to Novartis.
At 31 March 2015, the net deficit on the Group's pension plans was
GBP2,168 million compared with GBP1,689 million at 31 December 2014.
The increase in the net deficit primarily arose from decreases in
the rates used to discount UK pension liabilities from 3.6% to 3.3%,
and US pension liabilities from 3.8% to 3.6%, together with the
impact of the Novartis transaction, partly offset by an increase
in UK asset values.
At 31 March 2015, the post-retirement benefits provision was GBP1,481
million compared with GBP1,397 million at 31 December 2014. The
increase in the provision arose from the decrease in the rate used
to discount the US provision together with a stronger US Dollar
at the period end.
In certain circumstances, Novartis has the right to require GSK
to acquire its 36.5% shareholding in the Consumer Healthcare joint
venture at a market-based valuation. This right is exercisable in
certain windows from 2018 to 2035 and may be exercised either in
respect of Novartis' entire shareholding or in up to four instalments.
If exercised, GSK would not be able to avoid this obligation, and
so has recognised a financial liability of GBP6,204 million in Other
non-current liabilities. This represents the present value of the
estimated amount payable by GSK in the event of full exercise of
the right by Novartis.
In certain circumstances, the other shareholders in ViiV Healthcare,
Pfizer (11.7%) and Shionogi (10%) may require GSK to acquire their
shareholdings at a market based valuation. Pfizer may request an
IPO at any time and if either GSK does not consent to such IPO or
an offering is not completed within nine months, Pfizer could require
GSK to acquire its shareholding. Shionogi may also request GSK to
acquire its shareholding in ViiV in certain circumstances and limited
windows in 2017, 2020 and 2022.
At 31 March 2015, the ESOP Trusts held 35.7 million GSK shares against
the future exercise of share options and share awards. The carrying
value of GBP151 million has been deducted from other reserves. The
market value of these shares was GBP564 million.
At 31 March 2015, the company held 491.5 million Treasury shares
at a cost of GBP6,917 million, which has been deducted from retained
earnings.
Contingent liabilities
There were contingent liabilities at 31 March 2015 in respect of
guarantees and indemnities entered into as part of the ordinary
course of the Group's business. No material losses are expected
to arise from such contingent liabilities. Provision is made for
the outcome of legal and tax disputes where it is both probable
that the Group will suffer an outflow of funds and it is possible
to make a reliable estimate of that outflow. Descriptions of the
significant legal and tax disputes to which the Group is a party
are set out on page 36.
Novartis transaction
The three-part inter-conditional transaction with Novartis AG involving
its Consumer Healthcare, Vaccines and Oncology businesses completed
on 2 March 2015.
GSK and Novartis have contributed their respective Consumer Healthcare
businesses into a Consumer Healthcare Joint Venture in a non-cash
transaction. GSK has an equity interest of 63.5% and majority control
of the Joint Venture. In addition, GSK has acquired Novartis' global
Vaccines business (excluding influenza vaccines) for an initial
cash consideration of $5.25 billion with subsequent potential milestone
payments of up to $1.8 billion and ongoing royalties. The first
milestone of $450 million was paid on 26 March 2015.
The fair values of the assets acquired, including goodwill are provided
in the table below.
Consumer
Healthcare Vaccines
GBPm GBPm
------------ ---------
Net assets acquired
Intangible assets 5,976 2,804
Other net assets 702 669
Deferred tax liabilities (1,345) (94)
------------ ---------
5,333 3,379
Non-controlling interest (2,114) -
Goodwill 897 556
------------ ---------
Total consideration 4,116 3,935
------------ ---------
On the acquisition of the Vaccines business, total consideration
includes GBP594 million of contingent consideration and is net of
a GBP52 million deferred tax asset on the contingent consideration.
GSK has also divested its marketed Oncology portfolio, related R&D
activities and rights to its AKT inhibitor and also granted commercialisation
partner rights for future oncology products to Novartis for consideration
of $16 billion (GBP10,395 million). After taking account of the
book value of assets, including goodwill, derecognised of GBP1,014
million and related costs, the profit on disposal amounted to GBP9,262
million before tax and GBP7,342 million after tax.
These amounts are provisional and subject to change.
Reconciliation of cash flow to movements in net debt
Q1 2015 Q1 2014
GBPm GBPm
--------- ---------
Net debt at beginning of the period (14,377) (12,645)
Increase/(decrease) in cash and bank overdrafts 5,678 (1,996)
Net repayment of short-term loans 645 894
Net repayment of obligations under finance leases 6 6
Exchange adjustments (45) 78
Other non-cash movements (5) 3
--------- ---------
Decrease/(increase) in net debt 6,279 (1,015)
--------- ---------
Net debt at end of the period (8,098) (13,660)
--------- ---------
Core results reconciliations
The reconciliations between core results and total results for Q1
2015 and Q1 2014 are set out below.
Income statement - Core results reconciliation
Three months ended 31 March 2015
Acquisition
accounting
Core Intangible Intangible Major Legal and Total
results amortisation impairment restructuring costs other results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 5,622 5,622
Cost of sales (1,739) (138) (81) (155) 10 (2,103)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 3,883 (138) (81) (155) 10 3,519
Selling, general
and
administration (1,866) (179) (85) (95) (2,225)
Research and
development (789) (13) (21) (32) (12) (867)
Royalty income 77 77
Other operating
income/(expense) 8,712 8,712
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 1,305 (151) (102) (366) (85) 8,615 9,216
Net finance costs (156) (1) (2) (159)
Profit on
disposal of
associates 843 843
Share of after
tax profits
of associates
and joint
ventures 7 16 23
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 1,156 (151) (102) (367) (85) 9,472 9,923
Taxation (231) 37 25 101 - (1,817) (1,885)
Tax rate % 20.0% 19.0%
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 925 (114) (77) (266) (85) 7,655 8,038
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 91 (142) (51)
Profit
attributable
to
shareholders 834 (114) (77) (266) (85) 7,797 8,089
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 17.3p (2.4) (1.6) (5.5) (1.8)p 161.8p 167.8p
------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of shares
(millions) 4,820 4,820
------------ ------------
Income statement - Core results reconciliation
Three months ended 31 March 2014
Acquisition
accounting
Core Intangible Intangible Major Legal and Total
results amortisation impairment restructuring costs other results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 5,613 5,613
Cost of sales (1,558) (147) (15) (23) (1,743)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 4,055 (147) (15) (23) 3,870
Selling, general
and
administration (1,811) (52) (108) (1,971)
Research and
development (784) (23) (33) (4) (15) (859)
Royalty income 70 70
Other operating
income/(expense) (44) (44)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 1,530 (170) (48) (79) (108) (59) 1,066
Net finance costs (161) (1) (2) (164)
Share of after
tax profits
of associates
and joint
ventures 1 1
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 1,370 (170) (48) (80) (108) (61) 903
Taxation (301) 44 9 19 22 23 (184)
Tax rate % 22.0% 20.4%
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 1,069 (126) (39) (61) (86) (38) 719
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 62 (11) 51
Profit
attributable
to
shareholders 1,007 (126) (39) (61) (86) (27) 668
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 21.0p (2.7)p (0.8)p (1.3)p (1.8)p (0.5)p 13.9p
------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of shares
(millions) 4,802 4,802
------------ ------------
Independent review report to GlaxoSmithKline plc
Report on the condensed financial information
Our conclusion
We have reviewed the condensed financial information, defined below,
in the Results Announcement of GlaxoSmithKline plc for the three
months ended 31 March 2015. Based on our review, nothing has come
to our attention that causes us to believe that the condensed financial
information is not prepared, in all material respects, in accordance
with the accounting policies set out in the accounting policies and
basis of preparation section on page 37 of the Results Announcement.
This conclusion is to be read in the context of what we say in the
remainder of this report.
What we have reviewed
The condensed financial information, which is prepared by GlaxoSmithKline
plc, comprises:
-- the balance sheet at 31 March 2015;
-- the income statement and statement of comprehensive income for
the three month period then ended;
-- the cash flow statement for the period then ended;
-- the statement of changes in equity for the period then ended; and
-- the accounting policies and basis of preparation and related notes
on pages 34 to 39 (excluding the Global Pharmaceuticals, ViiV Healthcare
and Vaccines turnover tables).
As disclosed on page 37, the financial reporting framework that has
been applied in the preparation of the full annual financial statements
of the Group is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union.
The condensed financial information included in the Results Announcement
has been prepared in accordance with the accounting policies set
out in the accounting policies and basis of preparation section on
page 37.
What a review of condensed financial information involves
We conducted our review in accordance with International Standard
on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity' issued
by the Auditing Practices Board for use in the United Kingdom. A
review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters,
and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland)
and consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified
in an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the Results Announcement
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed financial
information.
Responsibilities for the condensed financial information and the
review
Our responsibilities and those of the directors
The Results Announcement, including the condensed financial information,
is the responsibility of, and has been approved by, the directors.
The directors are responsible for preparing the Results Announcement
in accordance with the accounting policies set out in the accounting
policies and basis of preparation section on page 37.
Our responsibility is to express to the Company a conclusion on the
condensed financial information in the Results Announcement based
on our review. This report, including the conclusion, has been prepared
for and only for the Company for management's stewardship purposes
and for no other purpose. We do not, in giving this conclusion, accept
or assume responsibility for any other purpose or to any other person
to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
6 May 2015
London
Notes:
(a) The maintenance and integrity of the GlaxoSmithKline plc website
is the responsibility of the directors; the work carried out by
the auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the condensed financial information
since it was initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and
dissemination of condensed financial information may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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