TIDMGSK
RNS Number : 8807W
GlaxoSmithKline PLC
28 April 2021
Issued: Wednesday, 28 April 2021, London U.K.
GSK delivers Q1 sales of GBP7.4 billion -18% AER, -15% CER
Total EPS 21.5p, -32% AER, -25% CER; Adjusted EPS 22.9p -39% AER,
-33% CER
2021 guidance reconfirmed
Q1 performance reflects expected year-on-year impact and disruption
from COVID-19
On track to create New GSK and New Consumer Healthcare company in
2022
Highlights
Strong growth in new pharmaceutical products offset by stocking and
pandemic disruption
-- Pharmaceuticals GBP3.9 billion -12% AER, -8% CER, with growth in
new and specialty products (+3% CER) including: Respiratory +24%
CER; Immuno-inflammation +26% CER; and Oncology +38% CER partly
offsetting decline in Established Products -17% CER. HIV -11% CER
impacted by 2020 stocking and tender phasing; HIV two-drug regimen
sales +41% CER
-- Vaccines GBP1.2 billion -32% AER, -30% CER (Shingrix -47% CER)
reflecting government prioritisation of COVID-19 vaccinations.
Continue to expect strong growth from Shingrix in H2
-- Consumer Healthcare GBP2.3 billion -19% AER, -16% CER (-9% excluding
divestments/brands under review) reflecting year-on-year "pantry-loading"
comparison and weak cold/flu season
Effective cost control supports delivery of adjusted earnings per
share of 22.9p
-- Total Group operating margin 22.8%. Total EPS 21.5p -32% AER, -25%
CER
-- Adjusted Group operating margin 25.4%. Adjusted EPS 22.9p -39%
AER, -33% CER
-- Q1 net cash flow from operations GBP331 million. Free cash outflow
GBP3 million
Continued R&D delivery and strengthening of Biopharma pipeline
-- Launch of Cabenuva, the world's first and only long-acting HIV
treatment
-- Approvals of Rukobia and Jemperli (dostarlimab) and positive regulatory
opinion for Benlysta
-- Phase III trial starts for RSV older adults vaccine and GSK '294
for severe asthma
-- Positive data for antibody treatment VIR-7831 with EUA filed in
US and EU
-- Phase III trial start with Medicago for adjuvanted COVID-19 vaccine
On track to create New GSK and standalone Consumer Healthcare company
in 2022
-- Consumer Healthcare JV commercial integration broadly complete;
separation activities advancing
-- Pharmaceutical portfolio rationalisation continues with cephalosporin
divestment announced
-- New GSK Investor Update on 23 June to outline strategy, growth
outlooks (2022-2031), capital allocation priorities and timing
and approach to separation
Reconfirming full-year 2021 EPS guidance and 2022 outlook
-- Continue to expect 2021 Adjusted EPS to decline by a mid to high-single
digit percentage in CER
-- 2022 outlook unchanged with meaningful improvements expected in
revenues and margins
Dividend of 19p declared for Q1 2021. Continue to expect 80p/share
for 2021
Emma Walmsley, Chief Executive Officer, GSK said: "Our first quarter
results are in line with our expectations and reflect the anticipated
impacts of COVID-19. We continue to expect a significant improvement
in performance over the remainder of the year and reconfirm our guidance
for 2021 and 2022 outlook. The launch of Cabenuva for HIV and Phase
III starts for our RSV vaccine and a new long-acting treatment for
severe asthma are key milestones as we continue to strengthen our
growth prospects. Separation plans are also well underway and we
look forward to sharing our strategy and growth outlook for New GSK
with investors in June."
The Total results are presented in summary on page 2 and under 'Financial
performance' on page 11 and Adjusted results reconciliations are
presented on pages 21 and 22. 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 are defined on page 9 and GBP% or AER% growth, CER% growth,
free cash flow and other non-IFRS measures are defined on page 41.
GSK provides guidance on an Adjusted results basis only, for the
reasons set out on page 10. All expectations, guidance and targets
regarding future performance and dividend payments should be read
together with 'Outlook, assumptions and cautionary statements' on
pages 42 and 43.
Q1 2021 results
Q1 2021 Growth
--------------
GBPm GBP% CER%
-------- ------- -----
Turnover 7,418 (18) (15)
Total operating profit 1,693 (16) (8)
Total earnings per
share 21.5p (32) (25)
Adjusted operating
profit 1,881 (30) (23)
Adjusted earnings per
share 22.9p (39) (33)
Net cash from operating
activities 331 (66)
Free cash flow (3) >(100)
2021 guidance
We reconfirm our guidance range for 2021 for a decline of mid to
high-single digit percent Adjusted EPS at CER.
In 2021, as planned we will continue to increase investment in our
pipeline, build on our top-line momentum for key growth drivers and
largely complete readiness for separation. Assuming healthcare systems
and consumer trends approach normality in the second half of the
year, we continue to expect Pharmaceutical revenue to grow flat to
low-single digits at CER and Consumer Healthcare revenue to grow
low to mid-single digits at CER excluding brands divested/under review
with above market growth. For our Vaccines business, as noted at
the time of announcing full-year 2020 results, we anticipated disruption
during the first half of the year, given governments' prioritisation
of COVID-19 vaccination programmes and ongoing measures to contain
the pandemic. This was expected to impact adult and adolescent immunisations,
including Shingrix, notably in the US and this is reflected in our
first-quarter 2021 Vaccines performance. We are encouraged by the
rate at which COVID-19 vaccinations are being deployed in many countries,
particularly the US and UK, which provides support for healthcare
systems returning to normal. As a consequence we remain confident
in the underlying demand for our Vaccine products, and we expect
strong recovery and contribution to growth, notably from Shingrix,
in the second half of the year. We continue to expect Vaccines revenue
for 2021 to grow flat to low-single digits at CER.
All expectations, guidance and targets regarding future performance
and dividend payments should be read together with 'Outlook, assumptions
and cautionary statements' on pages 42 and 43. If exchange rates
were to hold at the closing rates on 31 March 2021 ($1.38/GBP1, EUR1.17/GBP1
and Yen 152/GBP1) for the rest of 2021, the estimated negative impact
on 2021 Sterling turnover growth would be 5% and if exchange gains
or losses were recognised at the same level as in 2020, the estimated
negative impact on 2021 Sterling Adjusted EPS growth would be around
9%.
Results presentation
A webcast of the quarterly results presentation hosted by Emma Walmsley,
GSK CEO, will be held at 2pm BST on 28 April 2021. Presentation materials
will be published on www.gsk.com prior to the webcast and a transcript
of the webcast will be published subsequently.
Information available on GSK's website does not form part of, and
is not incorporated by reference into, this Results Announcement.
Investor update
At our investor update on 23 June we plan to set out in detail the
strategy, growth prospects and financial outlooks for New GSK, including
an in-depth review of key marketed and pipeline growth drivers. Alongside
these we will provide details of a new distribution policy which
reflects the future investment priorities focused on delivering sustainable
long-term shareholder value. Lastly we will provide an update on
the timing and approach to separation.
Operating performance - Q1 2021
Turnover Q1 2021
------------------------
Growth Growth
GBPm GBP% CER%
------ ------- -------
Pharmaceuticals 3,882 (12) (8)
Vaccines 1,224 (32) (30)
Consumer Healthcare 2,312 (19) (16)
------ ------- -------
7,418 (18) (15)
Corporate and other unallocated turnover -
------ ------- -------
Group turnover 7,418 (18) (15)
------ ------- -------
Group turnover was GBP7,418 million in the quarter, down 18% AER,
15% CER. Excluding the impact of brands divested or under review
in Consumer Healthcare, Group turnover was down 13% at CER.
Pharmaceuticals turnover in the quarter was GBP3,882 million, down
12% AER, 8% CER, reflecting the continued impact of the COVID-19
pandemic, including the stock build in Q1 2020 and lower demand
for antibiotic products in Q1 2021. New and Specialty sales of GBP1,940
million declined 1% AER but grew 3% CER, with growth from Respiratory,
Immuno-inflammation and Oncology partially offset by decline in
HIV due to the stock build in prior year and phasing of tenders
in the International region. Sales of Established Pharmaceuticals
declined 20% AER, 17% CER, to GBP1,942 million.
Vaccines turnover declined 32% AER, 30% CER to GBP1,224 million,
primarily driven by the adverse impact of the COVID-19 pandemic
on Shingrix, Hepatitis vaccines, DTPa-containing vaccines and Bexsero,
partly offset by the performance of Cervarix in China.
Reported Consumer Healthcare sales declined 19% AER, 16% CER to
GBP2,312 million in the first quarter, largely driven by the divestment
programme which has now completed. Sales excluding brands divested/under
review declined 9% CER as a direct result of the comparison last
year including accelerated purchases across all categories as a
result of the COVID-19 pandemic when sales excluding brands divested/under
review were up 14% CER in Q1 2020 on a pro-forma basis, combined
with a historically weak cold and flu season.
Operating profit
Total operating profit was GBP1,693 million in Q1 2021 compared
with GBP2,014 million in Q1 2020. The total operating margin was
22.8%. Adjusted operating profit was GBP1,881 million, 30% lower
than Q1 2020 at AER, 23% lower at CER on a turnover decline of 15%
CER. The Adjusted operating margin of 25.4% was 4.1 percentage points
lower at AER, and 2.9 percentage points lower on a CER basis than
in Q1 2020. The decrease in Total operating profit included an unfavourable
comparison to an increase in value of the shares in Hindustan Unilever
in Q1 2020, offset by a number of other asset disposals, lower major
restructuring costs and lower re-measurement charges on the contingent
consideration liabilities.
The reduction in Adjusted operating profit primarily reflected the
impact of sales decline across all three businesses as a result
of the COVID-19 pandemic, including an adverse impact on Vaccines
and an adverse comparison to an uplift from increased customer demand
and stock building in Q1 2020 in Pharmaceuticals and Consumer Healthcare,
plus increased investment in R&D. This was partly offset by tight
control of ongoing costs including reduced promotional and variable
spending across all three businesses as a result of the COVID-19
lockdowns, a favourable legal settlement in the quarter compared
to increased legal costs in 2020 and benefits from continued restructuring.
Earnings per share
Total EPS was 21.5p, compared with 31.5p in Q1 2020. Unfavourable
comparisons to an increase in value of the shares in Hindustan Unilever
in Q1 2020 were offset by a number of other asset disposals, lower
major restructuring costs and lower re-measurement charges on the
contingent consideration liabilities and the unwind in 2020 of the
fair market value uplift on inventory arising on completion of the
Consumer Healthcare Joint Venture with Pfizer.
Adjusted EPS was 22.9p compared with 37.7p in Q1 2020, down 39%
AER and 33% CER, on a 23% CER decrease in Adjusted operating profit
reflecting the impact of sales decline across all three businesses
as a result of the COVID-19 pandemic, higher interest costs and
a higher effective tax rate partly offset by a lower non-controlling
interest allocation
of Consumer Healthcare and ViiV profits.
Cash flow
The net cash inflow from operating activities for the quarter was
GBP331 million (Q1 2020: GBP965 million). Free cash outflow was
GBP3 million for the quarter (Q1 2020: GBP531 million inflow). The
decrease primarily reflected reduced operating profit including
adverse exchange impacts, adverse timing of returns and rebates,
increased inventory and increased dividends to non-controlling interests,
partly offset by a reduction in trade receivables from lower sales
compared to an increase in Q1 2020, increased proceeds from disposal
of intangible assets and lower tax payments.
R&D pipeline
Our approach to R&D focuses on the science of the immune system,
genetics and advanced technologies. The pipeline currently comprises
59 vaccines and medicines, predominantly in the areas of infectious
diseases, oncology and immune-mediated diseases.
As previously disclosed in the FY 2020 presentation to analysts and
investors on 3 February 2021, the company has identified over 20
potential product approvals which could take place by 2026, of which
more than 10 could significantly change medical practice and potentially
generate peak annual sales in excess of one billion dollars.
Pipeline news flow highlights since Q4 2020 Results listed in chronological
order.
COVID-19
Vaccine collaborations
-- Reached an agreement in principle with Novavax and the UK Government
Vaccines Taskforce to support manufacturing of up to 60 million
doses of Novavax's COVID-19 vaccine candidate (NVX-CoV2373) for
use in the UK.
-- Medicago and GSK started a Phase III trial of adjuvanted COVID-19
vaccine candidate in combination with GSK's pandemic adjuvant,
as part of the ongoing Phase II/III study.
-- Sanofi and GSK started a new Phase II study of adjuvanted recombinant
protein-based COVID-19 vaccine candidate.
-- GSK and SK Bioscience started a new collaboration and Phase I/II
study of an adjuvanted protein-based COVID-19 vaccine candidate.
-- GSK started a Phase I study with self-amplifying mRNA (SAM) with
COVID-19 as model antigen.
VIR-7831/GSK4182136 (dual-action SARS-CoV-2 monoclonal antibody)
-- Announced the European Medicines Agency (EMA) started a review
of VIR-7831 for the early treatment of COVID-19.
-- Announced positive topline results from the Phase II BLAZE-4 trial
evaluating bamlanivimab with VIR-7831 in low-risk adults with COVID-19.
-- Announced submission of an application to the US Food and Drug
Administration (FDA) requesting Emergency Use Authorisation for
VIR-7831.
-- Started a Phase II study evaluating the intramuscular use of VIR-7831
in early COVID-19 treatment.
-- Announced positive results from the Phase III COMET-ICE trial demonstrating
an 85% reduction in hospitalisation or death from early treatment
with VIR-7831 in adults with COVID-19.
-- The NIH-sponsored ACTIV-3 study of VIR-7831 in hospitalised COVID-19
patients was closed to future enrolment while the data matures,
following a recommendation by the Data and Safety Monitoring Board.
VIR-7832/GSK4182137 (dual-action SARS-CoV-2 monoclonal antibody)
-- Dosed the first patient in the Phase Ib UK AGILE study.
Otilimab (anti-GM-CSF monoclonal antibody)
-- Announced an amendment to the Phase II (OSCAR) study of otilimab
for the treatment of hospitalised adult patients with COVID-19
to confirm potentially significant findings in a cohort of patients
70 years and older.
Oncology
Jemperli (dostarlimab; PD-1)
-- Received US FDA approval for Jemperli (dostarlimab-gxly) for the
treatment of adult patients with mismatch repair-deficient (dMMR)
recurrent or advanced endometrial cancer, as determined by an FDA-approved
test, that have progressed on or following prior treatment with
a platinum-containing regimen.
-- Granted conditional marketing authorisation from the European Commission
for Jemperli (dostarlimab) for use in women with dMMR/microsatellite
instability-high (MSI-H) recurrent or advanced endometrial cancer
who have progressed on or following prior treatment with a platinum
containing regimen.
-- Received positive opinion from the EMA's Committee for Medicinal
Products for Human Use (CHMP) for the treatment of women with dMMR/MSI-H
recurrent or advanced endometrial cancer who have progressed on
or following prior treatment with a platinum containing regimen.
Feladilimab (inducible T cell co-stimulatory (ICOS) agonist)
-- Stopped the Phase II INDUCE-3 trial enrolling patients, following
a recommendation by the Independent Data Monitoring Committee,
including discontinuing treatment with feladilimab. The Phase II
INDUCE-4 trial has also been stopped.
Bintrafusp alfa (TGF beta trap/PD-1 agonist)
-- Merck KGaA announced the Phase II INTR@PID BTC 047 study in second
line biliary tract cancer failed to meet the pre-defined threshold
to support regulatory filing in this setting.
GSK4362676 (Mat2A inhibitor)
-- IDEAYA Biosciences announced the first patient was dosed in a Phase
I trial of IDE397/GSK'676.
GSK3537142 (NYESO-ImmTAC)
-- Removed from the Phase I pipeline due to portfolio prioritisation.
HIV/Infectious diseases
GSK3640254 (maturation inhibitor)
-- Presented positive proof-of-concept findings for GSK'254, a novel,
investigational maturation inhibitor for the treatment of HIV at
the 2021 Conference on Retroviruses and Opportunistic Infections.
Findings showed the antiviral activity, safety and tolerability
of GSK'254 and support its continued study in Phase IIb.
Cabenuva (cabotegravir + rilpivirine)
-- Presented data for long-acting cabotegravir and rilpivirine for
the treatment of HIV at the 2021 Conference on Retroviruses and
Opportunistic Infections showing continued virologic suppression
to 96 weeks.
-- Submitted Supplemental New Drug Application to US FDA for expanded
use as a HIV treatment for use every 2-months.
-- European launch for Cabenuva in long-acting HIV treatment.
Rukobia (fostemsavir; attachment inhibitor)
-- Received European and UK Marketing Authorisation for Rukobia (fostemsavir),
a first-in-class attachment inhibitor in combination with other
antiretrovirals for the treatment of adults with multidrug-resistant
HIV.
Influenza
-- Announced a binding agreement with Vir Biotechnology to expand
the existing COVID-19 collaboration to include the research and
development of new therapies for influenza and other respiratory
viruses.
Vaccines
Respiratory Syncytial Virus (RSV)
-- Started a Phase III study for RSV candidate vaccine programme for
older adults.
Other Pharmaceuticals
Benlysta (belimumab)
-- Received positive opinion from the CHMP recommending the use of
intravenous and subcutaneous Benlysta (belimumab) in combination
with background immunosuppressive therapies for the treatment of
adult patients with active lupus nephritis.
GSK3511294 (long-acting anti-IL-5 monoclonal antibody)
-- Dosed the first patient in the SWIFT-2 trial as part of the Phase
III clinical programme investigating GSK'294 in patients with severe
eosinophilic asthma. The Phase III studies SWIFT-1 and NIMBLE have
also started.
Trelegy (fluticasone furoate/umeclidinium/vilanterol)
-- Received a negative opinion from the EMA's CHMP for Trelegy in
asthma recommending against label expansion.
GSK3439171 (H-PGDS inhibitor; Duchenne Muscular Dystrophy)
-- Removed from the Phase I pipeline due to portfolio prioritisation.
Contents Page
Total and Adjusted results 9
Financial performance 11
Cash generation 26
Returns to shareholders 27
Income statement 29
Statement of comprehensive income 30
Pharmaceuticals turnover 31
Vaccines turnover 32
Balance sheet 33
Statement of changes in equity 34
Cash flow statement 35
Segment information 36
Legal matters 37
Additional information 38
Reconciliation of cash flow to movements in net debt 40
Net debt analysis 40
Free cash flow reconciliation 40
Reporting definitions 41
Outlook, assumptions and cautionary statements 42
Independent review report 44
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:
Media enquiries: Simon Steel +44 (0) 20 8047 (London)
5502
Tim Foley +44 (0) 20 8047 (London)
5502
Kristen Neese +1 215 751 3335 (Philadelphia)
Kathleen Quinn +1 202 603 5003 (Washington)
Analyst/Investor enquiries: James Dodwell +44 (0) 20 8047 (London)
2406
Sonya Ghobrial +44 (0) 7392 784784 (Consumer)
Mick Readey +44 (0) 7990 339653 (London)
Jeff McLaughlin +1 215 751 7002 (Philadelphia)
Frannie DeFranco +1 215 751 4855 (Philadelphia)
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Registered Office:
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Brentford, Middlesex
TW8 9GS
Total and Adjusted results
Total reported results represent the Group's overall performance.
GSK also uses a number of adjusted, non-IFRS, measures to report
the performance of its business. Adjusted results 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.
Adjusted results are defined below and other non-IFRS measures are
defined on page 41.
GSK believes that Adjusted results, when considered together with
Total results, provide investors, analysts and other stakeholders
with helpful complementary information to understand better the
financial performance and position of the Group from period to period,
and allow the Group's performance to be more easily compared against
the majority of its peer companies. These measures are also used
by management for planning and reporting purposes. They may not
be directly comparable with similarly described measures used by
other companies.
GSK encourages investors and analysts not to rely on any single
financial measure but to review GSK's quarterly results announcements,
including the financial statements and notes, in their entirety.
GSK is committed to continuously improving its financial reporting,
in line with evolving regulatory requirements and best practice.
In line with this practice, GSK expects to continue to review and
refine its reporting framework.
Adjusted results exclude the following items from Total results,
together with the tax effects of all of these items:
-- amortisation of intangible assets (excluding computer software)
-- impairment of intangible assets (excluding computer software) and
goodwill
-- Major restructuring costs, which include impairments of tangible
assets and computer software, (under specific Board approved programmes
that are structural, of a significant scale and where the costs
of individual or related projects exceed GBP25 million), including
integration costs following material acquisitions
-- transaction-related accounting or other adjustments related to
significant acquisitions
-- proceeds and costs of disposal of associates, products and businesses;
significant legal charges (net of insurance recoveries) and expenses
on the settlement of litigation and government investigations;
other operating income other than royalty income, and other items
-- separation costs
Costs for all other ordinary course smaller scale restructuring
and legal charges and expenses are retained within both Total and
Adjusted results.
As Adjusted results include the benefits of Major restructuring
programmes but exclude significant costs (such as significant legal,
major restructuring and transaction items) they should not be regarded
as a complete picture of the Group's financial performance, which
is presented in Total results. The exclusion of other Adjusting
items may result in Adjusted earnings being materially higher or
lower than Total earnings. In particular, when significant impairments,
restructuring charges and legal costs are excluded, Adjusted earnings
will be higher than Total earnings.
GSK has undertaken a number of Major restructuring programmes in
response to significant changes in the Group's trading environment
or overall strategy, or following material acquisitions. Costs,
both cash and non-cash, of these programmes are provided for as
individual elements are approved and meet the accounting recognition
criteria. As a result, charges may be incurred over a number of
years following the initiation of a Major restructuring programme.
Significant legal charges and expenses are those arising from the
settlement of litigation or government investigations that are not
in the normal course and materially larger than more regularly occurring
individual matters. They also include certain major legacy matters.
Reconciliations between Total and Adjusted results, providing further
information on the key Adjusting items, are set out on pages 21
and 22.
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 for Total results 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.
ViiV Healthcare
ViiV Healthcare is a subsidiary of the Group and 100% of its operating
results (turnover, operating profit, profit after tax) are included
within the Group income statement.
Earnings are allocated to the three shareholders of ViiV Healthcare
on the basis of their respective equity shareholdings (GSK 78.3%,
Pfizer 11.7% and Shionogi 10%) and their entitlement to preferential
dividends, which are determined by the performance of certain products
that each shareholder contributed. As the relative performance of
these products changes over time, the proportion of the overall earnings
allocated to each shareholder also changes. In particular, the increasing
proportion of sales of dolutegravir-containing products has a favourable
impact on the proportion of the preferential dividends that is allocated
to GSK. Adjusting items are allocated to shareholders based on their
equity interests. GSK was entitled to approximately 86% of the Total
earnings and 83% of the Adjusted earnings of ViiV Healthcare for
2020.
As consideration for the acquisition of Shionogi's interest in the
former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi received
the 10% equity stake in ViiV Healthcare and ViiV Healthcare also
agreed to pay additional future cash consideration to Shionogi, contingent
on the future sales performance of the products being developed by
that joint venture, principally dolutegravir. Under IFRS 3 'Business
combinations', GSK was required to provide for the estimated fair
value of this contingent consideration at the time of acquisition
and is required to update the liability to the latest estimate of
fair value at each subsequent period end. The liability for the contingent
consideration recognised in the balance sheet at the date of acquisition
was GBP659 million. Subsequent re-measurements are reflected within
other operating income/(expense) and within Adjusting items in the
income statement in each period. At 31 March 2021, the liability,
which is discounted at 8.0%, stood at GBP5,277 million, on a post-tax
basis.
Cash payments to settle the contingent consideration are made to
Shionogi by ViiV Healthcare each quarter, based on the actual sales
performance of the relevant products in the previous quarter. These
payments reduce the balance sheet liability and hence are not recorded
in the income statement. The cash payments made to Shionogi by ViiV
Healthcare in Q1 2021 were GBP216 million.
Because the liability is required to be recorded at the fair value
of estimated future payments, there is a significant timing difference
between the charges that are recorded in the Total income statement
to reflect movements in the fair value of the liability and the actual
cash payments made to settle the liability.
Further explanation of the acquisition-related arrangements with
ViiV Healthcare are set out on pages 52 and 53 of the Annual Report
2020.
Financial performance - Q1 2021
Total results
The Total results for the Group are set out below.
Q1 2021 Q1 2020 Growth Growth
GBPm GBPm GBP% CER%
-------- -------- ------- -------
Turnover 7,418 9,090 (18) (15)
Cost of sales (2,480) (3,199) (22) (21)
-------- -------- ------- -------
Gross profit 4,938 5,891 (16) (12)
Selling, general and administration (2,427) (2,916) (17) (15)
Research and development (1,118) (1,187) (6) (3)
Royalty income 91 67 36 39
Other operating income/(expense) 209 159
-------- -------- ------- -------
Operating profit 1,693 2,014 (16) (8)
Finance income 10 41
Finance expense (201) (229)
Share of after tax profits
of
associates and joint ventures 16 9
-------- -------- ------- -------
Profit before taxation 1,518 1,835 (17) (9)
Taxation (258) (156)
Tax rate % 17.0% 8.5%
-------- -------- ------- -------
Profit after taxation 1,260 1,679 (25) (17)
-------- -------- ------- -------
Profit attributable to non-controlling
interests 187 114
Profit attributable to shareholders 1,073 1,565
-------- -------- ------- -------
1,260 1,679 (25) (17)
-------- -------- ------- -------
Earnings per share 21.5p 31.5p (32) (25)
-------- -------- ------- -------
Adjusted results
The Adjusted results for the Group are set out below. Reconciliations
between Total results and Adjusted results for Q1 2021 and Q1 2020
are set out on pages 21 and 22.
Q1 2021
--------------------------------------
% of Growth Growth
GBPm turnover GBP% CER%
-------- ---------- ------- -------
Turnover 7,418 100 (18) (15)
Cost of sales (2,236) (30.1) (14) (13)
Selling, general and administration (2,315) (31.2) (17) (15)
Research and development (1,077) (14.5) (1) 3
Royalty income 91 1.2 36 39
-------- ---------- ------- -------
Adjusted operating profit 1,881 25.4 (30) (23)
-------- ---------- ------- -------
Adjusted profit before tax 1,707 (32) (25)
Adjusted profit after tax 1,389 (36) (29)
Adjusted profit attributable
to shareholders 1,143 (39) (33)
-------- ------- -------
Adjusted earnings per share 22.9p (39) (33)
-------- ------- -------
Operating profit by business Q1 2021
% of Growth Growth
GBPm turnover GBP% CER%
------ ---------- ------- -------
Pharmaceuticals 1,910 49.2 (5) -
Pharmaceuticals R&D* (791) (5) (1)
------ ---------- ------- -------
Total Pharmaceuticals 1,119 28.8 (5) 2
Vaccines 306 25.0 (64) (60)
Consumer Healthcare 535 23.1 (30) (25)
------ ---------- ------- -------
1,960 26.4 (30) (25)
Corporate & other unallocated
costs (79)
Adjusted operating profit 1,881 25.4 (30) (23)
------ ---------- ------- -------
* Operating profit of Pharmaceuticals R&D segment, which is the responsibility
of the Chief Scientific Officer and President, R&D. It excludes
ViiV Healthcare R&D expenditure, which is reported within the Pharmaceuticals
segment.
Turnover
Pharmaceuticals turnover
Q1 2021
------------------------
Growth Growth
GBPm GBP% CER%
------ ------- -------
Respiratory 619 19 24
HIV 1,031 (15) (11)
Immuno-inflammation 180 19 26
Oncology 110 36 38
------ ------- -------
New and Specialty 1,940 (1) 3
Established Pharmaceuticals 1,942 (20) (17)
------
3,882 (12) (8)
------
US 1,713 (3) 4
Europe 950 (17) (18)
International 1,219 (19) (14)
------ ------- -------
3,882 (12) (8)
------ ------- -------
Pharmaceuticals turnover in the quarter was GBP3,882 million, down
12% AER, 8% CER.
The first quarter decline reflected the continued impact of the COVID-19
pandemic. A strong prior year comparator included pandemic related
stock build at the end of the first quarter, accounting for approximately
4 percentage points of the CER decline. In the current quarter, the
impact on the market environment included lower demand for antibiotic
products in International and Europe regions.
New and Specialty sales of GBP1,940 million declined 1% AER but grew
3% CER, with ongoing growth from Respiratory, Immuno-inflammation
and Oncology partially offset by decline in HIV due to pandemic related
stock build in prior year and phasing of tenders in the International
region.
Respiratory sales were up 19% AER, 24% CER, to GBP619 million, on
growth of Trelegy and Nucala and our Immuno-inflammation and Oncology
portfolios continue to show double digit growth. HIV sales declined
15% AER, 11% CER, to GBP1,031 million, including the impact of stock
build last year, with growth in Dovato offset by Tivicay and Triumeq.
Sales of Established Pharmaceuticals declined 20% AER, 17% CER, to
GBP1,942 million.
In the US, sales declined 3% AER but grew 4% CER. Continued growth
of Nucala, Trelegy, Benlysta and Dovato was offset by the decline
in Triumeq and in Established Pharmaceuticals, including the ongoing
impact of generic Ventolin.
In Europe, sales declined 17% AER, 18% CER, with a strong comparator,
including COVID-19 pandemic related stocking at the end of the quarter.
This quarter, growth of Trelegy, Benlysta and HIV two-drug regimens
was offset by declines in Tivicay, Triumeq, and the Established Pharmaceuticals
portfolio. This portfolio was impacted by generic competition including
Seretide, Duodart and Volibris, lower antibiotic demand, and a one-off
UK Relenza contract last year.
International declined 19% AER, 14% CER. Growth from the Respiratory
portfolio was offset by declines in HIV and Established Pharmaceuticals
which was impacted by COVID-19 suppressed antibiotics and dermatology
markets and increased generic competition in Japan on Xyzal and Avolve.
Respiratory
Total Respiratory sales were up 19% AER, 24% CER, with growth from
Trelegy, Nucala and Anoro. International Respiratory sales grew 32%
AER, 38% CER including Nucala, up 27% AER, 33% CER, and Trelegy up
76% AER, 82% CER including the impact of Trelegy Asthma launched
in Japan in Q4 2020.
In Europe, Respiratory grew 2% AER, but was flat at CER reflecting
strong comparator including additional demand related to COVID-19
pandemic related stocking at the end of the quarter. In the US, Respiratory
grew 24% AER, 32% CER, driven by Trelegy and Nucala and the impact
of a prior period RAR adjustment.
Sales of Nucala were GBP254 million in the quarter and grew 21% AER,
26% CER, with US sales up 30% AER, 39% CER to GBP150 million and
International sales of GBP42 million grew 27% AER, 33% CER. Europe
sales were flat at AER, down 2% CER.
Trelegy sales were up 28% AER, 35% CER to GBP248 million driven by
growth in all regions. In the US, sales benefited from the new asthma
indication approved and launched in Q3 2020, with sales up 29% AER,
37% CER. In Europe, sales grew 7% AER, 7% CER and in International,
where Trelegy asthma was approved in Japan in Q4 2020, sales grew
76% AER, 82% CER to GBP30 million.
HIV
HIV sales were GBP1,031 million with decline of 15% AER, 11% CER
in the quarter. The Q1 2020 sales comparator benefited from customer
stocking due to COVID-19, mainly in the US and Europe together with
timing of Tivicay tenders in International. These two factors accounted
for 8 and 2 percentage points of CER decline respectively, in addition
to 1 percentage point of CER decline from the mature portfolio. Triumeq
sales were GBP436 million, down 23% AER, 20% CER and Tivicay sales
were GBP301 million, down 27% AER,
24% CER.
New HIV products Juluca, Dovato, Rukobia and Cabenuva delivered sales
of GBP262 million representing 25% of the total HIV portfolio. Sales
of the two drug regimens Juluca and Dovato were GBP112 million and
GBP141 million respectively with combined growth of 36% AER, 41%
CER. Rukobia sales were GBP7 million. Cabenuva, the first long acting
injectable, launched in the US.
In the US, total sales were GBP597 million with decline of 15% AER,
10% CER. New HIV products delivered sales of GBP166 million, including:
Dovato GBP74 million growing 64% AER, 76% CER, Juluca GBP83 million
declining 12% AER, 5% CER, Rukobia GBP7 million and Cabenuva GBP2
million. Combined Tivicay and Triumeq sales were GBP419 million declining
24% AER, 19% CER. In Europe, total sales were GBP287 million with
decline of 10% AER, 12% CER. New HIV products delivered sales of
GBP84 million, including: Dovato GBP58 million growing >100% AER,
CER and Juluca GBP26 million growing 8% AER, 4% CER. Combined Tivicay
and Triumeq sales were GBP196 million declining 25% AER, 26% CER.
Oncology
Sales of Zejula, our PARP inhibitor treatment for Ovarian cancer
were GBP88 million in the quarter, up 9% AER, 11% CER. Sales comprised
GBP51 million in the US and GBP36 million in Europe.
Blenrep for the treatment of patients with relapsed or refractory
multiple myeloma was approved and launched in the US and Europe in
Q3 2020 and reported sales of GBP21 million in the quarter.
Immuno-inflammation
Sales of Benlysta in the quarter were up 18% AER, 25% CER to GBP178
million, including impact of Lupus Nephritis launches in US and Japan.
Established Pharmaceuticals
Sales of Established Pharmaceuticals in the quarter were GBP1,942
million, down 20% AER, 17% CER.
Established Respiratory products declined 14% AER, 11% CER to GBP1,127
million. This includes the ongoing impact of generic Ventolin in
the US and Xyzal in Japan. Advair/Seretide sales declined 11% AER,
8% CER reflecting ongoing impact of generic competition.
The remainder of the Established Pharmaceuticals portfolio declined
by 27% AER, 24% CER to GBP815 million on lower demand for antibiotics
during the COVID-19 pandemic period, the impact of government mandated
changes increasing use of generics in markets including France, Japan
and China, and a strong pre-COVID-19 comparator.
Vaccines turnover
Q1 2021
------------------------
Growth Growth
GBPm GBP% CER%
------ ------- -------
Meningitis 190 (16) (13)
Influenza 18 (14) (5)
Shingles 327 (49) (47)
Established Vaccines 689 (24) (23)
------
1,224 (32) (30)
------
US 505 (50) (47)
Europe 307 (12) (13)
International 412 (7) (5)
------ ------- -------
1,224 (32) (30)
------ ------- -------
Vaccines turnover declined 32% AER, 30% CER to GBP1,224 million,
primarily driven by the adverse impact of the COVID-19 pandemic on
Shingrix, Hepatitis vaccines, DTPa-containing vaccines and Bexsero.
This decline was partly offset by the performance of Cervarix in
China.
Vaccines performance in the first quarter was affected by lower demand
due to the rapid pace of COVID-19 vaccination programme deployment
mainly in the US, resulting in lower Shingrix vaccination in Q1 2021.
In addition to COVID-19 mass vaccination, some markets re-introduced
stay-at-home directives resulting in limited visits to healthcare
practitioners and points of vaccination. Vaccines sales in the comparator
quarter in 2020 grew 19% CER and had no material pandemic impact
outside of China.
Lower demand in the quarter was related to COVID-19 pandemic conditions
unless stated otherwise.
Meningitis
Meningitis sales declined 16% AER, 13% CER to GBP190 million. Bexsero
sales declined 18% AER, 16% CER to GBP134 million, reflecting lower
demand in the US and International.
Menveo sales declined 2% AER but grew 2% CER to GBP39 million, primarily
driven by favourable phasing in International, partly offset by lower
demand in Europe. In the US, Bexsero and Menveo both grew market
share.
Influenza
Fluarix/FluLaval sales declined by 14% AER, 5% CER to GBP18 million.
Shingles
Shingrix declined by 49% AER, 47% CER to GBP327 million, primarily
driven by lower demand in the US due to prioritised focus on COVID-19
mass vaccination of older adults, partly offset by a continued strong
performance momentum in Germany and the launch in China.
Established Vaccines
Hepatitis vaccines declined 55% AER, 54% CER to GBP95 million, adversely
impacted in the US and Europe by lower demand, travel restrictions
in Europe and competition returning to the US market.
Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix)
declined by 21% AER, 19% CER. Infanrix/Pediarix sales declined 24%
AER, 22% CER to GBP136 million, reflecting lower demand in the US
together with change in recommendation for the dosing schedule in
Germany. Boostrix sales were down 16% AER, 14% CER to GBP94 million
primarily due to lower vaccination rates in the US.
Rotarix sales were down 25% AER, 23% CER to GBP114 million, reflecting
lower demand in the US and unfavourable phasing in Emerging Markets.
Synflorix sales declined by 17% AER, 17% CER to GBP102 million,
primarily due to lower tender demand in Emerging Markets and Europe.
MMRV vaccines sales grew 11% AER, 12% CER to GBP63 million, largely
driven by improved supply and increased market share in Europe together
with favorable phasing in International.
Consumer Healthcare turnover
Q1 2021
------------------------
Growth Growth
GBPm GBP% CER%
------ ------- -------
Oral health 695 (5) (1)
Pain relief 546 (11) (8)
Vitamins, minerals and supplements 349 (4) (1)
Respiratory health 243 (45) (42)
Digestive health and other 428 (5) -
------ ------- -------
2,261 (13) (9)
Brands divested/under review 51 (81) (80)
------ ------- -------
2,312 (19) (16)
------ ------- -------
US 713 (26) (21)
Europe 611 (18) (19)
International 988 (14) (9)
------ ------- -------
2,312 (19) (16)
------ ------- -------
On a reported basis, sales declined 19% AER, 16% CER to GBP2,312
million in the first quarter largely driven by the divestment programme
which has now completed.
Sales excluding brands divested/under review declined 9% CER as a
direct result of the comparison last year including accelerated purchases
across all categories as a result of the COVID-19 pandemic when sales
excluding brands divested/under review were up 14% CER in Q1 2020
on a pro-forma basis, combined with a historically weak cold and
flu season. Given these challenging comparisons in Q1 2020 from COVID-19
and subsequent destocking in Q2 2020, the 2 year category CAGRs are
shared below and these will be shared for the first half of this
year only, as this is more indicative of underlying trends than looking
at the quarters in isolation.
International sales excluding brands divested/under review reported
sales grew mid-single digit with strong performance in the emerging
markets such as China helped by easier comparatives, with good growth
in the retained business in India, Latin America, the Middle East
and Africa.
Oral health
Oral health sales fell 5% AER, 1% CER to GBP695 million. In the previous
year Oral health sales had increased 13% CER. Sensodyne delivered
low single digit growth despite the comparative, reflecting underlying
brand strength, continued innovation and good consumer up take in
traditional retail and ecommerce channels particularly in India and
China. Gum health delivered high single digit growth, whilst Denture
care declined high single-digit given challenging market conditions
consistent with trends seen through 2020. On a 2 year CAGR growth
was mid-single digit, consistent with the trends seen in the second
half of 2020 after the accelerated purchases and subsequent destocking.
Pain relief
Pain relief sales declined 11% AER, 8% CER to GBP546 million. In
the prior year, Pain relief sales had increased mid-teens per cent
on a pro-forma basis. Advil declined double digit with Panadol down
high single digit which more than offset double digit growth in Voltaren
driven by the successful Rx to OTC switch in the US last year. The
2 year CAGR for the category was up mid-single digit, helped also
by the Voltaren Rx to OTC switch in Q2 2020.
Vitamins, minerals and supplements
Vitamins, minerals and supplements sales declined 4% AER, 1% CER
to GBP349 million. In the prior year Vitamins, minerals and supplements
sales had increased high-teens per cent on a pro-forma basis. Caltrate
delivered double digit growth, continuing the momentum seen throughout
last year, and Centrum grew low single digit, both the result of
continued consumer focus on health and wellness although this was
more than offset by a double digit decline in Emergen-C which faced
particularly challenging comparatives (volumes almost doubled last
year). On a 2 year CAGR the category growth was up high single digit.
Respiratory health
Respiratory health sales declined 45% AER, 42% CER to GBP243 million.
In the previous year Respiratory health sales had increased mid-twenties
per cent on a pro-forma basis. Theraflu and Robitussin declined double
digit with Contac down high single digit, and all were adversely
impacted by a lower cold and flu season as a result of the pandemic
and social distancing. On a 2 year CAGR the category was down in
the mid-teens.
Digestive health and other
Digestive health and other brands sales declined 5% AER and was flat
CER at GBP428 million. In the prior year Digestive health and other
brands had increased low-single digits on a pro-forma basis. Growth
in Digestive health products more than offset a decline in Skin health
products and Smokers' health products. The 2 year category CAGR was
up low single digit.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 33.4%, 1.8 percentage
points lower at AER and 2.6 percentage points lower in CER terms
compared with Q1 2020. This primarily reflected lower write downs
in a number of manufacturing sites and the unwind in Q1 2020 of the
fair market value uplift on inventory arising on completion of the
Consumer Healthcare Joint Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted cost of sales
as a percentage of turnover was 30.1%, 1.4 percentage points higher
at AER and 0.7 percentage points higher at CER compared with Q1 2020.
This reflected an adverse mix in Vaccines, primarily due to the reduction
in Shingrix sales in the US as well as higher supply chain costs
and under-recoveries resulting from lower demand in the current period,
partly offset by favourable mix in Pharmaceuticals.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 32.7%, 0.6 percentage
points higher at AER and 0.1 percentage points higher at CER compared
with Q1 2020.
Excluding Adjusting items, Adjusted SG&A costs as a percentage of
turnover were 31.2%, 0.6 percentage points higher at AER than in
Q1 2020 and 0.1 percentage points higher on a CER basis. Adjusted
SG&A costs declined 17% AER, 15% CER which reflected the tight control
of ongoing costs and reduced variable spending across all three businesses
as a result of the COVID-19 lockdowns, and the continuing benefit
of restructuring in Pharmaceuticals, Consumer Healthcare and support
functions. Around a third of this decline also reflected a favourable
legal settlement in the quarter compared to increased legal costs
in 2020.
Research and development
Total R&D expenditure was GBP1,118 million (15.1% of turnover), down
6% AER, 3% CER, including a decrease in major restructuring charges.
Adjusted R&D expenditure was GBP1,077 million (14.5% of turnover),
1% lower at AER, 3% higher at CER than in Q1 2020.
Pharmaceuticals R&D expenditure was GBP834 million, down 2% AER,
up 2% CER, primarily driven by increases in Specialty and Primary
Care and HIV portfolios, offset by a net reduction in Oncology compared
to Q1 2020 reflecting phasing in spend on Blenrep, efficiency savings
from the implementation of our One Development programme for Pharmaceuticals
and Vaccines as part of the Separation Preparation restructuring
programme and variable spending as a result of COVID-19 lockdowns.
In the Specialty and Primary Care portfolio there has been a significant
increase in investment, primarily related to our two key COVID-19
treatment programmes (VIR-7831 and otilimab) as well as a number
of other programs including HBV antisense oligonucleotide (GSK3228836),
anti-IL5 for asthma (GSK3511294) and otilimab for rheumatoid arthritis.
In Oncology, there was increased investment from progression of a
number of key programmes, including Zejula and dostarlimab, offset
by a phasing in spend on Blenrep.
R&D expenditure in Vaccines was GBP188 million, up 19% AER, 18% CER,
reflecting increased investment in clinical programmes for meningitis
ABCWY and RSV, partly offset by efficiency savings from the implementation
of the One Development programme and variable spending as a result
of COVID-19 lockdowns. R&D expenditure in Consumer Healthcare was
GBP55 million.
Royalty income
Royalty income was GBP91 million (Q1 2020: GBP67 million), up 36%
AER, 39% CER, primarily driven by higher sales of Gardasil.
Other operating income/(expense)
Net other operating income of GBP209 million (Q1 2020: GBP159 million
income) primarily reflected a number of asset disposals including
the disposal of royalty rights on cabozantinib and disposal of a
number of Consumer brands partly offset by accounting charges of
GBP107 million (Q1 2020: GBP473 million) arising from the re-measurement
of the contingent consideration liabilities related to the acquisitions
of the former Shionogi-ViiV Healthcare joint venture and the former
Novartis Vaccines business and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV Healthcare.
This included a re-measurement charge of GBP134 million (Q1 2020:
GBP435 million) for the contingent consideration liability due to
Shionogi, primarily as a result of the unwinding of the discount
for GBP93 million and a charge for GBP41 million from adjustments
to sales forecasts partly offset by updated exchange rate assumptions.
Operating profit
Total operating profit was GBP1,693 million in Q1 2021 compared with
GBP2,014 million in Q1 2020. This included an unfavourable comparison
to an increase in value of the shares in Hindustan Unilever in Q1
2020, offset by a number of other asset disposals, lower major restructuring
costs, lower re-measurement charges on the contingent consideration
liabilities and the unwind in 2020 of the fair market value uplift
on inventory arising on completion of the Consumer Healthcare Joint
Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted operating profit
was GBP1,881 million, 30% lower than Q1 2020 at AER, 23% lower at
CER on a turnover decline of 15% CER. The Adjusted operating margin
of 25.4% was 4.1 percentage points lower at AER, and 2.9 percentage
points lower on a CER basis than in Q1 2020.
The reduction in Adjusted operating profit primarily reflected the
impact of sales decline across all three businesses as a result of
the COVID-19 pandemic, including an adverse impact on Vaccines particularly
Shingrix and Hepatitis and an adverse comparison to an uplift from
increased customer demand and stock building in Q1 2020 in Pharmaceuticals
and Consumer Healthcare, as well as increased investment in R&D.
This was partly offset by tight control of ongoing costs including
reduced promotional and variable spending across all three businesses
as a result of the COVID-19 lockdowns, a favourable legal settlement
in the quarter compared to increased legal costs in 2020 and benefits
from continued restructuring across the business.
Contingent consideration cash payments which are made to Shionogi
and other companies reduce the balance sheet liability and hence
are not recorded in the income statement. Total contingent consideration
cash payments in Q1 2021 amounted to GBP221 million (Q1 2020: GBP215
million). This included cash payments made to Shionogi of GBP216
million (Q1 2020: GBP213 million).
Operating profit by business
Pharmaceuticals operating profit was GBP1,119 million, down 5% AER,
but up 2% CER on a turnover decrease of 8% CER. The operating margin
of 28.8% was 1.9 percentage points higher at AER than in Q1 2020
and 2.8 percentage points higher on a CER basis. This primarily reflected
the tight control of ongoing costs, reduced variable spending as
a result of the COVID-19 lockdowns, a favourable legal settlement
in the quarter compared to increased legal costs in 2020 and the
continuing benefit of restructuring. This was partly offset by increased
investment in R&D.
Vaccines operating profit was GBP306 million, down 64% AER, 60% CER
on a turnover decrease of 30% CER. The operating margin of 25.0%
was 22.5 percentage points lower at AER than in Q1 2020 and 20.4
percentage points lower on a CER basis. This was primarily driven
by the negative operating leverage from the significant COVID-19
related sales decline, higher supply chain costs resulting from lower
demand, under recoveries in the current period and adverse mix due
to Shingrix sales in the US, along with higher R&D spend to support
key strategic priorities. This was partly offset by higher royalty
income.
Consumer Healthcare operating profit was GBP535 million, down 30%
AER, 25% CER on a turnover decrease of 16% CER. The operating margin
of 23.1% was 3.6 percentage points lower at AER and 2.9 percentage
points lower on a CER basis than in Q1 2020. This primarily reflected
the impact of divestments and comparison with the favourable profit
impact of accelerated purchases due to COVID-19 in Q1 2020 partially
offset by synergy benefits from the Pfizer Joint Venture integration
and tight cost control.
Net finance costs
Total net finance costs were GBP191 million compared with GBP188
million in Q1 2020. Adjusted net finance costs were GBP190 million
compared with GBP187 million in Q1 2020. The increase primarily reflects
an adverse comparison to a fair value gain on interest rate swaps
in the 2020 comparator and lower interest income on overseas cash
post-closing of the divestment of Horlicks and other Consumer Healthcare
nutrition products in India and a number of other countries, partly
offset by reduced interest expense from lower debt levels and favourable
movements in foreign exchange rates.
Share of after tax profits of associates and joint ventures
The share of after tax losses of associates and joint ventures was
GBP16 million (Q1 2020: GBP9 million profits).
Taxation
The charge of GBP258 million represented an effective tax rate on
Total results of 17.0% (Q1 2020: 8.5%) and reflected the different
tax effects of the various Adjusting items. Q1 2020 included a non-taxable
unrealised gain arising from the increase in value of the shares
in Hindustan Unilever Limited in connection with the disposal of
Horlicks and other Consumer Healthcare brands. Tax on Adjusted profit
amounted to GBP318 million and represented an effective Adjusted
tax rate of 18.6% (Q1 2020: 13.7%).
Issues related to taxation are described in Note 14, 'Taxation' in
the Annual Report 2020. 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.
Non-controlling interests
The allocation of Total earnings to non-controlling interests amounted
to GBP187 million (Q1 2020: GBP114 million). The increase was primarily
due to an increased allocation of ViiV Healthcare profits of GBP76
million (Q1 2020: GBP40 million), including reduced credits for re-measurement
of contingent consideration liabilities, and an increased allocation
of Consumer Healthcare Joint Venture profits of GBP87 million (Q1
2020: GBP59 million).
The allocation of Adjusted earnings to non-controlling interests
amounted to GBP246 million (Q1 2020: GBP282 million). The reduction
in allocation primarily reflected a reduced allocation of Consumer
Healthcare Joint Venture profits of GBP114 million (Q1 2020: GBP139
million) and a reduced allocation of ViiV Healthcare profits of GBP108
million (Q1 2020: GBP128 million), partly offset by higher net profits
in some of the Group's other entities with non-controlling interests.
Earnings per share
Total EPS was 21.5p, compared with 31.5p in Q1 2020. Unfavourable
comparisons to an increase in value of the shares in Hindustan Unilever
in Q1 2020 were offset by a number of other asset disposals, lower
major restructuring costs and lower re-measurement charges on the
contingent consideration liabilities and the unwind in 2020 of the
fair market value uplift on inventory arising on completion of the
Consumer Healthcare Joint Venture with Pfizer.
Adjusted EPS was 22.9p compared with 37.7p in Q1 2020, down 39% AER
and 33% CER, on a 23% CER decrease in Adjusted operating profit reflecting
the impact of sales decline across all three businesses as a result
of the COVID-19 pandemic, higher interest costs and a higher effective
tax rate partly offset by a lower non-controlling interest allocation
of Consumer Healthcare and ViiV profits.
Currency impact on Q1 2021 results
The results for Q1 2021 are based on average exchange rates, principally
GBP1/$1.38, GBP1/EUR1.14 and GBP1/Yen 146. Comparative exchange rates
are given on page 38. The period-end exchange rates were GBP1/$1.38,
GBP1/EUR1.17 and GBP1/Yen 152.
In the quarter, turnover decreased 18% AER, 15% CER. Total EPS was
21.5p compared with 31.5p in Q1 2020. Adjusted EPS was 22.9p compared
with 37.7p in Q1 2020, down 39% AER and 33% CER. The adverse currency
impact primarily reflected the strengthening in Sterling, particularly
against the US as well as Yen. Exchange gains or losses on the settlement
of intercompany transactions had a negligible impact on the negative
currency impact of six percentage points on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for
Q1 2021 and Q1 2020 are set out below.
Three months ended 31 March 2021
Divestments,
significant
legal
Intangible Intangible Major and
Total amort- impair- restruct- Transaction- other Separation Adjusted
results isation ment uring related items costs results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 7,418 7,418
Cost of sales (2,480) 175 1 34 7 27 (2,236)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 4,938 175 1 34 7 27 5,182
Selling, general
and
administration (2,427) 75 2 35 (2,315)
Research and
development (1,118) 26 13 2 (1,077)
Royalty income 91 91
Other operating
income/(expense) 209 (1) 109 (317) -
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 1,693 201 14 110 116 (288) 35 1,881
Net finance costs (191) 1 (190)
Share of after
tax profits
of associates
and joint
ventures 16 16
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 1,518 201 14 111 116 (288) 35 1,707
Taxation (258) (39) (3) (24) (31) 44 (7) (318)
Tax rate % 17.0% 18.6%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 1,260 162 11 87 85 (244) 28 1,389
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 187 59 246
Profit
attributable
to
shareholders 1,073 162 11 87 26 (244) 28 1,143
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 21.5p 3.2p 0.2p 1.7p 0.5p (4.8)p 0.6p 22.9p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number of shares
(millions) 4,993 4,993
------------ ------------
Three months ended 31 March 2020
Divestments,
significant
legal
Intangible Intangible Major and
Total amort- impair- restruct- Transaction- other Adjusted
results isation ment uring related items results
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 9,090 9,090
Cost of sales (3,199) 171 29 293 96 (2,610)
------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 5,891 171 29 293 96 6,480
Selling, general
and
administration (2,916) 14 106 10 (2,786)
Research and
development (1,187) 17 84 (1,086)
Royalty income 67 67
Other operating
income/(expense) 159 473 (632) -
------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 2,014 188 43 483 569 (622) 2,675
Net finance costs (188) 1 (187)
Share of after
tax
profits of
associates and
joint
ventures 9 9
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before
taxation 1,835 188 43 484 569 (622) 2,497
Taxation (156) (39) (6) (105) (58) 22 (342)
Tax rate % 8.5% 13.7%
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after
taxation 1,679 149 37 379 511 (600) 2,155
------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit
attributable
to
non-controlling
interests 114 168 282
Profit
attributable
to
shareholders 1,565 149 37 379 343 (600) 1,873
------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per
share 31.5p 3.0p 0.8p 7.6p 6.9p (12.1)p 37.7p
------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average
number
of
shares
(millions) 4,965 4,965
------------ ------------
Major restructuring and integration
Within the Pharmaceuticals sector, the highly regulated manufacturing
operations and supply chains and long lifecycle of the business mean
that restructuring programmes, particularly those that involve the
rationalisation or closure of manufacturing or R&D sites are likely
to take several years to complete.
Total Major restructuring charges incurred in Q1 2021 were GBP110
million (Q1 2020: GBP483 million), analysed as follows:
Q1 2021 Q1 2020
------------------------- -------------------------
Cash Non-cash Total Cash Non-cash Total
GBPm GBPm GBPm GBPm GBPm GBPm
------ --------- ------ ------ --------- ------
2018 major restructuring
programme (incl. Tesaro) 7 3 10 26 155 181
Consumer Healthcare
Joint
Venture integration
programme 40 4 44 57 2 59
Separation Preparation
restructuring programme 79 9 88 237 - 237
Combined restructuring
and
integration programme - (32) (32) 3 3 6
126 (16) 110 323 160 483
------ --------- ------ ------ --------- ------
Cash charges of GBP79 million under the Separation Preparation programme
primarily arose from restructuring of some administrative and central
manufacturing functions. Non-cash charges of GBP9 million were related
to write-down of assets on disposal and closure of sites in the Pharmaceuticals
Supply Chain.
Cash charges of GBP40 million on the Consumer Healthcare Joint Venture
programme primarily related to severance and integration costs. The
non-cash credit in the Combined restructuring and integration programme
primarily reflected a write back on disposal of a site.
Total cash payments made in Q1 2021 were GBP211 million (Q1 2020:
GBP168 million), GBP100 million (Q1 2020: GBP11 million) relating
to the Separation Preparation restructuring programme, a further
GBP60 million (Q1 2020: GBP70 million) relating to the Consumer Healthcare
Joint Venture integration programme GBP33 million (Q1 2020: GBP53
million) under the 2018 major restructuring programme including the
settlement of certain charges accrued in previous quarters and GBP18
million for the existing Combined restructuring and integration programme
(Q1 2020: GBP34 million).
The analysis of Major restructuring charges by business was as follows:
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
Pharmaceuticals 37 172
Vaccines (44) 210
Consumer Healthcare 49 74
-------- --------
42 456
Corporate & central functions 68 27
-------- --------
Total Major restructuring costs 110 483
-------- --------
The analysis of Major restructuring charges by Income statement line
was as follows:
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
Cost of sales 34 293
Selling, general and administration 75 106
Research and development 2 84
Other operating income (1) -
Total Major restructuring costs 110 483
-------- --------
The benefit in the quarter from restructuring programmes was GBP0.2
billion, the Consumer Healthcare Joint Venture integration was GBP0.1
billion and the benefit from the Separation Preparation restructuring
programme was GBP0.1 billion.
The 2018 major restructuring programme, including Tesaro, is expected
to cost GBP1.75 billion to the end of 2021, with cash costs of GBP0.85
billion and non-cash costs of GBP0.9 billion, and is expected to
deliver annual savings of around GBP450 million by the end of 2021
(at 2019 rates). These savings are intended to be fully re-invested
to help fund targeted increases in R&D and commercial support of
new products.
The completion of the Consumer Healthcare Joint Venture with Pfizer
is expected to realise substantial cost synergies, generating total
annual cost savings of GBP0.5 billion by 2022 for expected cash costs
of GBP0.7 billion and non-cash charges expected to be GBP0.1 billion,
plus additional capital expenditure of GBP0.2 billion. Up to 25%
of the cost savings are intended to be reinvested in the business
to support innovation and other growth opportunities.
The Group initiated in Q1 2020 a two-year Separation Preparation
programme to prepare for the separation of GSK into two companies:
New GSK, a biopharma company with an R&D approach focused on science
related to the immune system, the use of genetics and new technologies,
and a new leader in Consumer Healthcare. The programme aims to:
-- Drive a common approach to R&D with improved capital allocation
-- Align and improve the capabilities and efficiency of global support
functions to support New GSK
-- Further optimise the supply chain and product portfolio, including
the divestment of non-core assets. A strategic review of prescription
dermatology is underway
-- Prepare Consumer Healthcare to operate as a standalone company
The programme continues to target delivery of GBP0.7 billion of annual
savings by 2022 and GBP0.8 billion by 2023, with total costs estimated
at GBP2.4 billion, of which GBP1.6 billion is expected to be cash
costs. The proceeds of anticipated divestments are largely expected
to cover the cash costs of the programme.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of GBP116
million (Q1 2020: GBP569 million). This included a net GBP107 million
accounting charge for the re-measurement of the contingent consideration
liabilities related to the acquisitions of the former Shionogi-ViiV
Healthcare joint venture and the former Novartis Vaccines business
and the liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare.
Q1 2021 Q1 2020
Charge/(credit) GBPm GBPm
-------- --------
Contingent consideration on former Shionogi-ViiV
Healthcare joint venture
(including Shionogi preferential dividends) 134 435
ViiV Healthcare put options and Pfizer preferential
dividends (53) 49
Contingent consideration on former Novartis Vaccines
business 26 (11)
Release of fair value uplift on acquired Pfizer
inventory - 91
Other adjustments 9 5
-------- --------
Total transaction-related charges 116 569
-------- --------
The GBP134 million charge relating to the contingent consideration
for the former Shionogi-ViiV Healthcare joint venture represented
an increase in the valuation of the contingent consideration due
to Shionogi, primarily as a result of the unwind of the discount
for GBP93 million and a charge of GBP41 million primarily from adjustments
to sales forecasts partly offset by updated exchange rate assumptions.
The GBP53 million credit relating to the ViiV Healthcare put option
and Pfizer preferential dividends represented a reduction in the
valuation of the put option as a result of trading performance of
peer companies and updated exchange rate assumptions.
The ViiV Healthcare contingent consideration liability is fair valued
under IFRS. The potential impact of the COVID-19 pandemic remains
uncertain and at 31 March 2021, it has been assumed that there will
be no significant impact on the long-term value of the liability.
This position remains under review and the amount of the liability
will be updated in future quarters as further information on the
impact of the pandemic becomes available. An explanation of the accounting
for the non-controlling interests in ViiV Healthcare is set out on
page 10.
Divestments, significant legal charges and other items
Divestments and other items also included gains from a number of
asset disposals, including the disposal of royalty rights on cabozantinib
and the disposal of a number of Consumer brands and certain other
Adjusting items. The Consumer Brands disposal programme is complete
and has delivered net proceeds of GBP1.1 billion. There was a GBP1
million credit (Q1 2020: GBP5 million charge) for significant legal
matters arising in the quarter. Significant legal cash payments were
GBP1 million (Q1 2020: GBP5 million).
Separation costs
From Q2 2020, the Group started to report additional costs to prepare
for Consumer Healthcare separation. These are estimated at GBP600-700
million, excluding transaction costs.
Cash generation
Cash flow
Q1 2021 Q1 2020
-------- --------
Net cash inflow from operating activities
(GBPm) 331 965
Free cash (outflow)/inflow* (GBPm) (3) 531
Free cash flow growth (%) >(100)% >100%
Free cash flow conversion* (%) <-% 34%
Net debt** (GBPm) 21,402 26,668
-------- --------
* Free cash flow and free cash flow conversion are defined on page
41 .
** Net debt is analysed on page 40.
Q1 2021
The net cash inflow from operating activities for the quarter was
GBP331 million (Q1 2020: GBP965 million). The decrease primarily
reflected reduced operating profit including adverse exchange impacts,
adverse timing of returns and rebates and increased inventory, partly
offset by a reduction in trade receivables from lower sales compared
to an increase in Q1 2020.
Total cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were GBP216 million
(Q1 2020: GBP213 million), of which GBP189 million was recognised
in cash flows from operating activities and GBP27 million was recognised
in contingent consideration paid within investing cash flows. These
payments are deductible for tax purposes.
Free cash outflow was GBP3 million for the quarter (Q1 2020: GBP531
million inflow). The decrease primarily reflected reduced operating
profit including adverse exchange impacts, adverse timing of returns
and rebates, increased inventory and increased dividends to non-controlling
interests, partly offset by a reduction in trade receivables from
lower sales compared to an increase in Q1 2020, increased proceeds
from disposal of intangible assets and lower tax payments.
Net debt
At 31 March 2021, net debt was GBP21.4 billion, compared with GBP20.8
billion at 31 December 2020, comprising gross debt of GBP26.2 billion
and cash and liquid investments of GBP4.8 billion. Net debt increased
due to the dividends paid to shareholders of GBP0.9 billion and additional
investments of GBP0.1 billion, partly offset by GBP0.4 billion net
favourable exchange impacts from the translation of non-Sterling
denominated debt and exchange on other financing items.
At 31 March 2021, GSK had short-term borrowings (including overdrafts
and lease liabilities) repayable within 12 months of GBP3.2 billion
with loans of GBP3.4 billion repayable in the subsequent year.
Returns to shareholders
Quarterly dividends
The Board has declared a first interim dividend for 2021 of 19 pence
per share (Q1 2020: 19 pence per share).
GSK recognises the importance of dividends to shareholders and aims
to distribute regular dividend payments that will be determined primarily
with reference to the free cash flow generated by the business after
funding the investment necessary to support the Group's future growth.
The Board currently intends to maintain the dividend for 2021 at
the current level of 80p per share, subject to any material change
in the external environment or performance expectations.
At our investor update on 23 June we plan to set out in detail the
strategy, growth prospects and financial outlooks for New GSK, including
an in-depth review of key marketed and pipeline growth drivers. Alongside
these we will provide details of a new distribution policy which
reflects the future investment priorities focused on delivering sustainable
long-term shareholder value. We anticipate that this new policy will
deliver competitive and attractive returns informed by appropriate
earnings pay-out ratios through the investment cycle well covered
by Free Cash Flow and, importantly, expected growth potential. We
expect that aggregate distributions for GSK will be lower than at
present. This new policy will be implemented for dividends paid in
respect of 2022.
Payment of dividends
The equivalent interim dividend receivable by ADR holders will be
calculated based on the exchange rate on 6 July 2021. An annual fee
of $0.03 per ADS (or $0.0075 per ADS per quarter) is charged by the
Depositary.
The ex-dividend date will be 20 May 2021, with a record date of 21
May 2021 and a payment date of 8 July 2021.
Paid/ Pence per
payable share GBPm
------------- ---------- -----
2021
First interim 8 July 2021 19 951
----------
2020
First interim 9 July 2020 19 946
8 October
Second interim 2020 19 946
14 January
Third interim 2021 19 946
Fourth interim 8 April 2021 23 1,151
--- ------
80 3,989
--- ------
Weighted average number of shares
Q1 2021 Q1 2020
millions millions
---------- ----------
Weighted average number of shares
- basic 4,993 4,965
Dilutive effect of share options
and share awards 44 45
---------- ----------
Weighted average number of shares
- diluted 5,037 5,010
---------- ----------
At 31 March 2021, 5,003 million shares (Q1 2020: 4,976 million) were
in free issue (excluding Treasury shares and shares held by the ESOP
Trusts). GSK made no share repurchases during the period. The company
issued 1.4 million shares under employee share schemes in the period
for proceeds of GBP15 million (Q1 2020: GBP23 million).
At 31 March 2021, the ESOP Trust held 27.6 million GSK shares against
the future exercise of share options and share awards. The carrying
value of GBP136 million has been deducted from other reserves. The
market value of these shares was GBP362 million.
At 31 March 2021, the company held 355.2 million Treasury shares
at a cost of GBP4,969 million, which has been deducted from retained
earnings.
Financial information
Income statement
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
TURNOVER 7,418 9,090
Cost of sales (2,480) (3,199)
-------- --------
Gross profit 4,938 5,891
Selling, general and administration (2,427) (2,916)
Research and development (1,118) (1,187)
Royalty income 91 67
Other operating income/(expense) 209 159
-------- --------
OPERATING PROFIT 1,693 2,014
Finance income 10 41
Finance expense (201) (229)
Share of after tax profits
of
associates and joint ventures 16 9
-------- --------
PROFIT BEFORE TAXATION 1,518 1,835
Taxation (258) (156)
Tax rate % 17.0% 8.5%
-------- --------
PROFIT AFTER TAXATION 1,260 1,679
-------- --------
Profit attributable to non-controlling
interests 187 114
Profit attributable to shareholders 1,073 1,565
-------- --------
1,260 1,679
-------- --------
EARNINGS PER SHARE 21.5p 31.5p
-------- --------
Diluted earnings per share 21.3p 31.2p
-------- --------
Statement of comprehensive income
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
Profit for the period 1,260 1,679
Items that may be reclassified subsequently to income
statement:
Exchange movements on overseas net assets and net
investment hedges (267) 178
Fair value movements on cash flow hedges (11) (18)
Reclassification of cash flow hedges to income statement 14 1
(264) 161
-------- --------
Items that will not be reclassified to income statement:
Exchange movements on overseas net assets of non-controlling
interests (34) 53
Fair value movements on equity investments 236 (39)
Tax on fair value movements on equity investments 54 10
Re-measurement gains on defined benefit plans 23 1,000
Tax on re-measurement gains on defined benefit plans (12) (187)
-------- --------
267 837
-------- --------
Other comprehensive income for the period 3 998
-------- --------
Total comprehensive income for the period 1,263 2,677
-------- --------
Total comprehensive income for the period attributable
to:
Shareholders 1,110 2,510
Non-controlling interests 153 167
-------- --------
1,263 2,677
-------- --------
Pharmaceuticals turnover - three months ended 31 March 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
GBPm GBP% CER% GBPm GBP% CER% GBPm GBP% CER% GBPm GBP% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Respiratory 619 19 24 386 24 32 143 2 - 90 32 38
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Anoro Ellipta 117 - 4 63 - 10 36 - (6) 18 - 6
Trelegy Ellipta 248 28 35 173 29 37 45 7 7 30 76 82
Nucala 254 21 26 150 30 39 62 - (2) 42 27 33
HIV 1,031 (15) (11) 597 (15) (10) 287 (10) (12) 147 (19) (15)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dolutegravir
products 990 (15) (11) 576 (17) (11) 280 (8) (10) 134 (19) (15)
Tivicay 301 (27) (24) 163 (24) (19) 75 (29) (30) 63 (32) (27)
Triumeq 436 (23) (20) 256 (24) (19) 121 (22) (24) 59 (14) (12)
Juluca 112 (7) (3) 83 (12) (5) 26 8 4 3 50 50
Dovato 141 >100 >100 74 64 76 58 >100 >100 9 >100 >100
Rukobia 7 - - 7 - - - - - - - -
Cabenuva 2 - - 2 - - - - - - - -
Other 32 (30) (26) 12 (14) (7) 7 (53) (53) 13 (24) (18)
Immuno-
inflammation
and
other specialty 180 19 26 145 15 23 16 14 14 19 73 73
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Benlysta 178 18 25 145 15 23 16 14 14 17 55 55
Oncology 110 36 38 65 35 44 43 30 27 2 >100 >100
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Zejula 88 9 11 51 6 12 36 9 6 1 >100 >100
Blenrep 21 - - 14 - - 7 - - - - -
New and Specialty
Pharmaceuticals 1,940 (1) 3 1,193 - 7 489 (4) (5) 258 (1) 3
Established
Pharmaceuticals 1,942 (20) (17) 520 (8) (2) 461 (27) (29) 961 (22) (18)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Established
Respiratory 1,127 (14) (11) 442 (3) 4 258 (21) (22) 427 (20) (16)
Arnuity Ellipta 6 (33) (33) 4 (43) (43) - - - 2 - -
Avamys/Veramyst 103 (6) - - - - 16 (16) (16) 87 (3) 3
Flixotide/Flovent 117 (5) - 70 40 50 16 (43) (43) 31 (31) (29)
Incruse Ellipta 52 (9) (7) 27 (10) (3) 18 (10) (10) 7 - (14)
Relvar/Breo
Ellipta 268 (6) (3) 112 (3) 4 82 (6) (8) 74 (11) (7)
Seretide/Advair 351 (11) (8) 117 10 17 95 (25) (27) 139 (14) (9)
Ventolin 189 (25) (21) 112 (24) (19) 25 (34) (37) 52 (24) (18)
Other Respiratory 41 (52) (48) - - - 6 (25) (12) 35 (55) (53)
Dermatology 100 (10) (6) - - - 34 (11) (13) 66 (10) (3)
Augmentin 91 (46) (43) - - - 23 (60) (60) 68 (39) (34)
Avodart 83 (41) (39) 1 - - 30 (39) (39) 52 (43) (40)
Imigran/Imitrex 25 (26) (26) 8 (47) (47) 12 (8) (8) 5 (17) (17)
Lamictal 116 (15) (12) 55 (20) (16) 28 (13) (12) 33 (8) (6)
Seroxat/Paxil 33 (8) (6) - - - 8 (20) (20) 25 (4) -
Valtrex 22 (21) (18) 3 (25) (25) 8 (11) (11) 11 (27) (20)
Other 345 (26) (22) 11 (52) (48) 60 (40) (42) 274 (20) (15)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Pharmaceuticals 3,882 (12) (8) 1,713 (3) 4 950 (17) (18) 1,219 (19) (14)
-------- -------- -------- -------- ---------- -------- -------- --------- -------- -------- --------- --------
Vaccines turnover - three months ended 31 March 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
GBPm GBP% CER% GBPm GBP% CER% GBPm GBP% CER% GBPm GBP% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Meningitis 190 (16) (13) 55 (31) (27) 90 (5) (6) 45 (10) (4)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Bexsero 134 (18) (16) 31 (43) (39) 85 1 - 18 (31) (19)
Menveo 39 (2) 2 24 (8) (4) 4 (56) (56) 11 >100 >100
Other 17 (19) (24) - - - 1 (50) (50) 16 (16) (21)
Influenza 18 (14) (5) - - - - - - 18 (5) 5
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Fluarix,
FluLaval 18 (14) (5) - - - - - - 18 (5) 5
Shingles 327 (49) (47) 269 (55) (52) 31 55 50 27 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Shingrix 327 (49) (47) 269 (55) (52) 31 55 50 27 - -
Established
Vaccines 689 (24) (23) 181 (45) (41) 186 (20) (21) 322 (7) (6)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Infanrix,
Pediarix 136 (24) (22) 64 (27) (23) 40 (26) (28) 32 (16) (11)
Boostrix 94 (16) (14) 43 (26) (21) 36 3 - 15 (21) (21)
Hepatitis 95 (55) (54) 51 (60) (58) 24 (56) (56) 20 (33) (30)
Rotarix 114 (25) (23) 22 (46) (44) 30 (3) (3) 62 (22) (19)
Synflorix 102 (17) (17) - - - 12 (37) (37) 90 (13) (13)
Priorix,
Priorix
Tetra,
Varilrix 63 11 12 - - - 32 10 10 31 11 14
Cervarix 45 >100 >100 - - - 8 >100 >100 37 >100 >100
Other 40 (38) (39) 1 (94) (81) 4 (33) (50) 35 (17) (21)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Vaccines 1,224 (32) (30) 505 (50) (47) 307 (12) (13) 412 (7) (5)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Balance sheet
31 March 31 December
2021 2020
GBPm GBPm
----------- ------------
ASSETS
Non-current assets
Property, plant and equipment 9,842 10,176
Right of use assets 791 830
Goodwill 10,442 10,597
Other intangible assets 29,418 29,824
Investments in associates and
joint ventures 370 364
Other investments 3,385 3,060
Deferred tax assets 4,312 4,287
Derivative financial instruments 6 5
Other non-current assets 989 1,041
----------- ------------
Total non-current assets 59,555 60,184
----------- ------------
Current assets
Inventories 6,216 5,996
Current tax recoverable 691 671
Trade and other receivables 6,492 6,952
Derivative financial instruments 234 152
Liquid investments 60 78
Cash and cash equivalents 4,757 6,292
Assets held for sale 74 106
----------- ------------
Total current assets 18,524 20,247
----------- ------------
TOTAL ASSETS 78,079 80,431
----------- ------------
LIABILITIES
Current liabilities
Short-term borrowings (3,172) (3,725)
Contingent consideration liabilities (746) (765)
Trade and other payables (14,610) (15,840)
Derivative financial instruments (226) (221)
Current tax payable (660) (545)
Short-term provisions (861) (1,052)
----------- ------------
Total current liabilities (20,275) (22,148)
----------- ------------
Non-current liabilities
Long-term borrowings (23,047) (23,425)
Corporation tax payable (175) (176)
Deferred tax liabilities (3,566) (3,600)
Pensions and other post-employment
benefits (3,468) (3,650)
Other provisions (672) (707)
Derivative financial instruments (20) (10)
Contingent consideration liabilities (5,062) (5,104)
Other non-current liabilities (784) (803)
----------- ------------
Total non-current liabilities (36,794) (37,475)
----------- ------------
TOTAL LIABILITIES (57,069) (59,623)
----------- ------------
NET ASSETS 21,010 20,808
----------- ------------
EQUITY
Share capital 1,346 1,346
Share premium account 3,296 3,281
Retained earnings 6,700 6,755
Other reserves 3,523 3,205
----------- ------------
Shareholders' equity 14,865 14,587
Non-controlling interests 6,145 6,221
----------- ------------
TOTAL EQUITY 21,010 20,808
----------- ------------
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 2021 1,346 3,281 6,755 3,205 14,587 6,221 20,808
Profit for the
period 1,073 1,073 187 1,260
Other
comprehensive
(expense)/income
for the period (255) 292 37 (34) 3
------------ ------------ ------------ ------------ ------------
Total
comprehensive
income
for the period 818 292 1,110 153 1,263
------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (236) (236)
Contributions from
non-controlling
interests 7 7
Dividends to
shareholders (946) (946) (946)
Shares issued 15 15 15
Realised after tax
profits
on disposal of
equity
investments 29 (29) - -
Write-down on
shares held
by ESOP Trusts (55) 55 - -
Share-based
incentive plans 99 99 99
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 2021 1,346 3,296 6,700 3,523 14,865 6,145 21,010
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2020 1,346 3,174 4,530 2,355 11,405 6,952 18,357
Profit for the
period 1,565 1,565 114 1,679
Other
comprehensive
income/(expense)
for the period 998 (53) 945 53 998
------------ ------------ ------------ ------------ ------------
Total
comprehensive
income/(expense)
for
the period 2,563 (53) 2,510 167 2,677
------------ ------------ ------------ ------------ ------------
Distributions to
non-controlling
interests (119) (119)
Contribution from
non-controlling
interests 3 3
Dividends to
shareholders (941) (941) (941)
Shares issued - 23 23 23
Realised after tax
losses
on disposal of
equity
investments (41) 41 - -
Shares acquired by
ESOP
Trusts 78 362 (440) - -
Write-down on
shares held
by ESOP Trusts (217) 217 - -
Share-based
incentive plans 97 97 97
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 March 2020 1,346 3,275 6,353 2,120 13,094 7,003 20,097
------------ ------------ ------------ ------------ ------------ ------------ ------------
Cash flow statement - three months ended 31 March 2021
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
Profit after tax 1,260 1,679
Tax on profits 258 156
Share of after tax profits of associates and
joint ventures (16) (9)
Net finance expense 191 188
Depreciation, amortisation and other adjusting
items 361 194
Increase in working capital (539) (1,340)
Contingent consideration paid (192) (186)
(Decrease)/increase in other net liabilities
(excluding contingent
consideration paid) (837) 544
-------- --------
Cash generated from operations 486 1,226
Taxation paid (155) (261)
-------- --------
Net cash inflow from operating activities 331 965
-------- --------
Cash flow from investing activities
Purchase of property, plant and equipment (201) (197)
Proceeds from sale of property, plant and equipment 37 6
Purchase of intangible assets (153) (147)
Proceeds from sale of intangible assets 328 113
Purchase of equity investments (103) (26)
Proceeds from sale of equity investments 44 45
Contingent consideration paid (29) (29)
Disposal of businesses 3 146
Investment in associates and joint ventures - (1)
Interest received 8 18
Decrease in liquid investments 18 -
Dividends from associates and joint ventures - 14
-------- --------
Net cash outflow from investing activities (48) (58)
-------- --------
Cash flow from financing activities
Issue of share capital 15 23
Repayment of short-term loans (5) (116)
Repayment of lease liabilities (49) (53)
Interest paid (95) (96)
Dividends paid to shareholders (946) (941)
Distributions to non-controlling interests (236) (119)
Contributions from non-controlling interests 7 3
Other financing items (67) 247
-------- --------
Net cash outflow from financing activities (1,376) (1,052)
-------- --------
Decrease in cash and bank overdrafts in the
period (1,093) (145)
-------- --------
Cash and bank overdrafts at beginning of the
period 5,262 4,831
Exchange adjustments (35) 42
Decrease in cash and bank overdrafts (1,093) (145)
-------- --------
Cash and bank overdrafts at end of the period 4,134 4,728
-------- --------
Cash and bank overdrafts at end of the period
comprise:
Cash and cash equivalents 4,757 4,769
Cash and cash equivalents reported in assets
held for sale - 483
-------- --------
4,757 5,252
Overdrafts (623) (524)
-------- --------
4,134 4,728
-------- --------
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). GSK reports results under
four segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines and
Consumer Healthcare, and individual members of the CET are responsible
for each segment.
The Pharmaceuticals R&D segment is the responsibility of the Chief
Scientific Officer and President, R&D and is reported as a separate
segment. The operating profit of this segment excludes the ViiV Healthcare
operating profit (including R&D expenditure) that is reported within
the Pharmaceuticals segment.
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.
Corporate and other unallocated turnover and costs include the results
of certain 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 2021 Q1 2020 Growth Growth
GBPm GBPm GBP% CER%
-------- -------- ------- -------
Pharmaceuticals 3,882 4,396 (12) (8)
Vaccines 1,224 1,805 (32) (30)
Consumer Healthcare 2,312 2,862 (19) (16)
-------- -------- ------- -------
7,418 9,063 (18) (15)
Corporate and other unallocated
turnover - 27
-------- -------- ------- -------
Total turnover 7,418 9,090 (18) (15)
-------- -------- ------- -------
Operating profit by segment
Q1 2021 Q1 2020 Growth Growth
GBPm GBPm GBP% CER%
-------- -------- ------- -------
Pharmaceuticals 1,910 2,018 (5) -
Pharmaceuticals R&D (791) (835) (5) (1)
-------- -------- ------- -------
Pharmaceuticals including R&D 1,119 1,183 (5) 2
Vaccines 306 858 (64) (60)
Consumer Healthcare 535 766 (30) (25)
-------- -------- ------- -------
Segment profit 1,960 2,807 (30) (25)
Corporate and other unallocated
costs (79) (132)
-------- -------- ------- -------
Adjusted operating profit 1,881 2,675 (30) (23)
Adjusting items (188) (661)
-------- -------- ------- -------
Total operating profit 1,693 2,014 (16) (8)
Finance income 10 41
Finance costs (201) (229)
Share of after tax profits of
associates
and joint ventures 16 9
-------- -------- ------- -------
Profit before taxation 1,518 1,835 (17) (9)
-------- -------- ------- -------
Legal matters
The Group is involved in significant legal and administrative proceedings,
principally product liability, intellectual property, tax, anti-trust,
consumer fraud and governmental investigations, which are more fully
described in the 'Legal Proceedings' note in the Annual Report 2020.
At 31 March 2021, the Group's aggregate provision for legal and other
disputes (not including tax matters described on page 20) was GBP0.2
billion (31 December 2020: GBP0.3 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 legal developments this quarter.
Additional information
Accounting policies and basis of preparation
This unaudited Results Announcement contains condensed financial
information for the three months ended 31 March 2021, and should
be read in conjunction with the Annual Report 2020, which was prepared
in accordance with International Financial Reporting Standards as
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union. This Results Announcement has been prepared applying
consistent accounting policies to those applied by the Group in the
Annual Report 2020.
The Group has not identified any changes to its key sources of accounting
judgements or estimations of uncertainty compared with those disclosed
in the Annual Report 2020.
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 2020 were published
in the Annual Report 2020, which has been delivered to the Registrar
of Companies and on which the report of the independent auditor was
unqualified and did not contain a statement under section 498 of
the Companies Act 2006.
COVID-19 pandemic
The potential impact of the COVID-19 pandemic on GSK's trading performance
and all our principal risks has been assessed with mitigation plans
put in place. In the first quarter of 2021, as anticipated, the pandemic
impacted Group performance primarily in demand for Vaccines as a
result of governments' prioritisation of COVID-19 vaccination programmes
and of ongoing containment measures impacting customers' ability
and willingness to access vaccination services across all regions.
We remain confident in the underlying demand for our Vaccine products
and are encouraged by the rate at which COVID-19 vaccinations are
being deployed in many countries, particularly the US and UK, which
provides support for healthcare systems returning to normal. We continue
to monitor the situation closely, as this continues to be a very
dynamic and uncertain situation, with the ultimate severity, duration
and impact unknown at this point including potential impacts on trading
results, clinical trials, supply continuity and our employees. The
situation could change at any time and there can be no assurance
that the COVID-19 pandemic will not have a material adverse impact
on the future results of the Group.
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 2021 Q1 2020 2020
-------- -------- -----
Average rates:
US$/GBP 1.38 1.29 1.29
Euro/GBP 1.14 1.17 1.13
Yen/GBP 146 140 137
Period-end rates:
US$/GBP 1.38 1.24 1.36
Euro/GBP 1.17 1.13 1.11
Yen/GBP 152 134 141
During Q1 2021 average Sterling exchange rates were stronger against
the US Dollar and the Yen but weaker against the Euro compared with
the same period in 2020. Period-end Sterling exchange rates were
stronger against the US Dollar, the Euro and the Yen compared with
the 2020 period-end rates.
Net assets
The book value of net assets increased by GBP202 million from GBP20,808
million at 31 December 2020 to GBP21,010 million at 31 March 2021.
This primarily reflected the Total profit for the period and the
increase in the fair value of equity investments exceeding the adverse
exchange movements and the dividends paid during the period.
The carrying value of investments in associates and joint ventures
at 31 March 2021 was GBP370 million (31 December 2020: GBP364 million),
with a market value of GBP340 million (31 December 2020: GBP364 million).
At 31 March 2021, the net deficit on the Group's pension plans was
GBP2,112 million compared with GBP2,104 million at 31 December 2020.
The increase in the net deficit primarily arose from lower UK assets
and an increase in the UK inflation rate from 2.8% to 3.2% partly
offset by increases in the rates used to discount UK pension liabilities
from 1.4% to 2.1%, and US pension liabilities from 2.3% to 3.0%.
The Group continues to monitor and review the pension asset portfolios
in response to the pandemic given the elevated uncertainty inherent
for valuations particularly for the property asset class.
The estimated present value of the potential redemption amount of
the Pfizer put option related to ViiV Healthcare, recorded in Other
payables in Current liabilities, was GBP907 million (31 December
2020: GBP960 million).
Contingent consideration amounted to GBP5,808 million at 31 March
2021 (31 December 2020: GBP5,869 million), of which GBP5,277 million
(31 December 2020: GBP5,359 million) represented the estimated present
value of amounts payable to Shionogi relating to ViiV Healthcare
and GBP496 million (31 December 2020: GBP477 million) represented
the estimated present value of contingent consideration payable to
Novartis related to the Vaccines acquisition.
Of the contingent consideration payable (on a post-tax basis) to
Shionogi at 31 March 2021, GBP723 million (31 December 2020: GBP745
million) is expected to be paid within one year.
Movements in contingent consideration are as follows :
ViiV Healthcare Group
Q1 2021 GBPm GBPm
---------------- ------
Contingent consideration at beginning of the
period 5,359 5,869
Re-measurement through income statement 134 160
Cash payments: operating cash flows (189) (192)
Cash payments: investing activities (27) (29)
Contingent consideration at end of the period 5,277 5,808
---------------- ------
ViiV Healthcare Group
Q1 2020 GBPm GBPm
---------------- ------
Contingent consideration at beginning of the
period 5,103 5,479
Re-measurement through income statement 435 436
Cash payments: operating cash flows (185) (186)
Cash payments: investing activities (28) (29)
Contingent consideration at end of the period 5,325 5,700
---------------- ------
Contingent liabilities
There were contingent liabilities at 31 March 2021 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 disputes
to which the Group is a party are set out on page 37.
Reconciliation of cash flow to movements in net debt
Q1 2021 Q1 2020
GBPm GBPm
--------- ---------
Net debt at beginning of the period (20,780) (25,215)
Decrease in cash and bank overdrafts (1,093) (145)
Decrease in liquid investments (18) -
Net decrease in short-term loans 5 116
Repayment of lease liabilities 49 53
Exchange adjustments 466 (1,454)
Other non-cash movements (31) (23)
--------- ---------
Increase in net debt (622) (1,453)
--------- ---------
Net debt at end of the period (21,402) (26,668)
--------- ---------
Net debt analysis
31 March 31 December
2021 2020
GBPm GBPm
--------- ------------
Liquid investments 60 78
Cash and cash equivalents 4,757 6,292
Short-term borrowings (3,172) (3,725)
Long-term borrowings (23,047) (23,425)
---------
Net debt at end of the period (21,402) (20,780)
--------- ------------
Free cash flow reconciliation
Q1 2021 Q1 2020
GBPm GBPm
-------- --------
Net cash inflow from operating activities 331 965
Purchase of property, plant and
equipment (201) (197)
Proceeds from sale of property,
plant and equipment 37 6
Purchase of intangible assets (153) (147)
Proceeds from disposals of intangible
assets 328 113
Net finance costs (87) (78)
Dividends from joint ventures and
associates - 14
Contingent consideration paid (reported in
investing activities) (29) (29)
Distributions to non-controlling
interests (236) (119)
Contributions from non-controlling
interests 7 3
Free cash (outflow)/inflow (3) 531
-------- --------
Reporting definitions
Total and Adjusted results
Total reported results represent the Group's overall performance.
GSK also uses a number of adjusted, non-IFRS, measures to report
the performance of its business. Adjusted results 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.
Adjusted results are defined on page 9 and other non-IFRS measures
are defined below.
Free cash flow
Free cash flow is defined as the net cash inflow/outflow from operating
activities less capital expenditure on property, plant and equipment
and intangible assets, contingent consideration payments, net finance
costs, and dividends paid to non-controlling interests plus proceeds
from the sale of property, plant and equipment and intangible assets,
and dividends received from joint ventures and associates. 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. A reconciliation
of net cash inflow from operations to free cash flow is set out on
page 40.
Free cash flow conversion
Free cash flow conversion is free cash flow as a percentage of earnings.
Working capital
Working capital represents inventory and trade receivables less trade
payables.
CER and AER 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.
CER% represents growth at constant exchange rates. GBP% or AER% represents
growth at actual exchange rates.
Pro-forma growth
The acquisition of the Pfizer consumer healthcare business completed
on 31 July 2019 and so GSK's reported results for Q1 2020 included
three months of results of the former Pfizer consumer healthcare
business from 1 January 2020.
The Group has presented in this Results Announcement pro-forma growth
rates at CER in Q1 2020 for sales excluding brands divested/under
review for Consumer Healthcare and sales for certain categories of
consumer healthcare products taking account of this transaction.
Pro-forma growth rates for the quarter are calculated comparing reported
results for Q1 2020, calculated applying the exchange rates used
in the comparative period, with the results for Q1 2019 adjusted
to include the equivalent three months of results of the former Pfizer
consumer healthcare business during Q1 2019, as consolidated (in
US$) and included in Pfizer's US GAAP results.
2 year Compound Annual Growth Rate
CAGR is defined as the compound annual growth rate and shows the
annualised average rate of pro-forma revenue growth between two given
years, assuming growth takes place at an exponentially compounded
rate. For Consumer Healthcare, the 2 year revenue CAGR has been shared
showing the annualised average rate of pro-forma revenue growth between
2019 and 2021.
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.
Outlook, assumptions and cautionary statements
2021 guidance
Our guidance range for 2021 is a decline of mid to high-single digit
percent adjusted EPS at CER.
Assumptions related to 2021 guidance
In outlining the guidance for 2021, 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 has made planning assumptions for 2021 that healthcare
systems and consumer trends will approach normality in the second
half of the year, and we expect turnover to be flat to low single
digit growth for the Pharmaceuticals and Vaccines businesses and
low to mid-single digit growth for Consumer Healthcare excluding
brands divested/under review. These planning assumptions as well
as earnings guidance and dividend expectations assume no material
interruptions to supply of the Group's products, no material mergers,
acquisitions or disposals, no material litigation or investigation
costs for the Company (save for those that are already recognised
or for which provisions have been made), no share repurchases by
the Company, and no change in the Group's shareholdings in ViiV Healthcare.
The assumptions also assume no material changes in the healthcare
environment. The 2021 guidance factors in all divestments and product
exits announced to date, including product divestments planned in
connection with the formation of the Consumer Healthcare Joint Venture
with Pfizer, and the non-core divestments planned to fund the cash
costs of the Separation Preparation restructuring programme.
The Group's guidance assumes successful delivery of the Group's integration
and restructuring plans. It also assumes that the integration and
investment programmes following the creation of the Consumer Healthcare
Joint Venture with Pfizer are delivered successfully. Material costs
for investment in new product launches and R&D have been factored
into the expectations given. Given the potential development options
in the Group's pipeline, the outlook may be affected by additional
data-driven R&D investment decisions. The guidance is given on a
constant currency basis.
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 forward-looking nature of these assumptions 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, macro-economic
activity, the impact of outbreaks, epidemics or pandemics, such as
the COVID-19 pandemic and ongoing challenges and uncertainties posed
by the COVID-19 pandemic for businesses and governments around the
world, 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, 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 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 report.
Independent review report to GlaxoSmithKline plc
We have been engaged by GlaxoSmithKline plc ("the Company") to review
the condensed financial information in the Results Announcement for
the three months ended 31 March 2021.
What we have reviewed
The condensed financial information comprises:
-- the income statement and statement of comprehensive income for
the three month period ended 31 March 2021 on pages 29 to 30;
-- the balance sheet as at 31 March 2021 on page 33;
-- the statement of changes in equity for the three month period
then ended on page 34;
-- the cash flow statement for the three month period then ended
on page 35; and
-- the accounting policies and basis of preparation and the explanatory
notes to the condensed financial information on pages 31 to 32
and 36 to 39 that have been prepared applying consistent accounting
policies to those applied by the Group in the Annual Report 2020,
which was prepared in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the European Union.
We have read the other information contained in the Results Announcement,
including the non-IFRS measures contained on pages 31 to 32 and 36
to 39, and considered whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
This report is made solely to the Company 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. Our work has been
undertaken so that we might state to the Company those matters we
are required to state to it in an independent review report and for
no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company,
for our review work, for this report, or for the conclusions we have
formed .
Directors' responsibilities
The Results Announcement of GlaxoSmithKline plc, 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 by applying consistent accounting policies to
those applied by the Group in the Annual Report 2020, which was prepared
in accordance with IFRS as adopted by the European Union .
Our responsibility
Our responsibility is to express to the Company a conclusion on the
condensed financial information in the Results Announcement based
on our review.
Scope of review
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 inquiries,
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 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 .
Conclusion
Based on our review, nothing has come to our attention that causes
us to believe that the condensed financial information in the Results
Announcement for the three months ended 31 March 2021 are 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 38 .
Deloitte LLP
Statutory Auditor
London, United Kingdom
28 April 2021
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