Issued:
Wednesday, 29 July 2020, London U.K.
|
GSK
delivers Q2 sales of £7.6 billion -2% AER, -3% CER (Pro-forma
-10% CER*)
Total EPS 45.5p >100% AER; >100% CER; Adjusted EPS 19.2p -37%
AER, -38% CER
|
|
||
Financial and product
highlights
|
||
|
||
●
|
Reported Group sales £7.6 billion -2% AER, -3% CER (Pro-forma
-10% CER*; -8% CER
excluding divestments/brands under review). Pharmaceuticals £4.1 billion -5% AER, -5%
CER; Vaccines £1.1 billion -29% AER, -29% CER; Consumer
Healthcare £2.4 billion +25% AER, +25% CER (Pro-forma -6%
CER)
|
|
●
|
H1
Reported group sales £16.7 billion 8% AER, 8% CER (Pro-forma
flat CER*; +1% CER excluding divestments/brands under
review)
|
|
●
|
Sales decline in Q2 2020 reflects expected disruption from
COVID-19, particularly in Vaccines as well as destocking from Q1
2020 in Pharmaceuticals and Consumer Healthcare
|
|
●
|
Total Respiratory sales £883 million +17% AER, +16%
CER. Trelegy sales £194 million +62% AER, +58% CER.
Nucala
sales £241 million +24% AER, +21%
CER
|
|
●
|
Total HIV sales £1.2 billion, -2% AER, -3% CER. Dolutegravir
sales £1.1 billion, -1% AER, -2% CER, two-drug regimen sales
£181 million, >100% AER, >100% CER (Dovato sales £68 million, >100% AER, >100%
CER, Juluca sales £113 million, +35% AER, +33%
CER)
|
|
●
|
Shingrix sales £323
million, -16% AER%, -19% CER
|
|
●
|
Total Group operating margin 37.4%. Adjusted Group operating margin
22.9%, reflecting lower sales and growth in investment in
R&D
|
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●
|
Total EPS 45.5p; >100% AER, >100% CER reflecting profit on
disposal of Horlicks and other Consumer Healthcare
brands
|
|
●
|
Adjusted EPS 19.2p -37% AER, -38% CER reflecting lower sales and
higher non-controlling interests following creation of the Consumer
Healthcare JV in 2019 and a higher tax rate
|
|
●
|
Q2 net cash flow from operations £2.76 billion. Free cash flow
£1.95 billion
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|
●
|
19p dividend declared for the quarter
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|
|
||
Guidance
|
||
●
|
Guidance for 2020 Adjusted EPS maintained; outcome is dependent in
particular on timing of a recovery in vaccination
rates
|
|
|
|
|
Pipeline
highlights
|
||
●
|
Continued strengthening of the biopharma pipeline which now
contains 35 medicines and 15 vaccines; over 75% of pipeline assets
are focused on immunology
|
|
●
|
Three approvals in Q2: Zejula in ovarian cancer, Rukobia in HIV, Duvroq in anaemia (Japan). Expect further approval
decisions for assets in Oncology and
Respiratory
|
|
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||
●
|
HIV
|
|
|
-
|
Cabenuva resubmitted in the US
as HIV treatment; regulatory decision anticipated Q1
2021
|
|
-
|
Data showing superiority of long-acting cabotegravir versus Truvada
in PrEP presented at IAS
|
|
-
|
FDA approval of Rukobia as first-in-class treatment for adults with few
treatment options available
|
|
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|
●
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Oncology
|
|
|
-
|
Zejula approved by FDA for
first line maintenance treatment in ovarian cancer in all comers
regardless of biomarker status
|
|
-
|
Positive European CHMP opinion for belantamab mafodotin in multiple
myeloma; FDA AdCom voted in favour (12-0) of risk-benefit profile
with approval decision anticipated in August
|
|
|
|
●
|
Respiratory
|
|
|
-
|
Nucala granted priority review
by FDA for hypereosinophilic syndrome (HES). Decision expected H1
2021
|
|
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●
|
Vaccines
|
|
|
-
|
New
positive Phase II data received for RSV vaccine for maternal and
older adults. Data to be presented at upcoming scientific congress.
Phase III study start in maternal adults planned for H2
2020
|
|
-
|
Strategic
collaboration announced with CureVac on mRNA technology
|
|
|
|
GSK’s response to
COVID-19
|
||
●
|
Multiple collaborations underway to develop adjuvanted COVID-19
vaccines. Phase I studies initiated by Clover Pharmaceuticals and
Medicago
|
|
●
|
Announced the intention to make 1 billion doses of vaccine adjuvant
available in 2021. Agreement reached with UK Government to supply
up to 60 million doses of candidate Sanofi-GSK vaccine. Discussions
underway with US and EU
|
|
●
|
Phase II/III study start expected in Q3 for Vir antibody for
high-risk outpatients with COVID-19. Phase IIa POC study of
otilimab as potential treatment for COVID-19 started
|
|
|
Q2 2020 results
|
|||||||||||
|
Q2 2020
|
|
Growth
|
|
H1 2020
|
|
Growth
|
||||
|
£m
|
|
£%
|
|
CER%
|
|
£m
|
|
£%
|
|
CER%
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,624
|
|
(2)
|
|
(3)
|
|
16,714
|
|
8
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
2,850
|
|
92
|
|
90
|
|
4,864
|
|
67
|
|
66
|
Total
earnings per share
|
45.5p
|
|
>100
|
|
>100
|
|
77.0p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
1,749
|
|
(19)
|
|
(21)
|
|
4,424
|
|
2
|
|
2
|
Adjusted
earnings per share
|
19.2p
|
|
(37)
|
|
(38)
|
|
56.9p
|
|
(6)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
2,760
|
|
99
|
|
|
|
3,725
|
|
82
|
|
|
Free
cash flow
|
1,949
|
|
>100
|
|
|
|
2,480
|
|
>100
|
|
|
|
|
|
|
|
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The Total results are presented under ‘Financial
performance’ on pages 12 and 28 and Adjusted results
reconciliations are presented on pages 24, 25, 38 and 39. 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 10 and £% or AER% growth, CER% growth, free cash flow and
other non-IFRS measures are defined on page 67. GSK provides
guidance on an Adjusted results basis only, for the reasons set out
on page 11. All expectations, guidance and targets regarding future
performance and dividend payments should be read together with
‘Outlook, assumptions and cautionary statements’ on
pages 68 and 69.
|
|
*
|
Reported AER and
CER growth rates include three and six months’ results of
former Pfizer consumer healthcare business. Pro-forma CER growth
rates are calculated as if the equivalent three and six months of
Pfizer consumer healthcare business results, as reported by Pfizer,
were included in the comparative period of Q2 2019 and H1 2019
respectively. See ‘Pro-forma growth’ on page
11.
|
Emma Walmsley, Chief Executive
Officer, GSK said:
“The fundamentals of GSK’s business remain strong and
we are maintaining good momentum on our strategic priorities. This
quarter, we presented promising data and had positive regulatory
reviews for new speciality pipeline medicines to treat HIV and
Oncology; and made further progress with our Consumer Healthcare
integration and Future Ready programmes, both of which will prepare
the company for separation.
“We continue to believe that multiple options will be needed
to prevent and treat COVID-19 and are working at pace with our
partners to develop potential adjuvanted vaccines and therapeutics
to fight the virus. At the same time, we have made strategic
investments in next-generation vaccine and antibody technologies,
most recently through our new collaboration with
CureVac.
“As expected, our performance this quarter was disrupted by
COVID-19, particularly in our Vaccines business, as visits to
healthcare professionals were limited due to lockdown measures.
Overall, we are seeing good underlying demand for our major
products and are confident this will be reflected in future
performance when the impact of COVID measures
eases.”
|
2020 guidance
|
At the time of announcing full-year 2019 results on 5 February 2020
we provided guidance with respect to expected full-year 2020
Adjusted EPS, being a decline in the range of -1% to -4% at
CER.
This guidance reflected our expectations for growth in key new
products, and the start of a two-year period in which we would
continue to increase investment in these products and in our
R&D pipeline, alongside implementation of our new programme
which will prepare the Group for separation.
The guidance excluded any impact in 2020 from any further material
divestments beyond those previously announced and any potential
impact on our business from the Coronavirus outbreak.
The COVID-19 pandemic has impacted Group performance during the
first half of 2020. As we anticipated, in Q2 2020 performance was
disrupted, particularly in the Vaccines business, as visits to
healthcare professionals were limited due to containment
measures.
While we are maintaining our 2020 Adjusted EPS guidance, there
remain notable risks to business performance over the balance of
the year. In particular, the outcome is dependent on the timing of
a recovery in vaccination rates, particularly in the US, which we
anticipate in the third quarter. If we were to experience a delay
in this recovery we could see a significant impact in 2020. In the
case of, for example, a three month delay, the impact on adjusted
EPS would be up to 5 percentage points.
All expectations, guidance and targets regarding future performance
and dividend payments should be read together with ‘Outlook,
assumptions and cautionary statements’ on pages 68 and
69. If exchange rates were to hold at the closing rates on
30 June 2020 ($1.23/£1, €1.10/£1 and Yen
132/£1) for the rest of 2020, the estimated impact on 2020
Sterling turnover growth would be around flat and if exchange gains
or losses were recognised at the same level as in 2019, the
estimated impact on 2020 Sterling Adjusted EPS growth would also be
around flat.
|
Results
presentation
|
|
A
webcast of the quarterly results presentation hosted by Emma
Walmsley, GSK CEO, will be held at 2pm BST on 29 July 2020.
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.
|
Operating performance – Q2 2020
|
Turnover
|
Q2 2020
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,102
|
|
(5)
|
|
(5)
|
|
(5)
|
Vaccines
|
1,133
|
|
(29)
|
|
(29)
|
|
(29)
|
Consumer
Healthcare
|
2,389
|
|
25
|
|
25
|
|
(6)
|
|
|
|
|
|
|
|
|
|
7,624
|
|
(2)
|
|
(3)
|
|
(10)
|
|
|
|
|
|
|
|
|
Corporate
and other unallocated turnover
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
turnover
|
7,624
|
|
(2)
|
|
(3)
|
|
(10)
|
|
|
|
|
|
|
|
|
Group turnover was £7,624 million in the quarter, down 2% AER,
3% CER and 10% CER on a pro-forma basis.
On a pro-forma basis, Group turnover was down 10% CER, and down 8%
CER excluding the impact of divestments in Vaccines and brands
divested or under review in Consumer Healthcare. Sales decline
reflects expected disruption from COVID-19, particularly in
Vaccines as well as destocking from Q1 2020 in Pharmaceuticals and
Consumer Healthcare.
Pharmaceuticals
turnover in the quarter was £4,102 million, down 5% AER, 5%
CER. HIV sales were down 2% AER, 3% CER, to £1,185 million,
with growth in Juluca and
Dovato offset by declines
in Tivicay and Triumeq including destocking.
Respiratory sales were up 17% AER, 16% CER, to £883 million,
on growth of Trelegy and
Nucala. Sales of
Established Pharmaceuticals declined 17% AER, 17% CER, to
£1,780 million, reflecting destocking and lower demand for
antibiotics due to COVID-19.
Vaccines turnover declined 29% AER, 29% CER to £1,133 million,
primarily driven by the adverse impact of the COVID-19 pandemic on
DTPa-containing, Hepatitis, Shingles and Meningitis vaccines,
together with the Rabipur and Encepur divestment.
Reported
Consumer Healthcare sales grew 25% AER, 25% CER to £2,389
million in the quarter, largely driven by the inclusion of the
Pfizer portfolio. On a pro-forma basis, sales declined 6% CER, and
were flat at CER excluding brands divested/under review, including reversal of stockbuilding
in Q1 2020.
Operating profit
Total
operating profit was £2,850 million in Q2 2020 compared with
£1,484 million in Q2 2019. The total operating margin was
37.4%. Adjusted operating profit was £1,749 million, down 19%
AER, 21% CER on a turnover decrease of 3% CER. The Adjusted
operating margin was 22.9%. On a pro-forma basis, Adjusted
operating profit was 27% lower at CER on a turnover decrease of 10%
CER. The pro-forma Adjusted operating margin was
22.9%.
The
increase in Total operating profit reflected the profit on disposal
of the Horlicks and other
Consumer Healthcare brands and resultant sale of shares in
Hindustan Unilever with increased income from asset disposals. This
was partly offset by higher re-measurement charges on the
contingent consideration liabilities. The decrease in pro-forma
Adjusted operating profit primarily reflected reduced leverage from
the reduction in sales across all three businesses, continuing
price pressures particularly in Respiratory and an increase in
R&D investment.
Earnings per share
Total
EPS was 45.5p, compared with 19.5p in Q2 2019. The increase in EPS
primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare
brands as well as increased income from asset disposals, partly
offset by higher re-measurement charges on the contingent
consideration liabilities and lower operating performance as a
result of COVID-19 impact on the Vaccines business and destocking
in Pharmaceuticals and Consumer Healthcare following a strong
operating performance in Q1 2020.
Adjusted
EPS was 19.2p compared with 30.5p in Q2 2019, down 37% AER, 38%
CER. This reduction primarily resulted from lower sales and a
higher non-controlling interest allocation of Consumer Healthcare
profits and a higher effective tax rate.
Cash flow
The net
cash inflow from operating activities for the quarter was
£2,760 million (Q2 2019: £1,389 million) and free cash
flow was £1,949 million (Q2 2019: £370 million). The
increase primarily reflected a significant reduction in trade
receivables as a result of collections following strong sales in
Q1, the beneficial timing of payments for returns and rebates and
taxes, higher disposals of intangible assets partly offset by
reduced operating profits, increased inventory and higher dividends
to non-controlling interests.
|
Operating performance – H1 2020
|
Turnover
|
H1 2020
|
||||||
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,498
|
|
-
|
|
-
|
|
-
|
Vaccines
|
2,938
|
|
(5)
|
|
(6)
|
|
(6)
|
Consumer
Healthcare
|
5,251
|
|
35
|
|
36
|
|
2
|
|
|
|
|
|
|
|
|
|
16,687
|
|
8
|
|
8
|
|
-
|
|
|
|
|
|
|
|
|
Corporate
and other unallocated turnover
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Group
turnover
|
16,714
|
|
8
|
|
8
|
|
-
|
|
|
|
|
|
|
|
|
Operating profit
Total operating profit was £4,864 million compared with
£2,912 million in H1 2019. Adjusted operating profit was
£4,424 million, up 2% AER, 2% CER on a turnover increase of 8%
CER. The Adjusted operating margin of 26.5% was 1.5 percentage
points lower at AER, and 1.7 percentage points lower on a CER basis
than in H1 2019. The pro-forma Adjusted operating margin was
26.5%.
The
reduction in pro-forma Adjusted operating profit primarily
reflected the adverse impact from the reduction in sales in
Vaccines as a result of the COVID-19 pandemic, continuing price
pressure, particularly in Respiratory, investment in R&D, and
investments in promotional product support, particularly for new
launches in Vaccines, HIV and Respiratory. This was partly offset
by a favourable mix in Vaccines, reduced promotional and variable
spending across all three business as a result of the COVID-19
lockdowns, the continuing benefit of restructuring in
Pharmaceuticals and Consumer Healthcare and the tight control of
ongoing costs, particularly in non-promotional spending across all
three businesses.
Earnings per share
Total
EPS was 77.0p, compared with 36.3p in H1 2019. The increase in EPS
primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare
brands as well as increased income from asset disposals, partly
offset by higher re-measurement charges on the contingent
consideration liabilities and a one-off benefit in H1 2019 from the
increased share of after tax profits of the associate
Innoviva.
Adjusted
EPS was 56.9p compared with 60.6p in H1 2019, down 6% AER, 6% CER.
The reduction primarily resulted from a higher non-controlling
interest allocation of Consumer Healthcare profits, reduced share
of after tax profits of associates resulting from a non-recurring
income tax benefit in Innoviva partly offset by a reduced effective
tax rate.
Cash flow
The net cash inflow from operating activities for the six months
was £3,725 million (H1 2019: £2,052 million) and free
cash flow was £2,480 million for the six months (H1 2019:
£535 million). The increase primarily reflected a reduction in
trade receivables as a result of collections following strong sales
in Q1 2020, the beneficial timing of payments for returns and
rebates and taxes, a lower seasonal increase of inventory, improved
operating profits and higher disposals of intangible assets and
milestone income.
|
R&D pipeline news flow highlights since Q1 2020
|
35 medicines in development, 15 Vaccines
|
COVID-19
|
Collaborations
|
|
●
|
COVID-19
vaccine development collaboration with Clover Biopharmaceuticals
began clinical trials with a Phase I study using GSK’s
pandemic adjuvant in combination with COVID-19 vaccine candidate
SCB-2019.
|
●
|
Announced
the intention to produce 1 billion doses of pandemic vaccine
adjuvant in 2021 to support COVID-19 vaccine
collaborations.
|
●
|
Agreement reached with UK Government to supply up to 60 million
doses of candidate Sanofi-GSK vaccine. Discussions underway with US
and EU
|
●
|
Announced
collaboration with Medicago to develop a novel adjuvanted COVID-19
candidate vaccine. Collaboration will also explore vaccine
development opportunities for other infectious
diseases.
|
Otilimab (aGM-CSF antibody)
|
|
●
|
The
first patient was dosed in the Phase IIa proof of concept OSCAR
study of otilimab, an anti GM-CSF antibody, in patients with severe
pulmonary COVID-19 related disease. Data are expected in H1
2021.
|
Oncology
|
Zejula
(niraparib, PARP inhibitor)
|
|
●
|
The US
FDA approved Zejula as the
only once-daily PARP inhibitor in first-line monotherapy
maintenance treatment for women with platinum-responsive advanced
ovarian cancer regardless of biomarker status.
|
Belantamab
mafodotin (GSK2857916, BCMA immunoconjugate)
|
|
●
|
The
EMA’s Committee for Medicinal Products for Human Use issued a
positive opinion for belantamab mafodotin in patients with
relapsed/refractory multiple myeloma.
|
●
|
An FDA
Advisory Committee meeting voted 12-0 in favour of the positive
benefit/risk profile of belantamab mafodotin for patients with
relapsed/refractory multiple myeloma.
|
●
|
The
first patient was dosed in the pivotal second line multiple myeloma
study, DREAMM-7, of belantamab mafodotin in combination with
bortezomib and dexamethasone.
|
●
|
The
first patient was dosed in the pivotal third line multiple myeloma
study, DREAMM-3, of belantamab mafodotin monotherapy.
|
●
|
The
first patient was dosed in a Phase Ib combination study evaluating
belantamab mafodotin with SpringWorks investigational gamma
secretase inhibitor, nirogacestat, in patients with
relapsed/refractory multiple myeloma. This combination is being
evaluated as a sub-study in the ongoing DREAMM-5 platform
trial.
|
●
|
16
presentations, including new analyses from the pivotal DREAMM-2
study and initial results from the DREAMM-4 study, were shared at
the European Hematology Association (EHA) Annual
Congress.
|
●
|
DREAMM-2
and DREAMM-6 data reinforcing the potential of investigational
belantamab mafodotin in patients with relapsed/refractory multiple
myeloma were shared at the American Society of Clinical Oncology
(ASCO). Please note the mOS from the DREAMM-2 13-month analysis has
been corrected to 13.7 months following the identification of
discrepancies in patient data used to calculate
survival.
|
Bintrafusp alfa (TGF beta trap/anti-PDL1)
|
|
●
|
Two-year
follow-up data for first-in-class bifunctional immunotherapy
bintrafusp alfa targeting TGF-b/PD-L1, in second-line NSCLC, were
shared at ASCO.
|
GSK’609 (ICOS
receptor agonist)
|
|
●
|
Reported
findings from ongoing studies into the anti-tumour potential of
targeting the ICOS receptor through GSK’609 alone and in
combination with immune checkpoint therapies for the treatment of
head and neck squamous cell carcinoma were shared at
ASCO.
|
IDEAYA partnership
|
|
●
|
A broad
partnership with IDEAYA was announced in synthetic lethality, an
emerging field in precision medicine oncology covering three IDEAYA
synthetic lethality programmes – MAT2A, Pol Theta and Werner
Helicase, which are projected to reach clinical trials within the
next three years.
|
GSK’608 (CD96)
|
|
●
|
The
first patient was dosed in a Phase I study of GSK’608 in
monotherapy and in combination with dostarlimab for patients with
advanced solid tumour cancers.
|
GSK’091 (TLR4
agonist)
|
|
●
|
GSK’091
for cancer was terminated due to portfolio
prioritisation.
|
HIV/Infectious diseases
|
Cabenuva
(cabotegravir + rilpivirine)
|
|
●
|
Cabenuva was resubmitted in the US as a treatment for HIV;
regulatory decision is anticipated in Q1 2021.
|
●
|
Positive
data from the CUSTOMIZE trial, the first ever implementation
research study on how best to integrate an investigational
once-monthly injectable HIV treatment in US healthcare practices,
were presented at AIDS 2020.
|
Cabotegravir (long acting integrase inhibitor)
|
|
●
|
Final
data from the HPTN 083 study presented at AIDS 2020 showed
investigational long acting injectable cabotegravir administered
every two months is 66% more effective than daily pills in
preventing HIV-1 acquisition.
|
Rukobia
(fostemsavir, attachment inhibitor)
|
|
●
|
The US
FDA approved Rukobia, a
first-in-class treatment for HIV in adults with few treatment
options available.
|
Tivicay
(dolutegravir)
|
|
●
|
The US
FDA approved the first-ever dispersible tablet formulation of
dolutegravir, Tivicay PD, a
once-daily treatment for children living with HIV.
|
GSK’394
(combinectin, entry inhibitor)
|
|
●
|
GSK’394
for HIV was terminated due to portfolio
prioritisation.
|
Immuno-inflammation
|
Benlysta
(belimumab)
|
|
●
|
Regulatory
submissions to the US FDA and EMA were made for Benlysta in lupus
nephritis.
|
Respiratory
|
Nucala
(mepolizumab)
|
|
●
|
The US
FDA granted a priority review of Nucala for patients with
hypereosinophilic syndrome (HES).
|
GSK’078 (SARM)
|
|
●
|
GSK’078
for COPD muscle weakness was terminated as data did not support
progression in this indication.
|
GSK’557 (nemiralisib, PI3Kd inhibitor)
|
|
●
|
GSK’557
for activated phosphoinositide 3-kinase delta syndrome was
terminated due to portfolio prioritisation.
|
Other pharmaceuticals
|
Duvroq
(daprodustat, HIF-PHI)
|
|
●
|
The
first regulatory approval for Duvroq was received in Japan for
patients with anaemia due to chronic kidney disease.
|
Vaccines
|
Shingrix
|
|
●
|
The
EMA’s Committee for Medicinal Products for Human Use issued a
positive opinion for Shingrix immuno compromised
patients.
|
RSV older adults vaccine
|
|
●
|
A Phase
I/II study of RSV older adult vaccine achieved its primary endpoint
and supports progression to Phase III.
|
RSV maternal vaccine
|
|
●
|
A Phase
I/II study of RSV maternal vaccine achieved its primary endpoint
and supports progression to Phase III.
|
COPD vaccine
|
|
●
|
Initial
data of the proof-of-concept study on the COPD candidate vaccine
showed it did not meet the primary endpoint. Work is ongoing to
better understand the data; no progression to Phase III is
planned.
|
Staphylococcus aureus
|
|
●
|
The
first patient was dosed in a Phase I study seeking to develop a
vaccine for the prevention of primary and recurrent
soft-skin-tissue infections caused by S.aureus.
|
CureVac
|
|
●
|
A
strategic mRNA technology collaboration with CureVac was announced
for the research, development, manufacturing and commercialisation
of up to five mRNA-based vaccines and monoclonal antibodies (mAbs)
targeting infectious disease pathogens.
|
Contents
|
Page
|
|
|
Total
and Adjusted results
|
10
|
Financial
performance – Q2 2020
|
12
|
Financial
performance – H1 2020
|
28
|
Cash
generation
|
43
|
Returns
to shareholders
|
44
|
|
|
Income
statements
|
46
|
Statement
of comprehensive income – three months ended 30 June
2020
|
47
|
Statement
of comprehensive income – six months ended 30 June
2020
|
48
|
Pharmaceuticals
turnover – three months ended 30 June 2020
|
49
|
Pharmaceuticals
turnover – six months ended 30 June 2020
|
50
|
Vaccines
turnover – three months ended 30 June 2020
|
51
|
Vaccines
turnover – six months ended 30 June 2020
|
52
|
Balance
sheet
|
53
|
Statement
of changes in equity
|
54
|
Cash
flow statement – six months ended 30 June 2020
|
55
|
Segment
information
|
56
|
Legal
matters
|
58
|
Additional
information
|
59
|
Reconciliation
of cash flow to movements in net debt
|
65
|
Net
debt analysis
|
65
|
Free
cash flow reconciliation
|
65
|
Principal
risks and uncertainties
|
66
|
Reporting
definitions
|
67
|
Outlook,
assumptions and cautionary statements
|
68
|
Directors’
responsibility statement
|
70
|
Independent
review report
|
71
|
Contacts
|
GSK –
one of the world’s leading research-based pharmaceutical and
healthcare companies – is committed to improving the quality
of human life by enabling people to do more, feel better and live
longer. For further information please
visit
www.gsk.com.
|
GSK enquiries:
|
|
|
|
UK
Media enquiries:
|
Simon
Steel
|
+44 (0)
20 8047 5502
|
(London)
|
|
Tim
Foley
|
+44 (0)
20 8047 5502
|
(London)
|
|
Mary
Hinks-Edwards
|
+44 (0)
20 8047 5502
|
(London)
|
|
|
|
|
US
Media enquiries:
|
Kristen
Neese
|
+1 215
751 3335
|
(Philadelphia)
|
|
Kathleen
Quinn
|
+1 202
603 5003
|
(Washington)
|
|
|
|
|
Analyst/Investor
enquiries:
|
Sarah
Elton-Farr
|
+44 (0)
20 8047 5194
|
(London)
|
|
Sonya
Ghobrial
|
+44 (0)
7392 784784
|
(Consumer)
|
|
James
Dodwell
|
+44 (0)
20 8047 2406
|
(London)
|
|
Danielle
Morris
|
+44 (0)
20 8047 7562
|
(London)
|
|
Jeff
McLaughlin
|
+1 215
751 7002
|
(Philadelphia)
|
|
Frannie
DeFranco
|
+1 215
751 4855
|
(Philadelphia)
|
Registered
in England & Wales:
No. 3888792
|
|
Registered
Office:
980 Great West
Road
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 pro-forma growth and other
non-IFRS measures are defined on page 67.
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 £25 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 24, 25, 38 and
39.
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.
|
Pro-forma growth
The
acquisition of the Pfizer consumer healthcare business completed on
31 July 2019 and so GSK’s reported results for Q2 2020
include three months of results of the former Pfizer consumer
healthcare business from 1 April 2020.
The
Group has presented pro-forma growth rates at CER for turnover,
Adjusted operating profit and operating profit by business taking
account of this transaction. Pro-forma growth rates for the quarter
are calculated comparing reported results for Q2 2020, calculated
applying the exchange rates used in the comparative period, with
the results for Q2 2019 adjusted to include the equivalent three
months of results of the former Pfizer consumer healthcare business
during Q2 2019, as consolidated (in US$) and included in
Pfizer’s US GAAP results. Similarly, pro-forma growth rates
at CER for the six months to 30 June 2020 are calculated comparing
reported results for the six months to 30 June 2020, calculated
applying the exchange rates used in the comparative period, with
the results for the six months to 30 June 2019, adjusted to include
the equivalent six months of results of the former Pfizer consumer
healthcare business, as consolidated (in US$) and included in
Pfizer’s US GAAP results.
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 85% of the Total
earnings and 82% of the Adjusted earnings of ViiV Healthcare for
2019.
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 £659 million. Subsequent re-measurements are
reflected within other operating income/expense and within
Adjusting items in the income statement in each period. At 30 June
2020, the liability, which is discounted at 8.5%, stood at
£5,436 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 H1 2020 were £445
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 50 and 51 of the Annual Report
2019.
|
Financial performance – Q2 2020
|
Total results
|
The
Total results for the Group are set out below.
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
7,624
|
|
7,809
|
|
(2)
|
|
(3)
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,449)
|
|
(2,637)
|
|
(7)
|
|
(7)
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,175
|
|
5,172
|
|
-
|
|
(1)
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,709)
|
|
(2,590)
|
|
5
|
|
5
|
Research
and development
|
(1,301)
|
|
(1,113)
|
|
17
|
|
15
|
Royalty income
|
75
|
|
78
|
|
(4)
|
|
(10)
|
Other
operating income/(expense)
|
1,610
|
|
(63)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
2,850
|
|
1,484
|
|
92
|
|
90
|
|
|
|
|
|
|
|
|
Finance
income
|
1
|
|
21
|
|
|
|
|
Finance
expense
|
(229)
|
|
(237)
|
|
|
|
|
Share
of after tax profits/(losses) of associates and joint
ventures
|
19
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
2,641
|
|
1,264
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Taxation
|
(201)
|
|
(214)
|
|
|
|
|
Tax rate %
|
7.6%
|
|
16.9%
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
2,440
|
|
1,050
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
177
|
|
86
|
|
|
|
|
Profit
attributable to shareholders
|
2,263
|
|
964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,440
|
|
1,050
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Earnings per share
|
45.5p
|
|
19.5p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Adjusted results
The
Adjusted results for the Group are set out below. Reconciliations
between Total results and Adjusted results for Q2 2020 and Q2 2019
are set out on pages 24 and 25.
|
|
Q2 2020
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Reported
growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
7,624
|
|
100
|
|
(2)
|
|
(3)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,249)
|
|
(29.5)
|
|
-
|
|
-
|
|
(8)
|
Selling,
general and administration
|
(2,530)
|
|
(33.2)
|
|
4
|
|
4
|
|
(5)
|
Research
and development
|
(1,171)
|
|
(15.4)
|
|
13
|
|
11
|
|
9
|
Royalty
income
|
75
|
|
1.0
|
|
(4)
|
|
(10)
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
1,749
|
|
22.9
|
|
(19)
|
|
(21)
|
|
(27)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
1,541
|
|
|
|
(21)
|
|
(22)
|
|
|
Adjusted
profit after tax
|
1,225
|
|
|
|
(26)
|
|
(27)
|
|
|
Adjusted
profit attributable to shareholders
|
958
|
|
|
|
(37)
|
|
(37)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
19.2p
|
|
|
|
(37)
|
|
(38)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
Q2 2020
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Reported
growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
1,886
|
|
46.0
|
|
(9)
|
|
(10)
|
|
(10)
|
Pharmaceuticals
R&D*
|
(910)
|
|
|
|
11
|
|
9
|
|
9
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
976
|
|
23.8
|
|
(22)
|
|
(23)
|
|
(23)
|
Vaccines
|
265
|
|
23.4
|
|
(57)
|
|
(58)
|
|
(58)
|
Consumer
Healthcare
|
521
|
|
21.8
|
|
33
|
|
33
|
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
1,762
|
|
23.1
|
|
(22)
|
|
(23)
|
|
(29)
|
Corporate
& other unallocated costs
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
1,749
|
|
22.9
|
|
(19)
|
|
(21)
|
|
(27)
|
|
|
|
|
|
|
|
|
|
|
*
|
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
|
|
Q2 2020
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Respiratory
|
883
|
|
17
|
|
16
|
HIV
|
1,185
|
|
(2)
|
|
(3)
|
Immuno-inflammation
|
177
|
|
17
|
|
15
|
Oncology
|
77
|
|
35
|
|
33
|
Established
Pharmaceuticals
|
1,780
|
|
(17)
|
|
(17)
|
|
|
|
|
|
|
|
4,102
|
|
(5)
|
|
(5)
|
|
|
|
|
|
|
US
|
1,801
|
|
1
|
|
(1)
|
Europe
|
931
|
|
(10)
|
|
(11)
|
International
|
1,370
|
|
(8)
|
|
(7)
|
|
|
|
|
|
|
|
4,102
|
|
(5)
|
|
(5)
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the quarter was £4,102 million, down 5% AER, 5%
CER. HIV sales were down 2% AER, 3% CER, to £1,185 million,
with growth in Juluca and
Dovato offset by declines
in Tivicay and Triumeq. Respiratory sales were up 17%
AER, 16% CER, to £883 million, on growth of Trelegy and Nucala. Sales of Established
Pharmaceuticals declined 17% AER, 17% CER, to £1,780
million.
In the
quarter, as expected, the COVID-19 related first quarter customer
stockbuilding, which predominantly impacted Europe and the US,
broadly reversed with only a minor dolutegravir impact in Europe
and the US remaining. The quarter also saw lower levels of new
patient prescriptions in the US and Europe, reduced market demand
for allergy and antibiotic products in International and pressure
on net prices in the US.
In the
US, sales grew 1% AER but declined 1% CER. Continued growth of
Nucala, Trelegy, Benlysta and the HIV two-drug regimens
was more than offset by the decline and COVID-19 destocking in
Tivicay, Triumeq and Established
Pharmaceuticals, including the impact of generic albuterol
substitutes.
In
Europe, sales declined 10% AER, 11% CER, reflecting the impact of
destocking and generic competition and almost fully offsetting the
additional demand experienced in the first quarter related to
COVID-19.
International
declined 8% AER, 7% CER, with Respiratory growth offset by lower
Established Pharmaceutical sales including the impact of a weaker
allergy season in Japan, lower Augmentin sales across the region and
lower sales in China.
Respiratory
Total
Respiratory sales were up 17% AER, 16% CER, with strong growth from
Trelegy and Nucala in all regions. International
Respiratory sales grew 17% AER, 17% CER, including Nucala, up 42% AER, 31% CER, and
Relvar/Breo up 8% AER, 12%
CER to £81 million. In Europe, Respiratory sales grew 13% AER,
13% CER despite the impact of the reversal of the customer
stockbuilding in Q1 2020 related to the COVID-19 pandemic. In the
US, Trelegy and
Nucala growth continued
while Relvar/Breo sales
were down 11% AER, 12% CER, impacted by competitive pricing
pressures and the impact of generic Advair on the US ICS/LABA
market.
Sales
of Nucala were £241
million in the quarter and grew 24% AER, 21% CER, with US sales up
28% AER, 26% CER to £150 million. Europe sales of £54
million grew 4% AER, 6% CER and International sales of £37
million grew 42% AER, 31% CER including growth of the at-home use
application.
Trelegy sales were up 62% AER, 58% CER to £194 million
with strong growth in all regions. In the US, sales grew 65% AER,
60% CER, reflecting continued market share growth. In Europe, sales
grew 64% AER, 59% CER and in International sales grew 38% AER, 46%
CER.
Relvar/Breo sales were up 2% AER, 2% CER to £242
million in the quarter. In the US, Relvar/Breo declined 11% AER, 12% CER,
reflecting competitive pricing pressures and the impact of generic
Advair on the US ICS/LABA
market. In Europe and International, Relvar/Breo continued to grow, up 11%
AER, 9% CER and 8% AER, 12% CER, respectively.
HIV
HIV
sales were £1,185 million, down 2% AER, 3% CER in the quarter.
The dolutegravir franchise declined 1% AER, 2% CER, delivering
sales of £1,140 million. The remaining portfolio, with sales
of £45 million and 4% of total HIV sales, declined 27% AER,
32% CER and reduced the overall growth of total HIV by one
percentage point.
Sales
of dolutegravir products were £1,140 million in the quarter.
Sales were impacted by customer destocking following the customer
stockbuilding in Q1 2020 due to COVID-19, mainly on Tivicay and Triumeq. Tivicay delivered sales of £373
million and declined 9% AER, 10% CER. Triumeq delivered sales of £586
million and declined 9% AER, 11% CER. The two-drug regimens,
Juluca and Dovato delivered sales of £181
million in the quarter, with combined growth more than offsetting
the decline of the three-drug regimen Triumeq.
In the
US, dolutegravir sales grew 1% AER, but declined 2% CER and in
Europe sales declined 4% AER, 5% CER impacted by customer
destocking following the customer stockbuilding in Q1 2020 due to
COVID-19. Following recent launches of Dovato, combined sales of the two-drug
regimens were £139 million in the US and £38 million in
Europe, with growth more than offsetting the decline in
Triumeq. International was
flat at AER, but grew 4% CER, driven by Tivicay.
Oncology
Sales
of Zejula, the PARP
inhibitor asset acquired from Tesaro in Q1 2019 were £77
million in the quarter, up 35% AER, 32% CER. Sales comprised
£47 million in the US and £30 million in
Europe.
Immuno-inflammation
Sales
of Benlysta in the quarter
were up 18% AER, 15% CER to £177 million, including sales of
the sub-cutaneous formulation of £89 million. In the US,
Benlysta grew 16% AER, 14%
CER to £153 million.
Established Pharmaceuticals
Sales
of Established Pharmaceuticals in the quarter were £1,780
million, down 17% AER, 17% CER.
Established
Respiratory products declined 12% AER, 12% CER to £805
million. This reflected the impact of generic albuterol substitutes
on Ventolin in the US, the
impact of COVID-19 pandemic related destocking in Europe and
allergy market contraction in Japan. In the US, sales of
Advair/Seretide grew 36%
AER, 34% CER to £143 million, reflecting a spike in the
ICS/LABA class during April and May. In Europe and International,
Seretide sales were down
12% AER, 13% CER and 7% AER, 6% CER, respectively, impacted by
generic competition in Europe, COVID-19 related
destocking.
The
remainder of the Established Pharmaceuticals portfolio declined 20%
AER, 20% CER to £975 million on lower demand for Dermatology
products and Antibiotics during the COVID-19 pandemic period, the
impact of government mandated changes increasing the use of
generics in China, and comparison with a strong Q2 2019, which
included a European Relenza
contract.
|
Vaccines turnover
|
|
Q2 2020
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Meningitis
|
167
|
|
(29)
|
|
(29)
|
Influenza
|
15
|
|
(12)
|
|
(6)
|
Shingles
|
323
|
|
(16)
|
|
(19)
|
Established
Vaccines
|
628
|
|
(34)
|
|
(34)
|
|
|
|
|
|
|
|
1,133
|
|
(29)
|
|
(29)
|
|
|
|
|
|
|
US
|
448
|
|
(42)
|
|
(45)
|
Europe
|
288
|
|
(29)
|
|
(29)
|
International
|
397
|
|
(2)
|
|
-
|
|
|
|
|
|
|
|
1,133
|
|
(29)
|
|
(29)
|
|
|
|
|
|
|
Vaccines turnover declined 29% AER, 29% CER to £1,133 million,
primarily driven by the adverse impact of the COVID-19 pandemic on
DTPa-containing, Hepatitis, Shingles and Meningitis vaccines,
together with the Rabipur and Encepur divestment.
Vaccines performance in the second quarter across all regions was
affected by lower demand due to limited visits to healthcare
practitioners and points of vaccination during the pandemic and
government stay-at-home directives. In areas where government
restrictions were lifted, wellness visits and vaccination rates
have started to recover, with paediatric vaccinations returning to
near pre-COVID-19 levels by the end of the quarter, while
adolescent and adult immunisations improved at a slower
pace.
Meningitis
Meningitis sales declined 29% AER, 29% CER to £167
million. Bexsero and Menveo
sales decreased 31% AER, 30% CER to
£108 million and 39% AER, 39% CER to £38 million
respectively, reflecting lower demand across all regions due to
de-prioritisation of vaccination during the COVID-19 pandemic. In
the US, Bexsero maintained and Menveo grew market share.
Influenza
Fluarix/FluLaval sales were
£15 million, down 12% AER, 6% CER.
Shingles
Shingrix sales
declined 16% AER, 19% CER to £323 million, primarily
driven by lower adult wellness visits and vaccination rates related
to the COVID-19 pandemic stay-at-home directives in the US, partly
offset by favourable return and rebate movements in the US. Total
US prescriptions for Shingrix reflected partial recovery of demand by the end of
the quarter. In Europe, a strong performance was recorded in
Germany due to robust underlying demand in post-lockdown
conditions.
Established Vaccines
Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) declined 42% AER, 43% CER. Infanrix/Pediarix
sales declined 39% AER, 40% CER to
£119 million, reflecting lower demand due to the COVID-19
pandemic conditions in the US, unfavourable year-on-year US CDC
stockpile movements and supply constraints in
Europe.
Boostrix sales were down 47%
AER, 47% CER to £76 million primarily due to the negative
impact of COVID-19 restrictions on vaccination rates across all
regions.
Hepatitis vaccines declined 62% AER, 62% CER to £86 million,
adversely impacted in the US and Europe by the COVID-19 pandemic
and related travel restrictions, together with competition
returning to market in the US.
Synflorix sales declined by 4%
AER, 5% CER to £103 million, primarily due to lower tender
volume demand in Europe.
Rotarix sales were up 10% AER,
9% CER to £128 million, reflecting favourable phasing in
Emerging Markets and in International, partly offset by lower
demand in the US due to COVID-19 confinement
measures.
MMRV vaccines sales grew 8% AER, 8% CER to £54 million,
largely driven by improved supply in Europe.
|
Consumer Healthcare turnover
|
|
|
|
Q2 2020
|
||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Oral
health
|
|
|
639
|
|
(2)
|
|
(1)
|
Pain
relief
|
|
|
529
|
|
38
|
|
38
|
Vitamins,
minerals and supplements
|
|
|
404
|
|
>100
|
|
>100
|
Respiratory
health
|
|
|
214
|
|
9
|
|
8
|
Digestive
health and other
|
|
|
487
|
|
22
|
|
22
|
|
|
|
2,273
|
|
37
|
|
37
|
|
|
|
|
|
|
|
|
Brands
divested/under review
|
|
|
116
|
|
(55)
|
|
(54)
|
|
|
|
|
|
|
|
|
|
|
|
2,389
|
|
25
|
|
25
|
|
|
|
|
|
|
|
|
US
|
|
|
829
|
|
75
|
|
70
|
Europe
|
|
|
602
|
|
4
|
|
4
|
International
|
|
|
958
|
|
11
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
2,389
|
|
25
|
|
25
|
|
|
|
|
|
|
|
|
Pro-forma
growth
|
|
|
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
On a
reported basis, sales grew 25% AER, 25% CER to £2,389 million
in the quarter, largely driven by the inclusion of the Pfizer
portfolio. On a pro-forma basis, sales declined 6% CER and were
flat at CER excluding brands divested/under review.
At a
regional level, China returned to growth as the mandated retailer
shutdowns were lifted, but weaker performance resulted due to the
expected unwinding of accelerated purchases seen in the previous
quarter, particularly in Europe and to a lesser extent in the US.
Quarterly sales growth also benefited by approximately two
percentage points, largely in the Digestive health and Pain relief
categories, from increased retailer stocking ahead of a systems
cutover in North America which is expected to reverse in the third
quarter. The majority of the benefit from the accelerated
purchasing related to COVID-19 seen in the first quarter has now
reversed, although Vitamins, minerals and supplements continued to
benefit from an increased consumer focus on health and
wellness.
Oral health
Oral
health sales declined 2% AER, 1% CER to £639 million. Sensodyne grew in low single-digits but
continued to gain share, with growth negatively impacted by the
unwind of prior quarter accelerated purchases which also affected
Denture care and Gum health, and which has now largely reversed.
Overall growth was also impacted by a decline in non-strategic
brands.
Pain relief
Pain relief grew 38% AER, 38% CER to £529 million. On a
pro-forma basis, sales declined in low single digits. Continued
strong performance of Panadol, and the successful Rx to OTC switch and launch
of Voltaren OTC in the US, were partly offset by a weaker
performance of Voltaren in Europe. Overall performance was also impacted
by the unwinding of accelerated purchases seen in the prior quarter.
Vitamins, minerals and supplements
Vitamins,
minerals and supplements more than doubled at AER and CER to
£404 million. On a pro-forma basis, sales grew in the
high-teens per cent, with strong performances from Centrum and Emergen-C, reflecting continued
strong consumer demand for the
category, particularly in the US and China.
Respiratory health
Respiratory
health sales grew 9% AER, 8% CER to £214 million. On a
pro-forma basis, sales declined in low double-digits. Continued
growth of Theraflu was
offset by the unwinding of accelerated purchases seen in the
previous quarter and reduced demand for seasonal nasal spray
products.
Digestive health and other
Digestive
health and other brands grew 22% AER, 22% CER to £487 million.
On a pro-forma basis, sales declined in low single digits, reflecting continued weaker
Skin health performance, the expected unwinding of
accelerated purchases of Digestive
health and other products, and also the impact of lower footfall,
reducing impulse purchases in retail stores due to the ongoing
pandemic.
|
Operating performance
|
Cost of sales
Total
cost of sales as a percentage of turnover was 32.1%, 1.6 percentage
points lower at AER and 1.5 percentage points lower in CER terms
compared with Q2 2019. This reflected a reduction in the costs of
Major restructuring programmes, primarily as a result of lower
write downs in a number of manufacturing sites.
Excluding
these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 29.5%, 0.8 percentage points higher at
AER and 1.0 percentage points higher at CER compared with Q2 2019.
On a pro-forma basis, Adjusted cost of sales as a percentage of
turnover was 29.5%, 0.7 percentage points higher at CER, compared
with Q2 2019. This reflected unfavourable product mix in Vaccines,
primarily due to the decline of Shingrix in the US and in Consumer
Healthcare and continued adverse pricing pressure in
Pharmaceuticals, particularly in Respiratory, partly offset by
lower inventory adjustments in Vaccines and a further contribution
from integration and restructuring savings in Pharmaceuticals and
Consumer Healthcare.
Selling, general and administration
Total
SG&A costs as a percentage of turnover were 35.5%, 2.4
percentage points higher at AER and 2.5 percentage points higher at
CER compared with Q2 2019. This included increased major
restructuring costs partly offset by lower significant legal and
transaction costs.
Excluding
these and other Adjusting items, Adjusted SG&A costs as a
percentage of turnover were 33.2%, 2.0 percentage points higher at
AER than in Q2 2019 and 2.2 percentage points higher on a CER
basis. On a pro-forma basis, Adjusted SG&A costs as a
percentage of turnover were 33.2%, 1.9 percentage points higher at
CER, compared with Q2 2019.
Adjusted
SG&A costs grew 4% AER, 4% CER but declined 5% CER on a
pro-forma basis, which reflected reduced promotional and variable
spending across all three business as a result of the COVID-19
lockdowns as well as the continuing benefit of restructuring in
Pharmaceuticals and Consumer Healthcare and the tight control of
ongoing costs, partly offset by increased investment for new
launches in Respiratory and HIV and an adverse comparison to income
from favourable settlements in Vaccines in Q2 2019.
Research and development
Total
R&D expenditure was £1,301 million (17.1% of turnover), up
17% AER, 15% CER, including an increase in impairment charges.
Adjusted R&D expenditure was £1,171 million (15.4% of
turnover), 13% higher at AER, 11% higher at CER than in Q2 2019. On
a pro-forma basis, Adjusted R&D expenditure grew 9% CER
compared with Q2 2019.
Pharmaceuticals
R&D expenditure was £922 million, up 15% AER, 13% CER,
reflecting a continued significant increase in Oncology investment
across multiple mid and late-stage assets including the legacy
Tesaro portfolio and a number of other programmes including
belantamab mafodotin, ICOS and bintrafusp alfa. In addition to the
Oncology investment there has also been increased spending on the
progression of key assets in the Specialty and primary care
portfolio such as otilimab for RA, the initiation of several
COVID-19 programmes as well as on daprodustat which recently
received approval in Japan. These increases in investment were
partly offset by reduced spending in HIV and the ongoing benefits
of the R&D portfolio re-prioritisation decisions in 2019.
R&D expenditure in Vaccines and Consumer Healthcare was
£175 million and £74 million, respectively.
Royalty income
Royalty
income was £75 million (Q2 2019: £78 million), down 4%
AER, 10% CER, primarily reflecting adverse movements in Consumer
Healthcare.
|
Other operating income/(expense)
Net
other operating income of £1,610 million (Q2 2019: £63
million expense) primarily reflected the net profit on disposal in
the quarter of the Horlicks
and other Consumer Healthcare brands of £2,304 million in Q2
2020, which was after reversal of £776 million of embedded
derivative gains on the value of the shares taken in prior years
and Q1 2020. This was partly offset by the related loss on sale of
the shares in Hindustan Unilever in Q2 2020 of £476 million.
Other operating income also included an increase in profit and
milestone income from a number of asset disposals.
The
gains were partly offset by accounting charges of £368 million
(Q2 2019: £188 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 £343
million (Q2 2019: £226 million) for the contingent
consideration liability due to Shionogi, primarily arising from
changes in sales forecasts and exchange rate assumptions as well as
the unwind of the discounting.
|
Operating profit
Total
operating profit was £2,850 million in Q2 2020 compared with
£1,484 million in Q2 2019. This reflected the profit on
disposal of the Horlicks
and other Consumer Healthcare brands and resultant sale of shares
in Hindustan Unilever as well as increased income from asset
disposals. This was partly offset by higher re-measurement charges
on the contingent consideration liabilities.
Excluding
these and other Adjusting items, Adjusted operating profit was
£1,749 million, 19% lower than Q2 2019 at AER and 21% lower at
CER on a turnover decrease of 3% CER. The Adjusted operating margin
of 22.9% was 4.9 percentage points lower at AER, and 5.1 percentage
points lower on a CER basis than in Q2 2019. On a pro-forma basis,
Adjusted operating profit was 27% lower at CER on a turnover
decrease of 10% CER. The Adjusted pro-forma operating margin of
22.9% was 5.3 percentage points lower on a CER basis than in Q2
2019.
The
reduction in pro-forma Adjusted operating profit primarily
reflected the adverse impact from reduction in sales across all
three businesses as a result of the COVID-19 pandemic, including a
reduction in customer demand primarily in Vaccines and destocking
in the quarter in Pharmaceuticals and Consumer Healthcare and
increased investment in R&D including a significant increase in
Oncology investments and initiation of several COVID-19 programmes.
In addition, there was adverse mix in Vaccines and Consumer
Healthcare, continuing price pressure, particularly in Respiratory
and increased investment for new launches in Respiratory and HIV.
This was partly offset by reduced promotional and variable spending
overall across all three businesses as a result of the COVID-19
lockdowns and the continued benefit of restructuring and tight
control of ongoing costs across all three businesses.
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 Q2 2020 amounted to £240 million (Q2 2019:
£226 million). This included cash payments made to Shionogi of
£232 million (Q2 2019: £220 million).
Operating profit by business
Pharmaceuticals
operating profit was £976 million, down 22% AER, 23% CER on a
turnover decrease of 5% CER. The operating margin of 23.8% was 5.4
percentage points lower at AER than in Q2 2019 and 5.4 percentage
points lower on a CER basis. This primarily reflected the negative
operating leverage from the COVID-19 related sales decline, a
significant increase in Oncology R&D and initiation of several
COVID-19 programmes, increase in cost of sales percentage due to
the continued impact of lower prices, particularly in Respiratory,
and investment in new product support and targeted priority
markets. This was partly offset by reduced promotional and variable
spending as a result of the COVID-19 lockdowns and tight control of
ongoing costs.
Vaccines operating profit was £265 million, down 57% AER, 58%
CER on a turnover decrease of 29% CER. The operating margin of
23.4% was 15.2 percentage points lower at AER than in Q2 2019 and
15.7 percentage points lower on a CER basis. This was primarily
driven by the negative operating leverage from the significant
COVID-19-related sales decline, as well as adverse mix and an
adverse comparison to income from one-off settlements in Q2 2019,
partly offset by lower inventory adjustments.
Consumer
Healthcare operating profit was £521 million, up 33% AER, 33%
CER on a turnover increase of 25% CER. On a pro-forma basis,
operating profit was £521 million, 11% CER lower on a turnover
decrease of 6% CER. The operating margin of 21.8% was 1.4
percentage points higher at AER and 1.3 percentage points higher on
a CER basis than in Q2 2019. The pro-forma operating margin of
21.8% was 1.2 percentage points lower on a CER basis. This was
primarily driven by reduced leverage from a decline in sales growth
in the quarter due to COVID-19 customer destocking and lower
customer footfall. This decline was partly offset by synergy
benefits from the Pfizer integration and targeted areas of lower
promotional investment.
Net finance costs
Total
net finance costs were £228 million compared with £216
million in Q2 2019. Adjusted net finance costs were £227
million compared with £220 million in Q2 2019. The increase
primarily reflected reduced swap interest income on foreign
currency hedges and lower interest income on reduced overseas cash
following the divestment of Horlicks and other Consumer Healthcare
nutrition products in India and a number of other countries. The
increase was partly offset by favourable refinancing of term
debt.
Share of after tax profits of associates and joint
ventures
The
share of after tax profits of associates and joint ventures was
£19 million (Q2 2019: £4 million losses).
Taxation
The
charge of £201 million represented an effective tax rate on
Total results of 7.6% (Q2 2019: 16.9%) and reflected the different
tax effects of the various Adjusting items, including the disposal
of Horlicks and other
Consumer Healthcare brands to Unilever and the subsequent disposal
of shares received in Hindustan Unilever. Tax on Adjusted profit
amounted to £316 million and represented an effective Adjusted
tax rate of 20.5% (Q2 2019: 15.4%), reflecting delays in settlement
of open periods and an updated forecast profit mix for the
year.
Issues
related to taxation are described in Note 14,
‘Taxation’ in the Annual Report 2019. 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 £177 million (Q2 2019: £86 million). The increase was
primarily due to the allocation of Consumer Healthcare profits of
£137 million (Q2 2019: £nil) following the completion of
the new Consumer Healthcare Joint Venture with Pfizer on 31 July
2019, partly offset by reduced allocation of ViiV Healthcare
profits of £24 million (Q2 2019: £75 million), including
increased charges for re-measurement of contingent consideration
liabilities.
The
allocation of Adjusted earnings to non-controlling interests
amounted to £267 million (Q2 2019: £138 million). The
increase in allocation primarily reflected an increased allocation
of Consumer Healthcare profits of £138 million (Q2 2019:
£nil) following the completion of the new Consumer Healthcare
Joint Venture with Pfizer on 31 July 2019 partly offset by a
reduced allocation of ViiV Healthcare profits of £113 million
(Q2 2019: £127 million).
Earnings per share
Total
EPS was 45.5p, compared with 19.5p in Q2 2019. The increase in EPS
primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare
brands as well as increased income from asset disposals, partly
offset by higher re-measurement charges on the contingent
consideration liabilities and lower operating performance as a
result of the COVID-19 impact on the Vaccines business and
destocking in Pharmaceuticals and Consumer Healthcare following a
strong operating performance in Q1 2020.
Adjusted
EPS was 19.2p compared with 30.5p in Q2 2019, down 37% AER, 38%
CER, on a 21% CER decrease in Adjusted operating profit. This
reduction primarily resulted from a higher effective tax rate and a
higher non-controlling interest allocation of Consumer Healthcare
profits.
Currency impact on Q2 2020 results
The
results for Q2 2020 are based on average exchange rates,
principally £1/$1.25, £1/€1.13 and £1/Yen 134.
Comparative exchange rates are given on page 59. The period-end
exchange rates were £1/$1.23, £1/€1.10 and
£1/Yen 132.
In the
quarter, turnover decreased 2% AER, 3% CER. Total EPS was 45.5p
compared with 19.5p in Q2 2019. Adjusted EPS was 19.2p compared
with 30.5p in Q2 2019, down 37% AER, 38% CER. The marginally
positive currency impact primarily reflected the weakness in
Sterling, particularly against the US$ and Yen, partly offset by
weakness in emerging market currencies relative to Q2 2019.
Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the positive currency
impact of one percentage point on Adjusted EPS.
|
Adjusting
items
The
reconciliations between Total results and Adjusted results for Q2
2020 and Q2 2019 are set out below.
|
Three months ended 30 June 2020
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Intangible
impairment
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments significant
legal and other items
£m
|
Separation
costs
£m
|
Adjusted
results
£m
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Turnover
|
7,624
|
|
|
|
|
|
|
7,624
|
Cost of sales
|
(2,449)
|
180
|
(2)
|
12
|
10
|
|
|
(2,249)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Gross profit
|
5,175
|
180
|
(2)
|
12
|
10
|
|
|
5,375
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,709)
|
|
3
|
182
|
(20)
|
(4)
|
18
|
(2,530)
|
Research and development
|
(1,301)
|
17
|
116
|
(2)
|
|
(1)
|
|
(1,171)
|
Royalty income
|
75
|
|
|
|
|
|
|
75
|
Other operating income/(expense)
|
1,610
|
|
|
1
|
359
|
(1,970)
|
|
-
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Operating profit
|
2,850
|
197
|
117
|
193
|
349
|
(1,975)
|
18
|
1,749
|
|
|
|
|
|
|
|
|
|
Net
finance costs
|
(228)
|
|
|
|
|
1
|
|
(227)
|
Share
of after tax profits of associates and joint ventures
|
19
|
|
|
|
|
|
|
19
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit before taxation
|
2,641
|
197
|
117
|
193
|
349
|
(1,974)
|
18
|
1,541
|
|
|
|
|
|
|
|
|
|
Taxation
|
(201)
|
(34)
|
(22)
|
(47)
|
(56)
|
47
|
(3)
|
(316)
|
Tax rate %
|
7.6%
|
|
|
|
|
|
|
20.5%
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit after taxation
|
2,440
|
163
|
95
|
146
|
293
|
(1,927)
|
15
|
1,225
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit
attributable to non-controlling interests
|
177
|
|
|
|
90
|
|
|
267
|
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
2,263
|
163
|
95
|
146
|
203
|
(1,927)
|
15
|
958
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
45.5p
|
3.2p
|
1.9p
|
2.9p
|
4.1p
|
(38.7)p
|
0.3p
|
19.2p
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares (millions)
|
4,977
|
|
|
|
|
|
|
4,977
|
|
––––––––––––
|
|
|
|
|
|
|
––––––––––––
|
Three months ended 30 June
2019
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Intangible
impairment
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments significant
legal and other items
£m
|
Adjusted
results
£m
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Turnover
|
7,809
|
|
|
|
|
|
7,809
|
Cost of sales
|
(2,637)
|
188
|
4
|
198
|
4
|
|
(2,243)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Gross profit
|
5,172
|
188
|
4
|
198
|
4
|
|
5,566
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(2,590)
|
|
2
|
67
|
41
|
47
|
(2,433)
|
Research and development
|
(1,113)
|
17
|
11
|
44
|
|
1
|
(1,040)
|
Royalty income
|
78
|
|
|
|
|
|
78
|
Other operating (expense)/income
|
(63)
|
|
|
|
202
|
(139)
|
-
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Operating profit
|
1,484
|
205
|
17
|
309
|
247
|
(91)
|
2,171
|
|
|
|
|
|
|
|
|
Net finance costs
|
(216)
|
|
|
|
|
(4)
|
(220)
|
Share of after tax losses of associates and joint
ventures
|
(4)
|
|
|
|
|
|
(4)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit before taxation
|
1,264
|
205
|
17
|
309
|
247
|
(95)
|
1,947
|
|
|
|
|
|
|
|
|
Taxation
|
(214)
|
(39)
|
(2)
|
(59)
|
(61)
|
75
|
(300)
|
Tax rate %
|
16.9%
|
|
|
|
|
|
15.4%
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit after taxation
|
1,050
|
166
|
15
|
250
|
186
|
(20)
|
1,647
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit
attributable to non-controlling interests
|
86
|
|
|
|
52
|
|
138
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
964
|
166
|
15
|
250
|
134
|
(20)
|
1,509
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
Earnings per share
|
19.5p
|
3.3p
|
0.3p
|
5.1p
|
2.7p
|
(0.4)p
|
30.5p
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (millions)
|
4,947
|
|
|
|
|
|
4,947
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
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 Q2 2020 were £193
million (Q2 2019: £309 million), analysed as
follows:
|
|
Q2 2020
|
|
Q2
2019
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
major restructuring programme (incl. Tesaro)
|
30
|
|
15
|
|
45
|
|
87
|
|
192
|
|
279
|
Consumer
Healthcare Joint Venture integration programme
|
82
|
|
15
|
|
97
|
|
21
|
-
|
-
|
|
21
|
Separation
Preparation restructuring programme
|
42
|
|
3
|
|
45
|
|
-
|
|
-
|
|
-
|
Combined
restructuring and integration programme
|
(3)
|
|
9
|
|
6
|
|
-
|
|
9
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151
|
|
42
|
|
193
|
|
108
|
|
201
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
charges primarily arose from restructuring of Vaccines
Manufacturing and R&D functions as well as commercial
pharmaceuticals restructuring under the Separation Preparation
programme, integration costs under the Consumer Healthcare Joint
Venture integration programme and restructuring of the
manufacturing organisation, R&D and some administrative
functions as well as the integration of Tesaro under the 2018 major
restructuring programme. Non-cash charges under the 2018 major
restructuring programme primarily related to write down of sites on
disposal of sites as part of plans to restructure the manufacturing
network.
Total
cash payments made in Q2 2020 were £163 million (Q2 2019:
£111 million), £31 million for the existing Combined
restructuring and integration programme (Q2 2019: £63
million), £47 million (Q2 2019: £28 million) under the
2018 major restructuring programme including the settlement of
certain charges accrued in previous quarters, a further £65
million (Q2 2019: £20 million) relating to the Consumer
Healthcare Joint Venture integration programme and £20 million
relating to the Separation Preparation restructuring
programme.
The
analysis of Major restructuring charges by business was as
follows:
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
|
|
|
Pharmaceuticals
|
44
|
|
232
|
Vaccines
|
(14)
|
|
17
|
Consumer
Healthcare
|
105
|
|
41
|
|
|
|
|
|
135
|
|
290
|
Corporate
& central functions
|
58
|
|
19
|
|
|
|
|
Total
Major restructuring costs
|
193
|
|
309
|
|
|
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
|
|
|
Cost of
sales
|
12
|
|
198
|
Selling,
general and administration
|
182
|
|
67
|
Research
and development
|
(2)
|
|
44
|
Other
operating expense
|
1
|
|
-
|
|
|
|
|
Total
Major restructuring costs
|
193
|
|
309
|
|
|
|
|
The
benefit in the quarter from the 2018 major restructuring programme
was £0.1 billion and the benefit from the Consumer Healthcare
Joint Venture integration was £0.1 billion. Given its early
stage the benefit from the Separation Preparation restructuring
programme was less than £0.1 billion.
|
Transaction-related adjustments
Transaction-related
adjustments resulted in a net charge of £349 million (Q2 2019:
£247 million). This included a net £368 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.
|
Charge/(credit)
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
|
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare joint venture
(including Shionogi preferential dividends)
|
343
|
|
226
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
10
|
|
(47)
|
Contingent
consideration on former Novartis Vaccines business
|
15
|
|
9
|
Other
adjustments
|
(19)
|
|
59
|
|
|
|
|
Total
transaction-related charges
|
349
|
|
247
|
|
|
|
|
The
£343 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 a £99 million unwind of the
discount and a £244 million charge primarily from adjustments
to sales forecasts as well as updated exchange rate
assumptions.
The
ViiV Healthcare contingent consideration liability is valued on a
long-term basis. The potential impact of the COVID-19 pandemic
remains uncertain and at 30 June 2020, 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 11.
Divestments, significant legal charges and other items
Divestments
and other items included a gain in the period of £1,828
million arising from the net profit on disposal in the quarter of
the Horlicks and other
Consumer Healthcare brands of £2,304 million in Q2 2020,
partly offset by the related loss on sale of the shares in
Hindustan Unilever in Q2 2020 of £476 million. The net profit
on disposal in the quarter was net of reversal of £776 million
of embedded derivative gains on the value of the shares taken in
prior years and Q1 2020. Divestments and other items also included
a gain from a number of asset disposals and certain other Adjusting
items. A charge of £1 million (Q2 2019: £47 million) for
significant legal matters included the settlement of existing
matters as well as provisions for ongoing litigation. Significant
legal cash payments were £1 million (Q2 2019: £4
million).
Separation costs
From Q2
2020, the Group has started to report additional one-time costs to
prepare for Consumer Healthcare separation.
|
Financial performance – H1 2020
|
Total results
|
The
Total results for the Group are set out below.
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Turnover
|
16,714
|
|
15,470
|
|
8
|
|
8
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(5,648)
|
|
(5,370)
|
|
5
|
|
6
|
|
|
|
|
|
|
|
|
Gross
profit
|
11,066
|
|
10,100
|
|
10
|
|
10
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(5,625)
|
|
(5,067)
|
|
11
|
|
12
|
Research
and development
|
(2,488)
|
|
(2,119)
|
|
17
|
|
16
|
Royalty income
|
142
|
|
151
|
|
(6)
|
|
(8)
|
Other
operating income/(expense)
|
1,769
|
|
(153)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
4,864
|
|
2,912
|
|
67
|
|
66
|
|
|
|
|
|
|
|
|
Finance
income
|
42
|
|
55
|
|
|
|
|
Finance
expense
|
(458)
|
|
(461)
|
|
|
|
|
Share
of after tax profits of associates and joint ventures
|
28
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation
|
4,476
|
|
2,559
|
|
75
|
|
74
|
|
|
|
|
|
|
|
|
Taxation
|
(357)
|
|
(524)
|
|
|
|
|
Tax rate %
|
8.0%
|
|
20.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation
|
4,119
|
|
2,035
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
291
|
|
241
|
|
|
|
|
Profit
attributable to shareholders
|
3,828
|
|
1,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,119
|
|
2,035
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Earnings per share
|
77.0p
|
|
36.3p
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Adjusted results
|
The
Adjusted results for the Group are set out below. Reconciliations
between Total results and Adjusted results for H1 2020 and H1 2019
are set out on pages 38 and 39.
|
|
H1 2020
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Reported
growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
16,714
|
|
100
|
|
8
|
|
8
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(4,859)
|
|
(29.1)
|
|
9
|
|
10
|
|
-
|
Selling,
general and administration
|
(5,316)
|
|
(31.8)
|
|
10
|
|
11
|
|
1
|
Research
and development
|
(2,257)
|
|
(13.5)
|
|
12
|
|
11
|
|
9
|
Royalty
income
|
142
|
|
0.9
|
|
(6)
|
|
(8)
|
|
(8)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,424
|
|
26.5
|
|
2
|
|
2
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
profit before tax
|
4,038
|
|
|
|
1
|
|
1
|
|
|
Adjusted
profit after tax
|
3,380
|
|
|
|
3
|
|
3
|
|
|
Adjusted
profit attributable to shareholders
|
2,831
|
|
|
|
(5)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings per share
|
56.9p
|
|
|
|
(6)
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit by business
|
H1 2020
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
%
of
turnover
|
|
Growth
£%
|
|
Reported
growth
CER%
|
|
Pro-forma
growth
CER%
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
3,904
|
|
45.9
|
|
(3)
|
|
(4)
|
|
(4)
|
Pharmaceuticals
R&D*
|
(1,745)
|
|
|
|
13
|
|
11
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Total
Pharmaceuticals
|
2,159
|
|
25.4
|
|
(13)
|
|
(14)
|
|
(14)
|
Vaccines
|
1,123
|
|
38.2
|
|
(8)
|
|
(10)
|
|
(10)
|
Consumer
Healthcare
|
1,287
|
|
24.5
|
|
57
|
|
59
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
4,569
|
|
27.3
|
|
1
|
|
-
|
|
(8)
|
Corporate
& other unallocated costs
|
(145)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,424
|
|
26.5
|
|
2
|
|
2
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
*
|
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
|
|
H1 2020
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Respiratory
|
1,754
|
|
27
|
|
26
|
HIV
|
2,392
|
|
3
|
|
2
|
Immuno-inflammation
|
328
|
|
21
|
|
19
|
Oncology
|
158
|
|
58
|
|
57
|
Established
Pharmaceuticals
|
3,866
|
|
(12)
|
|
(11)
|
|
|
|
|
|
|
|
8,498
|
|
-
|
|
-
|
|
|
|
|
|
|
US
|
3,559
|
|
3
|
|
1
|
Europe
|
2,073
|
|
2
|
|
2
|
International
|
2,866
|
|
(3)
|
|
(2)
|
|
|
|
|
|
|
|
8,498
|
|
-
|
|
-
|
|
|
|
|
|
|
Pharmaceuticals
turnover in the six months was £8,498 million, flat at both
AER and CER. HIV sales were up 3% AER, 2% CER, to £2,392
million, with growth in Juluca and Dovato partly offset by Tivicay and Triumeq. Respiratory sales were up 27%
AER, 26% CER, to £1,754 million, on growth of Trelegy and Nucala. Sales of Established
Pharmaceuticals declined 12% AER, 11% CER to £3,866
million.
Towards
the end of the first quarter, additional demand related to the
COVID-19 pandemic had a positive impact on growth of HIV and
Respiratory products. As expected, this effect has broadly reversed
in the second quarter, with only a minor dolutegravir impact in
Europe and US remaining. The second quarter also saw lower levels
of new patient prescriptions in the US and Europe, reduced market
demand for allergy and antibiotic products in International and
pressure on net prices in the US.
In the
US, sales grew 3% AER, 1% CER. Continued growth of Nucala, Trelegy, Benlysta and the HIV two-drug regimens
was partly offset by the decline and COVID-19 destocking in
Tivicay, Triumeq and Established Products,
including the impact of generic albuterol substitutes.
In
Europe, sales grew 2% AER, 2% CER, with strong growth from
Respiratory, HIV, Oncology and Benlysta partly offset by the decline
of Established Pharmaceutical sales, with the net impact of
COVID-19 broadly neutral over the six months.
International
declined 3% AER, 2% CER, with Respiratory, HIV and Benlysta growth more than offset by
lower Established Pharmaceutical sales including the impact of a
weaker allergy season in Japan and lower sales in China including
the impact of government mandated changes increasing the use of
generics.
Respiratory
Total
Respiratory sales were up 27% AER, 26% CER, with strong growth in
all regions. International Respiratory sales grew 26% AER, 26% CER
including Nucala, up 46% AER, 42% CER, and Relvar/Breo, up 13% AER, 14% CER to
£164 million. In Europe, Respiratory sales were £466
million up 26% AER, 27% CER. In the US, Trelegy and Nucala growth continued and
Relvar/Breo benefited from
the impact of a prior period RAR adjustment in the first
quarter.
Sales
of Nucala were £451
million in the six months and grew 30% AER, 28% CER, with US sales
up 31% AER, 29% CER to £265 million. Europe sales of £116
million grew 20% AER, 21% CER and International sales of £70
million grew 46% AER, 42% CER including growth of the at-home use
application.
Trelegy sales were up 87% AER, 85% CER to £387 million
driven by growth in all regions. In the US, sales grew 81% AER, 77%
CER, reflecting continued market share growth. In Europe, sales
grew 90% AER, 90% CER and in International sales were £35
million in the six months.
Relvar/Breo sales were up 16% AER, 16% CER to £527
million in the six months. In the US, Relvar/Breo grew 16% AER, 14% CER,
benefiting from the impact of a prior period RAR adjustment in the
first quarter. In Europe and International, Relvar/Breo also continued to grow, up
20% AER, 20% CER and 13% AER, 14% CER respectively.
HIV
HIV
sales were £2,392 million up 3% AER, 2% CER in the six months.
The dolutegravir franchise grew 4% AER, 3% CER, delivering sales of
£2,301 million. The remaining portfolio, with sales of
£91 million and 4% of total HIV sales, declined 22% AER, 23%
CER and reduced the overall growth of total HIV by one percentage
point.
Sales
of dolutegravir products were £2,301 million in the six
months. Sales benefited from customer stock building due to
COVID-19, mainly on Tivicay
and Triumeq that has not
yet fully reversed. Tivicay
delivered sales of £785 million, down 1% AER, 2% CER and
Triumeq sales were
£1,149 million, down 9% AER, 10% CER. The two-drug regimens,
Juluca and Dovato delivered sales of £367
million in the six months, with combined growth more than
offsetting decline in the three-drug regimen, Triumeq.
In the
US, dolutegravir sales grew 2% AER, but were flat at CER, and in
Europe sales grew 6% AER, 6% CER. The growth was driven by two-drug
regimen share growth and benefited from customer stocking due to
COVID-19 not fully reversed in the six months. Following recent
launches of Dovato,
combined sales of the two-drug regimens were £278 million in
the US and £81 million in Europe, with growth offsetting the
decline in Triumeq.
International continued to grow strongly with total dolutegravir
sales growth of 10% AER, 14% CER, driven by Tivicay tender business.
Oncology
Sales
of Zejula, the PARP
inhibitor asset acquired from Tesaro in Q1 2019 were £158
million in the six months, up 60% AER, 58% CER benefiting from a
favourable comparison with H1 2019. Sales comprised £95
million in the US and £63 million in Europe.
Immuno-inflammation
Sales
of Benlysta in the six
months were up 21% AER, 19% CER to £328 million, including
sales of the sub-cutaneous formulation of £156 million. In the
US, Benlysta grew 18% AER,
16% CER to £279 million.
Established Pharmaceuticals
Sales
of Established Pharmaceuticals in the six months were £3,866
million, down 12% AER, 11% CER.
Established
Respiratory products declined 11% AER, 11% CER to £1,770
million. Advair/Seretide
and Ventolin were impacted
by generic substitutes in the US and Europe, and in the
International region allergy sales were impacted by market
contraction in Japan.
The
remainder of the Established Pharmaceuticals portfolio declined 12%
AER, 11% CER to £2,096 million, including the impact of lower
demand for antibiotics and Dermatology products during the COVID-19
pandemic period, the impact of government mandated changes
increasing the use of generics in China, and a strong comparator,
including the European Relenza contract.
|
Vaccines turnover
|
|
H1 2020
|
||||
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
Meningitis
|
392
|
|
(12)
|
|
(10)
|
Influenza
|
36
|
|
13
|
|
22
|
Shingles
|
970
|
|
31
|
|
28
|
Established
Vaccines
|
1,540
|
|
(18)
|
|
(18)
|
|
|
|
|
|
|
|
2,938
|
|
(5)
|
|
(6)
|
|
|
|
|
|
|
US
|
1,461
|
|
(6)
|
|
(8)
|
Europe
|
636
|
|
(14)
|
|
(14)
|
International
|
841
|
|
4
|
|
6
|
|
|
|
|
|
|
|
2,938
|
|
(5)
|
|
(6)
|
|
|
|
|
|
|
Vaccines turnover declined 5% AER, 6% CER to £2,938 million,
primarily driven by the adverse impact of the COVID-19 pandemic on
Hepatitis, DTPa-containing, Meningitis and Shingles vaccines,
partially offset by growth in Shingrix in Q1 2020.
Vaccines performance across all regions was affected by lower
demand due to limited visits to healthcare practitioners and points
of vaccination during the pandemic and government stay-at-home
directives. In areas where lockdowns were lifted, wellness visits
and vaccination rates have started to recover, with paediatric
vaccination near pre-COVID levels by the end of the period, while
adolescent and adult immunisations improved at a slower
pace.
Meningitis
Meningitis sales declined 12% AER, 10% CER to £392
million. Bexsero sales declined 13% AER, 11% CER to £272
million, reflecting lower demand across all regions due to the
COVID-19 pandemic. Menveo sales declined 18% AER, 17% CER to £78
million, primarily driven by the negative impact of COVID-19
lockdowns on vaccination rates partly offset by higher demand in
Europe. In the US, Bexsero and Menveo grew market share.
Influenza
Fluarix/FluLaval sales were
£36 million, up 13% AER, 22% CER, reflecting favourable
phasing and higher demand in the International
region.
Shingles
Shingrix sales
grew 31% AER, 28% CER to £970 million, primarily
driven by strong uptake in Q1 2020 and favourable returns and
rebates, partly offset by a decline in demand in Q2 2020 due to
lower adult wellness visits and vaccination rates related to
COVID-19 pandemic stay-at-home directives in the US. In Europe, a
strong performance was recorded in Germany due to robust underlying
demand in post-lockdown conditions
Established Vaccines
Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) declined by 24% AER, 25% CER.
Infanrix/Pediarix
sales declined 21% AER, 21% CER to
£299 million, reflecting lower demand due to the COVID-19
pandemic in the US, unfavourable year-on-year US CDC stockpile
movements and supply constraints in Europe.
Hepatitis vaccines declined 35% AER, 36% CER to £299 million,
impacted in the US and Europe by the COVID-19 pandemic and related
travel restrictions, together with competition returning to market
in the US.
Synflorix sales were £226
million, down 1% AER, but flat at CER, primarily due to lower
tender volume demand in Europe partly offset by higher demand in
International.
Rotarix sales were up 12% AER,
12% CER to £279 million, reflecting favourable phasing in
Emerging Markets and in International, partly offset by lower
demand in the US due to COVID-19 confinement
measures.
MMRV vaccines sales grew 6% AER, 8% CER to £111 million,
largely driven by improved supply in Europe.
|
Consumer Healthcare turnover
|
|
|
|
H1 2020
|
||||
|
|
|
|
|
|
|
|
|
|
|
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Oral
health
|
|
|
1,372
|
|
4
|
|
6
|
Pain
relief
|
|
|
1,140
|
|
51
|
|
53
|
Vitamins,
minerals and supplements
|
|
|
767
|
|
>100
|
|
>100
|
Respiratory
health
|
|
|
653
|
|
34
|
|
34
|
Digestive
health and other
|
|
|
939
|
|
26
|
|
26
|
|
|
|
4,871
|
|
45
|
|
46
|
|
|
|
|
|
|
|
|
Brands
divested/under review
|
|
|
380
|
|
(30)
|
|
(28)
|
|
|
|
|
|
|
|
|
|
|
|
5,251
|
|
35
|
|
36
|
|
|
|
|
|
|
|
|
US
|
|
|
1,798
|
|
87
|
|
83
|
Europe
|
|
|
1,348
|
|
15
|
|
15
|
International
|
|
|
2,105
|
|
20
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
5,251
|
|
35
|
|
36
|
|
|
|
|
|
|
|
|
Pro-forma
growth
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
On a
reported basis, sales grew 35% AER, 36% CER to £5,251 million
in the six months, largely driven by the inclusion of the Pfizer
portfolio. On a pro-forma basis, sales grew 2% CER, and 7% CER
excluding brands divested/under review. This reflected the strong
performance in the first quarter, continued strong demand of
Vitamins, minerals and supplements products and increased retailer
stocking ahead of a systems cutover in North America which
benefited sales by one percentage point in the six months. The
remaining small stocking benefit from COVID-19 is expected to fully
unwind in the second half of the year, and the sales cutover
benefit to reverse in the third quarter.
Oral health
Oral
health sales grew 4% AER, 6% CER to £1,372 million.
Sensodyne continued to
perform strongly, reporting low double-digit growth, reflecting
underlying strength of the brand, supported by recent innovations
including Sensodyne Sensitivity
& Gum. Gum health grew in double digits, while Denture
care was flat. Growth in Oral health was impacted by a decline in
the non-strategic brands.
Pain relief
Pain
relief grew 51% AER, 53% CER to £1,140 million. On a pro-forma
basis, sales grew in mid-single digits, with significant growth of
Panadol and Advil reflecting accelerated purchases
and increased consumption due to the COVID-19 pandemic,
particularly in Q1 2020. The successful launch of Voltaren OTC in the US contributed to
overall growth for the brand, although performance was impacted by
a weaker performance in Europe.
Vitamins, minerals and supplements
Vitamins,
minerals and supplements growth more than doubled to £767
million. On a pro-forma basis, sales grew in the high teens per
cent, with strong performance from Centrum and Emergen-C driven by increased consumer demand for the category,
particularly in the US and China.
Respiratory health
Respiratory
health sales grew 34% AER, 34% CER to £653 million. On a
pro-forma basis, sales grew in low double-digits, with broad-based
growth across the category, although the accelerated purchases and
increased consumption in response to the COVID-19 pandemic seen in
the first quarter largely unwound in the second
quarter.
Digestive health and other
Digestive
health and other brands grew 26% AER, 26% CER to £939 million.
On a pro-forma basis, sales declined in low single-digits, with
growth in Smokers’ health and Digestive health products
offset by a low double digit decline
in Skin health products and a decline in other non-strategic
brands.
|
Operating
performance
|
Cost of sales
Total
cost of sales as a percentage of turnover was 33.8%, 0.9 percentage
points lower at AER and 0.8 percentage points lower in CER terms
compared with H1 2019. This reflected a reduction in the costs of
Major restructuring programmes, primarily as a result of lower
write downs in a number of manufacturing sites, partly offset by
the unwinding 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 29.1%, 0.3 percentage points higher at
AER, 0.5 percentage points higher at CER compared with H1 2019. On
a pro-forma basis, Adjusted cost of sales as a percentage of
turnover was 29.1%, 0.1 percentage points higher at CER, compared
with H1 2019. This reflected continued adverse pricing pressure in
Pharmaceuticals, particularly in Respiratory and unfavourable
product mix in Consumer Healthcare, partly offset by a more
favourable product mix in Vaccines, and a further contribution from
integration savings in Consumer Healthcare.
Selling, general and administration
Total
SG&A costs as a percentage of turnover were 33.7%, 0.9
percentage points higher at AER and 1.1 percentage points higher at
CER compared with H1 2019. This reflected increased Major
restructuring costs partly offset by lower significant legal and
transaction costs.
Excluding
these and other Adjusting items, Adjusted SG&A costs as a
percentage of turnover were 31.8%, 0.6 percentage points higher at
AER than in H1 2019 and 0.8 percentage points higher on a CER
basis. On a pro-forma basis, Adjusted SG&A costs as a
percentage of turnover were 31.8%, 0.5 percentage points higher at
CER, compared with H1 2019.
The
growth in Adjusted SG&A costs of 10% AER, 11% CER and 1% CER on
a pro-forma basis reflected increased investment resulting from the
acquisition of Tesaro and in promotional product support,
particularly for new launches in Vaccines, Respiratory and HIV as
well as increased costs for a number of legal settlements. This was
partly offset by reduced promotional and variable spending across
all three business as a result of the COVID-19 lockdowns, the
continuing benefit of restructuring in Pharmaceuticals and Consumer
Healthcare and the tight control of ongoing costs, particularly in
non-promotional spending across all three businesses.
Research and development
Total
R&D expenditure was £2,488 million (14.9% of turnover), up
17% AER, 16% CER, including an increase in Major restructuring
costs. Adjusted R&D expenditure was £2,257 million (13.5%
of turnover), 12% higher at AER, 11% higher at CER than in H1 2019.
On a pro-forma basis, Adjusted R&D expenditure grew 9% CER
compared with H1 2019.
Pharmaceuticals
R&D expenditure was £1,775 million, up 15% AER, 13% CER,
primarily driven by a continued significant increase in investment
in Oncology reflecting the assets from the Tesaro acquisition
(primarily Zejula and
dostarlimab) and progression of a number of other programmes
including belantamab mafodotin, ICOS and bintrafusp alfa as well as
the initiation of several programmes focused on COVID-19. This
increased investment has been partly offset by a reduction in
investment in Research due to the early phase portfolio
reprioritisation in 2019. R&D expenditure in Vaccines and
Consumer Healthcare was £333 million and £149 million,
respectively.
Royalty income
Royalty
income was £142 million (H1 2019: £151 million), down 6%
AER, 8% CER, primarily reflecting adverse movements in Consumer
Healthcare.
|
Other operating income/(expense)
Net
other operating income of £1,769 million (H1 2019: £153
million expense) primarily reflected the net profit on disposal of
the Horlicks and other
Consumer Healthcare brands of £2,815 million in Q2 2020, which
was after reversal of £240 million of embedded derivative
gains on the value of the shares taken in prior years. This was
partly offset by the related loss on sale of the shares in
Hindustan Unilever in Q2 2020 of £476 million. Other operating
income also included an increase in profit and milestone income
from a number of asset disposals.
This
was partly offset by accounting charges of £841 million (H1
2019: £103 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 £778
million (H1 2019: £166 million) for the contingent
consideration liability due to Shionogi, primarily arising from
changes in exchange rate assumptions as well as sales forecasts and
the unwind of the discounting.
|
Operating profit
Total
operating profit was £4,864 million in H1 2020 compared with
£2,912 million in H1 2019. This reflected the profit on
disposal of the Horlicks
and other Consumer Healthcare brands and resultant sale of shares
in Hindustan Unilever as well as increased income from asset
disposals. This was partly offset by higher re-measurement charges
on the contingent consideration liabilities.
Excluding
these and other Adjusting items, Adjusted operating profit was
£4,424 million, 2% higher than H1 2019 at AER and 2% higher at
CER on a turnover increase of 8% CER. The Adjusted operating margin
of 26.5% was 1.5 percentage points lower at AER, and 1.7 percentage
points lower on a CER basis than in H1 2019. On a pro-forma basis,
Adjusted operating profit was 7% lower at CER on a turnover which
was flat at CER. The Adjusted pro-forma operating margin of 26.5%
was 1.9 percentage points lower on a CER basis than in H1
2019.
The
reduction in pro-forma Adjusted operating profit primarily
reflected the adverse impact from the reduction in sales in
Vaccines as a result of the COVID-19 pandemic, investment in
R&D including a significant increase in Oncology investment,
partly on the assets from the Tesaro acquisition and initiation of
several COVID-19 programmes, continuing price pressure,
particularly in Respiratory, including the impact of the launch of
a generic version of Advair
in the US in February 2019 and investments in promotional product
support, particularly for new launches in Vaccines, HIV and
Respiratory. This was partly offset by a favourable mix in
Vaccines, reduced promotional and variable spending across all
three business as a result of the COVID-19 lockdowns, the
continuing benefit of restructuring in Pharmaceuticals and Consumer
Healthcare and the tight control of ongoing costs, particularly in
non-promotional spending across all three businesses.
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 H1 2020 amounted to £455 million (H1 2019:
£443 million). This included cash payments made to Shionogi of
£445 million (H1 2019: £439 million).
Operating profit by business
Pharmaceuticals
operating profit was £2,159 million, down 13% AER, 14% CER on
turnover that was flat at CER. The operating margin of 25.4% was
4.1 percentage points lower at AER than in H1 2019 and 4.2
percentage points lower on a CER basis. This primarily reflected a
significant increase in Oncology R&D, the increase in cost of
sales percentage due to the continued impact of lower prices,
particularly in Respiratory, including the impact of the launch of
a generic version of Advair
in the US in February 2019, and investment in new product support
and targeted priority markets, together with higher provisions for
legal settlements and costs in the six months. This was partly
offset by the reduced promotional and variable spending as a result
of the COVID-19 lockdowns, the continued benefit of restructuring
and tight control of ongoing costs.
Vaccines
operating profit was £1,123 million, down 8% AER, 10% CER on a
turnover decrease of 6% CER. The operating margin of 38.2% was 1.2
percentage points lower at AER than in H1 2019 and 1.6 percentage
points lower on a CER basis. This was primarily driven by negative
operating leverage from the COVID-19 related decline in sales,
investment behind key brands and income from one-off settlements in
2019, partly offset by positive product mix.
Consumer
Healthcare operating profit was £1,287 million, up 57% AER,
59% CER on a turnover increase of 36% CER. On a pro-forma basis,
operating profit was £1,287 million, 8% CER higher on a
turnover increase of 2% CER. The operating margin of 24.5% was 3.4
percentage points higher at AER and 3.5 percentage points higher on
a CER basis than in Q2 2019. The pro-forma operating margin of
24.5% was 1.2 percentage points higher on a CER basis. The higher
margin was driven by higher than normal sales growth in Q1 2020,
partly offset by a decline and unwind in Q2 2020, primarily due to
COVID-19 buying patterns. Margin growth was also supported by
synergy delivery from the Pfizer integration and targeted areas of
lower promotional investment due to lockdown impacts.
Net finance costs
Total
net finance costs were £416 million compared with £406
million in H1 2019. Adjusted net finance costs were £414
million compared with £407 million in H1 2019. The increase
primarily reflected reduced interest income on overseas cash
following the divestment of Horlicks and other Consumer Healthcare
nutrition products in India and a number of other countries plus
reduced swap interest income on foreign currency hedges. The
increase was partly offset by favourable refinancing of term
debt.
Share of after tax profits of associates and joint
ventures
The
share of after tax profits of associates was £28 million (H1
2019: £53 million). H1 2019 included a one-off adjustment of
£51 million to reflect GSK’s share of increased after
tax profits of Innoviva primarily as a result of a non-recurring
income tax benefit.
Taxation
The
charge of £357 million represented an effective tax rate on
Total results of 8.0% (H1 2019: 20.5%) and reflected the different
tax effects of the various Adjusting items, including the disposal
of Horlicks and other
Consumer Healthcare brands to Unilever and subsequent disposal of
shares received in Hindustan Unilever. Tax on Adjusted profit
amounted to £658 million and represented an effective Adjusted
tax rate of 16.3% (H1 2019: 17.6%), reflecting cancellation by the
UK Government of a reduction in the UK corporation tax rate from
19% to 17% resulting in an increase in the value of balance sheet
deferred tax assets.
Issues
related to taxation are described in Note 14,
‘Taxation’ in the Annual Report 2019. 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 £291 million (H1 2019: £241 million). The increase was
primarily due to an increased allocation of Consumer Healthcare
profits of £196 million (H1 2019: £nil) following the
completion of the new Consumer Healthcare Joint Venture with Pfizer
on 31 July 2019, and which included the unwind of the fair value
uplift on acquired inventory and major restructuring costs. This
was partly offset by a reduced allocation of ViiV Healthcare
profits of £64 million (H1 2019: £204 million), including
increased charges for re-measurement of contingent consideration
liabilities.
The
allocation of Adjusted earnings to non-controlling interests
amounted to £549 million (H1 2019: £287 million). The
increase in allocation primarily reflected an increased allocation
of Consumer Healthcare profits of £277 million (H1 2019:
£nil) following the completion of the new Consumer Healthcare
Joint Venture with Pfizer on 31 July 2019 partly offset by a
reduced allocation of ViiV Healthcare profits of £241 million
(H1 2019: £250 million), and lower net profits in some of the
Group’s other entities with non-controlling interests,
primarily Consumer Healthcare India following the Horlicks and other Consumer brands
disposal.
Earnings per share
Total
EPS was 77.0p, compared with 36.3p in H1 2019. The increase in EPS
primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare
brands as well as increased income from asset disposals, partly
offset by higher re-measurement charges on the contingent
consideration liabilities and a one-off benefit in H1 2019 from
increased share of after tax profits of the associate
Innoviva.
Adjusted
EPS was 56.9p compared with 60.6p in H1 2019, down 6% AER, 6% CER,
on a 2% CER increase in Adjusted operating profit. The reduction
primarily resulted from a higher non-controlling interest
allocation of Consumer Healthcare profits, reduced share of after
tax profits of associates resulting from a non-recurring income tax
benefit in Innoviva and partly offset by a reduced effective tax
rate.
Currency impact on H1 2020 results
The
results for H1 2020 are based on average exchange rates,
principally £1/$1.27, £1/€1.15 and £1/Yen 137.
Comparative exchange rates are given on page 59. The period-end
exchange rates were £1/$1.23, £1/€1.10 and
£1/Yen 132.
In the
six months, turnover increased 8% AER, 8% CER. Total EPS was 77.0p
compared with 36.3p in H1 2019. Adjusted EPS was 56.9p compared
with 60.6p in H1 2019, down 6% AER, 6% CER. The flat currency
impact primarily reflected the weakness of Sterling, particularly
against the US$ and Yen, offset by weakness in emerging market
currencies relative to H1 2019. Exchange gains or losses on the
settlement of intercompany transactions had a negligible impact on
the flat currency impact on Adjusted EPS.
|
Adjusting items
The
reconciliations between Total results and Adjusted results for H1
2020 and H1 2019 are set out below.
|
Six months ended 30 June 2020
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Intangible
impairment
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments, significant
legal and other items
£m
|
Separation
costs
£m
|
Adjusted
results
£m
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Turnover
|
16,714
|
|
|
|
|
|
|
16,714
|
Cost of sales
|
(5,648)
|
351
|
27
|
305
|
106
|
|
|
(4,859)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Gross profit
|
11,066
|
351
|
27
|
305
|
106
|
|
|
11,855
|
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(5,625)
|
|
17
|
288
|
(20)
|
6
|
18
|
(5,316)
|
Research and development
|
(2,488)
|
34
|
116
|
82
|
|
(1)
|
|
(2,257)
|
Royalty income
|
142
|
|
|
|
|
|
|
142
|
Other operating income/(expense)
|
1,769
|
|
|
1
|
832
|
(2,602)
|
|
-
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Operating profit
|
4,864
|
385
|
160
|
676
|
918
|
(2,597)
|
18
|
4,424
|
|
|
|
|
|
|
|
|
|
Net finance costs
|
(416)
|
|
|
1
|
|
1
|
|
(414)
|
Share of after tax profits of associates and joint
ventures
|
28
|
|
|
|
|
|
|
28
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit before taxation
|
4,476
|
385
|
160
|
677
|
918
|
(2,596)
|
18
|
4,038
|
|
|
|
|
|
|
|
|
|
Taxation
|
(357)
|
(73)
|
(28)
|
(152)
|
(114)
|
69
|
(3)
|
(658)
|
Tax rate %
|
8.0%
|
|
|
|
|
|
|
16.3%
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit after taxation
|
4,119
|
312
|
132
|
525
|
804
|
(2,527)
|
15
|
3,380
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit
attributable to non-controlling interests
|
291
|
|
|
|
258
|
|
|
549
|
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
3,828
|
312
|
132
|
525
|
546
|
(2,527)
|
15
|
2,831
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
Earnings per share
|
77.0p
|
6.3p
|
2.6p
|
10.5p
|
11.0p
|
(50.8)p
|
0.3p
|
56.9p
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (millions)
|
4,971
|
|
|
|
|
|
|
4,971
|
|
––––––––––––
|
|
|
|
|
|
|
––––––––––––
|
Six months ended 30 June
2019
|
|
Total
results
£m
|
Intangible
amortisation
£m
|
Intangible
impairment
£m
|
Major
restructuring
£m
|
Transaction-
related
£m
|
Divestments, significant
legal and other items
£m
|
Adjusted
results
£m
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Turnover
|
15,470
|
|
|
|
|
|
15,470
|
Cost of sales
|
(5,370)
|
359
|
17
|
539
|
9
|
|
(4,446)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Gross profit
|
10,100
|
359
|
17
|
539
|
9
|
|
11,024
|
|
|
|
|
|
|
|
|
Selling, general and administration
|
(5,067)
|
|
6
|
92
|
70
|
69
|
(4,830)
|
Research and development
|
(2,119)
|
34
|
13
|
59
|
|
2
|
(2,011)
|
Royalty income
|
151
|
|
|
|
|
|
151
|
Other operating (expense)/income
|
(153)
|
|
|
(1)
|
115
|
39
|
-
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Operating profit
|
2,912
|
393
|
36
|
689
|
194
|
110
|
4,334
|
|
|
|
|
|
|
|
|
Net finance costs
|
(406)
|
|
|
1
|
|
(2)
|
(407)
|
Share of after tax profits of associates and joint
ventures
|
53
|
|
|
|
|
|
53
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit before taxation
|
2,559
|
393
|
36
|
690
|
194
|
108
|
3,980
|
|
|
|
|
|
|
|
|
Taxation
|
(524)
|
(76)
|
(5)
|
(117)
|
(53)
|
75
|
(700)
|
Tax rate %
|
20.5%
|
|
|
|
|
|
17.6%
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit after taxation
|
2,035
|
317
|
31
|
573
|
141
|
183
|
3,280
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Profit
attributable to non-controlling interests
|
241
|
|
|
|
46
|
|
287
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders
|
1,794
|
317
|
31
|
573
|
95
|
183
|
2,993
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
Earnings per share
|
36.3p
|
6.4p
|
0.7p
|
11.6p
|
1.9p
|
3.7p
|
60.6p
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares (millions)
|
4,942
|
|
|
|
|
|
4,942
|
|
––––––––––––
|
|
|
|
|
|
––––––––––––
|
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 H1 2020 were £676
million (H1 2019: £689 million), analysed as
follows:
|
|
H1 2020
|
|
H1
2019
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
Cash
£m
|
|
Non-cash
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
major restructuring programme (incl. Tesaro)
|
56
|
|
170
|
|
226
|
|
111
|
|
504
|
|
615
|
Consumer
Healthcare Joint Venture integration programme
|
139
|
|
17
|
|
156
|
|
31
|
|
-
|
|
31
|
Separation
Preparation restructuring programme
|
279
|
|
3
|
|
282
|
|
-
|
|
-
|
|
-
|
Combined
restructuring and integration programme
|
-
|
|
12
|
|
12
|
|
22
|
|
21
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
474
|
|
202
|
|
676
|
|
164
|
|
525
|
|
689
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
charges primarily arose from restructuring of Vaccines
Manufacturing and R&D functions as well as commercial
pharmaceuticals and some administrative functions restructuring
under the Separation Preparation programme, integration costs under
the Consumer Healthcare Joint Venture integration programme and
restructuring of the manufacturing organisation, R&D and some
administrative functions as well as the integration of Tesaro under
the 2018 major restructuring programme. Non-cash charges under the
2018 major restructuring programme primarily related to write down
of sites on disposal of sites as part of plans to restructure the
manufacturing network.
Total
cash payments made in H1 2020 were £331 million (H1 2019:
£285 million), £65 million for the existing Combined
restructuring and integration programme (H1 2019: £219
million), £100 million (H1 2019: £46 million) under the
2018 major restructuring programme including the settlement of
certain charges accrued in previous quarters, a further £135
million (H1 2019: £20 million) relating to the Consumer
Healthcare Joint Venture integration programme and £31 million
relating to the Separation Preparation restructuring
programme.
The
analysis of Major restructuring charges by business was as
follows:
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
Pharmaceuticals
|
216
|
|
568
|
Vaccines
|
196
|
|
17
|
Consumer
Healthcare
|
179
|
|
62
|
|
|
|
|
|
591
|
|
647
|
Corporate
& central functions
|
85
|
|
42
|
|
|
|
|
Total
Major restructuring costs
|
676
|
|
689
|
|
|
|
|
The
analysis of Major restructuring charges by Income statement line
was as follows:
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
Cost of
sales
|
305
|
|
539
|
Selling,
general and administration
|
288
|
|
92
|
Research
and development
|
82
|
|
59
|
Other
operating expense
|
1
|
|
(1)
|
|
|
|
|
Total
Major restructuring costs
|
676
|
|
689
|
|
|
|
|
The
benefit in the six months from the 2018 major restructuring
programme was £0.2 billion and the benefit from the Consumer
Healthcare Joint Venture integration was £0.1 billion. Given
its early stage the benefit from the Separation Preparation
restructuring programme was less than £0.1
billion.
The
2018 major restructuring programme, including Tesaro, is expected
to cost £1.75 billion over the period to 2021, with cash costs
of £0.85 billion and non-cash costs of £0.9 billion, and
is expected to deliver annual savings of around £450 million
by 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 new Consumer Healthcare Joint Venture with Pfizer
is expected to realise substantial cost synergies, generating total
annual cost savings of £0.5 billion by 2022 for expected cash
costs of £0.7 billion and non-cash charges of £0.3
billion, plus additional capital expenditure of £0.2 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 will target delivery of £0.7 billion of annual
savings by 2022 and £0.8 billion by 2023, with total costs
estimated at £2.4 billion, of which £1.6 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 £918 million (H1 2019:
£194 million). This included a net £841 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.
|
Charge/(credit)
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
Contingent
consideration on former Shionogi-ViiV Healthcare joint venture
(including Shionogi preferential dividends)
|
778
|
|
166
|
ViiV
Healthcare put options and Pfizer preferential
dividends
|
59
|
|
(71)
|
Contingent
consideration on former Novartis Vaccines business
|
4
|
|
8
|
Release
of fair value uplift on acquired Pfizer inventory
|
91
|
|
-
|
Other
adjustments
|
(14)
|
|
91
|
|
|
|
|
Total
transaction-related charges
|
918
|
|
194
|
|
|
|
|
The
£778 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, as a result of a £193 million unwind of the discount
and £585 million primarily from updated exchange rate
assumptions as well as adjustments to sales forecasts. The £59
million charge relating to the ViiV Healthcare put options and
Pfizer preferential dividends represented an increase in the
valuation of the put option as a result of updated exchange rate
assumptions as well as adjustments to multiples and sales
forecasts.
The
ViiV Healthcare contingent consideration liability is valued on a
long-term basis. The potential impact of the COVID-19 pandemic
remains uncertain and at 30 June 2020, 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 11.
Divestments, significant legal charges and other items
Divestments
and other items included a gain in the period of £2,339
million arising from the net profit on disposal of the Horlicks and other Consumer Healthcare
brands of £2,815 million in Q2 2020, after reversal of
£240 million of embedded derivative gains on the value of the
shares taken in prior years. This was partly offset by the related
loss on sale of the shares in Hindustan Unilever in Q2 2020 of
£476 million. Divestments and other items also included a gain
from a number of asset disposals and certain other Adjusting items.
A charge of £6 million (H1 2019: £69 million) for
significant legal matters included the settlement of existing
matters as well as provisions for ongoing litigation. Significant
legal cash payments were £6 million (H1 2019: £8
million).
Separation costs
From Q2
2020, the Group has started to report additional one-time costs to
prepare Consumer Healthcare for separation. These are estimated at
£600-700 million, excluding transaction costs.
|
Cash generation
|
Cash flow
|
|
Q2 2020
|
|
H1
2020
|
|
H1
2019
|
|
|
|
|
|
|
Net
cash inflow from operating activities (£m)
|
2,760
|
|
3,725
|
|
2,052
|
Free
cash flow* (£m)
|
1,949
|
|
2,480
|
|
535
|
Free
cash flow growth (%)
|
>100%
|
|
>100%
|
|
(35)%
|
Free
cash flow conversion* (%)
|
86%
|
|
65%
|
|
30%
|
Net
debt** (£m)
|
23,435
|
|
23,435
|
|
28,721
|
*
|
Free
cash flow and free cash flow conversion are defined on page
67.
|
**
|
Net
debt is analysed on page 65.
|
Q2 2020
The net
cash inflow from operating activities for the quarter was
£2,760 million (Q2 2019: £1,389 million). The increase
primarily reflected a significant reduction in trade receivables as
a result of collections following strong sales in Q1 and beneficial
timing of payments for returns and rebates and taxes partly offset
by reduced operating profits and increased inventory.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the quarter were £232
million (Q2 2019: £220 million), of which £203 million
was recognised in cash flows from operating activities and £29
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
Free
cash flow was £1,949 million for the quarter (Q2 2019:
£370 million). The increase primarily reflected a significant
reduction in trade receivables as a result of collections following
strong sales in Q1 2020, beneficial timing of payments for returns
and rebates and taxes and higher disposals of intangible assets
partly offset by increased inventory and higher dividends to
non-controlling interests.
|
H1 2020
The net
cash inflow from operating activities for the six months was
£3,725 million (H1 2019: £2,052 million). The increase
primarily reflected a reduction in trade receivables as a result of
collections following strong sales in Q1, beneficial timing of
payments for returns and rebates and taxes, a lower seasonal
increase of inventory and improved operating profits.
Total
cash payments to Shionogi in relation to the ViiV Healthcare
contingent consideration liability in the six months were £445
million (H1 2019: £439 million), of which £388 million
was recognised in cash flows from operating activities and £57
million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax
purposes.
Free
cash flow was £2,480 million for the six months (H1 2019:
£535 million). The increase primarily reflected a reduction in
trade receivables as a result of collections following strong sales
in Q1 2020, beneficial timing of payments for returns and rebates
and taxes, a lower seasonal increase of inventory and higher
disposals of intangible assets and milestone income, partly offset
by higher dividends to non-controlling interests.
|
Net debt
At 30
June 2020, net debt was £23.4 billion, compared with
£25.2 billion at 31 December 2019, comprising gross debt of
£31.7 billion and cash and liquid investments of £8.3
billion. Net debt decreased due to the £3.3 billion proceeds
from the Horlicks and other
Consumer brands disposal including shares in Hindustan Unilever of
£2.7 billion and £0.6 billion of other assets, £0.3
billion of other business and asset disposals together with
£2.5 billion free cash flow, partly offset by cash divested of
£0.5 billion, dividends paid to shareholders of £2.1
billion, £1.5 billion of unfavourable exchange impacts from
the translation of non-Sterling denominated debt and exchange on
other financing items and £0.2 billion in additional
investments.
At 30
June 2020, GSK had short-term borrowings (including overdrafts and
lease liabilities) repayable within 12 months of £6.0 billion
with loans of £4.7 billion repayable in the subsequent
year.
|
Returns to shareholders
|
Quarterly dividends
The
Board has declared a second interim dividend for 2020 of 19 pence
per share (Q2 2019: 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 2020 at the
current level of 80p per share, subject to any material change in
the external environment or performance expectations. Over time, as
free cash flow strengthens, it intends to build free cash flow
cover of the annual dividend to a target range of 1.25-1.50x,
before returning the dividend to growth.
Payment of dividends
The
equivalent interim dividend receivable by ADR holders will be
calculated based on the exchange rate on 6 October 2020. 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 13 August 2020, with a record date of 14
August 2020 and a payment date of 8 October 2020.
|
|
Paid/payable
|
|
Pence
per share
|
|
£m
|
|
|
|
|
|
|
2020
|
|
|
|
|
|
First
interim
|
9 July
2020
|
|
19
|
|
946
|
Second
interim
|
8
October 2020
|
|
19
|
|
946
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
First
interim
|
11 July
2019
|
|
19
|
|
940
|
Second
interim
|
10 October
2019
|
|
19
|
|
941
|
Third
interim
|
9 January
2020
|
|
19
|
|
941
|
Fourth
interim
|
9 April
2020
|
|
23
|
|
1,144
|
|
|
|
|
|
|
|
|
|
80
|
|
3,966
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
Q2 2020
millions
|
|
Q2
2019
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
|
|
4,977
|
|
4,947
|
Dilutive
effect of share options and share awards
|
|
|
46
|
|
44
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
|
|
5,023
|
|
4,991
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
|
|
|
|
|
|
H1 2020
millions
|
|
H1
2019
millions
|
|
|
|
|
|
|
Weighted
average number of shares – basic
|
|
|
4,971
|
|
4,942
|
Dilutive
effect of share options and share awards
|
|
|
46
|
|
43
|
|
|
|
|
|
|
Weighted
average number of shares – diluted
|
|
|
5,017
|
|
4,985
|
|
|
|
|
|
|
At 30
June 2020, 4,977 million shares (30 June 2019: 4,948 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 0.2 million shares under employee share schemes in
the quarter for proceeds of £3 million (Q2 2019: £6
million).
|
At 30 June 2020, the ESOP Trust held 39.7 million GSK shares
against the future exercise of share options and share awards. The
carrying value of £330 million has been deducted from other
reserves. The market value of these shares was £656
million.
At 30 June 2020, the company held 367.7 million Treasury shares at
a cost of £5,144 million, which has been deducted from
retained earnings.
|
Financial information
|
Income statements
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
|
|
|
|
TURNOVER
|
7,624
|
|
7,809
|
|
16,714
|
|
15,470
|
|
|
|
|
|
|
|
|
Cost of
sales
|
(2,449)
|
|
(2,637)
|
|
(5,648)
|
|
(5,370)
|
|
|
|
|
|
|
|
|
Gross
profit
|
5,175
|
|
5,172
|
|
11,066
|
|
10,100
|
|
|
|
|
|
|
|
|
Selling,
general and administration
|
(2,709)
|
|
(2,590)
|
|
(5,625)
|
|
(5,067)
|
Research
and development
|
(1,301)
|
|
(1,113)
|
|
(2,488)
|
|
(2,119)
|
Royalty income
|
75
|
|
78
|
|
142
|
|
151
|
Other
operating income/(expense)
|
1,610
|
|
(63)
|
|
1,769
|
|
(153)
|
|
|
|
|
|
|
|
|
OPERATING PROFIT
|
2,850
|
|
1,484
|
|
4,864
|
|
2,912
|
|
|
|
|
|
|
|
|
Finance
income
|
1
|
|
21
|
|
42
|
|
55
|
Finance
expense
|
(229)
|
|
(237)
|
|
(458)
|
|
(461)
|
Share
of after tax profits/(losses) of associates and joint
ventures
|
19
|
|
(4)
|
|
28
|
|
53
|
|
|
|
|
|
|
|
|
PROFIT BEFORE TAXATION
|
2,641
|
|
1,264
|
|
4,476
|
|
2,559
|
|
|
|
|
|
|
|
|
Taxation
|
(201)
|
|
(214)
|
|
(357)
|
|
(524)
|
Tax rate %
|
7.6%
|
|
16.9%
|
|
8.0%
|
|
20.5%
|
|
|
|
|
|
|
|
|
PROFIT AFTER TAXATION
|
2,440
|
|
1,050
|
|
4,119
|
|
2,035
|
|
|
|
|
|
|
|
|
Profit
attributable to non-controlling interests
|
177
|
|
86
|
|
291
|
|
241
|
Profit
attributable to shareholders
|
2,263
|
|
964
|
|
3,828
|
|
1,794
|
|
|
|
|
|
|
|
|
|
2,440
|
|
1,050
|
|
4,119
|
|
2,035
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
|
45.5p
|
|
19.5p
|
|
77.0p
|
|
36.3p
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
45.0p
|
|
19.3p
|
|
76.3p
|
|
36.0p
|
|
|
|
|
|
|
|
|
Statement of comprehensive
income
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
|
|
|
Profit
for the period
|
2,440
|
|
1,050
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
182
|
|
(120)
|
Reclassification
of exchange movements on liquidation or disposal of overseas
subsidiaries
|
36
|
|
-
|
Fair
value movements on cash flow hedges
|
(5)
|
|
(73)
|
Reclassification
of cash flow hedges to income statement
|
51
|
|
-
|
Deferred
tax on fair value movements on cash flow hedges
|
(3)
|
|
1
|
|
|
|
|
|
261
|
|
(192)
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
42
|
|
8
|
Fair
value movements on equity investments
|
224
|
|
6
|
Deferred
tax on fair value movements on equity investments
|
(24)
|
|
(20)
|
Re-measurement
losses on defined benefit plans
|
(1,445)
|
|
(131)
|
Tax on
re-measurement losses on defined benefit plans
|
279
|
|
27
|
|
|
|
|
|
(924)
|
|
(110)
|
|
|
|
|
Other
comprehensive expense for the period
|
(663)
|
|
(302)
|
|
|
|
|
Total
comprehensive income for the period
|
1,777
|
|
748
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
Shareholders
|
1,558
|
|
654
|
Non-controlling
interests
|
219
|
|
94
|
|
|
|
|
|
1,777
|
|
748
|
|
|
|
|
Statement of comprehensive
income
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
Profit
for the period
|
4,119
|
|
2,035
|
|
|
|
|
Items that may be reclassified subsequently to income
statement:
|
|
|
|
Exchange
movements on overseas net assets and net investment
hedges
|
360
|
|
(45)
|
Reclassification
of exchange movements on liquidation or disposal of overseas
subsidiaries
|
36
|
|
-
|
Fair
value movements on cash flow hedges
|
(23)
|
|
(73)
|
Reclassification
of cash flow hedges to income statement
|
52
|
|
1
|
Deferred
tax on fair value movements on cash flow hedges
|
(3)
|
|
-
|
|
|
|
|
|
422
|
|
(117)
|
|
|
|
|
Items that will not be reclassified to income
statement:
|
|
|
|
Exchange
movements on overseas net assets of non-controlling
interests
|
95
|
|
(10)
|
Fair
value movements on equity investments
|
185
|
|
44
|
Deferred
tax on fair value movements on equity investments
|
(14)
|
|
(30)
|
Re-measurement
losses on defined benefit plans
|
(445)
|
|
(573)
|
Tax on
re-measurement losses on defined benefit plans
|
92
|
|
102
|
|
|
|
|
|
(87)
|
|
(467)
|
|
|
|
|
Other
comprehensive income/(expense) for the period
|
335
|
|
(584)
|
|
|
|
|
Total
comprehensive income for the period
|
4,454
|
|
1,451
|
|
|
|
|
|
|
|
|
Total
comprehensive income for the period attributable to:
|
|
|
|
Shareholders
|
4,068
|
|
1,220
|
Non-controlling
interests
|
386
|
|
231
|
|
|
|
|
|
4,454
|
|
1,451
|
|
|
|
|
Pharmaceuticals turnover –
three months ended 30 June 2020
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
883
|
17
|
16
|
500
|
19
|
16
|
219
|
13
|
13
|
164
|
17
|
17
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Ellipta
products
|
642
|
15
|
14
|
350
|
16
|
13
|
165
|
17
|
16
|
127
|
11
|
14
|
Anoro Ellipta
|
139
|
9
|
6
|
88
|
9
|
5
|
32
|
7
|
10
|
19
|
12
|
6
|
Arnuity Ellipta
|
8
|
(43)
|
(50)
|
6
|
(50)
|
(50)
|
-
|
-
|
-
|
2
|
-
|
(50)
|
Incruse Ellipta
|
59
|
4
|
2
|
33
|
6
|
-
|
19
|
-
|
-
|
7
|
-
|
14
|
Relvar/Breo Ellipta
|
242
|
2
|
2
|
83
|
(11)
|
(12)
|
78
|
11
|
9
|
81
|
8
|
12
|
Trelegy Ellipta
|
194
|
62
|
58
|
140
|
65
|
60
|
36
|
64
|
59
|
18
|
38
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala
|
241
|
24
|
21
|
150
|
28
|
26
|
54
|
4
|
6
|
37
|
42
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
1,185
|
(2)
|
(3)
|
740
|
1
|
(2)
|
270
|
(7)
|
(7)
|
175
|
(5)
|
(2)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Dolutegravir
products
|
1,140
|
(1)
|
(2)
|
725
|
1
|
(2)
|
259
|
(4)
|
(5)
|
156
|
-
|
4
|
Tivicay
|
373
|
(9)
|
(10)
|
208
|
(14)
|
(16)
|
87
|
(12)
|
(14)
|
78
|
10
|
15
|
Triumeq
|
586
|
(9)
|
(11)
|
378
|
(6)
|
(9)
|
134
|
(16)
|
(16)
|
74
|
(12)
|
(10)
|
Juluca
|
113
|
35
|
33
|
90
|
29
|
27
|
21
|
62
|
62
|
2
|
100
|
>100
|
Dovato
|
68
|
>100
|
>100
|
49
|
>100
|
>100
|
17
|
-
|
-
|
2
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
9
|
(59)
|
(64)
|
-
|
-
|
-
|
2
|
(67)
|
(67)
|
7
|
(53)
|
(60)
|
Selzentry
|
21
|
(19)
|
(15)
|
12
|
(8)
|
(8)
|
6
|
(25)
|
(25)
|
3
|
(40)
|
(20)
|
Other
|
15
|
7
|
(14)
|
3
|
50
|
(50)
|
3
|
(25)
|
(25)
|
9
|
13
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
177
|
17
|
15
|
153
|
16
|
14
|
12
|
9
|
-
|
12
|
50
|
50
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Benlysta
|
177
|
18
|
15
|
153
|
16
|
14
|
12
|
9
|
-
|
12
|
71
|
71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology
|
77
|
35
|
33
|
47
|
42
|
39
|
30
|
25
|
21
|
-
|
-
|
-
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Zejula
|
77
|
35
|
32
|
47
|
42
|
39
|
30
|
25
|
21
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Pharmaceuticals
|
1,780
|
(17)
|
(17)
|
361
|
(22)
|
(24)
|
400
|
(23)
|
(23)
|
1,019
|
(12)
|
(11)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Established Respiratory
|
805
|
(12)
|
(12)
|
255
|
(18)
|
(20)
|
179
|
(14)
|
(14)
|
371
|
(6)
|
(5)
|
Seretide/Advair
|
421
|
2
|
2
|
143
|
36
|
34
|
113
|
(12)
|
(13)
|
165
|
(7)
|
(6)
|
Flixotide/Flovent
|
117
|
(7)
|
(7)
|
54
|
(17)
|
(18)
|
17
|
(23)
|
(18)
|
46
|
18
|
18
|
Ventolin
|
144
|
(39)
|
(39)
|
58
|
(59)
|
(60)
|
24
|
(17)
|
(21)
|
62
|
(6)
|
(2)
|
Avamys/Veramyst
|
62
|
(13)
|
(10)
|
-
|
-
|
-
|
19
|
(5)
|
(10)
|
43
|
(16)
|
(10)
|
Other
Respiratory
|
61
|
(10)
|
(16)
|
-
|
-
|
-
|
6
|
(25)
|
(12)
|
55
|
(10)
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dermatology
|
95
|
(11)
|
(9)
|
1
|
-
|
-
|
30
|
(27)
|
(24)
|
64
|
(2)
|
-
|
Augmentin
|
100
|
(25)
|
(23)
|
-
|
-
|
-
|
21
|
(45)
|
(45)
|
79
|
(17)
|
(15)
|
Avodart
|
134
|
(5)
|
(6)
|
2
|
100
|
100
|
39
|
(26)
|
(28)
|
93
|
7
|
7
|
Imigran/Imitrex
|
27
|
(25)
|
(28)
|
10
|
(41)
|
(41)
|
12
|
(8)
|
(15)
|
5
|
(17)
|
(17)
|
Lamictal
|
135
|
(5)
|
(6)
|
66
|
(8)
|
(10)
|
28
|
-
|
(4)
|
41
|
(2)
|
(2)
|
Seroxat/Paxil
|
36
|
(10)
|
(10)
|
-
|
-
|
-
|
8
|
(11)
|
(11)
|
28
|
(10)
|
(10)
|
Valtrex
|
25
|
-
|
-
|
3
|
>100
|
>100
|
7
|
-
|
-
|
15
|
(12)
|
(12)
|
Other
|
423
|
(30)
|
(29)
|
24
|
(61)
|
(62)
|
76
|
(37)
|
(36)
|
323
|
(23)
|
(22)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Pharmaceuticals
|
4,102
|
(5)
|
(5)
|
1,801
|
1
|
(1)
|
931
|
(10)
|
(11)
|
1,370
|
(8)
|
(7)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals turnover – six
months ended 30 June 2020
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory
|
1,754
|
27
|
26
|
964
|
28
|
25
|
466
|
26
|
27
|
324
|
26
|
26
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Ellipta
products
|
1,303
|
26
|
25
|
699
|
26
|
24
|
350
|
29
|
29
|
254
|
21
|
22
|
Anoro Ellipta
|
256
|
11
|
10
|
151
|
9
|
6
|
68
|
19
|
21
|
37
|
9
|
9
|
Arnuity Ellipta
|
17
|
(19)
|
(24)
|
13
|
(28)
|
(28)
|
-
|
-
|
-
|
4
|
33
|
-
|
Incruse Ellipta
|
116
|
(7)
|
(8)
|
63
|
(16)
|
(19)
|
39
|
5
|
5
|
14
|
8
|
15
|
Relvar/Breo Ellipta
|
527
|
16
|
16
|
198
|
16
|
14
|
165
|
20
|
20
|
164
|
13
|
14
|
Trelegy Ellipta
|
387
|
87
|
85
|
274
|
81
|
77
|
78
|
90
|
90
|
35
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nucala
|
451
|
30
|
28
|
265
|
31
|
29
|
116
|
20
|
21
|
70
|
46
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HIV
|
2,392
|
3
|
2
|
1,445
|
1
|
(1)
|
590
|
4
|
4
|
357
|
6
|
9
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Dolutegravir
products
|
2,301
|
4
|
3
|
1,416
|
2
|
-
|
564
|
6
|
6
|
321
|
10
|
14
|
Tivicay
|
785
|
(1)
|
(2)
|
422
|
(9)
|
(11)
|
193
|
-
|
-
|
170
|
24
|
28
|
Triumeq
|
1,149
|
(9)
|
(10)
|
716
|
(9)
|
(11)
|
290
|
(9)
|
(9)
|
143
|
(6)
|
(3)
|
Juluca
|
233
|
51
|
49
|
184
|
40
|
38
|
45
|
>100
|
>100
|
4
|
100
|
100
|
Dovato
|
134
|
>100
|
>100
|
94
|
>100
|
>100
|
36
|
-
|
-
|
4
|
>100
|
>100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Epzicom/Kivexa
|
18
|
(56)
|
(56)
|
1
|
(50)
|
(50)
|
5
|
(58)
|
(58)
|
12
|
(56)
|
(56)
|
Selzentry
|
47
|
(4)
|
(2)
|
23
|
(12)
|
(12)
|
14
|
(7)
|
(7)
|
10
|
25
|
38
|
Other
|
26
|
-
|
(12)
|
5
|
(29)
|
(57)
|
7
|
-
|
-
|
14
|
17
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Immuno-inflammation
|
328
|
21
|
19
|
279
|
18
|
16
|
26
|
18
|
18
|
23
|
77
|
77
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Benlysta
|
328
|
21
|
19
|
279
|
18
|
16
|
26
|
18
|
18
|
23
|
92
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology
|
158
|
58
|
57
|
95
|
61
|
58
|
63
|
54
|
54
|
-
|
-
|
-
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Zejula
|
158
|
60
|
58
|
95
|
61
|
58
|
63
|
57
|
57
|
-
|
-
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established Pharmaceuticals
|
3,866
|
(12)
|
(11)
|
776
|
(22)
|
(23)
|
928
|
(11)
|
(10)
|
2,162
|
(8)
|
(6)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Established Respiratory
|
1,770
|
(11)
|
(11)
|
558
|
(21)
|
(23)
|
399
|
(6)
|
(6)
|
813
|
(5)
|
(4)
|
Seretide/Advair
|
816
|
(9)
|
(9)
|
249
|
(11)
|
(12)
|
240
|
(8)
|
(8)
|
327
|
(8)
|
(6)
|
Flixotide/Flovent
|
240
|
(12)
|
(12)
|
104
|
(27)
|
(29)
|
45
|
(6)
|
(4)
|
91
|
12
|
14
|
Ventolin
|
397
|
(17)
|
(17)
|
205
|
(29)
|
(30)
|
62
|
-
|
-
|
130
|
(2)
|
2
|
Avamys/Veramyst
|
171
|
(8)
|
(7)
|
-
|
-
|
-
|
38
|
(3)
|
(3)
|
133
|
(10)
|
(8)
|
Other
Respiratory
|
146
|
(8)
|
(11)
|
-
|
-
|
-
|
14
|
(7)
|
(7)
|
132
|
(9)
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dermatology
|
206
|
(4)
|
(2)
|
1
|
(67)
|
(67)
|
68
|
(14)
|
(13)
|
137
|
3
|
6
|
Augmentin
|
269
|
(8)
|
(6)
|
-
|
-
|
-
|
78
|
(10)
|
(9)
|
191
|
(7)
|
(5)
|
Avodart
|
275
|
(3)
|
(3)
|
3
|
50
|
50
|
88
|
(19)
|
(19)
|
184
|
6
|
7
|
Imigran/Imitrex
|
61
|
(9)
|
(9)
|
25
|
(14)
|
(14)
|
25
|
(4)
|
(4)
|
11
|
(8)
|
(8)
|
Lamictal
|
272
|
(1)
|
(1)
|
135
|
(1)
|
(3)
|
60
|
13
|
13
|
77
|
(8)
|
(7)
|
Seroxat/Paxil
|
72
|
(10)
|
(10)
|
-
|
-
|
-
|
18
|
-
|
-
|
54
|
(13)
|
(13)
|
Valtrex
|
53
|
2
|
2
|
7
|
17
|
17
|
16
|
14
|
14
|
30
|
(6)
|
(6)
|
Other
|
888
|
(21)
|
(20)
|
47
|
(56)
|
(57)
|
176
|
(23)
|
(22)
|
665
|
(15)
|
(14)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Pharmaceuticals
|
8,498
|
-
|
-
|
3,559
|
3
|
1
|
2,073
|
2
|
2
|
2,866
|
(3)
|
(2)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
––––––––
|
–––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover –
three months ended 30 June
2020
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
167
|
(29)
|
(29)
|
46
|
(54)
|
(55)
|
77
|
(11)
|
(13)
|
44
|
(8)
|
(4)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Bexsero
|
108
|
(31)
|
(30)
|
27
|
(51)
|
(53)
|
71
|
(13)
|
(15)
|
10
|
(47)
|
(32)
|
Menveo
|
38
|
(39)
|
(39)
|
19
|
(58)
|
(58)
|
5
|
25
|
25
|
14
|
8
|
8
|
Other
|
21
|
24
|
18
|
-
|
-
|
-
|
1
|
-
|
-
|
20
|
25
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
15
|
(12)
|
(6)
|
-
|
-
|
-
|
-
|
-
|
-
|
15
|
(6)
|
-
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Fluarix, FluLaval
|
15
|
(12)
|
(6)
|
-
|
-
|
-
|
-
|
-
|
-
|
15
|
(6)
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
323
|
(16)
|
(19)
|
268
|
(24)
|
(26)
|
44
|
>100
|
>100
|
11
|
(48)
|
(52)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Shingrix
|
323
|
(16)
|
(19)
|
268
|
(24)
|
(26)
|
44
|
>100
|
>100
|
11
|
(48)
|
(52)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Vaccines
|
628
|
(34)
|
(34)
|
134
|
(59)
|
(61)
|
167
|
(45)
|
(46)
|
327
|
3
|
4
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Infanrix, Pediarix
|
119
|
(39)
|
(40)
|
41
|
(51)
|
(53)
|
42
|
(37)
|
(37)
|
36
|
(20)
|
(20)
|
Boostrix
|
76
|
(47)
|
(47)
|
34
|
(52)
|
(55)
|
27
|
(37)
|
(37)
|
15
|
(50)
|
(43)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
86
|
(62)
|
(62)
|
41
|
(68)
|
(69)
|
25
|
(65)
|
(66)
|
20
|
(13)
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
128
|
10
|
9
|
17
|
(32)
|
(36)
|
28
|
4
|
-
|
83
|
30
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
103
|
(4)
|
(5)
|
-
|
-
|
-
|
10
|
(33)
|
(40)
|
93
|
1
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
54
|
8
|
8
|
-
|
-
|
-
|
27
|
13
|
13
|
27
|
4
|
4
|
Cervarix
|
34
|
21
|
25
|
-
|
-
|
-
|
5
|
(17)
|
(17)
|
29
|
32
|
36
|
Other
|
28
|
(66)
|
(65)
|
1
|
(94)
|
(94)
|
3
|
(94)
|
(92)
|
24
|
(41)
|
(41)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Vaccines
|
1,133
|
(29)
|
(29)
|
448
|
(42)
|
(45)
|
288
|
(29)
|
(29)
|
397
|
(2)
|
-
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vaccines turnover – six months
ended 30 June 2020
|
|
Total
|
US
|
Europe
|
International
|
||||||||
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
–––––––––––––––––––––––––––––––––––––
|
||||||||
|
|
Growth
|
|
Growth
|
|
Growth
|
|
Growth
|
||||
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
|
–––––––––––––––––––––––
|
||||
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
£m
|
£%
|
CER%
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Meningitis
|
392
|
(12)
|
(10)
|
126
|
(26)
|
(27)
|
172
|
1
|
2
|
94
|
(9)
|
(2)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Bexsero
|
272
|
(13)
|
(11)
|
81
|
(21)
|
(22)
|
155
|
(3)
|
(2)
|
36
|
(28)
|
(18)
|
Menveo
|
78
|
(18)
|
(17)
|
45
|
(34)
|
(35)
|
14
|
75
|
75
|
19
|
-
|
11
|
Other
|
42
|
14
|
14
|
-
|
-
|
-
|
3
|
-
|
-
|
39
|
15
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Influenza
|
36
|
13
|
22
|
2
|
-
|
-
|
-
|
-
|
-
|
34
|
13
|
23
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Fluarix, FluLaval
|
36
|
13
|
22
|
2
|
-
|
-
|
-
|
-
|
-
|
34
|
13
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shingles
|
970
|
31
|
28
|
868
|
28
|
25
|
64
|
>100
|
>100
|
38
|
(16)
|
(16)
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Shingrix
|
970
|
31
|
28
|
868
|
28
|
25
|
64
|
>100
|
>100
|
38
|
(16)
|
(16)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Established
Vaccines
|
1,540
|
(18)
|
(18)
|
465
|
(34)
|
(35)
|
400
|
(28)
|
(27)
|
675
|
7
|
8
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Infanrix, Pediarix
|
299
|
(21)
|
(21)
|
129
|
(31)
|
(32)
|
96
|
(16)
|
(16)
|
74
|
(5)
|
(3)
|
Boostrix
|
188
|
(30)
|
(30)
|
92
|
(30)
|
(32)
|
62
|
(22)
|
(21)
|
34
|
(38)
|
(36)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hepatitis
|
299
|
(35)
|
(36)
|
169
|
(41)
|
(42)
|
80
|
(34)
|
(34)
|
50
|
(9)
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix
|
279
|
12
|
12
|
58
|
(17)
|
(19)
|
59
|
5
|
5
|
162
|
31
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Synflorix
|
226
|
(1)
|
-
|
-
|
-
|
-
|
29
|
(12)
|
(12)
|
197
|
1
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priorix, Priorix Tetra, Varilrix
|
111
|
6
|
8
|
-
|
-
|
-
|
56
|
10
|
10
|
55
|
2
|
6
|
Cervarix
|
46
|
(4)
|
(2)
|
-
|
-
|
-
|
9
|
(18)
|
(18)
|
37
|
-
|
3
|
Other
|
92
|
(38)
|
(38)
|
17
|
(39)
|
(46)
|
9
|
(90)
|
(89)
|
66
|
94
|
97
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
Vaccines
|
2,938
|
(5)
|
(6)
|
1,461
|
(6)
|
(8)
|
636
|
(14)
|
(14)
|
841
|
4
|
6
|
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
––––––––
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
sheet
|
|
30 June 2020
£m
|
|
30 June
2019
£m
|
|
31
December 2019
£m
|
ASSETS
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Property,
plant and equipment
|
10,490
|
|
10,385
|
|
10,348
|
Right
of use assets
|
941
|
|
1,023
|
|
966
|
Goodwill
|
10,998
|
|
7,026
|
|
10,562
|
Other
intangible assets
|
31,263
|
|
20,134
|
|
30,955
|
Investments
in associates and joint ventures
|
390
|
|
309
|
|
314
|
Other
investments
|
2,174
|
|
1,380
|
|
1,837
|
Deferred
tax assets
|
4,455
|
|
3,668
|
|
4,096
|
Derivative
financial instruments
|
5
|
|
86
|
|
103
|
Other
non-current assets
|
946
|
|
1,393
|
|
1,020
|
|
|
|
|
|
|
Total non-current assets
|
61,662
|
|
45,404
|
|
60,201
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Inventories
|
6,396
|
|
5,959
|
|
5,947
|
Current
tax recoverable
|
328
|
|
186
|
|
262
|
Trade
and other receivables
|
7,168
|
|
6,875
|
|
7,202
|
Derivative
financial instruments
|
421
|
|
211
|
|
421
|
Liquid
investments
|
87
|
|
84
|
|
79
|
Cash
and cash equivalents
|
8,166
|
|
4,123
|
|
4,707
|
Assets
held for sale
|
412
|
|
790
|
|
873
|
|
|
|
|
|
|
Total current assets
|
22,978
|
|
18,228
|
|
19,491
|
|
|
|
|
|
|
TOTAL ASSETS
|
84,640
|
|
63,632
|
|
79,692
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Short-term
borrowings
|
(5,964)
|
|
(10,147)
|
|
(6,918)
|
Contingent
consideration liabilities
|
(804)
|
|
(816)
|
|
(755)
|
Trade
and other payables
|
(15,450)
|
|
(13,385)
|
|
(14,939)
|
Derivative
financial instruments
|
(245)
|
|
(255)
|
|
(188)
|
Current
tax payable
|
(685)
|
|
(502)
|
|
(629)
|
Short-term
provisions
|
(776)
|
|
(674)
|
|
(621)
|
|
|
|
|
|
|
Total current liabilities
|
(23,924)
|
|
(25,779)
|
|
(24,050)
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
Long-term
borrowings
|
(25,726)
|
|
(23,313)
|
|
(23,590)
|
Corporation
tax payable
|
(195)
|
|
(273)
|
|
(189)
|
Deferred
tax liabilities
|
(3,967)
|
|
(1,233)
|
|
(3,810)
|
Pensions
and other post-employment benefits
|
(3,999)
|
|
(3,352)
|
|
(3,457)
|
Other
provisions
|
(814)
|
|
(625)
|
|
(670)
|
Derivative
financial instruments
|
(24)
|
|
-
|
|
(1)
|
Contingent
consideration liabilities
|
(5,026)
|
|
(5,212)
|
|
(4,724)
|
Other
non-current liabilities
|
(828)
|
|
(878)
|
|
(844)
|
|
|
|
|
|
|
Total non-current liabilities
|
(40,579)
|
|
(34,886)
|
|
(37,285)
|
|
|
|
|
|
|
TOTAL LIABILITIES
|
(64,503)
|
|
(60,665)
|
|
(61,335)
|
|
|
|
|
|
|
NET ASSETS
|
20,137
|
|
2,967
|
|
18,357
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
Share
capital
|
1,346
|
|
1,345
|
|
1,346
|
Share
premium account
|
3,278
|
|
3,157
|
|
3,174
|
Retained
earnings
|
6,622
|
|
(2,804)
|
|
4,530
|
Other
reserves
|
2,347
|
|
1,916
|
|
2,355
|
|
|
|
|
|
|
Shareholders’ equity
|
13,593
|
|
3,614
|
|
11,405
|
|
|
|
|
|
|
Non-controlling
interests
|
6,544
|
|
(647)
|
|
6,952
|
|
|
|
|
|
|
TOTAL EQUITY
|
20,137
|
|
2,967
|
|
18,357
|
|
|
|
|
|
|
Statement
of changes in
equity
|
|
Share
capital
£m
|
Share
premium
£m
|
Retained
earnings
£m
|
Other
reserves
£m
|
Shareholder’s
equity
£m
|
Non-controlling
interests
£m
|
Total
equity
£m
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
At 1
January 2020
|
1,346
|
3,174
|
4,530
|
2,355
|
11,405
|
6,952
|
18,357
|
|
|
|
|
|
|
|
|
Profit
for the period
|
|
|
3,828
|
|
3,828
|
291
|
4,119
|
Other
comprehensive income for the period
|
|
|
41
|
199
|
240
|
95
|
335
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Total
comprehensive income for the period
|
|
|
3,869
|
199
|
4,068
|
386
|
4,454
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(652)
|
(652)
|
Contributions
from non-controlling interests
|
|
|
|
|
|
3
|
3
|
Changes
to non-controlling interests
|
|
|
|
|
|
(145)
|
(145)
|
Dividends
to shareholders
|
|
|
(2,085)
|
|
(2,085)
|
|
(2,085)
|
Shares
issued
|
-
|
26
|
|
|
26
|
|
26
|
Realised
after tax profits on disposal of equity investments
|
|
|
36
|
(36)
|
-
|
|
-
|
Shares
acquired by ESOP Trusts
|
|
78
|
361
|
(439)
|
-
|
|
-
|
Write-down
on shares held by ESOP Trusts
|
|
|
(268)
|
268
|
-
|
|
-
|
Share-based
incentive plans
|
|
|
179
|
|
179
|
|
179
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
At 30 June 2020
|
1,346
|
3,278
|
6,622
|
2,347
|
13,593
|
6,544
|
20,137
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
|
|
|
|
|
|
|
|
As
previously reported
|
1,345
|
3,091
|
(2,137)
|
2,061
|
4,360
|
(688)
|
3,672
|
Adjustment
to non-controlling interest
|
|
|
(579)
|
|
(579)
|
579
|
-
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
As
revised
|
1,345
|
3,091
|
(2,716)
|
2,061
|
3,781
|
(109)
|
3,672
|
Implementation
of IFRS16
|
|
|
(93)
|
|
(93)
|
|
(93)
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
At 1
January 2019, as adjusted
|
1,345
|
3,091
|
(2,809)
|
2,061
|
3,688
|
(109)
|
3,579
|
|
|
|
|
|
|
|
|
Profit
for the period
|
|
|
1,794
|
|
1,794
|
241
|
2,035
|
Other
comprehensive expense for the period
|
|
|
(519)
|
(55)
|
(574)
|
(10)
|
(584)
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Total
comprehensive income/(expense) for the period
|
|
|
1,275
|
(55)
|
1,220
|
231
|
1,451
|
|
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Distributions
to non-controlling interests
|
|
|
|
|
|
(196)
|
(196)
|
Changes
in non-controlling interests
|
|
|
|
|
|
6
|
6
|
Contributions
from non-controlling interests
|
|
|
|
|
|
|
|
Dividends
to shareholders
|
|
|
(2,072)
|
|
(2,072)
|
|
(2,072)
|
Shares
issued
|
-
|
33
|
|
|
33
|
|
33
|
Realised
profits on disposal of equity investments
|
|
|
6
|
(6)
|
-
|
|
-
|
Shares
acquired by ESOP Trusts
|
|
33
|
295
|
(328)
|
-
|
|
-
|
Write-down
on shares held by ESOP Trusts
|
|
|
(244)
|
244
|
-
|
|
-
|
Share-based
incentive plans
|
|
|
166
|
|
166
|
|
166
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
At 30
June 2019
|
1,345
|
3,157
|
(3,383)
|
1,916
|
3,035
|
(68)
|
2,967
|
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
––––––––––––
|
Cash flow statement – six
months ended 30 June 2020
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
|
|
Profit after tax
|
4,119
|
|
2,035
|
|
Tax on
profits
|
357
|
|
524
|
|
Share
of after tax profits of associates and joint ventures
|
(28)
|
|
(53)
|
|
Net
finance expense
|
416
|
|
406
|
|
Depreciation,
amortisation and other adjusting items
|
(971)
|
|
1,959
|
|
Increase
in working capital
|
(476)
|
|
(990)
|
|
Contingent
consideration paid
|
(393)
|
|
(392)
|
|
Increase/(decrease)
in other net liabilities (excluding contingent consideration
paid)
|
1,251
|
|
(603)
|
|
|
|
|
|
|
Cash generated from operations
|
4,275
|
|
2,886
|
|
Taxation
paid
|
(550)
|
|
(834)
|
|
|
|
|
|
|
Net cash inflow from operating activities
|
3,725
|
|
2,052
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
Purchase
of property, plant and equipment
|
(420)
|
|
(501)
|
|
Proceeds
from sale of property, plant and equipment
|
12
|
|
70
|
|
Purchase
of intangible assets
|
(326)
|
|
(438)
|
|
Proceeds
from sale of intangible assets
|
636
|
|
12
|
|
Purchase
of equity investments
|
(208)
|
|
(49)
|
|
Proceeds
from sale of equity investments
|
2,871
|
|
39
|
|
Purchase
of businesses, net of cash acquired
|
(6)
|
|
(3,641)
|
|
Contingent
consideration paid
|
(62)
|
|
(51)
|
|
Disposal
of businesses
|
237
|
|
12
|
|
Investment
in associates and joint ventures
|
(1)
|
|
(5)
|
|
Interest
received
|
26
|
|
36
|
|
Dividends
from associates and joint ventures
|
14
|
|
-
|
|
|
|
|
|
|
Net cash inflow/(outflow) from investing activities
|
2,773
|
|
(4,516)
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
Issue
of share capital
|
26
|
|
33
|
|
Increase
in short-term loans
|
-
|
|
7,255
|
|
Increase
in long-term loans
|
2,354
|
|
2,603
|
|
Repayment
of short-term loans
|
(3,018)
|
|
(4,246)
|
|
Net
repayment of obligations under lease liabilities
|
(111)
|
|
(104)
|
|
Interest
paid
|
(476)
|
|
(449)
|
|
Dividends
paid to shareholders
|
(2,085)
|
|
(2,072)
|
|
Distributions
to non-controlling interests
|
(652)
|
|
(196)
|
|
Contributions
from non-controlling interests
|
3
|
|
-
|
|
Other
financing items
|
278
|
|
(55)
|
|
|
|
|
|
|
Net cash (outflow)/inflow from financing activities
|
(3,681)
|
|
2,769
|
|
|
|
|
|
|
Increase in cash and bank overdrafts in the period
|
2,817
|
|
305
|
|
|
|
|
|
|
Cash
and bank overdrafts at beginning of the period
|
4,831
|
|
4,087
|
|
Exchange
adjustments
|
28
|
|
14
|
|
Increase
in cash and bank overdrafts
|
2,817
|
|
305
|
|
|
|
|
|
|
Cash and bank overdrafts at end of the period
|
7,676
|
|
4,406
|
|
|
|
|
|
|
Cash
and bank overdrafts at end of the period comprise:
|
|
|
|
|
|
Cash
and cash equivalents
|
8,166
|
|
4,123
|
|
Cash
and cash equivalents reported in assets held for sale
|
2
|
|
532
|
|
|
|
|
|
|
|
8,168
|
|
4,655
|
|
Overdrafts
|
(492)
|
|
(249)
|
|
|
|
|
|
|
7,676
|
|
4,406
|
|
|
|
|
|
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
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
4,102
|
|
4,307
|
|
(5)
|
|
(5)
|
Vaccines
|
1,133
|
|
1,585
|
|
(29)
|
|
(29)
|
Consumer
Healthcare
|
2,389
|
|
1,917
|
|
25
|
|
25
|
|
|
|
|
|
|
|
|
Total
turnover
|
7,624
|
|
7,809
|
|
(2)
|
|
(3)
|
|
|
|
|
|
|
|
|
Operating profit by segment
|
|
Q2 2020
£m
|
|
Q2
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
1,886
|
|
2,075
|
|
(9)
|
|
(10)
|
Pharmaceuticals
R&D
|
(910)
|
|
(819)
|
|
11
|
|
9
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
976
|
|
1,256
|
|
(22)
|
|
(23)
|
Vaccines
|
265
|
|
612
|
|
(57)
|
|
(58)
|
Consumer
Healthcare
|
521
|
|
391
|
|
33
|
|
33
|
|
|
|
|
|
|
|
|
Segment
profit
|
1,762
|
|
2,259
|
|
(22)
|
|
(23)
|
Corporate
and other unallocated costs
|
(13)
|
|
(88)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
1,749
|
|
2,171
|
|
(19)
|
|
(21)
|
Adjusting
items
|
1,101
|
|
(687)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
2,850
|
|
1,484
|
|
92
|
|
90
|
|
|
|
|
|
|
|
|
Finance
income
|
1
|
|
21
|
|
|
|
|
Finance
costs
|
(229)
|
|
(237)
|
|
|
|
|
Share
of after tax profits/(losses) of associates and joint
ventures
|
19
|
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
2,641
|
|
1,264
|
|
>100
|
|
>100
|
|
|
|
|
|
|
|
|
Turnover by
segment
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
8,498
|
|
8,465
|
|
-
|
|
-
|
Vaccines
|
2,938
|
|
3,107
|
|
(5)
|
|
(6)
|
Consumer
Healthcare
|
5,251
|
|
3,898
|
|
35
|
|
36
|
|
|
|
|
|
|
|
|
|
16,687
|
|
15,470
|
|
8
|
|
8
|
Corporate
and other unallocated turnover
|
27
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
turnover
|
16,714
|
|
15,470
|
|
8
|
|
8
|
|
|
|
|
|
|
|
|
Operating profit by
segment
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
Growth
£%
|
|
Growth
CER%
|
|
|
|
|
|
|
|
|
Pharmaceuticals
|
3,904
|
|
4,043
|
|
(3)
|
|
(4)
|
Pharmaceuticals
R&D
|
(1,745)
|
|
(1,549)
|
|
13
|
|
11
|
|
|
|
|
|
|
|
|
Pharmaceuticals
including R&D
|
2,159
|
|
2,494
|
|
(13)
|
|
(14)
|
Vaccines
|
1,123
|
|
1,226
|
|
(8)
|
|
(10)
|
Consumer
Healthcare
|
1,287
|
|
821
|
|
57
|
|
59
|
|
|
|
|
|
|
|
|
Segment
profit
|
4,569
|
|
4,541
|
|
1
|
|
-
|
Corporate
and other unallocated costs
|
(145)
|
|
(207)
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
operating profit
|
4,424
|
|
4,334
|
|
2
|
|
2
|
Adjusting
items
|
440
|
|
(1,422)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating profit
|
4,864
|
|
2,912
|
|
67
|
|
66
|
|
|
|
|
|
|
|
|
Finance
income
|
42
|
|
55
|
|
|
|
|
Finance
costs
|
(458)
|
|
(461)
|
|
|
|
|
Share
of after tax profits of associates and joint ventures
|
28
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before taxation
|
4,476
|
|
2,559
|
|
75
|
|
74
|
|
|
|
|
|
|
|
|
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 2019. At
30 June 2020, the Group’s aggregate provision for legal and
other disputes (not including tax matters described on page 22) was
£0.3 billion (31 December 2019: £0.2
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.
Significant
developments since the date of the Annual Report 2019 are as
follows:
On 4
May 2020, the US Department of Justice informed the Group that it
would be closing its investigation without a recommendation of
further action with respect to the Group’s use of third-party
advisers in China. This followed the US Securities and Exchange
Commission’s notification to the Group on 8 March 2020 that
the SEC similarly was terminating its investigation into these
matters. Accordingly, this matter is now concluded.
On 18
June 2020, the Group received a Civil Investigative Demand (CID)
from the US Department of Justice (DOJ) seeking information related
to Zantac pursuant to the
False Claims Act. The Group is co-operating with the DOJ to provide
this information. Additionally, on 18 June 2020, the New Mexico
Attorney General filed a lawsuit against multiple defendants,
including GSK, relating to Zantac and other products containing
ranitidine.
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.
|
Additional
information
|
Accounting policies and basis of preparation
|
This
unaudited Results Announcement contains condensed financial
information for the three and six months ended 30 June 2020, is prepared in accordance with
the Disclosure and Transparency Rules (DTR) of the Financial
Conduct Authority and IAS 34 ‘Interim financial
reporting’ and should be read in conjunction with the Annual
Report 2019, which was prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union. This Results Announcement has been prepared
applying consistent accounting policies to those applied by the
Group in the Annual Report 2019.
|
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 2019 were published
in the Annual Report 2019, 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.
|
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:
|
|
Q2 2020
|
|
Q2
2019
|
|
H1 2020
|
|
H1
2019
|
|
2019
|
||
|
|
|
|
|
|
|
|
|
|
||
Average
rates:
|
|
|
|
|
|
|
|
|
|
||
|
US$/£
|
1.25
|
|
1.28
|
|
1.27
|
|
1.29
|
|
1.28
|
|
|
Euro/£
|
1.13
|
|
1.14
|
|
1.15
|
|
1.14
|
|
1.14
|
|
|
Yen/£
|
134
|
|
140
|
|
137
|
|
142
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
||
Period-end
rates:
|
|
|
|
|
|
|
|
|
|
||
|
US$/£
|
1.23
|
|
1.27
|
|
1.23
|
|
1.27
|
|
1.32
|
|
|
Euro/£
|
1.10
|
|
1.12
|
|
1.10
|
|
1.12
|
|
1.18
|
|
|
Yen/£
|
132
|
|
137
|
|
132
|
|
137
|
|
143
|
During Q2 2020 average Sterling exchange rates were weaker against
the US Dollar, the Euro and Yen compared with the same period in
2019. During the six months ended 30 June 2020, average Sterling
exchange rates were weaker against the US Dollar and the Yen but
stronger against the Euro. Period-end Sterling exchange rates were
weaker against the US Dollar, the Euro and Yen compared with the
2019 period-end rates.
|
Net assets
|
The
book value of net assets increased by £1,780 million from
£18,357 million at 31 December 2019 to £20,137 million at
30 June 2020. This primarily reflected the Total profit for the
period exceeding the re-measurement losses on defined benefit plans
and the dividends paid during the period.
The
carrying value of investments in associates and joint ventures at
30 June 2020 was £390 million (31 December 2019: £314
million), with a market value of £445 million (31 December
2019: £396 million).
At 30
June 2020, the net deficit on the Group’s pension plans was
£2,447 million compared with £1,921 million at 31
December 2019. The increase in the net deficit primarily arose from
decreases in the rates used to discount UK pension liabilities from
2.0% to 1.5%, and US pension liabilities from 3.2% to 2.6%, partly
offset by higher UK assets and a decrease in the UK inflation rate
from 3.0% to 2.9%. 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 £1,069 million (31
December 2019: £1,011 million).
During
the quarter, the Group issued an exchangeable bond giving the
investors the right to exchange their notes into underlying shares
in Theravance Biopharma, Inc. The par value of the exchangeable
bond was $280 million and the net proceeds received were $300
million (£242 million).
Contingent
consideration amounted to £5,830 million at 30 June 2020 (31
December 2019: £5,479 million), of which £5,436 million
(31 December 2019: £5,103 million) represented the estimated
present value of amounts payable to Shionogi relating to ViiV
Healthcare and £349 million (31 December 2019: £339
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 30 June 2020, £768 million (31 December 2019: £730
million) is expected to be paid within one year.
|
Movements in contingent consideration are as follows:
|
H1
2020
|
ViiV Healthcare
£m
|
|
Group
£m
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,103
|
|
5,479
|
Re-measurement
through income statement
|
778
|
|
806
|
Cash
payments: operating cash flows
|
(388)
|
|
(393)
|
Cash
payments: investing activities
|
(57)
|
|
(62)
|
|
|
|
|
Contingent
consideration at end of the period
|
5,436
|
|
5,830
|
|
|
|
|
H1
2019
|
ViiV
Healthcare
£m
|
|
Group
£m
|
|
|
|
|
Contingent
consideration at beginning of the period
|
5,937
|
|
6,286
|
Re-measurement
through income statement
|
166
|
|
185
|
Cash
payments: operating cash flows
|
(390)
|
|
(392)
|
Cash
payments: investing activities
|
(49)
|
|
(51)
|
|
|
|
|
Contingent
consideration at end of the period
|
5,664
|
|
6,028
|
|
|
|
|
Contingent liabilities
|
There
were contingent liabilities at 30 June 2020 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 58.
|
Business acquisitions and disposals
|
On 1
April 2020, GSK completed its divestment of Horlicks and other Consumer Healthcare
nutrition products in India and a number of other countries
(excluding Bangladesh) to Unilever and the merger of GSK’s
Indian listed Consumer Healthcare entity with Hindustan Unilever,
an Indian listed public company. GSK received a 5.7% equity stake
in Hindustan Unilever and approximately £395 million in
cash.
The
divestment in Bangladesh closed on 30 June 2020. Total cash
consideration received was approximately £177 million. GSK
disposed of its equity stake in Hindustan Unilever during May
2020.
The
cash divested for the disposal of Horlicks and other Consumer Healthcare
nutrition products in India and a number of other countries was
approximately £478 million.
|
Financial instruments fair value disclosures
|
The following tables categorise the Group’s financial assets
and liabilities held at fair value by the valuation methodology
applied in determining their fair value. Where possible, quoted
prices in active markets are used (Level 1). Where such prices are
not available, the asset or liability is classified as Level 2,
provided all significant inputs to the valuation model used are
based on observable market data. If one or more of the significant
inputs to the valuation model is not based on observable market
data, the instrument is classified as Level 3. Other investments
classified as Level 3 in the tables below comprise equity
investments in unlisted entities with which the Group has entered
into research collaborations and also investments in emerging life
science companies.
|
At 30 June 2020
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
Financial
assets at fair value through other comprehensive income
(FVTOCI):
|
|
|
|
|
|
|
|
Other investments designated at FVTOCI
|
1,266
|
|
-
|
|
848
|
|
2,114
|
Trade and other receivables
|
-
|
|
1,592
|
|
-
|
|
1,592
|
Financial
assets mandatorily at fair value through profit or loss
(FVTPL):
|
|
|
|
|
|
|
|
Other investments
|
-
|
|
-
|
|
60
|
|
60
|
Other non-current assets
|
-
|
|
756
|
|
43
|
|
799
|
Trade and other receivables
|
-
|
|
68
|
|
-
|
|
68
|
Held for trading derivatives that are not in a
designated and effective hedging relationship
|
-
|
|
292
|
|
5
|
|
297
|
Cash and cash equivalents
|
5,344
|
|
-
|
|
-
|
|
5,344
|
Derivatives designated and effective as hedging
instruments
|
-
|
|
129
|
|
-
|
|
129
|
|
|
|
|
|
|
|
|
|
6,610
|
|
2,837
|
|
956
|
|
10,403
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
|
|
|
|
|
|
|
|
Financial
liabilities mandatorily at fair value through profit or loss (FVTPL):
|
|
|
|
|
|
|
|
Contingent consideration liabilities
|
-
|
|
-
|
|
(5,830)
|
|
(5,830)
|
Held for trading derivatives that are not in a
designated and effective hedging relationship
|
-
|
|
(93)
|
|
(24)
|
|
(117)
|
Derivatives designated and effective as hedging
instruments.
|
-
|
|
(152)
|
|
-
|
|
(152)
|
|
|
|
|
|
|
|
|
|
-
|
|
(245)
|
|
(5,854)
|
|
(6,099)
|
|
|
|
|
|
|
|
|
At 31 December 2019
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial assets at fair value
|
|
|
|
|
|
|
|
Financial assets at fair value through other comprehensive income
(FVTOCI):
|
|
|
|
|
|
|
|
Other investments designated at FVTOCI
|
1,128
|
|
-
|
|
653
|
|
1,781
|
Trade and other receivables
|
-
|
|
1,665
|
|
-
|
|
1,665
|
Financial assets mandatorily measured at fair value through profit
or loss (FVTPL):
|
|
|
|
|
|
|
|
Other investments
|
-
|
|
-
|
|
56
|
|
56
|
Other non-current assets
|
-
|
|
743
|
|
44
|
|
787
|
Trade and other receivables
|
-
|
|
44
|
|
-
|
|
44
|
Held for trading derivatives that are not in a
designated and effective hedging relationship
|
-
|
|
353
|
|
4
|
|
357
|
Cash and cash equivalents
|
2,142
|
|
-
|
|
-
|
|
2,142
|
Derivatives designated and effective as hedging
instruments
|
-
|
|
167
|
|
-
|
|
167
|
|
|
|
|
|
|
|
|
|
3,270
|
|
2,972
|
|
757
|
|
6,999
|
|
|
|
|
|
|
|
|
At 31 December 2019
|
Level 1
£m
|
|
Level 2
£m
|
|
Level 3
£m
|
|
Total
£m
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value
|
|
|
|
|
|
|
|
Financial
liabilities mandatorily at fair value through profit or loss
(FVTPL):
|
|
|
|
|
|
|
|
Contingent consideration liabilities
|
-
|
|
-
|
|
(5,479)
|
|
(5,479)
|
Held for trading derivatives that are not in a
designated and effective hedging relationship
|
-
|
|
(141)
|
|
-
|
|
(141)
|
Derivatives designated and effective as hedging
instruments
|
-
|
|
(48)
|
|
-
|
|
(48)
|
|
|
|
|
|
|
|
|
|
-
|
|
(189)
|
|
(5,479)
|
|
(5,668)
|
|
|
|
|
|
|
|
|
Movements in the six months to 30 June 2020 and the six months to
30 June 2019 for financial instruments measured using Level 3
valuation methods are presented below:
|
|
Financial assets
£m
|
|
Financial liabilities
£m
|
|
|
|
|
At 1 January 2020
|
757
|
|
(5,479)
|
Gains/(losses) recognised in the income statement
|
6
|
|
(806)
|
Gains recognised in other comprehensive income
|
151
|
|
-
|
Additions
|
52
|
|
(24)
|
Disposals
|
(10)
|
|
-
|
Payments in the period
|
-
|
|
455
|
|
|
|
|
At 30 June 2020
|
956
|
|
(5,854)
|
|
|
|
|
At 1 January 2019
|
754
|
|
(6,286)
|
Gains/(losses) recognised in the income statement
|
(13)
|
|
(185)
|
Losses recognised in other comprehensive income
|
(40)
|
|
-
|
Additions
|
53
|
|
-
|
Disposals
|
(15)
|
|
-
|
Payments in the period
|
(42)
|
|
443
|
Transfers from Level 3
|
(37)
|
|
-
|
Exchange
|
7
|
|
-
|
|
|
|
|
At 30 June 2019
|
667
|
|
(6,028)
|
|
|
|
|
Net losses of £800 million (H1 2019: net losses of £198
million) reported in other operating income and net gains of
£151 million (H1 2019: net losses of £43 million)
reported in other comprehensive income were attributable to Level 3
financial instruments held at the end of the period.
Financial liabilities measured using Level 3 valuation methods at
30 June included £5,436 million of contingent consideration
for the acquisition in 2012 of the former Shionogi-ViiV Healthcare
joint venture and £349 million of contingent consideration for
the acquisition of the Novartis Vaccines business in 2015.
Contingent consideration is expected to be paid over a number of
years and will vary in line with the future performance of
specified products, the achievement of certain milestone targets
and movements in certain foreign currencies. The financial
liabilities are measured at the present value of expected future
cash flows, the most significant inputs to the valuation models
being future sales forecasts, the discount rate, the Sterling/US
Dollar exchange rate and the probability of success in achieving
milestone targets.
|
The table below shows, on an indicative basis, the income statement
and balance sheet sensitivity to reasonably possible changes in key
inputs to the valuation of the largest contingent consideration
liabilities.
|
|
Shionogi-
ViiV Healthcare
|
|
Novartis
Vaccines
|
Increase/(decrease) in financial liability
|
£m
|
|
£m
|
|
|
|
|
10% increase in sales forecasts
|
545
|
|
68
|
10% decrease in sales forecasts
|
(544)
|
|
(68)
|
1% (100 basis points) increase in discount rate
|
(209)
|
|
(23)
|
1% (100 basis points) decrease in discount rate
|
224
|
|
27
|
5% increase in probability of milestone success
|
|
|
8
|
5% decrease in probability of milestone success
|
|
|
(8)
|
10 cent appreciation of US Dollar
|
350
|
|
(10)
|
10 cent depreciation of US Dollar
|
(297)
|
|
9
|
10 cent appreciation of Euro
|
125
|
|
30
|
10 cent depreciation of Euro
|
(103)
|
|
(25)
|
|
|
|
|
The Group transfers financial instruments between different levels
in the fair value hierarchy when, as a result of an event or change
in circumstances, the valuation methodology applied in determining
their fair values alters in such a way that it meets the definition
of a different level. There were no transfers between the Level 1
and Level 2 fair value measurement categories and no transfers to
or from the Level 3 category in the period. Transfers from Level 3
in the six months to 30 June 2019 related to equity investments in
companies which were listed on stock exchanges during that
period.
|
The following methods and assumptions were used to measure the fair
value of the significant financial instruments carried at fair
value on the balance sheet:
|
|
|
|
●
|
Cash
and cash equivalents carried at fair value – based on net
asset value of the funds
|
|
|
●
|
Other
investments – equity investments traded in an active market
determined by reference to the relevant stock exchange quoted bid
price; other equity investments determined by reference to the
current market value of similar instruments, recent financing
rounds or the discounted cash flows of the underlying net
assets
|
|
|
●
|
Contingent
consideration for business acquisitions and divestments –
based on present values of expected future cash flows
|
|
|
●
|
Interest
rate swaps, foreign exchange forward contracts, swaps and options
– based on the present value of contractual cash flows or
option valuation models using market-sourced data (exchange rates
or interest rates) at the balance sheet date
|
|
|
●
|
Company-owned
life insurance policies – based on cash surrender
value
|
|
|
●
|
Trade
receivables carried at fair value – based on invoiced
amount.
|
There are no material differences between the carrying value of the
Group's other financial assets and liabilities and their estimated
fair values, with the exception of bonds, for which the carrying
values and fair values are set out in the table below:
|
|
30 June 2020
|
|
31 December 2019
|
||||
|
|
|
|
|
|
|
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
Carrying
value
£m
|
|
Fair
value
£m
|
|
|
|
|
|
|
|
|
Bonds in a designated hedging relationship
|
(9,728)
|
|
(9,982)
|
|
(8,636)
|
|
(9,085)
|
Other bonds
|
(17,718)
|
|
(22,365)
|
|
(15,582)
|
|
(19,048)
|
|
|
|
|
|
|
|
|
|
(27,446)
|
|
(32,347)
|
|
(24,218)
|
|
(28,133)
|
|
|
|
|
|
|
|
|
The following methods and assumptions are used to estimate the fair
values of financial assets and liabilities which are not measured
at fair value on the balance sheet:
|
|
|
|
●
|
Liquid
investments – approximates to the carrying
amount
|
|
|
●
|
Cash
and cash equivalents carried at amortised cost – approximates
to the carrying amount
|
|
|
●
|
Short-term
loans, overdrafts and commercial paper – approximates to the
carrying amount because of the short maturity of these
instruments
|
|
|
●
|
Long-term
loans – based on quoted market prices (a Level 1 fair value
measurement) in the case of European and US Medium Term Notes and
other fixed rate borrowings; approximates to the carrying amount in
the case of other fixed rate borrowings and floating rate
bank loans
|
|
|
●
|
Receivables
and payables, including put options, carried at amortised cost
– approximates to the carrying amount
|
|
|
●
|
Lease
obligations – approximates to the carrying
amount.
|
Put option
Other
payables in Current liabilities includes the present value of the
expected redemption amount of the Pfizer put option over its
non-controlling interest in ViiV Healthcare of £1,069 million.
This reflects a number of assumptions around future sales and
profit forecasts, multiples and forecast exchange rates. The
forecast exchange rates used are consistent with market rates at 30
June 2020.
The table below shows on an indicative basis the income statement
and balance sheet sensitivity to reasonably possible changes in the
key inputs to the measurement of this liability.
|
Increase/(decrease) in financial liability
|
|
|
ViiV
Healthcare
put
option
£m
|
|
|
|
|
10%
increase in sales forecasts
|
|
|
130
|
10%
decrease in sales forecasts
|
|
|
(129)
|
1% (100
basis points) increase in discount rate
|
|
|
(46)
|
1% (100
basis points) decrease in discount rate
|
|
|
50
|
|
|
|
|
Reconciliation of cash flow to
movements in net debt
|
|
H1 2020
£m
|
|
H1
2019
£m
|
|
|
|
|
Net
debt, as previously reported
|
(25,215)
|
|
(21,621)
|
Implementation
of IFRS 16
|
-
|
|
(1,303)
|
|
|
|
|
Net
debt at beginning of the period, as adjusted
|
(25,215)
|
|
(22,924)
|
|
|
|
|
Increase
in cash and bank overdrafts
|
2,817
|
|
305
|
Net
decrease/(increase) in short-term loans
|
3,018
|
|
(3,009)
|
Increase
in long-term loans
|
(2,354)
|
|
(2,603)
|
Net
repayment of obligations under lease liabilities
|
111
|
|
104
|
Debt of
subsidiary undertakings acquired
|
-
|
|
(482)
|
Exchange
adjustments
|
(1,769)
|
|
(86)
|
Other
non-cash movements
|
(43)
|
|
(26)
|
|
|
|
|
Decrease/(increase)
in net debt
|
1,780
|
|
(5,797)
|
|
|
|
|
Net
debt at end of the period
|
(23,435)
|
|
(28,721)
|
|
|
|
|
Net debt
analysis
|
|
30 June 2020
£m
|
|
30 June
2019
£m
|
|
31
December 2019
£m
|
|
|
|
|
|
|
Liquid
investments
|
87
|
|
84
|
|
79
|
Cash
and cash equivalents
|
8,166
|
|
4,123
|
|
4,707
|
Cash
and cash equivalents reported in assets
held
for sale
|
2
|
|
532
|
|
507
|
Short-term
borrowings
|
(5,964)
|
|
(10,147)
|
|
(6,918)
|
Long-term
borrowings
|
(25,726)
|
|
(23,313)
|
|
(23,590)
|
|
|
|
|
|
|
Net
debt at end of the period
|
(23,435)
|
|
(28,721)
|
|
(25,215)
|
|
|
|
|
|
|
Free cash flow
reconciliation
|
|
Q2 2020
£m
|
|
H1
2020
£m
|
|
H1
2019
£m
|
|
|
|
|
|
|
Net
cash inflow from operating activities
|
2,760
|
|
3,725
|
|
2,052
|
Purchase
of property, plant and equipment
|
(223)
|
|
(420)
|
|
(501)
|
Proceeds
from sale of property, plant and equipment
|
6
|
|
12
|
|
70
|
Purchase
of intangible assets
|
(179)
|
|
(326)
|
|
(438)
|
Proceeds
from disposals of intangible assets
|
523
|
|
636
|
|
12
|
Net
finance costs
|
(372)
|
|
(450)
|
|
(413)
|
Dividends
from joint ventures and associates
|
-
|
|
14
|
|
-
|
Contingent
consideration paid (reported in investing activities)
|
(33)
|
|
(62)
|
|
(51)
|
Distributions
to non-controlling interests
|
(533)
|
|
(652)
|
|
(196)
|
Contributions
from non-controlling interests
|
-
|
|
3
|
|
-
|
|
|
|
|
|
|
Free
cash flow
|
1,949
|
|
2,480
|
|
535
|
|
|
|
|
|
|
Principal risks and
uncertainties
The
principal risks and uncertainties affecting the Group are those
described under the headings below. These are detailed in the
‘Principal risks and uncertainties’ section of the
Annual Report 2019.
|
Patient
safety
|
Failure
to appropriately collect, review, follow up, or report human safety
information, including adverse events from all potential sources,
and to act on any relevant findings in a timely
manner.
|
|
|
Product
quality
|
Failure
by GSK, its contractors or suppliers to ensure appropriate controls
and governance of quality in product development; compliance with
good manufacturing practice or good distribution practice
regulations in commercial, clinical trials, manufacturing and
distribution activities; compliance with the terms of GSK product
licences and supporting regulatory activities.
|
|
|
Financial
controls and reporting
|
Failure
to comply with current tax laws or incurring significant losses due
to treasury activities; failure to report accurate financial
information in compliance with accounting standards and applicable
legislation.
|
|
|
Anti-bribery
and corruption
|
The
risk comprises five sub-risk areas: bribery of public officials by
GSK; bribery of commercial and other non-public entities by GSK;
bribery by third parties acting on behalf of GSK; GSK employees
receiving and/or requesting bribes and/or other undue personal
benefit; other corruption-non-compliance with laws and regulations
related to money laundering or facilitation of tax evasion by third
parties/clients/partners.
|
|
|
Commercial
practices
|
Failure
to engage in commercial activities that are consistent with the
letter and spirit of the law, industry or the Group’s
requirements relating to marketing and communications about our
medicines and associated therapeutic areas; appropriate
interactions with healthcare professionals and patients, and
legitimate and transparent transfer of value.
|
|
|
Privacy
|
Failure
to collect, secure, use and destroy personal information in
accordance with applicable data privacy laws.
|
|
|
Research
practices
|
Failure
to adequately conduct ethical and sound pre-clinical and clinical
research. In addition, failure to engage in scientific activities
that are consistent with the letter and spirit of the law,
industry, or the Group’s requirements. It comprises the
following sub-risks: non-clinical and laboratory research; human
subject research; data integrity; care, welfare and treatment of
animals; human biological samples management; data disclosure;
regulatory filings and engagement; scientific engagement and
intellectual property.
|
|
|
Third
party oversight risk
|
The
risk that our third parties fail to meet their contractual,
regulatory or ethical obligations resulting in significant
operational, reputational, legal and financial risk for GSK, and in
some cases our employees directly.
|
|
|
Environment,
health & safety and sustainability (EHSS)
|
Failure
in management of: execution of hazardous activities; GSK’s
physical assets and infrastructure; handling and processing of
hazardous chemicals and biological agents; control of releases of
substances harmful to the environment in both the short and long
term, leading to incidents which could disrupt our R&D and
supply activities’ harm employees, harm the communities we
operate in and harm the environment and its longer-term
sustainability.
|
|
|
Information
security
|
The
risk that unauthorised disclosure, theft, unavailability or
corruption of GSK’s information or key information systems
may lead to harm to our patients, workforce and customers,
disruption to our business and/or loss of commercial or strategic
advantage, damage to our reputation or regulatory
sanction.
|
|
|
Supply
continuity
|
Failure
to deliver a continuous supply of compliant finished product;
inability to respond effectively to a crisis incident in a timely
manner to recover and sustain critical operations.
|
|
|
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. Up to the date of this report, the
pandemic, has as anticipated, impacted the Group performance during
the first half of 2020 primarily in demand for Vaccines as a result
of containment measures impacting customers’ ability and
willingness to access vaccination services across all regions. We
continue to monitor the situation closely, as this is clearly a
very dynamic and uncertain situation, with the ultimate severity,
duration and impact unknown at this point including the potential
impacts on trading results, our clinical trials, our supply
continuity and our employees. The situation could change at any
time and there can be no assurance that COVID-19 will not have a
material adverse impact on the future results of the
Group.
|
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 10 and other non-IFRS measures
are defined below.
Free cash flow
Free
cash flow is defined as the net cash inflow 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 66.
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. £%
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 Q2 2020
include three months of results of the former Pfizer consumer
healthcare business from 1 April 2020.
The
Group has presented pro-forma growth rates at CER for turnover,
Adjusted operating profit and operating profit by business taking
account of this transaction. Pro-forma growth rates at CER for the
quarter are calculated comparing reported results for Q2 2020,
calculated applying the exchange rates used in the comparative
period, with the results for Q2 2019 adjusted to include the
equivalent three months of results of the former Pfizer consumer
healthcare business during Q2 2019, as consolidated (in US$) and
included in Pfizer’s US GAAP results. Similarly, pro-forma
growth rates at CER for the six months to 30 June 2020 are
calculated comparing reported results for the six months to 30 June
2020, calculated applying the exchange rates used in the
comparative period, with the results for the six months to 30 June
2019, adjusted to include the equivalent six months of results of
the former Pfizer consumer healthcare business, as consolidated (in
US$) and included in Pfizer’s US GAAP results.
|
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.
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Outlook, assumptions and cautionary statements
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2020 guidance
While we are maintaining our 2020 Adjusted EPS guidance, there
remain notable risks to business performance over the balance of
the year. In particular, the outcome is dependent on the timing of
a recovery in vaccination rates, particularly in the US, which we
anticipate in the third quarter. If we were to experience a delay
in this recovery we could see a significant impact in 2020. In the
case of, for example, a three month delay, the impact on adjusted
EPS would be up to 5 percentage points.
2016-2020 outlook
In May
2015, GSK announced that it expected Group sales to grow at CER at
a low-to-mid single digits percentage CAGR and Adjusted EPS to grow
at CER at a mid-to-high single digit percentage CAGR for the period
2016-2020. On 3 December 2018, GSK announced that it continued to
expect to deliver on its previously published Group outlooks to
2020, but, following the acquisition of Tesaro, expected Adjusted
EPS growth at CER for the period 2016-2020 to be at the bottom end
of the mid-to-high single digit percentage CAGR range. These
outlooks are based on 2015 exchange rates.
Assumptions related to 2020 guidance and 2016-2020
outlook
In
outlining the expectations for 2020 and the five-year period
2016-2020, the Group has made certain assumptions about the
healthcare sector, the different markets in which the Group
operates and the delivery of revenues and financial benefits from
its current portfolio, pipeline and restructuring
programmes.
For the
Group specifically, over the period to the end of 2020, GSK expects
further declines in sales of Seretide/Advair. The introduction of a
generic alternative to Advair in the US has been factored into
the Group’s assessment of its future performance. The Group
assumes no premature loss of exclusivity for other key products
over the period.
The
assumptions for the Group’s revenue, earnings and dividend
expectations assume no material interruptions to supply of the
Group’s products, no material mergers, acquisitions or
disposals, except for the acquisition of Tesaro, the divestment of
Horlicks and other Consumer
Healthcare products to Unilever and the formation of a new Consumer
Healthcare Joint Venture with Pfizer, all announced in December
2018, 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 assumed no material changes in the macro-economic
and healthcare environment over the period. The 2020 guidance and
2016-2020 outlook have factored in all divestments and product
exits since 2015, including the divestment and exit of more than
130 non-core tail brands (£0.5 billion in annual sales) as
announced on 26 July 2017 and the product divestments planned in
connection with the formation of the Consumer Healthcare Joint
Venture with Pfizer.
The
Group’s expectations assume successful delivery of the
Group’s integration and restructuring plans over the period
2016-2020, including the extension and enhancement to the combined
programme announced on 26 July 2017, the new Major restructuring
plan announced on 25 July 2018, the Consumer Healthcare Joint
Venture integration programme and the new Separation Preparation
programme. They also assume that the integration and investment
programmes following the Tesaro acquisition and the Consumer
Healthcare Joint Venture with Pfizer over this period 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 expectations are given on a constant
currency basis (2016-2020 outlook at 2015 CER).
Assumptions and cautionary statement regarding forward-looking
statements
The
Group’s management believes that the assumptions outlined
above are reasonable, and that the aspirational targets described
in this report are achievable based on those assumptions. However,
given the longer term nature of these expectations and targets,
they are subject to greater uncertainty, including potential
material impacts if the above assumptions are not realised, and
other material impacts related to foreign exchange fluctuations,
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 2019 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.
Cautionary statement regarding pro-forma growth rates
The
pro-forma growth rates at CER in this Results Announcement have
been provided to illustrate the position in Q2 2020 relative to the
position in Q2 2019 as if, for the purposes of the Q2 2019 results,
the acquisition of the Pfizer consumer healthcare business had
taken place as at 31 July 2018 and that, accordingly, three months
of results of the former Pfizer consumer healthcare business were
included in Q2 2019. Similarly, pro-forma growth rates have been
provided to illustrate the position for the six months to 30 June
2020 relative to the position for the six months to 30 June 2019 as
if, for the purposes of the six months to 30 June 2019 results, the
acquisition of the Pfizer consumer healthcare business had taken
place as at 31 July 2018 and that, accordingly, six months of
results of the former Pfizer consumer healthcare business were
included in the six months to 30 June 2019. The results of the
former Pfizer consumer healthcare business included for Q2 2019 and
the six months to 30 June 2019 are as consolidated (in US$) and
included in Pfizer’s US GAAP results. The results for Q2 2020
and the six months to 30 June 2020 used to calculate the pro-forma
growth rates are as reported at CER.
The
pro-forma growth rates have been provided for illustrative purposes
only and, by their nature, address a hypothetical situation and
therefore do not represent the Group’s actual growth rates.
The pro-forma growth rates do not purport to represent what the
Group’s results of operations actually would have been if the
Pfizer acquisition had been completed on the date indicated, nor do
they purport to represent the results of operations at any future
date. In addition, the pro-forma growth rates do not reflect the
effect of anticipated synergies and efficiencies or accounting and
reporting differences associated with the acquisition of the Pfizer
consumer healthcare business.
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Directors’ responsibility
statement
The Board of Directors approved this Half-yearly Financial Report
on 29 July 2020.
The Directors confirm that to the best of their knowledge the
unaudited condensed financial information has been prepared in
accordance with IAS 34 as adopted by the European Union and that
the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8.
After making enquiries, the Directors considered it appropriate to
adopt the going concern basis in preparing this Half-yearly
Financial Report.
The Directors of GlaxoSmithKline plc are as follows:
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Sir Jonathan Symonds
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Non-Executive Chairman, Nominations & Corporate Governance
Committee Chair
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Emma Walmsley
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Chief Executive Officer (Executive Director)
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Iain Mackay
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Chief Financial Officer (Executive Director)
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Hal Barron
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Chief Scientific Officer and President, R&D (Executive
Director)
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Vindi Banga
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Senior Independent Non-Executive Director
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Charles Bancroft
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Independent Non-Executive Director
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Vivienne Cox
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Independent Non-Executive Director
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Lynn Elsenhans
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Independent Non-Executive Director, Corporate Responsibility
Committee Chair
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Laurie Glimcher
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Independent Non-Executive Director
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Jesse Goodman
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Independent Non-Executive Director, Science Committee
Chair
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Judy Lewent
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Independent Non-Executive Director, Audit & Risk Committee
Chair
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Urs Rohner
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Independent Non-Executive Director, Remuneration Committee
Chair
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By order of the Board
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Emma Walmsley
Chief Executive Officer
29 July 2020
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Iain Mackay
Chief Financial Officer
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Independent review report to
GlaxoSmithKline plc
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We have
been engaged by GlaxoSmithKline plc (“the company”) to
review the condensed financial information (the “interim
financial statements”) in the Results Announcement of the
company for the three and six months ended 30 June
2020.
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What we have reviewed
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The
interim financial statements comprises:
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●
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the
income statement and statement of comprehensive income for the
three and six month periods ended 30 June 2020 on pages 46 to
48;
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the
balance sheet as at 30 June 2020 on page 53;
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the
statement of changes in equity for the six month period then ended
on page 54;
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●
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the
cash flow statement for the six month period then ended on page 55;
and
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the
accounting policies and basis of preparation and the explanatory
notes to the interim financial statements on pages 49 to 52 and 56
to 64.
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We have
read the other information contained in the Results Announcement,
including the non-IFRS measures contained on pages 49 to 52 and 56
to 65, 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 Financial
Reporting Council. 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 the company, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the Results Announcement of the company in accordance
with the Disclosure Guidance and Transparency Rules of the United
Kingdom’s Financial Conduct Authority.
As
disclosed in Note 1, the annual financial statements of the company
are prepared in accordance with IFRSs as adopted by the European
Union. The interim financial statements included in this Results
Announcement have been prepared in accordance with International
Accounting Standard 34 “Interim Financial Reporting” as
adopted by the European Union.
Our responsibility
Our
responsibility is to express to the company a conclusion on the
interim financial statements 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 Financial Reporting Council 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 interim financial statements in the Results
Announcement for the three and six months ended 30 June 2020 are
not prepared, in all material respects, in accordance with
International Accounting Standard 34 as adopted by the European
Union and the Disclosure Guidance and Transparency Rules of the
United Kingdom’s Financial Conduct Authority.
Deloitte LLP
Statutory
Auditor
London,
United Kingdom
29 July
2020
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GlaxoSmithKline plc
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(Registrant)
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Date: July
29, 2020
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By:/s/ VICTORIA
WHYTE
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Victoria Whyte
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Authorised
Signatory for and on
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behalf
of GlaxoSmithKline plc
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