3rd Quarter Results

GlaxoSmithKline PLC 24 October 2007 Issued: Wednesday, 24th October 2007, London, U.K. Results Announcement for the third quarter 2007 GSK reports third quarter EPS of 23.7p Significant new Operational Excellence programme announced GlaxoSmithKline plc (GSK) today announces its unaudited results for the third quarter ended 30th September 2007. The full results are presented under 'Income Statement' on pages 7 and 8, and are summarised below. FINANCIAL RESULTS* 9 months 9 months Q3 2007 Q3 2006 Growth 2007 2006 Growth £m £m CER% £% £m £m CER% £% Turnover 5,476 5,642 1 (3) 16,742 17,266 3 (3) Operating profit 1,910 2,023 (1) (6) 6,005 6,108 6 (2) Profit before tax 1,882 2,022 (2) (7) 5,921 6,089 5 (3) Earnings per share 23.7p 24.7p 1 (4) 74.7p 74.5p 9 - SUMMARY* • Group turnover up 1% to £5.5 billion; pharmaceutical turnover down 2% to £4.6 billion impacted by generic competition in the USA and a decrease in Avandia sales: - Seretide/Advair +7% to £835 million - Valtrex +13% to £229 million - Vaccines +49% to £593 million - Avandia products -38% to £225 million - Lamictal +14% to £275 million - Zofran -86% to £32 million • Consumer Healthcare delivers strong Q3 performance with sales up 16% to £871 million: - OTC sales up 24% to £417 million, with new weight loss treatment alli contributing £34 million • New Operational Excellence programme to deliver annual pre-tax cost savings of up to £700 million by 2010 and improve GSK's long-term productivity and efficiency: - £350 million of pre-tax cost savings expected in 2008 - Savings will partly mitigate the expected impact to 2008 earnings from generic competition and lower Avandia sales in 2008 - Charges of approximately £1.5 billion expected over the period 2007-2010. • Q3 dividend of 13p (2006: 12p). Expected full year dividend increased 10% to 53p (2006: 48p) • £1.7 billion of shares repurchased as part of £12 billion share buy-back programme (1st August to 23rd October) • GSK expects earnings per share growth of 8 to 10% at constant exchange rates in 2007, excluding charges related to its new Operational Excellence programme • R&D Neuroscience seminar announced - 13th December 2007, New York * The Group's practice is to discuss its results in terms of constant exchange rate (CER) growth. All commentaries compare 2007 results with 2006 in CER terms unless otherwise stated. See 'Accounting Presentation and Policies' on page 21. Commenting on the performance in the quarter and GSK's new Operational Excellence programme, JP Garnier, Chief Executive Officer, said: "GSK remains on track to meet its earnings guidance for the year, despite significant challenges. We continue to strengthen our product portfolio with 15 products launched, approved or filed so far this year, and we remain very focused on delivering more from our late-stage pipeline. We are also increasing R&D investment in key areas of future growth, such as biopharmaceuticals, oncology, vaccines and neuroscience. GSK is also constantly seeking ways to adapt its operations and its cost base to remain competitive. Operational Excellence is part of our culture and in our new programme we will be accelerating and expanding many initiatives to improve GSK's productivity. This will include streamlining our manufacturing, adapting our selling model and improving efficiencies in R&D. We are very conscious that these initiatives will impact our staff in certain areas of our business and we regret that job reductions will be a necessary part of this programme. We will do everything we can to support those employees who are affected. However, by making the changes we envision, GSK will be better placed to address the challenges we face in 2008 and be in a stronger position to create long-term value for patients and shareholders." PHARMACEUTICAL UPDATE Total pharmaceutical turnover fell by 2% to £4.6 billion. In the United States, turnover fell 7% to £2.2 billion, impacted by continued generic competition and a reduction in Avandia sales. In Europe turnover was up 1% to £1.3 billion, with sales growth of vaccines and newer products offsetting generic competition to older products and further price cuts mandated by European governments. Sales in International were £1.0 billion, up 9%, with good growth seen in emerging markets including India and China. Seretide/Advair sales up 7% to £835 million Total sales of Seretide/Advair, for asthma and COPD, were up 7% to £835 million. In the USA, sales grew 5% to £452 million. Estimated underlying US growth of Advair in the third quarter was 8%. In Europe, sales grew 8% to £293 million and in International sales grew 15% to £90 million. In the USA, new treatment guidelines issued by the National Institute of Health were published in August and support the use of combination therapies, such as Advair, as initial therapy in moderate or severe patients with asthma. GSK also continues to see increased use of Advair in the treatment of COPD and is in ongoing discussions with the FDA to expand product labelling for use of Advair in this patient group. Vaccine sales up 49% to £593 million; impressive US performance driven by flu and hepatitis vaccines In the USA, vaccine sales rose 97% to £237 million. Sales growth was driven by orders for flu vaccines, Fluarix and FluLaval, which together contributed sales of £93 million and continued good performance of Infanrix/Pediarix, (+40% to £58 million), and hepatitis vaccines (+82% to £66 million). In August, the FDA accepted a marketing application for Rotarix, GSK's vaccine to prevent rotavirus gastroenteritis in infants. Sales in Europe grew 22% to £206 million also benefiting from demand for flu vaccines. Sales in International markets grew 35% to £150 million, with increased use of Rotarix and successful tenders for Varilrix and Priorix. Following approval by the EMEA in September, GSK has recently launched Cervarix, its vaccine to prevent cervical cancer, in 12 European markets, including the UK, Germany and Belgium. Further launches are expected in other European markets during the fourth quarter. Cervarix has already been approved in several International markets, and in September was the first vaccine of its type to be filed in Japan. GSK also filed Cervarix for WHO prequalification in September as part of its commitment to making the vaccine available in the developing world. Avandia product group sales declined 38% to £225 million Sales of the Avandia product group, for the treatment of type 2 diabetes, fell 38% to £225 million for the quarter, with US sales down 48% to £130 million. Sales in European and International markets declined 11% to £50 million and 22% to £45 million respectively. On 30th July, an FDA Advisory Committee met to discuss the potential cardiovascular risks associated with the use of thiazolidinediones, with a specific focus on Avandia. The FDA is currently reviewing the committee's recommendations. Lamictal, Valtrex and Requip - combined sales grew 16% to over £550 million Sales of Lamictal, for the treatment of epilepsy and bipolar disorder, grew 14% to £275 million, with strong sales performance in the USA, up 20% to £224 million. In September, GSK received an FDA approvable letter for Lamictal XR, a once-daily extended-release treatment for epilepsy. The company is discussing with the FDA the next steps for the application. Sales of Valtrex, for herpes, rose 13% to £229 million, with US sales up 11% to £162 million. Sales of Requip, for Parkinson's disease and restless legs syndrome (RLS), grew 31% to £87 million in the quarter, driven by strong sales in the USA, up 39% to £59 million. In August, GSK received an approvable letter for Requip 14hr for treatment of RLS. A decision from the FDA on the marketing application for Requip 24hr for Parkinson's disease is expected in December. Other key growth drivers contribute £154 million of sales in third quarter: Avodart, for enlarged prostate, continued to perform strongly with sales up 33% to £72 million. During the quarter, GSK announced new results from the CombAT study - combination therapy with Avodart and tamsulosin. These data, which have been submitted to regulators, showed that Avodart and tamsulosin in combination provide significantly greater urinary symptom improvement for men with enlarged prostate than either treatment used as monotherapy. GSK's share of the co-promotion income for Boniva/Bonviva, the only once-monthly medicine for post-menopausal osteoporosis, was up 56% to £41 million. Sales of Arixtra, a once-daily anticoagulant, doubled to £25 million. During the quarter Arixtra was also approved in Europe for the treatment of acute coronary syndromes. Sales of Tykerb, for breast cancer, were £16 million in the quarter with the product continuing to gain share of the Her2+ metastatic breast cancer market. Other products Total sales of HIV products were £360 million, up 3%, with strong sales growth from new products Epzicom/ Kivexa (+33% to £80 million) and Lexiva (+19% to £37 million) offsetting competition to older products, Combivir (-4% to £115 million) and Epivir (-13% to £38 million). Sales of Relenza, GSK's anti-viral for influenza, were £28 million, down 7%, reflecting lower demand from governments to stockpile it for use in the event of a flu pandemic. Sales of Zofran (-86% to £32 million), Flixonase/Flonase (-23% to £49 million) and Wellbutrin XL (-41% to £114 million ) decreased as a result of generic competition to these products. Total sales of Coreg IR and Coreg CR, for heart conditions, were £145 million, down 20%, reflecting generic competition to Coreg IR which began in September. Sales of Coreg CR were £31 million during the quarter. PHARMACEUTICAL PIPELINE UPDATE Neuroscience seminar GSK today announced that it intends to hold a meeting for investors and analysts on 13th December in New York, to focus on products in its clinical pipeline for the treatment of neuroscience diseases and disorders, such as Alzheimer's, schizophrenia, multiple sclerosis and depression. R&D pipeline Earlier this month, the company published an update on its R&D pipeline. GSK currently has 149 projects in clinical development comprising 89 NCEs, 37 PLEs and 23 vaccines. GSK has 33 key assets currently in phase III development or registration. GSK has recently signed three major in-licensing agreements, further strengthening its late-stage pipeline in key therapeutic areas: oncology, auto-immune diseases and neuroscience. STA-4783 - a first in class oxidative stress inducer, for the treatment of metastatic melanoma, was in-licensed from Synta Pharmaceuticals. STA-4783 is in phase III clinical development. Otelixizumab (TRX4) - a novel anti-CD3 monoclonal antibody, currently in phase II development for type 1 diabetes and in phase I development for psoriasis, was in-licensed from Tolerx. Lunivia - an agreement to market Lunivia, a new treatment for insomnia, worldwide (excluding the USA, Canada, Mexico and Japan), was completed with Sepracor. A marketing application for Lunivia was submitted to the EMEA in July. Approvals and filings GSK received a positive opinion from European regulatory authorities in October for use of Avamys to treat allergic rhinitis in adults and children. Also in October, the FDA approved Hycamtin capsules for the treatment of relapsed small cell lung cancer. In August, Atriance was approved in Europe for the treatment of patients with T-cell acute lymphoblastic leukaemia (T-ALL) and T-cell lymphoblastic lymphoma (T-LBL). Responses have also been submitted to the FDA following requests from the agency for additional information on Entereg, for management of post-operative ileus, and Trexima, for migraine. CONSUMER HEALTHCARE UPDATE Continued strong quarterly sales growth of 16% to £871 million, driven by strong performance of OTC medicines and key brands, Lucozade, Aquafresh and Sensodyne In North America sales grew 35% to £240 million benefiting from the launch of alli and the integration of new brands, Breathe Right and FiberChoice, which were acquired in 2006. In Europe, sales grew 8% to £386 million and International sales were up 14% to £245 million. • Over-the-counter (OTC) medicine sales grew 24% to £417 million, reflecting the successful launch of alli in the USA, which contributed sales of £34 million, and strong growth of Panadol, up 13% to £60 million. Combined sales of Breathe Right and FiberChoice were £22 million for the quarter, and grew 24% compared with the same period last year, when marketed by CNS Inc. • Oral care sales grew 11% to £260 million. Sales of Sensodyne grew 23% to £75 million, benefiting from the introduction of the new Pronamel brand. Sales of the Aquafresh product line grew 12% to £75 million benefiting from the launches of Aquafresh White Trays, Aquafresh Advance and Aquafresh IsoActive gel. • Nutritional healthcare product sales grew 8% to £194 million. Lucozade grew 12% to £95 million benefiting from the launch of new flavours. Sales of Horlicks grew 18% to £47 million while sales of Ribena declined 7% to £41 million. FINANCIAL REVIEW Operational Excellence GSK today announced a significant new £1.5 billion Operational Excellence programme to improve the effectiveness and productivity of its operations. Operational Excellence programmes have been a key part of the company's financial strategy for several years and have delivered cost savings and process improvements in a wide variety of business areas. The new programme is expected to deliver total annual pre-tax savings of up to £700 million by 2010 with savings realised across the business: manufacturing (40%); selling and administration (40%) and R&D infrastructure savings (20%). GSK expects to realise the majority of annual savings within the first two years of the programme, with approximately £350 million expected by 2008 and £550 million by 2009. These savings will partly mitigate the expected impact to 2008 earnings from generic competition and lower Avandia sales and the associated adverse impact on GSK's gross margin. The new programme will accelerate and expand many initiatives to improve productivity and efficiency, including further streamlining of manufacturing, adapting GSK's selling model and improving efficiencies in R&D. In manufacturing, GSK will reduce the overall number of sites operating in its network and simplify processes and site activities to reduce over-capacity. The company will also continue to seek opportunities to outsource manufacture of existing products and for low-cost sourcing of materials, whilst focusing its capability on new products. GSK will continue to adapt its selling model. As a result of its changing product portfolio, GSK has already expanded its capabilities into specialist areas such as oncology and vaccines. GSK has also conducted several sales force pilot initiatives to assess new sales structures and selling techniques. Results from these initiatives have provided GSK with new opportunities to evolve its traditional selling methods competitively, including adopting more tailored and customised sales approaches in both developed and emerging markets. In R&D, GSK will continue to invest in the development of its promising late-stage pipeline and will increase investment in key areas of future growth, such as biopharmaceuticals, oncology, vaccines, neuroscience and emerging markets such as China. Cost savings in R&D will be focused on simplification and streamlining of support infrastructure. Total one-off costs for implementation of the new programme are expected to be approximately £1.5 billion, incurred over the period 2007 to 2010. In total, approximately 70% will be in cash expenditures and 30% will be in accounting write-downs. GSK business units will implement the new programme consistent with their business needs. Any proposed initiatives, including outsourcing, site closures and staff reductions will be subject to consultations with staff, works councils, trade unions and other employee representatives in accordance with applicable employment legislation. From Q4 2007, GSK will introduce a 3-column approach to the income statement. 'Business performance' will show GSK's underlying results excluding the one-off costs of the programme. The middle column will show the one-off costs related to the new Operational Excellence programme and the 'Total' column will show the full IFRS statutory results. Earnings guidance is now given on the business performance basis, excluding the costs of the new Operational Excellence programme. Dividends The Board has declared a Q3 2007 dividend of 13 pence per share. This compares with a dividend of 12 pence per share for Q3 2006. The equivalent interim dividend receivable by ADR holders is 53.2584 cents per ADS based on an exchange rate of £1/$2.0484. The ex-dividend date will be 31st October 2007, with a record date of 2nd November 2007 and a payment date of 10th January 2008. The full-year dividend for 2007 is expected to be 53 pence compared with 48 pence in 2006. Share buy-back programme Following the announcement in July 2007 of a two-year £12 billion share buy-back programme GSK repurchased £1.7 billion of shares in the period 1st August to 23rd October, to be held as Treasury shares. Operating profit and earnings per share Operating profit of £1,910 million decreased by 1% in CER terms compared with Q3 2006 and was below turnover growth of 1% in CER terms, reflecting higher legal charges and lower other operating income partially offset by lower R&D costs. In the quarter, gains from asset disposals were £22 million (£63 million in 2006), costs for legal matters were £64 million (£22 million in 2006), fair value movements on financial instruments resulted in a charge of £31 million (income of £22 million in 2006) and charges related to restructuring programmes were £13 million (£124 million in 2006). Profit after taxation decreased by 1% in CER terms, in line with the decrease in operating profit as a lower expected tax rate for the year was offset by higher net interest costs. EPS of 23.7 pence increased 1% in CER terms (4% decrease in sterling terms) compared with Q3 2006. The adverse currency impact of 5% on EPS reflected the strength of sterling against the US dollar. Currencies The Q3 2007 results are based on average exchange rates, principally £1/$2.03, £1/Euro 1.48 and £1/Yen 237. The period-end exchange rates were £1/$2.04, £1/Euro 1.43 and £1/Yen 234. If exchange rates were to hold at the Q3 2007 average level for the remainder of 2007, the adverse currency impact on EPS growth for the full-year would be around 7%. 2007 earnings guidance GSK expects business performance earnings per share growth of 8 to 10% at constant exchange rates in 2007, excluding charges related to the new Operational Excellence programme. GlaxoSmithKline - 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 company information including a copy of this announcement and details of the company's updated product development pipeline, visit GSK at www.gsk.com. Enquiries: UK Media Philip Thomson (020) 8047 5502 Claire Brough (020) 8047 5502 Alice Hunt (020) 8047 5502 Joss Mathieson (020) 8047 5502 US Media Nancy Pekarek (215) 751 7709 Mary Anne Rhyne (919) 483 2839 European Analyst / Investor David Mawdsley (020) 8047 5564 Sally Ferguson (020) 8047 5543 US Analyst / Investor Frank Murdolo (215) 751 7002 Tom Curry (215) 751 5419 Brand names appearing in italics throughout this document are trademarks of GSK or associated companies with the exception of Levitra, a trademark of Bayer, Bonviva/Boniva, a trademark of Roche and Vesicare, a trademark of Astellas Pharmaceuticals in many countries and of Yamanouchi Pharmaceuticals in certain countries, all of which are used under licence by the Group. Cautionary statement regarding forward-looking statements Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions investors that any forward-looking statements or projections made by the company, including those made in this Announcement, are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Factors that may affect the Group's operations are described under 'Risk Factors' in the 'Business Review' in the company's Annual Report 2006. INCOME STATEMENT Three months ended 30th September 2007 Q3 2007 Growth Q3 2006 £m CER% £m --- --- --- Turnover: Pharmaceuticals 4,605 (2) 4,876 Consumer Healthcare 871 16 766 --- --- TURNOVER 5,476 1 5,642 Cost of sales (1,232) 2 (1,222) --- --- Gross profit 4,244 - 4,420 Selling, general and administration (1,617) 3 (1,617) Research and development (769) (9) (871) Other operating income 52 91 --- --- Operating profit: Pharmaceuticals 1,707 (3) 1,842 Consumer Healthcare 203 15 181 --- --- OPERATING PROFIT 1,910 (1) 2,023 Finance income 75 64 Finance expense (117) (81) Share of after tax profits of associates and joint ventures 14 16 --- --- PROFIT BEFORE TAXATION 1,882 (2) 2,022 Taxation (536) (596) Tax rate % 28.5% 29.5% --- --- PROFIT AFTER TAXATION FOR THE PERIOD 1,346 (1) 1,426 --- --- Profit attributable to minority interests 36 35 Profit attributable to shareholders 1,310 1,391 --- --- 1,346 1,426 --- --- EARNINGS PER SHARE 23.7p 1 24.7p --- --- Diluted earnings per share 23.5p 24.4p --- --- INCOME STATEMENT Nine months ended 30th September 2007 9 months Growth 9 months 2007 2006 2006 £m CER% £m £m --- --- --- Turnover: Pharmaceuticals 14,186 1 14,942 20,078 Consumer Healthcare 2,556 15 2,324 3,147 --- --- --- TURNOVER 16,742 3 17,266 23,225 Cost of sales (3,678) 6 (3,565) (5,010) --- --- --- Gross profit 13,064 2 13,701 18,215 Selling, general and administration (5,131) 2 (5,323) (7,257) Research and development (2,284) (4) (2,477) (3,457) Other operating income 356 207 307 --- --- --- Operating profit: Pharmaceuticals 5,484 6 5,624 7,125 Consumer Healthcare 521 12 484 683 --- --- --- OPERATING PROFIT 6,005 6 6,108 7,808 Finance income 210 204 287 Finance expense (334) (266) (352) Share of after tax profits of associates and joint ventures 40 43 56 --- --- --- PROFIT BEFORE TAXATION 5,921 5 6,089 7,799 Taxation (1,687) (1,796) (2,301) Tax rate % 28.5% 29.5% 29.5% --- --- --- PROFIT AFTER TAXATION FOR THE PERIOD 4,234 7 4,293 5,498 --- --- --- Profit attributable to minority interests 77 85 109 Profit attributable to shareholders 4,157 4,208 5,389 --- --- --- 4,234 4,293 5,498 --- --- --- EARNINGS PER SHARE 74.7p 9 74.5p 95.5p --- --- --- Diluted earnings per share 73.9p 73.5p 94.5p --- --- --- PHARMACEUTICAL TURNOVER Three months ended 30th September 2007 Total USA Europe International -------------- -------------- -------------- ------------- £m CER% £m CER% £m CER% £m CER% ------ ----- ------ ----- ----- ----- ---- ----- RESPIRATORY 1,185 4 570 4 410 2 205 8 Seretide/Advair 835 7 452 5 293 8 90 15 Flixotide/Flovent 140 1 67 13 34 (13) 39 (5) Serevent 63 (6) 18 (5) 32 (9) 13 - Flixonase/Flonase 49 (23) 21 (41) 10 10 18 - CENTRAL NERVOUS SYSTEM 825 (4) 589 (4) 124 (13) 112 5 Seroxat/Paxil 128 (2) 33 9 27 (23) 68 3 Paxil IR 92 (7) - - 27 (23) 65 3 Paxil CR 36 12 33 13 - - 3 - Wellbutrin 135 (38) 131 (38) 2 100 2 (50) Wellbutrin IR, SR 21 (15) 18 (14) 1 - 2 (33) Wellbutrin XL 114 (41) 113 (41) 1 - - - Imigran/Imitrex 165 (2) 133 - 22 (19) 10 10 Lamictal 275 14 224 20 36 (12) 15 - Requip 87 31 59 39 23 10 5 67 ANTI-VIRALS 714 6 351 12 207 (5) 156 11 HIV 360 3 159 2 148 - 53 17 Combivir 115 (4) 50 (7) 47 (10) 18 25 Trizivir 55 (8) 28 (9) 23 (19) 4 >100 Epivir 38 (13) 14 (6) 16 (24) 8 - Ziagen 28 4 12 18 9 (10) 7 - Agenerase, Lexiva 37 19 20 22 13 17 4 - Epzicom/Kivexa 80 33 34 19 37 42 9 67 Herpes 256 12 166 13 36 3 54 15 Valtrex 229 13 162 11 29 7 38 28 Zovirax 27 4 4 >100 7 (13) 16 (6) Zeffix 42 5 4 (25) 6 - 32 9 Relenza 28 (7) 12 >100 14 (44) 2 - METABOLIC 297 (29) 160 (41) 65 2 72 (13) Avandia products 225 (38) 130 (48) 50 (11) 45 (22) Avandia 153 (51) 92 (60) 26 (17) 35 (27) Avandamet 60 39 29 >100 23 (8) 8 - Avandaryl 12 18 9 - 1 - 2 100 Bonviva/Boniva 41 56 28 24 11 >100 2 - VACCINES 593 49 237 97 206 22 150 35 Hepatitis 141 29 66 82 55 2 20 - Influenza 141 >100 93 >100 37 >100 11 10 Infanrix/Pediarix 137 16 58 40 62 (5) 17 33 Boostrix 26 56 20 50 5 67 1 100 Rotarix 23 >100 - - 6 >100 17 >100 CARDIOVASCULAR AND UROGENITAL 378 (2) 239 (4) 96 (1) 43 10 Coreg 145 (20) 144 (21) - - 1 50 Coreg CR 31 - 31 - - - - - Coreg IR 114 (37) 113 (38) - - 1 - Levitra 13 18 12 33 - - 1 (50) Avodart 72 33 45 27 21 29 6 >100 Arixtra 25 100 14 >100 9 33 2 - Fraxiparine 41 (16) - - 35 (20) 6 20 Vesicare 13 56 13 56 - - - - ANTI-BACTERIALS 302 (2) 41 (15) 130 (4) 131 6 Augmentin 117 (2) 11 (40) 54 - 52 11 ONCOLOGY AND EMESIS 104 (61) 52 (74) 35 (8) 17 (5) Zofran 32 (86) 4 (98) 17 (32) 11 (8) Hycamtin 30 11 18 12 11 10 1 - Tykerb 16 - 11 - 5 - - - OTHER 207 (9) (9) - 63 2 153 5 Zantac 37 (25) 5 (69) 10 (9) 22 (4) -------------- -------------- -------------- -------------- 4,605 (2) 2,230 (7) 1,336 1 1,039 9 -------------- -------------- -------------- ------------- Pharmaceutical turnover includes co-promotion income. PHARMACEUTICAL TURNOVER Nine months ended 30th September 2007 Total USA Europe International -------------- -------------- -------------- ------------- £m CER% £m CER% £m CER% £m CER% ------ ----- ------ ----- ----- ----- ---- ----- RESPIRATORY 3,669 4 1,745 3 1,294 3 630 9 Seretide/Advair 2,541 10 1,378 9 900 8 263 18 Flixotide/Flovent 446 (2) 203 1 117 (10) 126 (1) Serevent 198 (4) 55 (6) 99 (7) 44 4 Flixonase/Flonase 167 (34) 71 (56) 39 - 57 7 CENTRAL NERVOUS SYSTEM 2,449 (3) 1,740 (1) 380 (16) 329 4 Seroxat/Paxil 402 (5) 104 (10) 93 (18) 205 4 Paxil IR 288 (8) 2 (81) 93 (18) 193 3 Paxil CR 114 2 102 1 - - 12 8 Wellbutrin 399 (37) 387 (38) 3 50 9 (25) Wellbutrin IR, SR 59 (19) 50 (21) 2 - 7 (13) Wellbutrin XL 340 (39) 337 (39) 1 - 2 (50) Imigran/Imitrex 498 - 405 7 65 (30) 28 - Lamictal 796 16 645 26 107 (20) 44 10 Requip 251 40 174 53 66 10 11 63 ANTI-VIRALS 2,237 12 1,102 18 663 4 472 12 HIV 1,083 (1) 482 (1) 456 (3) 145 5 Combivir 347 (10) 150 (10) 147 (12) 50 (5) Trizivir 177 (9) 92 (7) 74 (15) 11 20 Epivir 119 (21) 40 (19) 52 (26) 27 (12) Ziagen 81 (3) 34 3 28 (10) 19 (5) Agenerase, Lexiva 105 14 59 18 39 11 7 - Epzicom/Kivexa 234 44 105 25 106 57 23 >100 Herpes 758 13 494 19 110 4 154 4 Valtrex 679 16 487 18 87 9 105 11 Zovirax 79 (7) 7 33 23 (12) 49 (9) Zeffix 126 12 10 - 18 6 98 14 Relenza 187 >100 90 >100 72 83 25 86 METABOLIC 1,193 (9) 729 (17) 215 19 249 1 Avandia products 988 (14) 650 (21) 170 7 168 - Avandia 717 (28) 493 (34) 88 (7) 136 (8) Avandamet 228 77 121 >100 80 25 27 59 Avandaryl 43 68 36 54 2 - 5 >100 Bonviva/Boniva 109 90 77 55 30 >100 2 100 VACCINES 1,359 21 424 52 556 10 379 11 Hepatitis 382 14 145 35 170 3 67 6 Influenza 146 >100 93 >100 37 >100 16 (11) Infanrix/Pediarix 406 13 152 34 201 (3) 53 32 Boostrix 53 33 34 32 14 40 5 25 Rotarix 52 >100 - - 16 >100 36 100 CARDIOVASCULAR AND UROGENITAL 1,256 11 834 15 299 3 123 1 Coreg 564 6 558 6 - - 6 40 Coreg CR 55 - 54 - - - 1 - Coreg IR 509 (4) 504 (4) - - 5 20 Levitra 38 32 36 34 - - 2 100 Avodart 202 39 126 44 60 22 16 80 Arixtra 71 >100 39 >100 28 75 4 >100 Fraxiparine 133 (13) - - 117 (13) 16 (19) Vesicare 36 70 36 70 - - - - ANTI-BACTERIALS 960 (2) 143 (3) 436 (5) 381 2 Augmentin 384 (7) 52 (19) 179 (10) 153 3 ONCOLOGY AND EMESIS 377 (54) 227 (64) 101 (15) 49 (16) Zofran 174 (74) 85 (84) 54 (36) 35 (21) Hycamtin 88 9 53 7 30 19 5 (20) Tykerb 32 - 24 - 8 - - - OTHER 686 - 32 (48) 186 2 468 6 Zantac 125 (25) 26 (50) 31 (18) 68 (11) ------------- ------------- ------------- ------------- 14,186 1 6,976 (2) 4,130 1 3,080 6 -------------- ------------- -------------- ------------- Pharmaceutical turnover includes co-promotion income. CONSUMER HEALTHCARE TURNOVER Three months ended 30th September 2007 Q3 2007 Growth £m CER% --------- --------- Over-the-counter medicines 417 24 Analgesics 104 16 Dermatological 43 16 Gastrointestinal 62 8 Respiratory tract 61 63 Smoking control 75 8 Natural wellness support 31 (9) Weight management 34 - Oral care 260 11 Nutritional healthcare 194 8 -------- --------- Total 871 16 --------- --------- CONSUMER HEALTHCARE TURNOVER Nine months ended 30th September 2007 9 months Growth 2007 CER% £m --------- --------- Over-the-counter medicines 1,238 20 Analgesics 304 11 Dermatological 127 8 Gastrointestinal 194 10 Respiratory tract 161 47 Smoking control 228 (3) Natural wellness support 90 (5) Weight management 110 - Oral care 774 10 Nutritional healthcare 544 10 --------- --------- Total 2,556 15 --------- --------- FINANCIAL REVIEW - INCOME STATEMENT Operating profit Q3 2007 Q3 2006 Growth ---------------------- -------------------- --------------- % of % of £m turnover £m turnover CER% £% ------ ------ ------ ------ ----- ----- Turnover 5,476 100.0 5,642 100.0 1 (3) Cost of sales (1,232) (22.5) (1,222) (21.7) 2 1 Selling, general and administration (1,617) (29.5) (1,617) (28.6) 3 - Research and development (769) (14.0) (871) (15.4) (9) (12) Other operating income 52 0.9 91 1.6 ------ ------ ------ ------ ----- ---- Operating profit 1,910 34.9 2,023 35.9 (1) (6) ------ ------ ------ ------ ----- ---- Overall, the operating margin decreased 1 percentage point, as sterling operating profit decreased 6% while sterling turnover declined 3%. Cost of sales as a percentage of turnover increased by 0.8 percentage points. At constant exchange rates, cost of sales as a percentage of turnover increased by 0.3 percentage points, reflecting unfavourable product and regional mix (1.4 percentage points), partially offset by lower costs arising on existing restructuring programmes (1.1 percentage points). SG&A costs as a percentage of turnover increased 0.9 percentage points compared with Q3 2006. Excluding legal costs and charges relating to restructuring programmes, SG&A costs at constant exchange rates increased in line with turnover growth. R&D expenditure declined 9% reflecting lower charges related to restructuring programmes. Excluding these costs, expenditure was broadly in line with last year. Pharmaceuticals R&D expenditure represented 16.1% (2006: 17.4%) of pharmaceutical turnover. Other operating income includes royalty income, equity investment disposals and impairments, product disposals and fair value adjustments to financial instruments. Other operating income was £52 million in Q3 2007 (Q3 2006: £91 million). The decrease is primarily due to adverse fair value movements on financial instruments (£31 million charge in Q3 2007 compared with £22 million income in Q3 2006) and lower asset disposal profits, partially offset by higher royalty income, which increased by £38 million compared with last year. Taxation The charge for taxation on profit, amounting to £536 million, represents an effective tax rate of 28.5%, which is the expected rate for the year. As reported in the 'Taxation' note to the Financial Statements included in the Annual Report 2006 the Group has open issues with the revenue authorities in the UK, Canada and Japan. On 28th March 2007, the Japanese Tax Court announced its decision in favour of the Tokyo Regional Tax Board. The decision will not have any significant impact on the company's tax rate for the year. GSK has paid and provided for all taxes due and has filed an appeal which was heard by the Japanese High Court in September. The judgement is expected in November. GSK continues to be in discussion with UK HMRC on outstanding UK issues, and in Canada is still awaiting the court's judgement. GSK uses the best advice in determining its transfer pricing methodology and in seeking to manage transfer pricing issues to a satisfactory conclusion and, on the basis of external professional advice, continues to believe that it has made adequate provision for the liabilities likely to arise from open assessments. The ultimate liability for such matters may vary from the amounts provided and is dependent upon the outcome of litigation proceedings and negotiations with the relevant tax authorities. Weighted average number of shares Q3 2007 Q3 2006 millions millions ---- ---- Weighted average number of shares - basic 5,520 5,641 Dilutive effect of share options and share awards 51 70 ---- ---- Weighted average number of shares - diluted 5,571 5,711 ---- ---- 9 months 9 months 2007 2006 2006 millions millions millions ---- ---- ---- Weighted average number of shares - basic 5,564 5,652 5,643 Dilutive effect of share options and share awards 64 70 57 ---- ---- ---- Weighted average number of shares - diluted 5,628 5,722 5,700 ---- ---- ---- The number of shares in issue, excluding those held by the ESOP Trusts and those held as Treasury shares at 30th September 2007, was 5,465 million (30th September 2006: 5,632 million). Dividends Paid/ Pence per payable share £m ---- ---- ---- 2007 First interim 12th July 2007 12 670 Second interim 11th October 2007 12 666 Third interim 10th January 2008 13 710 2006 First interim 6th July 2006 11 619 Second interim 5th October 2006 11 620 Third interim 4th January 2007 12 671 Fourth interim 12th April 2007 14 785 ---- ---- 48 2,695 ---- ---- The liability for an interim dividend is only recognised when it is paid, which is usually after the accounting period to which it relates. The second and third interim dividends for 2007 have not been recognised in these results. STATEMENT OF RECOGNISED INCOME AND EXPENSE 9 months 9 months 2006 2007 2006 £m £m £m ---- ---- ---- Exchange movements on overseas net assets 89 (293) (390) Tax on exchange movements (4) (141) (78) Fair value movements on available-for-sale investments (59) 23 84 Deferred tax on fair value movements on available-for-sale investments 7 (8) (15) Exchange movements on goodwill in reserves (1) 20 31 Actuarial gains on defined benefit plans 1,172 409 429 Deferred tax on actuarial movements in defined benefit plans (352) (137) (161) Fair value movements on cash flow hedges (7) (5) (5) Deferred tax on fair value movements on cash flow hedges 3 2 2 ---- ---- ---- Net gains/(losses) recognised directly in equity 848 (130) (103) Profit for the period 4,234 4,293 5,498 ---- ---- ---- Total recognised income and expense for the period 5,082 4,163 5,395 ---- ---- ---- Total recognised income and expense for the period attributable to: Shareholders 4,992 4,101 5,307 Minority interests 90 62 88 ---- ---- ---- 5,082 4,163 5,395 ---- ---- ---- BALANCE SHEET 30th September 30th September 31st December 2007 2006 2006 £m £m £m ASSETS ---- ---- ---- Non-current assets Property, plant and equipment 7,464 6,795 6,930 Goodwill 985 679 758 Other intangible assets 3,721 3,194 3,293 Investments in associates and joint ventures 313 292 295 Other investments 533 379 441 Deferred tax assets 2,278 2,054 2,123 Other non-current assets 994 565 721 ---- ---- ---- Total non-current assets 16,288 13,958 14,561 ---- ---- ---- Current assets Inventories 2,965 2,493 2,437 Current tax recoverable 159 758 186 Trade and other receivables 5,119 5,252 5,317 Liquid investments 1,084 1,043 1,035 Cash and cash equivalents 2,050 2,344 2,005 Assets held for sale 4 4 12 ---- ---- ---- Total current assets 11,381 11,894 10,992 ---- ---- ---- TOTAL ASSETS 27,669 25,852 25,553 ---- ---- ---- LIABILITIES Current liabilities Short-term borrowings (1,994) (653) (718) Trade and other payables (5,217) (4,611) (4,871) Current tax payable (1,217) (1,100) (621) Short-term provisions (601) (929) (1,055) ---- ---- ---- Total current liabilities (9,029) (7,293) (7,265) ---- ---- ---- Non-current liabilities Long-term borrowings (4,885) (4,852) (4,772) Deferred tax liabilities (831) (587) (595) Pensions and other post-employment benefits (1,331) (2,613) (2,339) Other provisions (1,002) (655) (528) Other non-current liabilities (429) (448) (406) ---- ---- ---- Total non-current liabilities (8,478) (9,155) (8,640) ---- ---- ---- TOTAL LIABILITIES (17,507) (16,448) (15,905) ---- ---- ---- NET ASSETS 10,162 9,404 9,648 ---- ---- ---- EQUITY Share capital 1,506 1,497 1,498 Share premium account 1,218 804 858 Retained earnings 6,818 6,940 6,965 Other reserves 337 (79) 65 ---- ---- ---- Shareholders' equity 9,879 9,162 9,386 Minority interests 283 242 262 ---- ---- ---- TOTAL EQUITY 10,162 9,404 9,648 ---- ---- ---- RECONCILIATION OF MOVEMENTS IN EQUITY 9 months 9 months 2006 2007 2006 £m £m £m ---- ---- ---- Total equity at beginning of period 9,648 7,570 7,570 Total recognised income and expense for the period 5,082 4,163 5,395 Dividends to shareholders (2,126) (1,978) (2,598) Shares issued 368 261 316 Shares purchased and held as Treasury shares (3,026) (828) (1,348) Consideration received for shares transferred by ESOP Trusts 104 120 151 Share-based incentive plans net of tax 181 175 247 Changes in minority interest shareholdings - 2 2 Distributions to minority shareholders (69) (81) (87) ---- ---- ---- Total equity at end of period 10,162 9,404 9,648 ---- ---- ---- FINANCIAL REVIEW - BALANCE SHEET Net assets The book value of net assets increased by £514 million from £9,648 million at 31st December 2006 to £10,162 million at 30th September 2007. This was attributable to a decrease in pension and other post-employment liabilities principally arising from an increase in the rate used to discount UK pension liabilities from 5.0% to 5.75%. At 30th September 2007, the net surplus on the Group's pension plans was £37 million, although it should be noted that the Group's annual review of assumptions, including, inter alia, mortality assumptions, will be carried out in December 2007. The carrying value of investments in associates and joint ventures at 30th September 2007 was £313 million, with a market value of £1,063 million. Equity At 30th September 2007, total equity had increased from £9,648 million at 31st December 2006 to £10,162 million. The increase arose principally from retained earnings and actuarial gains on defined benefit pension plans in the period and was partially offset by further purchases of Treasury shares, which include an accrual of £605 million to reflect the maximum potential commitment under an irrevocable purchase agreement to acquire Treasury shares during the period from 1st October to 24th October 2007. At 30th September 2007, the ESOP Trusts held 143.3 million GSK shares against the future exercise of share options and share awards. The carrying value of £1,662 million has been deducted from other reserves. The market value of these shares was £1,859 million. In Q3 2007, GSK repurchased £1,171 million of Treasury shares. At 30th September 2007, the company held 415.5 million Treasury shares at a cost of £5,568 million, which has been deducted from retained earnings. CASH FLOW STATEMENT Three months ended 30th September 2007 Q3 2007 Q3 2006 £m £m ---- ---- Profit after tax 1,346 1,426 Tax on profits 536 596 Share of after tax profits of associates and joint ventures (14) (16) Finance income/expense 42 17 Depreciation and other non-cash items 396 303 Increase in working capital (178) (289) Increase in other net liabilities 110 77 ---- ---- Cash generated from operations 2,238 2,114 Taxation paid (396) (2,166) ---- ---- Net cash inflow/(outflow) from operating activities 1,842 (52) ---- ---- Cash flow from investing activities Purchase of property, plant and equipment (358) (368) Proceeds from sale of property, plant and equipment 4 15 Purchase of intangible assets (66) (74) Proceeds from sale of intangible assets 2 76 Purchase of equity investments (8) (22) Proceeds from sale of equity investments 1 6 Share transactions with minority shareholders - (158) Purchase of businesses, net of cash acquired - 7 Investment in associates and joint ventures (1) (1) Interest received 71 58 Dividends from associates and joint ventures 5 6 ---- ---- Net cash outflow from investing activities (350) (455) ---- ---- Cash flow from financing activities Increase in liquid investments (33) (59) Proceeds from own shares for employee share options 20 17 Issue of share capital 36 37 Purchase of Treasury shares (1,113) (309) Repayment of long-term loans (207) - Net increase in short-term loans 726 43 Net repayment of obligations under finance leases (7) (10) Interest paid (105) (74) Dividends paid to shareholders (670) (619) Dividends paid to minority interests (2) (15) Other financing cash flows (53) (50) ---- ---- Net cash outflow from financing activities (1,408) (1,039) ---- ---- Increase/(decrease) in cash and bank overdrafts in the period 84 (1,546) Exchange adjustments 16 11 Cash and bank overdrafts at beginning of period 1,577 3,543 ---- ---- Cash and bank overdrafts at end of period 1,677 2,008 ---- ---- Cash and bank overdrafts at end of period comprise: Cash and cash equivalents 2,050 2,344 Overdrafts (373) (336) ---- ---- 1,677 2,008 ---- ---- CASH FLOW STATEMENT Nine months ended 30th September 2007 9 months 9 months 2006 2007 2006 £m £m £m ---- ---- ---- Profit after tax 4,234 4,293 5,498 Tax on profits 1,687 1,796 2,301 Share of after tax profits of associates and joint ventures (40) (43) (56) Finance income/expense 124 62 65 Depreciation and other non-cash items 920 887 1,138 Increase in working capital (373) (460) (471) Decrease in other net liabilities (400) (278) (272) ---- ---- ---- Cash generated from operations 6,152 6,257 8,203 Taxation paid (1,375) (3,405) (3,846) ---- ---- ---- Net cash inflow from operating activities 4,777 2,852 4,357 ---- ---- ---- Cash flow from investing activities Purchase of property, plant and equipment (1,042) (896) (1,366) Proceeds from sale of property, plant and equipment 23 32 43 Purchase of intangible assets (491) (155) (224) Proceeds from sale of intangible assets 7 183 175 Purchase of equity investments (158) (35) (57) Proceeds from sale of equity investments 45 22 32 Share transactions with minority shareholders - (158) (157) Purchase of businesses, net of cash acquired (233) (17) (273) Disposals of businesses and interests in associates - 3 5 Investment in associates and joint ventures (1) (8) (13) Interest received 208 197 299 Dividends from associates and joint ventures 11 13 15 ---- ---- ---- Net cash outflow from investing activities (1,631) (819) (1,521) ---- ---- ---- Cash flow from financing activities Increase in liquid investments (19) (49) (55) Proceeds from own shares for employee share options 104 120 151 Issue of share capital 368 261 316 Purchase of Treasury shares (2,330) (814) (1,348) Repayment of long-term loans (207) - - Increase in long-term loans 983 - - Net increase in/(repayment of) short-term loans 451 (874) (739) Net repayment of obligations under finance leases (29) (27) (34) Interest paid (279) (247) (414) Dividends paid to shareholders (2,126) (1,978) (2,598) Dividends paid to minority interests (69) (81) (87) Other financing cash flows (77) (100) 16 ---- ---- ---- Net cash outflow from financing activities (3,230) (3,789) (4,792) ---- ---- ---- Decrease in cash and bank overdrafts in the period (84) (1,756) (1,956) Exchange adjustments (1) (208) (254) Cash and bank overdrafts at beginning of period 1,762 3,972 3,972 ---- ---- ---- Cash and bank overdrafts at end of period 1,677 2,008 1,762 ---- ---- ---- Cash and bank overdrafts at end of period comprise: Cash and cash equivalents 2,050 2,344 2,005 Overdrafts (373) (336) (243) ---- ---- ---- 1,677 2,008 1,762 ---- ---- ---- RECONCILIATION OF CASH FLOW TO MOVEMENTS IN NET DEBT 9 months 9 months 2006 2007 2006 £m £m £m ---- ---- ---- Net debt at beginning of the period (2,450) (1,237) (1,237) Decrease in cash and bank overdrafts (84) (1,756) (1,956) Cash outflow from liquid investments 19 49 55 Net increase in long-term loans (776) - - Net (increase in)/repayment of short-term loans (451) 874 739 Net repayment of obligations under finance leases 29 27 34 Exchange adjustments 14 (12) (9) Other non-cash movements (46) (63) (76) ---- ---- ---- Increase in net debt (1,295) (881) (1,213) ---- ---- ---- Net debt at end of the period (3,745) (2,118) (2,450) ---- ---- ---- FINANCIAL REVIEW - CASH FLOW Cash generated from operations was £2,238 million in Q3 2007. This represents an increase of £124 million compared with Q3 2006. The operating cash flow is in excess of the funds needed for the routine cash flows of tax, capital expenditure on property, plant and equipment and dividend payments to shareholders, together amounting to £1,424 million. Receipts of £56 million arose from the exercise of share options: £20 million from shares held by the ESOP Trusts and £36 million from the issue of new shares. In addition, £1,113 million was spent in the period on purchasing the company's shares to be held as Treasury shares. EXCHANGE RATES The results and net assets of the Group, as reported in sterling, are affected by movements in exchange rates between sterling and overseas currencies. GSK uses the average of exchange rates prevailing during the period to translate the results and cash flows of overseas Group subsidiaries, associates and joint ventures into sterling and period-end rates to translate the net assets of those undertakings. The currencies which most influence these translations, and the relevant exchange rates, are: Q3 2007 Q3 2006 9 months 9 months 2006 2007 2006 Average rates: ---- ---- ---- ---- ---- £/US$ 2.03 1.88 1.99 1.82 1.85 £/Euro 1.48 1.48 1.48 1.46 1.47 £/Yen 237 219 237 211 215 Period-end rates: £/US$ 2.04 1.87 2.04 1.87 1.96 £/Euro 1.43 1.47 1.43 1.47 1.48 £/Yen 234 221 234 221 233 During the period to 30th September 2007, average sterling exchange rates were stronger against the US dollar and the Yen compared with 2006. Comparing Q3 2007 period-end rates with Q3 2006 period-end rates, sterling was also stronger against the US dollar and the Yen but weaker against the Euro. LEGAL MATTERS The Group is involved in various legal and administrative proceedings, principally product liability, intellectual property, tax, anti-trust and governmental investigations and related private litigation concerning sales, marketing and pricing. The Group makes provision for those proceedings on a regular basis and may make additional significant provisions for such legal proceedings, as required in the event of further developments in those matters, consistent with generally accepted accounting principles. Litigation, particularly in the USA, is inherently unpredictable and excessive awards that may not be justified by the evidence can occur. The Group could in the future incur judgments or enter into settlements of claims that could result in payments that exceed its current provisions by an amount that would have a material adverse effect on the Group's financial condition, results of operations and cash flows. Intellectual property claims include challenges to the validity of the patents on various of the Group's products or processes and assertions of non-infringement of those patents. A loss in any of these cases could result in loss of patent protection for the product at issue. The consequence of any such loss could be a significant decrease in sales of that product and could materially affect future results of operations for the Group. At 30th September 2007, the Group's aggregate provision for legal and other disputes (not including tax matters described under 'Taxation' on page 12) was £1.1 billion. 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. Developments since the date of the Annual Report as previously updated by the Legal matters section of the Results Announcement for the first and second quarters of 2007 include: Intellectual property In September 2007, Roche Laboratories commenced actions in the US District Court for the District of New Jersey against seven generic drug manufacturers, and in the US District Court for the Northern District of Illinois against an eighth such manufacturer in each case alleging infringement of Roche patents relating to Boniva tablets. Each of the defendants had filed an abbreviated new drug application (ANDA) with the US Food and Drug Administration (FDA) with a certification of invalidity or non-infringement of at least one of the Roche patents. Only one manufacturer has challenged the basic compound patent which expires in March 2012. Final FDA approval of those ANDAs is stayed until the earlier of November 2010 or resolution of the relevant patent infringement action. The Group participates in the marketing of Boniva pursuant to a co-promotion agreement with Roche. The cases are in their early stages. With respect to the Group's patent infringement action against Teva Pharmaceuticals in respect of Avandia, the parties reached a settlement which provides that Teva may enter the US market with its generic versions of Avandia, Avandamet and Avandaryl oral tablets late in the first quarter 2012. Other terms of the settlement remain confidential. With respect to the Group's settlement with Teva in respect of Lamictal, Teva will be entitled to launch its own generic version of lamotrigine tablets in the USA in mid-2008. With respect to the Group's patent infringement action against Mylan Pharmaceuticals in respect of the Group's new US patent covering a delayed and controlled release formulation of paroxetine hydrochloride (Paxil CR), the parties have reached a settlement which provides for Mylan to enter the market for all strengths of Paxil CR no later than 1st October 2008. Other terms of the settlement remain confidential. Developments with respect to tax matters are described in 'Taxation' on page 12. ACCOUNTING PRESENTATION AND POLICIES This unaudited Results Announcement containing condensed financial information for the three and nine months ended 30th September 2007 is prepared in accordance with IAS 34 'Interim Financial Reporting' and the accounting policies set out in the Annual Report 2006, except that the following new accounting standards and interpretations have been implemented in 2007: • IFRS 7 'Financial instruments: disclosures' • Amendment to IAS 1 'Capital disclosures' • IFRIC 9 'Reassessment of embedded derivatives' • IFRIC 10 'Interim financial reporting and impairment'. None of these has had a material impact on the results of current or prior periods. This Results Announcement does not constitute statutory accounts of the Group within the meaning of section 240 of the Companies Act 1985. The income statement, statement of recognised income and expense and cash flow statement for the year ended, and the balance sheet at, 31st December 2006 have been derived from the full Group accounts published in the Annual Report 2006, which have been delivered to the Registrar of Companies and on which the report of the independent auditors was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. Data for market share and market growth rates are GSK estimates based on the most recent data from independent external sources and, where appropriate, are valued in sterling at relevant exchange rates. Figures quoted for product market share reflect sales by GSK and licensees. 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 previous year. All commentaries are presented in terms of CER unless otherwise stated. INVESTOR INFORMATION Announcement of Q3 2007 results This Announcement was approved by the Board of Directors on Wednesday 24th October 2007. Financial calendar The company will announce preliminary results for 2007 and fourth quarter 2007 results on 7th February 2008. The fourth interim dividend for 2007 will have an ex-dividend date of 13th February 2008 and a record date of 15th February 2008. It will be paid on 10th April 2008. Internet This Announcement and other information about GSK are available on the company's website at: http://www.gsk.com. INDEPENDENT REVIEW REPORT TO GLAXOSMITHKLINE PLC Introduction We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the three and nine months ended 30th September 2007, which comprise the consolidated Income Statement, the consolidated Balance Sheet, the consolidated Cash Flow Statement, the consolidated Statement of Recognised Income and Expense (nine month period only) and the related notes. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. Directors' responsibilities The interim financial report is the responsibility of, and has been approved by, the directors. The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this financial report has 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 condensed set of financial statements in the interim financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of this Results Announcement and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the three and nine months ended 30th September 2007 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union. PricewaterhouseCoopers LLP Chartered Accountants London 24th October 2007 Notes: (a) The maintenance and integrity of the GlaxoSmithKline plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions. 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