UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the
month of July 2021
Commission
File Number 001-15170
GlaxoSmithKline plc
(Translation
of registrant's name into English)
980 Great West Road, Brentford, Middlesex, TW8 9GS
(Address
of principal executive office)
Indicate
by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form
20-F . . . .X. . . . Form 40-F . . . . . . . .
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate
by check mark if the registrant is submitting the Form 6-K in paper
as permitted by Regulation S-T Rule 101(b)(7): ____
GlaxoSmithKline plc
(the ‘Company’ or 'GSK')
Issued: 2 July 2021, London UK
Elliott Advisors (UK) letter to GSK
The Board of GSK notes the letter issued by Elliott Advisors (UK)
Limited ("Elliott") on 1 July. The Board welcomes constructive
input from all shareholders that is supportive of the creation and
delivery of long-term sustainable shareholder value and benefits
for patients. The Board is issuing this announcement to all
shareholders and all parties with an interest in GSK to address the
matters raised by Elliott in the letter.
Clear
priority is to deliver step-change in growth and performance,
create shareholder value and deliver positive scale human health
impact
At its Investor Update on 23 June, GSK set out new ambitions for
patients and a step-change in growth and performance for
shareholders. Subsequent engagement with GSK's largest shareholders
has evidenced widespread and strong support for these strategic
ambitions and confidence in GSK's leadership team to deliver
them.
The ambitions and plans communicated at the Investor Update follow
a significant four-year corporate transformation to address
historic long-standing issues that have affected GSK's performance.
These issues have been well recognised by the Board and the
Executive team and include all of those identified in Elliott's
letter.
Major progress has been achieved to improve performance, strengthen
R&D productivity, enhance commercial execution, and to
streamline GSK's portfolio and cost base. In addition, there have
been significant changes in culture and capabilities across the
company, to improve accountability, increase agility and raise
levels of ambition.
This transformation provides the platform for GSK to separate into
two, new global companies, both of which will have major impacts on
human health and can deliver compelling performance and attractive
returns and value to shareholders. The Board and the Executive team
believe that focus and stability are now critical to deliver a
successful separation and the key innovation, commercial and
financial targets expected for New GSK as a growth-focused
company.
Robust governance in place to deliver separation and enhance board
expertise
In preparation for separation of Consumer Healthcare, the Board of
GSK has been preparing for two new, appropriately qualified,
independent boards. In the last 18 months, governance and oversight
has been further strengthened with the appointment of two new
non-executive directors; changes have been made to the remit of the
Science Committee to deepen understanding of scientific strategy
and execution; and Board focus and oversight have been increased on
the detailed mechanics and preparations for separation with the
formation of a new Transformation & Separation
Committee.
A formal process to appoint a Chair and to form a Board of
Directors for the new Consumer Health company is already well
underway. The appointment of a Chair is expected in the second half
of 2021 who will then, in accordance with best practice, lead the
process of appointments to establish the new Board. This new Board
will include the appropriate mix of skills, experience and
continuity, relevant to Consumer Health, to represent and maximise
the value of this new business for shareholders.
As previously stated, and building on recent non-executive
appointments, further appointments to the Board of GSK are
expected, prior to the separation, to increase biopharmaceuticals
and scientific experience for New GSK.
The Board of GSK believes that the appointment of executive
leadership to the new Consumer Health company well in advance of
the separation will benefit and support delivery of financial
performance and execution of the separation. The Board has
therefore conducted an extensive search and selection process to
appoint a CEO Designate for Consumer Healthcare. This process,
conducted over 6 months and supported by a leading global search
firm, was overseen by the Nominations & Corporate Governance
Committee and resulted in direct evaluation and interview of
several external and internal candidates for the position. This
process is now nearing completion and an announcement is expected
to be made in due course.
The separation of Consumer Healthcare is a clear part of GSK's
strategic agenda, led by CEO Emma Walmsley, to transform GSK and to
deliver a step-change in growth and performance. As evidenced at
the Investor Update last week, and with New GSK representing the
majority of GSK's existing business, the Board is not conducting a
selection process post-separation.
The Board strongly believes Emma Walmsley is the right leader of
New GSK and fully supports the actions being taken by her and the
management team, all of whom are subject to rigorous assessments of
performance. Under Emma's leadership, the Board fully expects this
team to deliver a step-change in performance and long-term
shareholder value creation through the separation and in the years
beyond.
Separation of Consumer Healthcare to maximise value for
shareholders
The Board's clear priorities are to unlock the potential of New GSK
and Consumer Healthcare, to strengthen New GSK's balance sheet and
to maximise value for all shareholders.
Subject to approval from shareholders, the separation will be by
way of a demerger in mid-2022 of at least 80% of GSK's holding in
Consumer Healthcare to GSK shareholders, with New GSK retaining up
to 20% of that holding as a short-term financial investment to be
monetised in a timely manner to further strengthen New GSK's
balance sheet and help fund certain pension benefit
obligations.
The demerger structure reflects feedback from a significant
proportion of GSK's shareholders that they wish to own Consumer
Healthcare as a new listed entity, given its strong prospects for
sustainable sales and profit growth, high cash generation and the
expectation that it will deliver attractive returns for
shareholders.
The Board has a strong focus on maximising shareholder value and
will fulfil its fiduciary duties to evaluate any alternative
options for Consumer Healthcare that may arise. If any alternative
opportunity should arise, the Board would consider, amongst other
things, the realised value against the opportunity cost for
shareholders of no longer being able to benefit from the future
growth and value accretion of Consumer Healthcare as an independent
global category-leading consumer company, which the Board believes
will be significant over the coming years. In making this
assessment, the Board will also take into account any additional
tax or other frictional costs compared to the announced demerger
structure.
Outlooks for New GSK represent a step-change in growth and
performance
At its Investor Update, GSK announced a package of new financial
outlooks and ambitions.
●
Over
the period 2021-26, New GSK expects to deliver sales growth and
adjusted operating profit growth of more than 5% and 10%
respectively CAGR at constant exchange rates (with 2021 as the base
year). Adjusted operating margins are expected to improve from the
current mid-20s level to over 30% by 2026.
●
Profit
growth is expected to be underpinned by a combination of strong
revenue growth from new vaccines and specialty medicines, improving
operational performance and benefits from the
transformation.
●
These
financial outlooks exclude any contribution from COVID-19 related
revenues.
●
By
2031, New GSK aims to deliver sales of more than £33 billion
(at constant exchange rates). The £33 billion sales
ambition is before any significant revenue contribution from
early-stage pipeline assets or any contribution from business
development.
●
Cash
generated from operations is expected to exceed £10 billion by
2026. New GSK is expected to have a stronger balance sheet (net
debt / adjusted EBITDA of <2x following separation) and a
progressive dividend policy starting at 45p per share in
2023.
These financial outlooks and ambitions represent a step-change.
They are based on rigorous challenge and follow assessment of
10-year forecasts, conducted over many months, by the Executive
Team and the Board. These outlooks and ambitions are set as the
minimum level of growth that New GSK is expected to achieve or is
targeting, with clear ambitions to exceed as stated at the Investor
Update.
As stated at the Investor Update, the new outlooks and ambitions
will be incorporated into existing incentive plans. Incentive
measures for these plans include delivery of innovation sales,
pipeline progress, operational performance and relative total
shareholder returns, and so are strongly aligned to shareholder
interests and shareholder value creation.
New GSK positioned to maximise opportunities across prevention and
treatment
Innovations in science and technology are driving increasing
convergence across prevention and treatment, offering significant
scientific and commercial opportunities for New GSK. With R&D
focussed on science of the immune system, and world-leading
capabilities in vaccine and pharmaceutical development, GSK is
well-placed to capture these opportunities and it underpins GSK's
approach to further integration in R&D and prioritisation of
capital to Vaccines and Specialty Medicines.
GSK has built an industry-leading and high-performing Vaccines
business, which has increased revenues from £4.6billion in
2016 to £7.0billion in 2020, and is expected to deliver high
single digit % sales CAGR in 2021-26. This business has benefited
from operational integration with pharmaceuticals in key areas for
many years, notably commercial operations and clinical development;
but is also operationally independent where it is optimal, for
example in manufacturing.
As announced at the Investor Update, New GSK will disclose revenues
of Vaccines and Specialty Medicines. Reflecting their integration,
and as is common to the sector, the Board does not believe it would
be appropriate to have separate divisional reporting.
Strong commitment to delivering sustainable shareholder
value
The Board and the Executive team fully recognise the need to
deliver improved and sustained value for all shareholders. Both
strongly believe that the separation of GSK and the launch of the
two, new independent companies with thriving people will deliver
significant and sustainable value for shareholders, together with
positive, scale human health impact for patients and other
stakeholders.
************
Notes for Information
Investor Update
GSK hosted an Investor Update on 23 June that provided details of
its strategy, outlook for growth and plans to create shareholder
value, following the planned demerger in mid-2022 of its Consumer
Healthcare business. Copies of the materials from the Investor
Update are available in the investor relations section of GSK's
website (https://www.gsk.com/en-gb/investors/new-gsk/).
Important
Notices
Assumptions relating to the outlook, ambition and dividend
expectation statements in this announcement
The statements above regarding growth outlooks for the period
2021-2026, the 2026 cash generated from operations outlook, the
2031 sales ambition, and dividend expectations reflect statements
made in the company's Investor Update on 23 June 2021. As
such, they are subject to the same assumptions as set out in the
company's announcement of the same date under the
heading "Assumptions relating to the 2021-2026 sales and
adjusted operating profit growth outlooks, 2026 cash generated from
operations outlook, 2031 sales ambition and 2021-2023 dividend
expectations".
Notwithstanding these statements, there is still uncertainty as to
whether the relevant assumptions, targets, outlooks expectations
and ambitions will be achieved, including based on the assumptions
referred to above.
All outlook and ambition statements are given on a constant
currency basis and use 2021 forecast exchange rates as a base,
assuming a continuation of Q1 2021 closing rates (£1/$1.38,
£1/€1.17, £1/Yen 152). 2021-2026 outlook refers to
the 5 years to 2026 with 2021 as the base year.
Assumptions and cautionary statement regarding forward looking
statements
The Group's management believes that the assumptions outlined above
are reasonable, and that the targets, outlooks, ambitions and
expectations described in this document are achievable based on
those assumptions. However, given the forward-looking nature of
these assumptions, targets and expectations, 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, macro-economic activity,
the impact of outbreaks, epidemics or pandemics, such as the
continued COVID-19 pandemic and ongoing challenges and
uncertainties posed by the COVID-19 pandemic for businesses and
governments around the world, changes in legislation, regulation,
government actions or intellectual property protection, product
development and approvals, 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 'aim', 'ambition', '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, dividend payments and
financial results. Other than in accordance with its legal or
regulatory obligations (including under the Market Abuse
Regulation, 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 or
referred to 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 2020 and any impacts of the COVID-19
pandemic.
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 document.
Reporting definitions
A number of adjusted measures are used to report the performance of
our business, which are non-IFRS measures. Adjusted
results, CER and other non-IFRS measures may be considered in
addition to, but not as a substitute for or superior to,
information presented in accordance with IFRS. These measures are
defined and reconciliations to the nearest IFRS measure are
available in our first quarter 2021 earnings release and Annual
Report on Form 20-F for FY 2020.
GSK provides earnings guidance to the investor community on the
basis of Adjusted results. This is in line with peer companies and
expectations of the investor community, supporting easier
comparison of the Group's performance with its peers. GSK is not
able to give guidance and outlooks for Total results, including
Total Operating Profit and Total Operating Margin as it cannot
reliably forecast certain material elements of the Total results,
particularly the future fair value movements on contingent
consideration and put options that can and have given rise to
significant adjustments driven by external factors such as currency
and other movements in capital markets. Therefore a
reconciliation of the guidance for Adjusted results to equivalent
guidance for Total results is not available without unreasonable
effort.
Compound Annual Growth Rate (CAGR) is defined as the compound
annual growth rate and shows the annualised average rate of revenue
or profit growth between two given years, at constant currency,
assuming growth takes place at an exponentially compounded
rate.
Adjusted EBITDA is defined as Adjusted Earnings before interest and
tax, depreciation and amortisation.
About GSK
GSK is a science-led global healthcare company with a special
purpose: to help people do more, feel better, live longer. For
further information please visit www.gsk.com/about-us.
Adjusted results are a non-IFRS measure that may be considered in
addition to, but not as a substitute for, or superior to,
information presented in accordance with IFRS. Adjusted
results, constant exchange rate (CER%) growth and other non-IFRS
measures are defined and reconciliations to the nearest IFRS
measure are available in our first quarter 2021 earnings release
and in our Annual Report on Form 20-F for FY 2020 and in the
"Reporting definitions" section of this document above. GSK
provides guidance and outlooks on an Adjusted results basis only,
for the reasons set out above. All expectations, ambitions,
targets and other statements regarding future performance should be
read together with the "Assumptions relating to the outlook,
ambition and dividend expectation statements" and "Reporting
definitions" sections of this document above.
GSK enquiries:
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Media
enquiries:
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Simon
Steel
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+44 (0)
20 8047 5502
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(London)
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Tim
Foley
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+44 (0)
20 8047 5502
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(London)
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Kristen
Neese
|
+1 804
217 8147
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(Philadelphia)
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Kathleen
Quinn
|
+1 202
603 5003
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(Washington
DC)
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Analyst/Investor
enquiries:
|
James
Dodwell
|
+44 (0)
20 8047 2406
|
(London)
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Sonya
Ghobrial
|
+44 (0)
7392 784784
|
(Consumer)
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Mick
Readey
|
+44 (0)
7990 339653
|
(London)
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Jeff
McLaughlin
|
+1 215
751 7002
|
(Philadelphia)
|
|
Frannie
DeFranco
|
+1 215
751 4855
|
(Philadelphia)
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Registered in England & Wales:
No.
3888792
Registered Office:
980
Great West Road
Brentford,
Middlesex
TW8
9GS
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorised.
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GlaxoSmithKline plc
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(Registrant)
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Date: July
01, 2021
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By:/s/ VICTORIA
WHYTE
--------------------------
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Victoria Whyte
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Authorised
Signatory for and on
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behalf
of GlaxoSmithKline plc
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