3rd Quarter Results

RNS Number : 8786Q
GlaxoSmithKline PLC
26 October 2011
 



Issued: Wednesday, 26th October 2011, London, U.K

Results Announcement for the third quarter 2011

 

GSK delivers strong Q3 performance with underlying sales growth* of 6% and reported sales growth of 3%

 

·   EPS 28.5p +1% before major restructuring*

·   Dividend +6% to 17p; 2011 share buyback expectations increased to up to £2.3 billion

 

Results before major restructuring*



Q3 2011



9 months
2011



£m

CER%

£%


£m

CER%

£%

Turnover

7,104 

3

4

 

20,409 

(3)

(4)

Earnings per share

28.5p

1

1

 

85.8p

41 

40 

 

Total results



Q3 2011



9 months
2011



£m

CER%

£%


£m

CER%

£%

Turnover

7,104 

3

4

 

20,409 

(3)

(4)

Restructuring charges

65 

 

 

 

391 

 

 

Earnings per share

27.6p

9

9

 

79.4p

76 

74 

 

The full results are presented under 'Income Statement' on pages 24 and 25.

*   For explanations of the measures 'Results before major restructuring', 'CER growth', 'Adjusted net cash inflow from operating activities', 'Net income margin' and 'Underlying sales growth', which excludes pandemic related products, Avandia and Valtrex, see pages 22 and 23.

 

Summary


■

Group underlying sales growth of 6% across Pharmaceuticals and Vaccines (Pharmaceuticals +2%, Vaccines +21%) and Consumer Healthcare of 5%, reflecting portfolio breadth and mix:


-

Pharmaceuticals and Vaccines underlying sales growth, driven by Emerging Markets (+11%), Japan (+57%) and USA (+1%), offsetting decline in Europe (-4%)


-

Consumer Healthcare growth led by Oral care (+10%) and Nutrition (+9%) with OTC flat


-

Group sales outside USA and Europe £2.7 billion (+17%), representing around 38% of reported turnover


-

Total Group 9 month reported sales -3% (underlying sales +5%)



■

Continuing focus on operating leverage and financial efficiencies:


-

Q3 operating profit before major restructuring £2.2 billion (+3%)


-

Operating margin excluding legal and OOI 29.7%; full year operating margin guidance unchanged


-

EPS growth of 1% reflecting benefit of higher tax settlements in Q3 2010


-

Restructuring programme on track to deliver total savings of £2.5 billion by end of 2012




■

Enhancing cash generation and returns to shareholders:


-

Adjusted net cash inflow from operating activities of £2.3 billion in Q3, delivering £5.4 billion over 9 months


-

Dividend growth of 6% to 17p


-

Long term share buyback programme continues; 2011 expectations increased to up to £2.3 billion (+£300 million)



■

Increased pipeline visibility:


-

Data received on malaria vaccine RTS,S and IPX066 (Parkinson's Disease) and Promacta (Hepatitis C)


-

6 of 15 assets with Phase III data expected by end 2012 have now reported data (1 filed, 2 with pivotal studies complete and under review, 2 with supportive data and studies ongoing, 1 complete and negative)


-

More than 30 further Phase III read-outs expected by end of 2012




 

 

GSK's strategic priorities

 

GSK has focused its business around the delivery of three strategic priorities, which aim to increase growth, reduce risk and improve GSK's long-term financial performance:

 

 

·

Grow a diversified global business

·

Deliver more products of value

·

Simplify GSK's operating model

 

Chief Executive Officer's review


Today's results show that we are delivering on our strategy to generate sustainable sales growth, enhance cash generation and improve returns to shareholders.

 

For the quarter, we delivered underlying and reported sales growth of 6% and 3% respectively, reflecting growth across all three areas of our business - Pharmaceuticals, Vaccines and Consumer Healthcare.  Vaccines was particularly strong in the quarter, reflecting some phasing benefits, primarily relating to sales of Cervarix for the roll-out of Japan's national HPV programme.  We have delivered average quarterly underlying sales growth of around 4.5% over the last 7 quarters. 

 

As evidenced this quarter, the drag from Avandia, Valtrex and pandemic products has significantly reduced and although there is likely to be some quarterly variability, we continue to expect underlying sales growth to translate into reported sales growth in 2012.

 

The breadth and mix of GSK's product and geographic portfolio is helping the Group to mitigate economic volatility.  However, the environment for pharmaceutical and consumer products remains challenging.  The impact of Healthcare Reform in the USA and price cuts in Europe this year is in line with our expectations and we continue to expect a full year impact of around £325 million.  Going forward, further measures by these governments to reduce pharmaceutical prices cannot be ruled out.  Some Emerging Markets are also not immune to government pricing pressure.  However, our combined businesses in these markets continue to perform well and delivered underlying Group sales growth of 13% in the quarter, driven by strong volume growth.  

 

We remain focused on driving operational leverage and financial efficiency to deliver improving net income margins and stronger earnings per share growth.  Effective cost control offset mix and pricing pressures on our gross margin in the quarter and as a result operating profit grew in line with sales.  Our expectations for the 2011 operating margin (excluding legal charges and OOI) remain unchanged and we continue to expect the Group operating margin on the same basis to begin to improve gradually from 2012.

 

The business continues to be highly cash generative and in the third quarter, we generated cash inflows of over £2 billion before legal settlements.  We continue to see significant opportunities to further improve cash generation over time.

 

The performance of the business and resulting cash generation is allowing us to continue to increase returns to shareholders.  Today we have announced a further 6% increase in the dividend to 17p.  In addition, our expectations for share repurchases this year have increased from around £2 billion to up to £2.3 billion.  The process of divesting our non-core OTC brands continues and the brands are now being separated from the ongoing business.  We are continuing to target a conclusion to the bidding process by the end of the year but we remain focused on delivering appropriate shareholder value as we review the options for this business.

 

We also remain focused on improving returns on investment in R&D and by year end we will finalise investment allocation decisions for our Discovery Performance Units for the next three year business cycle.  Our late stage pipeline continues to make good progress.  Of the 15 assets with data expected by the end of 2012, six have now reported data.  Of these, data have been filed for Votrient in sarcoma, data is in-house and being reviewed for Promacta and IPX066 and programmes are ongoing for Relovair and RTS,S.  One study, with otelixizumab, failed to show efficacy.  In 2012, we look forward to significant phase III data flow across a broad range of therapy areas including our respiratory portfolio, oncology, diabetes, HIV and rare diseases.

 

 

Andrew Witty

Chief Executive Officer


A video interview with GSK CFO, Simon Dingemans, discussing today's results is available on www.gsk.com

 

 

Contents

Page

 

 

Q3 2011 results summary

1

Chief Executive Officer's review

2

Group performance

4

Divisional performance

11

Research and development

20

Definitions

22

Contacts

23

 

 

Income statement - three months ended 30th September 2011

24

Income statement - nine months ended 30th September 2011

25

Statement of comprehensive income

26

Pharmaceuticals and Vaccines turnover - three months ended 30th September 2011

27

Pharmaceuticals and Vaccines turnover - nine months ended 30th September 2011

28

Balance sheet

29

Statement of changes in equity

30

Cash flow statement - nine months ended 30th September 2011

31

Segmental information

32

Additional income statement information

35

Legal matters

37

Taxation

37

Additional information

38

Reconciliation of cash flow to movements in net debt

39

Auditors' review report

40

 

 

Group performance

 

Turnover and operating profit by division - Q3 2011

 

Reported turnover

Underlying
turnover

Operating profit before
major restructuring


---------------

------

-------------------------


£m

Growth
CER%

Growth
CER%

£m

Growth
CER%

Margin %


------

------

------

------

------

------

Pharmaceuticals

4,633

1

2

1,604 

(1)

35

Vaccines

1,142

14

21

446 

16 

39

 

------

------

------

------

------

------

Pharmaceuticals and Vaccines

5,775

3

6

2,050 

2 

36

Consumer Healthcare

1,329

5

5

328 

4 

25

 

------

------

------

------

------

------

 

7,104

3

6

2,378 

2 

33

 

------

------

------




Corporate & other unallocated costs

 

 

 

(199)

- 

 

 

 

 


------

------

------

 

 

 

 

2,179 

3 

31

 




------

------

------

 

In the quarter, underlying and reported sales grew 6% and 3% respectively, reflecting growth across all three areas of our business - Pharmaceuticals, Vaccines and Consumer Healthcare.  The breadth and mix of GSK's product and geographic portfolio is helping the Group to mitigate economic volatility.

 

Total Group turnover for Q3 2011 increased 3% to £7,104 million, with Pharmaceuticals and Vaccines turnover up 3% to £5,775 million (Pharmaceuticals up 1% to £4,633 million and Vaccines up 14% to £1,142 million).  Consumer Healthcare sales increased 5% to £1,329 million.

 

The decline in sales of pandemic related products, Avandia and Valtrex as expected had a negative impact on reported Pharmaceuticals and Vaccines sales growth in all regions in the quarter.  The quarter-on-quarter negative impact on reported growth related to these products was significantly lower in Q3 than in the first half of 2011.  Sales of these products declined by £129 million from £241 million in Q3 2010 to £112 million in Q3 2011 compared with a decline of £1,459 million from £1,727 million in H1 2010 to £268 million in H1 2011.  Total sales for these products in Q4 2010 were £317 million.

 

Excluding these three factors, underlying sales growth for the Group was 6% in the quarter, driven by strong growth in Vaccines (+21%) and a broad based contribution from Pharmaceuticals (+2%) and Consumer Healthcare (+5%).  Vaccines was particularly strong in the quarter, reflecting some phasing benefits, principally relating to sales of Cervarix for the roll-out of Japan's national HPV programme.

 

This performance was achieved despite the impact of pricing pressures in many markets.  The impact of European austerity price cuts and US Healthcare Reform measures together reduced Group sales by approximately £71 million (1 percentage point of growth) this quarter.

 

Operating profit in the quarter grew 3% in line with sales growth.  The growth in operating profit in Vaccines and Consumer Healthcare more than offset a small decline in Pharmaceuticals.

 

 

Turnover and operating profit by division - nine months 2011

 

Reported turnover

Underlying turnover

Operating profit before
major restructuring


---------------

------

-------------------------


£m

Growth
CER%

Growth
CER%

£m

Growth
CER%

Margin %


------

------

------

------

------

------

Pharmaceuticals

13,795

(2)

3

5,190 

1 

38

Vaccines

2,687

(20)

16

946 

(40)

35

 

------

------

------

------

------

------

Pharmaceuticals and Vaccines

16,482

(5)

5

6,136 

(9)

37

Consumer Healthcare

3,927

5 

5

852 

14 

22

 

------

------

------

------

------

------

 

20,409

(3)

5

6,988 

(6)

34

 

------

------

------




Corporate & other unallocated costs

 

 

 

(670)

(73)

 

 

 

 


------

------

------

 

 

 

 

6,318 

24 

31

 




------

------

------

 

In the 9 months reported turnover declined 3% and underlying turnover increased 5% reflecting underlying growth across all three areas of the business - Pharmaceuticals, Vaccines and Consumer Healthcare.

 

Total Group turnover declined 3% to £20,409 million, with Pharmaceuticals and Vaccines turnover down 5% to £16,482 million and Consumer Healthcare sales up 5% to £3,927 million.

 

Sales of pandemic related products, Avandia and Valtrex declined from £1,968 million for the first nine months of 2010 to £380 million for the same period in 2011.  The decline of these products had a significant negative impact on reported Pharmaceuticals and Vaccines sales growth in all regions.

 

Underlying sales growth for the Group was 5%, with Vaccines up 16% and Pharmaceuticals and Consumer Healthcare up 3% and 5%, respectively.  The growth in underlying Vaccines sales reflected the strong performances of Cervarix, Synflorix and Rotarix. 

 

This was achieved despite the impact of pricing pressures in many markets.  For the 9 months the incremental negative impact on sales of European austerity price cuts and US Healthcare Reform was approximately £230 million.  As previously disclosed, the full year impact is expected to be £325 million.

 

Operating profit in the 9 months increased 24%, reflecting lower legal charges and R&D costs, partly offset by the decline in sales of higher margin pandemic related products, Avandia and Valtrex.

 

 

Group turnover by geographic region



Reported turnover
Q3 2011

Underlying
turnover
Q3 2011

Reported turnover
9 months 2011

Underlying
turnover
9 months
2011


---------------

------

---------------

------


£m

CER%

CER%

£m

CER%

CER%


------

------

------

------

------

------

USA

2,325

1 

2 

6,436

(5)

- 

Europe

2,045

(4)

(3)

6,213

(10)

(3)

Emerging Markets

1,399

13 

13 

3,974

10 

18 

Asia Pacific

451

6 

9 

1,349

7 

11 

Japan

646

31 

50 

1,688

(1)

35 

Other

238

(10)

(6)

749

(13)

(4)

 

------

------

------

------

------

------

 

7,104

3 

6 

20,409

(3)

5 

 

------

------

------

------

------

------

 

Underlying turnover by geographic region - Q3 2011

 

Underlying quarterly turnover growth of 6% for the Group was primarily driven by growth in Japan (+50%) and Emerging Markets (+13%) which together with growth in the USA and Asia Pacific more than offset declines in Europe.

 

In Japan, Pharmaceuticals and Vaccines grew 57% and Consumer Healthcare grew 10%.  In Emerging Markets, Pharmaceuticals and Vaccines grew 11% and Consumer Healthcare 17%.  In the USA, Pharmaceuticals and Vaccines growth was 1% and Consumer Healthcare 5%.  In Europe, Pharmaceuticals and Vaccines declined 4% and Consumer Healthcare declined 3% and in Asia Pacific, Pharmaceuticals and Vaccines grew 10% and Consumer Healthcare grew 10%.  ViiV Healthcare sales grew by 7%, with USA up 11%, Europe up 1%, Emerging Markets up 17% and Rest of World down 6%.

 

In the quarter, Group sales outside the USA and Europe accounted for 38% of turnover and grew 17%.

 

Underlying turnover by geographic region - 9 months

 

Underlying quarterly growth of 5% for the Group was primarily driven by growth in Japan (+35% to £1,688 million) and Emerging markets (+18% to £3,974 million) which together with growth in Asia Pacific more than offset declines in Europe.

 

In Japan, Pharmaceuticals and Vaccines grew 40% and Consumer Healthcare grew 11%. In Emerging Markets, Pharmaceuticals and Vaccines grew 18% and Consumer Healthcare 17%.  In the USA, Pharmaceuticals and Vaccines was flat and Consumer Healthcare grew 1%.  In Europe both businesses declined, Pharmaceuticals and Vaccines by 3% and Consumer Healthcare by 1%.  In Asia Pacific, Pharmaceuticals and Vaccines grew 10% and Consumer Healthcare grew 13%.  ViiV Healthcare sales grew 1%, with USA up 2%, Europe down 3%, Emerging Markets up 22% and Rest of World down 10%.

 

Group sales outside the USA and Europe accounted for 38% of turnover and grew 17%.

 

 

Operating profit and margin - before major restructuring

 

Q3 2011

9 months 2011


-------------------------

-------------------------


£m

% of
turnover

Growth
CER %

£m

% of
turnover

Growth
CER %

 

------

------

------

------

------

------

Turnover

7,104 

100

3

20,409 

100

(3)

 

 

 

 

 

 

 

Cost of sales

(1,978)

28

3

(5,383)

26

(1)

Selling, general and administration

(2,067)

29

4

(6,365)

31

(21)

Research and development

(971)

14

2

(2,813)

14

(1)

Other operating income

 

 

 

 

 

 

 

-

royalty income

85 

 

 

218 

 

 

 

-

other

6 

 

 

252 

 

 

 

------

------

 

------

------

 

Operating profit

2,179 

31

3

6,318 

31

24 

 

------

------

 

------

------

 

Earnings per share

28.5p

 

1

85.8p

 

41 

 

------

 

 

------

 

 

 

Results before major restructuring - Q3 2011

Operating profit before major restructuring was £2,179 million, a 3% increase in CER terms.  The operating profit margin excluding other operating income and legal charges was 29.7% (Q3 2010: 30.6%).  The decline in the margin reflected the expected higher cost of sales and SG&A as a percentage of sales partially offset by lower R&D as a percentage of sales.

 

Cost of sales increased to 27.8% of turnover (Q3 2010: 27.5%).  This reflected an adverse regional and product mix as well as European austerity price cuts, partly offset by lower inventory write-offs and asset impairments.

 

SG&A costs were 29.1% of turnover compared with 28.7% in Q3 2010.  Excluding legal charges of £20 million (£48 million in Q3 2010), SG&A costs were 0.8 percentage points higher in Q3 2011 than in Q3 2010.  This reflected continued investment in growth markets and the impact of the US Healthcare reform levy (£25 million in the quarter).

 

R&D expenditure grew 2% to £971 million, 13.7% of turnover (Q3 2010: 13.9%).  Increased investment in the late-stage pipeline was partly offset by efficiency savings.

 

Other operating income was £91 million (Q3 2010: £95 million) primarily reflecting royalty income of £85 million (Q3 2010: £76 million).

 

The tax on profit before major restructuring charges amounted to £515 million and represented an effective tax rate of 25.7% (Q3 2010: 24.4%), reflecting the settlement of certain historical matters in 2011 and 2010.

 

EPS before major restructuring for the quarter was 28.5p compared with 28.2p in Q3 2010.

 

Results before major restructuring - 9 months

Operating profit before major restructuring was £6,318 million, a 24% increase in CER terms.  The increase reflected lower legal and R&D costs partially offset by the decline in higher margin sales of pandemic related products, Avandia and Valtrex.  The operating profit margin excluding legal charges and other operating income was 29.1%.  The company continues to expect operating margin (excluding legal charges and other operating income) in 2011 to be around one percentage point lower than the equivalent margin of 30.4% in 2010.

 

Cost of sales increased to 26.4% of turnover (2010: 25.6%).  This reflected the impact of the reduction of higher margin sales of pandemic related products, Avandia and Valtrex, together with the effect of regional and product mix and the impact of US Healthcare reform and European austerity price cuts.  These adverse impacts were partially offset by lower inventory write-offs and other one-off favourable movements together with greater savings from the operational excellence restructuring programme.  The company continues to expect 2011 cost of sales as a percentage of turnover to be around 26%.

 

SG&A costs were 31.2% of turnover compared with 38.2% in 2010.  Excluding legal costs of £81 million (£1,836 million in 2010), SG&A costs were 30.8% of turnover, 1.3 percentage points higher than in 2010.  This reflected the impact of the reduction in sales of pandemic related products, Avandia and Valtrex, investment in growth markets and the US Healthcare reform levy (£75 million in the 9 months), partly offset by operational excellence savings in the USA and Europe.  The company continues to expect 2011 SG&A costs, excluding legal charges, as a percentage of turnover to be around 30.5%.  The full year impact of the industry levy associated with US Healthcare Reform is expected to be approximately £100 million in 2011.

 

R&D expenditure declined 1% to £2,813 million, 13.8% of turnover (2010: 13.6%).  This decline reflected efficiency savings and lower intangible asset impairments partly offset by the increased investment in the late-stage pipeline.  The higher percentage of turnover reflected the reduction in sales of pandemic related products, Avandia and Valtrex.  The company continues to expect 2011 R&D costs as a percentage of turnover to be around 14%.

 

Other operating income was £470 million (2010: £375 million) primarily reflecting royalty income of £218 million (2010: £222 million) and profits on asset disposals of £301 million (2010: £184 million) partly offset by equity investment impairments of £53 million (2011: £34 million).  The company continues to expect other operating income of around £600 million for the year, excluding any profit arising on the proposed Consumer Healthcare divestments of non-core OTC brands.

 

The pre-tax profit on the disposal of interests in associates was £584 million (£246 million after tax), reflecting the disposal of the remaining shares in Quest Diagnostics.

 

Tax on profit before major restructuring charges amounted to £1,891 million and represented an effective tax rate of 29.6% (2010: 30.0%).  Excluding the impact of the tax on the disposal of the Quest shares, the tax rate was approximately 26.8%.  The company continues to expect a tax rate for the full year, excluding the Quest disposal and the effect of any tax on the proposed Consumer Healthcare divestments of non-core brands, of around 27%.  Including the Quest disposal, the overall tax rate for the year is still expected to be around 29.5%.

 

EPS before major restructuring for the 9 months was 85.8p compared with 61.5p in 2010.  Excluding legal charges EPS declined 4% in CER terms and 5% in sterling terms.

 

Total results

Operating profit after restructuring for Q3 2011 was £2,115 million compared with £1,958 million in Q3 2010.  This included £64 million of restructuring charges (Q3 2010: £171 million): £20 million was charged to cost of sales (Q3 2010: £31 million), £31 million to SG&A (Q3 2010: £84 million) and £13 million to R&D (Q3 2010: £56 million).  EPS after restructuring was 27.6p compared with 25.3p in Q3 2010.

 

Operating profit after restructuring for the nine months to September 2011 was £5,928 million compared with £4,103 million in 2010.  This included £390 million of restructuring charges (2010: £1,062 million): £54 million was charged to cost of sales (2010: £90 million), £235 million to SG&A (2010: £493 million) and £101 million to R&D (2010: £479 million).  EPS after restructuring was 79.4p compared with 45.7p in 2010.

 

 

Currency impact

The Q3 2011 results are based on average exchange rates, principally £1/$1.59, £1/€1.12 and £1/Yen 126.  Comparative exchange rates are given on page 38.  The period end exchange rates were £1/$1.56, £1/€1.16 and £1/Yen 120.  If exchange rates were to hold at period end levels for the rest of 2011 and there were no exchange gains or losses in the next quarter, the estimated impact on 2011 sterling EPS growth before major restructuring would be approximately zero.

 

 

Cash generation and conversion

 

Cash flow and net debt

 

Q3 2011

9 months 2011

9 months 2010


------

------

------

Net cash inflow from operating activities (£m)

1,828 

4,104 

5,332 

Adjusted net cash inflow from operating activities (£m)

2,318 

5,358 

6,646 

Free cash flow* (£m)

1,548 

2,775 

3,755 

Free cash flow growth (%)

181%

(26)%

(6)%

Free cash flow conversion*(%)

146%

99%

131%

 

------

------

------

*  Free cash flow and free cash flow conversion are defined on page 23.

 

 

 

 

In the quarter, net cash inflow from operating activities was £1,828 million, and adjusted net cash inflow from operating activities (excluding legal settlements), was £2,318 million, up 18% in sterling terms, primarily benefiting from the timing of tax payments.  After paying dividends to shareholders and non-controlling interests of £830 million and making share repurchases of £980 million, net debt increased by £241 million.

 

The net cash inflow from operating activities for the 9 months was £4,104 million (2010: £5,332 million).  Excluding legal settlements of £1,254 million (2010: £1,314 million), the adjusted net cash inflow from operating activities was £5,358 million (2010: £6,646 million), a 19% decrease in sterling terms over 2010.  This reflected the lower contributions from pandemic related products, Avandia and Valtrex in the 9 months, as well as the phasing of restructuring payments in 2010, and a less favourable working capital position.

 

The cash flow from operations together with asset disposals of £1,405 million enabled the Group to pay dividends (including distributions to non-controlling interests) of £2.8 billion, and spend £1,826 million on repurchasing shares.  At 30th September 2011, net debt was £9.5 billion, comprising gross debt of £15.1 billion and cash and liquid investments of £5.6 billion.  At 30th September 2011, GSK had short-term borrowings (including overdrafts) repayable within 12 months of £872 million with loans of £3,537 million repayable in the subsequent year.

 

Free cash flow declined in the 9 months compared with 2010 reflecting lower trading profit as a result of lower sales of pandemic related products, Avandia and Valtrex, and a less favourable working capital position.

 

Free cash flow conversion in 2010 benefited from the receipt of pandemic receivables and the timing of restructuring payments, which negatively impacted 2011.  Adjusting for these factors free cash flow conversion was broadly similar at 103% for 2011 (2010: 108%).

 

 

Working capital

 

30th September
2011

30th June
2011

31st March
2011

31st December
2010

30th September
2010


------

------

------

------

------

Working capital percentage of turnover (%)

24

25

25

23

25

Working capital conversion cycle* (days)

227

236

241

221

232

 

------

------

------

------

------

*  Working capital conversion cycle is defined on page 23.


 

In the quarter, working capital improved by nine days largely as a result of lower inventory holdings.  For the 9 months working capital increased by six days principally reflecting new product and seasonal inventory increases in Vaccines and Emerging Markets.

 

 

Reporting to shareholders

 

As previously announced, a number of changes to the way GSK reports, including transition to a Core EPS measure, will be introduced in 2012.  These changes will be presented in detail, at a teleconference on 1st December 2011.  Details of the teleconference will be distributed separately.

 

 

Returns to shareholders

 

GSK's commitment is to use free cash flow to support increasing dividends, undertake share repurchases or, where returns are more attractive, reinvest in the business, including bolt-on acquisitions.  The company has also stated that it intends to use the net proceeds from the proposed sale of its non-core OTC brands to fund increased returns to shareholders.

 

Dividends

The Board has declared a third interim dividend of 17 pence per share (Q3 2010: 16 pence).  The equivalent interim dividend receivable by ADR holders is 54.2980 cents per ADS based on an exchange rate of £1/$1.5970.  The ex-dividend date will be 2nd November 2011, with a record date of 4th November 2011 and a payment date of 5th January 2012.

 

Paid/
payable

Pence per
share

£m

 

------

------

------

2011

 

 

 

First interim

7th July 2011

16

814

Second interim

6th October 2011

16

808

Third interim

5th January 2012

17

845

 

 

------

------

2010

 

 

 

First interim

8th July 2010

15

764

Second interim

7th October 2010

15

759

Third interim

6th January 2011

16

816

Fourth interim

7th April 2011

19

967

 

 

------

------

 

 

65

3,306

 

 

------

------

 

Share repurchases

During the quarter, GSK repurchased 71.2 million shares (£934 million), bringing the total for the year to date to 142.7 million shares (£1,826 million).  Total repurchases in 2011 are now expected to be up to £2.3 billion.  GSK intends to continue to make significant repurchases beyond 2011 where this use of funds delivers an attractive return.  

 

 

Weighted average number of shares

 

 

 

 


Q3 2011
millions

Q3 2010
millions

 

 

------

------

Weighted average number of shares - basic

 

5,001

5,086

Dilutive effect of share options and share awards

 

58

40

 

 

------

------

Weighted average number of shares - diluted

 

5,059

5,126

 

 

------

------

 

 

 

 


9 months 2011
millions

9 months 2010
millions

2010
millions

 

------

------

------

Weighted average number of shares - basic

5,050

5,083

5,085

Dilutive effect of share options and share awards

71

45

43

 

------

------

------

Weighted average number of shares - diluted

5,121

5,128

5,128

 

------

------

------

 

The weighted average number of shares has been reduced by 15 million in Q3 2011 and 36 million in 9 months 2011 as a result of the share repurchase programme partly offset by the issue of new shares to meet share option exercises in the year. 

 

At 30th September 2011, 4,971 million shares were in free issue (excluding Treasury shares and shares held by the ESOP Trusts).  This compares with 5,091 million shares at 31st December 2010.

 

 

Divisional performance

 

Pharmaceuticals and Vaccines - Q3 2011

 

Reported turnover

Underlying turnover

Operating profit before
major restructuring


---------------

------

-------------------------


£m

Growth
CER%

Growth
CER%

£m

Growth
CER%

Margin %


------

------

------

------

------

------

USA

1,892

(1)

1 

1,262 

3 

67

Europe

1,410

(5)

(4)

779 

(6)

55

Emerging Markets

949

11 

11 

280 

- 

30

Asia Pacific

311

6 

10 

136 

8 

44

Japan

587

34 

57 

359 

30 

61

ViiV Healthcare

435

7 

7 

248 

10 

57

Pharmaceutical R&D

 

 

 

(734)

2 

 

Other trading and unallocated

   pharmaceuticals

191

(10)

(5)

(280)

(16)

>100

 

------

------

------

------

------

------

 

5,775

3 

6 

2,050 

2 

36

 

------

------

------

------

------

------

 

 

 

 

 

 

 

Pharmaceuticals (incl. ViiV Healthcare)

4,633

1 

2 

1,604 

(1)

35

Vaccines

1,142

14 

21 

446 

16 

39

 

------

------

------

------

------

------

 

5,775

3 

6 

2,050 

2 

36

 

------

------

------

------

------

------

 

 

Pharmaceuticals and Vaccines - 9 months 2011

 

Reported turnover

Underlying turnover

Operating profit before
major restructuring


---------------

------

-------------------------


£m

Growth
CER%

Growth
CER%

£m

Growth
CER%

Margin %


------

------

------

------

------

------

USA

5,219

(6)

- 

3,592 

- 

69 

Europe

4,322

(13)

(3)

2,388 

(17)

55 

Emerging Markets

2,707

7 

18 

811 

(7)

30 

Asia Pacific

931

5 

10 

421 

5 

45 

Japan

1,520

(2)

40 

922 

(8)

61 

ViiV Healthcare

1,167

1 

1 

651 

3 

56 

Pharmaceutical R&D

 

 

 

(2,141)

(4)

 

Other trading and unallocated
   pharmaceuticals

616

(13)

(2)

(508)

(17)

(83)

 

------

------

------

------

------

------

 

16,482

(5)

5 

6,136 

(9)

37 

 

------

------

------

------

------

------

 

 

 

 

 

 

 

Pharmaceuticals (incl. ViiV Healthcare)

13,795

(2)

3 

5,190 

1 

38 

Vaccines

2,687

(20)

16 

946 

(40)

35 

 

------

------

------

------

------

------

 

16,482

(5)

5 

6,136 

(9)

37 

 

------

------

------

------

------

------

 

Q3 2011

US sales fell by 1% in the quarter reflecting the loss of sales of pandemic related products, Avandia and Valtrex.  Operating profit increased 3%, as a result of continuing cost containment in SG&A and higher disposal income, more than offsetting the loss of profit from these products.  Underlying sales grew 1% in the quarter.  There were some adjustments (both positive and negative) to previous accruals for returns and rebates that impacted reported growth for several products.  The net effect of these adjustments, combined with some unfavourable stocking patterns, was not significant.

 

European sales declined 5%, reflecting the impact of the loss of Avandia and pandemic related product sales and ongoing austerity price cuts.  Operating profit declined 6% as the impact of lower sales of these higher margin products was partially mitigated by expense savings.  Total price reductions in Europe adversely impacted underlying sales growth for the region by approximately seven percentage points.  GSK continues to expect the full year impact of price reductions in Europe to impact underlying sales adversely by approximately 5%.

 

Sales in Emerging Markets increased 11%, with strong growth in Dermatologicals (in part reflecting a year-on-year benefit of acquisitions made in the fourth quarter of 2010) and Vaccines.  Operating profit was flat, reflecting the higher sales of lower margin tender vaccines and the loss of sales of pandemic related products and Avandia.

 

Asia Pacific operating profit increased 8% on a turnover increase of 6% reflecting favourable operating leverage.

 

In Japan, turnover grew 34% in the quarter, reflecting especially strong sales of Cervarix (£187 million) and the continued strong performance following the launch of Avodart (£20 million).  Operating profit increased 30%, which was below turnover growth of 34% due to lower product disposal income compared with Q3 2010.

 

ViiV Healthcare turnover grew 7% and operating profit 10% reflecting favourable adjustments to previous accruals for returns and rebates.

 

The other trading and unallocated pharmaceuticals turnover declined 10% reflecting the impact of the loss of Avandia and pandemic related product sales.  Underlying sales declined 5% due to lower global vaccine tenders.

 

Pharmaceuticals R&D costs increased 2%, primarily reflecting investment in the late-stage pipeline, partly offset by operational efficiency savings.

 

9 months 2011

Turnover in the USA fell 6%, reflecting the loss of sales of pandemic related products, Avandia and Valtrex.  Underlying turnover was flat.  Operating profit was also flat as a result of continuing cost containment in SG&A and higher product disposal income offsetting the loss of profit from these products.

 

The loss of sales of Avandia and pandemic related products and austerity price cuts continued to impact Europe and turnover fell 13%.  Underlying turnover was down 3%.  Operating profit declined 17% as the impact of lower sales of these higher margin products was partially mitigated by expense savings.

 

In Emerging Markets the loss of sales from pandemic related products and Avandia had a significant negative impact on reported sales growth of 7%.  Underlying turnover increased 18%, but operating profit declined 7% reflecting higher sales of lower margin tender vaccines, the loss of sales of pandemic related products and Avandia and a number of tail product disposals in Latin America in 2010.

 

Asia Pacific operating profit increased 5% on a turnover increase of 5%; underlying turnover grew 10%.

 

Japan's turnover decreased 2% reflecting the loss of sales of pandemic related products.  Operating profit declined 8% reflecting continued investment in the underlying business.  Underlying turnover increased 40% principally as a result of the strong Cervarix and new product performance.

 

ViiV Healthcare turnover grew 1% and operating profit 3%.

 

The other trading and unallocated pharmaceuticals turnover declined 13% reflecting the impact of the loss of Avandia and pandemic related product sales and lower vaccine tenders.  Underlying sales declined 2%.

 

Pharmaceuticals R&D costs declined 4%, primarily reflecting operational efficiency savings and lower intangible write-offs, partly offset by investment in the late-stage pipeline.

 

 

Pharmaceutical sales summary

 

Q3 2011


9 months 2011


---------------


---------------


£m

CER%


£m

CER%


------

------


------

------

Respiratory

1,714

(2)

 

5,341

Anti-virals

202

(10)

 

612

Central nervous system

458

3 

 

1,275

Cardiovascular and urogenital

700

7 

 

2,021

Metabolic

83

(35)

 

259

Anti-bacterials

323

(3)

 

1,035

Oncology and emesis

196

13 

 

511

Dermatology

283

4 

 

821

ViiV Healthcare (HIV)

435

7 

 

1,167

Other

239

1 

 

753

 

------

------


------

------

 

4,633

1 

 

13,795

 

------

------


------

------

 

Pharmaceutical sales growth in the quarter was sourced from several therapy areas, including Cardiovascular and urogenital, HIV, Oncology and emesis, Central nervous system and Dermatology, more than offsetting declines in Metabolic, Respiratory, Anti-virals and Anti-bacterials.

 

In the 9 months, turnover declined 2%, with growth in Cardiovascular and urogenital, Respiratory, Dermatology, Anti-bacterials, HIV and Oncology and emesis, more than offset by declines in Metabolic, Anti-virals and Central nervous system.

 

 

Respiratory

 

Q3 2011 (£1,714 million; -2%)

In the quarter, Respiratory sales declined, principally as a result of a 3% fall in Seretide/Advair sales to £1,217 million and a 3% decline in Flixotide/Flovent sales to £183 million.  Ventolin sales increased 5% to £136 million and Avamys/Veramyst grew 23% to £50 million.  Sales in the quarter were also impacted by net unfavourable adjustments to previous accruals for returns and rebates and unfavourable stocking patterns in the USA.  Excluding these factors global respiratory sales were flat.

 

In the USA, reported sales of Advair declined 7% to £593 million primarily due to variations in wholesaler and retailer stocking patterns in both Q3 2010 and Q3 2011.  Excluding these factors, sales for the quarter declined approximately 3% (7% volume decline partly offset by 4% positive impact of mix and price).

 

Flixotide/Flovent sales in the USA declined 3% to £100 million, largely reflecting unfavourable adjustments to previous accruals for returns and rebates and unfavourable stocking patterns.  Excluding these factors, US sales for the quarter grew approximately 8% (3% volume plus 5% positive impact of mix and price).

 

The ICS/LABA combination market in the USA (which includes Advair) has declined approximately 3% in Q3 2011 compared with Q3 2010, which was caused in part by new FDA labelling, implemented in 2010, required for all ICS/LABA combinations.  Overall, the company has maintained its clear leadership position in the overall 'controller' class (LABA, ICS and anti-cholinergic products) despite new competition (combined market share of Advair and Flovent 50% in Q3 2011 compared with 52% in Q3 2010).  Overall prescription volume in the controller class is down approximately 1%.  (All market growth and share data based on IMS Health data.)

 

European Respiratory sales were down 1% in the quarter.  Seretide sales were level at £384 million as volume increases offset the impact of price reductions by European governments.

 

In Emerging Markets, Respiratory sales grew 8% in the quarter, with growth across multiple products in the portfolio.  Seretide was flat in the quarter with sales of £75 million as strong volume growth was offset by price cuts particularly in Russia and Turkey.

 

In Japan, sales grew 5% to £116 million.

 

9 months 2011 (£5,341 million; +1%)

In the 9 months respiratory sales growth was primarily driven by growth of Ventolin, up 15% to £431 million, and Avamys/Veramyst, up 29% to £186 million, offsetting the 1% decline in Seretide/Advair sales.  In the USA, sales of Advair were down 3% to £1,793 million while Flovent grew 4% to £313 million and Ventolin grew 35% to £167 million.

 

 

Anti-virals

 

Q3 2011 (£202 million; -10%)

Sales growth in the quarter was impacted by low sales of Relenza (-94% to £2 million) compared with significant sales in 2010 related to pandemic flu.  In addition, Valtrex sales continued to decline as a result of generic competition in the USA and Europe (-12% to £87 million).  Sales of Zeffix were up 11% to £63 million as a result of strong growth in Emerging Markets.

 

9 months 2011 (£612 million; -30%)

Sales growth for the 9 months was impacted by low sales of Relenza (-81% to £23 million) compared with significant sales in 2010 related to pandemic flu.  In addition, Valtrex sales continued to decline as a result of generic competition in the USA and Europe (-41% to £263 million).  Sales of Zeffix were up 7% to £181 million as a result of strong growth in Emerging Markets.

 

 

Central nervous system

 

Q3 2011 (£458 million; +3%)

Central nervous system performance was primarily impacted by growth of Lamictal (up 18% to £153 million), principally reflecting strong growth of Lamictal XR and favourable adjustments to previous accruals for returns and rebates in the USA.

 

9 months 2011 (£1,275 million; -3%)

Central nervous system performance was primarily impacted by declines in Paxil sales (down 13% to £319 million) partially offset by Lamictal sales growth (up 7% to £395 million) benefiting from growth in Japan where the product grew 85% to £25 million and by a continuing strong performance of Lamictal XR in the USA.

 

 

Cardiovascular and urogenital

 

Q3 2011 (£700 million; +7%)

The Avodart franchise grew 19% to £188 million in the quarter with growth driven by a strong contribution from the ongoing launch of the new combination product Duodart/Jalyn in the USA and Europe and of Avodart in Japan.  Lovaza growth slowed in the quarter, as the overall market declined in part as a result of economic pressures in the USA.

 

9 months 2011 (£2,021 million; +10%)

Growth was primarily driven by growth in the Avodart franchise, up 21% to £542 million, and Lovaza, up 12% to £411 million.

 

 

Metabolic

 

Q3 2011 (£83 million; -35%)

The decline in Metabolic sales reflected the loss of sales of Avandia.

 

9 months 2011 (£259 million; -55%)

The decline in Metabolic sales primarily reflected the loss of sales of Avandia.  In addition, sales of Boniva were negatively impacted by the termination of co-promotion agreements in certain European countries in 2010.

 

 

Anti-bacterials

 

Q3 2011 (£323 million; -3%)

Anti-bacterial sales were down 3% to £323 million as lower sales in Europe (-12% to £112 million), primarily due to price cuts, offset growth in Emerging Markets (+5% to £155 million).

 

9 months (£1,035 million; +2%)

Anti-bacterial sales grew 2% to £1,035 million with growth in the category led by sales in Emerging Markets (+8% to £468 million), with growth across Augmentin, Fortum, Zinacef and Ceftin.

 

 

Oncology and emesis

 

Q3 2011 (£196 million; +13%)

The impact of generic competition in the USA to Hycamtin was offset by strong growth from the new products Votrient, Promacta and Arzerra (£64 million, + >100%).

 

9 months 2011 (£511 million; flat)

Sales for the 9 months were flat as the impact of generic competition in the USA to Hycamtin and the continued decline of Zofran were offset by strong growth from the new products Votrient, Promacta and Arzerra (£152 million, +>100%).

 

 

Dermatology

 

Q3 2011 (£283 million; +4%)

Reported growth benefited from the addition of sales from businesses acquired in the fourth quarter of 2010 and first quarter of 2011 and some favourable adjustments to previous accruals for returns and rebates.  Growth was negatively impacted by the effect of the disposal of Zovirax in North America and wholesaler stocking patterns.  Excluding these factors, growth in the category was flat, in part due to price cuts in Europe and the impact of generic competition to Evoclin in the USA.

 

9 months 2011 (£821 million; +4%)

Reported growth in the 9 months also benefited from the addition of sales from businesses acquired in the fourth quarter of 2010 and first quarter of 2011 and some favourable adjustments made in Q3 2011 to previous accruals for returns and rebates.  Growth was negatively impacted by the effect of the disposal of Zovirax in North America and wholesaler stocking patterns.  Excluding these factors, growth in the category was up 1%, impacted by price cuts in Europe and the impact of generic competition to Evoclin in the USA.

 

 

ViiV Healthcare (HIV)

 

Q3 2011 (£435 million; +7%)

Reported growth rates for ViiV Healthcare products in the USA reflected favourable adjustments to previous accruals for returns and rebates.  Excluding these ViiV Healthcare growth in the USA was 1% and global growth was 3%.  Sales in Emerging Markets included a significant and tender sale of Combivir of £21 million.

 

Terms of a settlement agreement with Teva allow for generic copies of Combivir to enter the US market in Q4 2011.

 

9 months 2011 (£1,167 million; +1%)

9 month year to date growth was primarily driven by Epzicom/Kivexa (up 10% to £447 million) and Selzentry (up 34% to £77 million).

 

 

Vaccines sales

 

Q3 2011


9 months 2011


---------------


---------------


£m

CER%


£m

CER%


------

------


------

------

Total Vaccines sales

1,142

14

 

2,687

(20)

 

------

------


------

------

Vaccines sales, excluding pandemic related products

1,141

21


2,677

16 

 

------

------


------

------

 

Q3 2011 (£1,142 million, +14%)

Excluding sales of pandemic flu vaccine, underlying sales rose 21% to £1,141 million in the quarter with strong growth in all markets except Europe, where vaccines sales (impacted by austerity price cuts) declined 12% to £285 million.

 

Cervarix sales more than doubled to £232 million in the quarter primarily reflecting the phasing of the national HPV vaccination programme in Japan which started at the very end of last year (£187 million in the quarter).  The catch-up vaccination cohort in Japan includes five age groups and the majority of vaccine to support this programme has now been shipped, with most of the remainder due to be shipped in Q1 2012.

 

Infanrix/Pediarix franchise reported strong growth in the USA in the quarter, up 61% to £60 million, helped by filling backorders for Kinrix.

 

Boostrix grew 7% to £62 million, led by growth in the USA, up 10% to £43 million in the quarter.  On 8th July 2011, the FDA approved Boostrix for use in adults of 65 years of age and older for active booster immunisation against tetanus, diphtheria and pertussis (whooping cough).  The full launch of this new indication began in September 2011.

 

Sales of hepatitis vaccines grew in Emerging Markets, up 15% to £23 million, and Asia Pacific, up 11% to £11 million.  In the USA, hepatitis sales were down 14% to £82 million, reflecting a difficult comparison with Q3 2010 when sales grew 39% as a result of filling backorders.

 

In the USA, sales of Fluarix/Flulaval were up 40% to £109 million in the quarter, helped by the early deliveries of GSK's supply for the current season.  Growth in the USA helped to offset a significant decline in Europe (down 52% to £24 million), which is primarily related to the impact of price cuts.

 

9 months 2011 (£2,687 million, -20%)

The loss of flu pandemic vaccine sales in the 9 months resulted in a decline in reported vaccines sales of 20% to £2,687 million.  Excluding the effect of the flu pandemic vaccine sales, underlying sales grew by 16%, with growth in all regions except Europe.  European underlying vaccines sales were impacted by austerity price cuts and fewer tender orders for Cervarix and declined 13% to £790 million.

 

In the first 9 months, Synflorix grew 61% to £283 million (Q3 +14% to £107m) reflecting continued growth related to tenders in Emerging Markets.

 

The strong reported growth of Rotarix (+49% to £227 million) reflected the impact of the product being off the market during part of 2010.

 

 

Sales from new pharmaceutical and vaccine launches

 

Q3 2011


9 months 2011


---------------


---------------


£m

CER%


£m

CER%


------

------


------

------

Avamys/Veramyst

50

23 

 

186

29 

Lamictal XR

29

55 

 

77

72 

Requip XL

37

(3)

 

108

(1)

Treximet

14

8 

 

42

5 

Coreg CR

35

(14)

 

107

(6)

Duodart/Jalyn

29

>100 

 

71

>100 

Volibris

25

>100 

 

69

>100 

Promacta

22

>100 

 

51

>100 

Arzerra

12

33 

 

32

50 

Tyverb/Tykerb

61

3 

 

172

3 

Votrient

30

>100 

 

69

>100 

Cervarix

232

>100 

 

406

>100 

Rotarix

75

44 

 

227

49 

Synflorix

107

14 

 

283

61 

Others

15

 

 

29

 

 

------

------


------

------

 

773

69 

 

1,929

54 

 

------

------


------

------

 

Total sales of new products (launched since beginning of 2007 and excluding pandemic vaccine) were £773 million and grew 69% in the quarter.  The most significant contributors to this growth were: Cervarix, Synflorix, Duodart/Jalyn and Votrient.

 

The launches of three new products are underway:

 

·

Benlysta for lupus is being launched in the USA as part of the global partnership with Human Genome Sciences, Inc.  The product has also recently been introduced in Germany (the first market in Europe) and launches in several additional markets are expected during the fourth quarter.  Total sales in the quarter were $19 million.  GSK turnover of £6 million reflects share of gross profit in the USA and total sales in all other markets.

 

 

·

Trobalt as an adjunctive (add-on) treatment of partial onset seizures (a form of epilepsy where a seizure begins in a specific area in one side of the brain) is also being launched in Europe (£1 million).  Additionally, the product has been approved by the FDA under the brand name Potiga, and following a review by the US Drug Enforcement Administration, launch of the product is expected during the first half of 2012.

 

 

·

Horizant for the treatment of moderate-to-severe primary Restless Legs Syndrome in adults received FDA approval during Q2 and the launch of the product is underway.  Additionally, on 9th August 2011, a supplemental new Drug Application (sNDA) was submitted to the FDA requesting approval of Horizant for management of post-herpetic neuralgia in adults and in October the FDA accepted the application.

 

 

Consumer Healthcare

 

Q3 2011


9 months 2011


---------------


---------------

 

£m

CER%


£m

CER%


------

------


------

------

Turnover

 

 

 

 

 

Over-the-counter medicines

606

-

 

1,828

1

Oral healthcare

446

10

 

1,297

9

Nutritional healthcare

277

9

 

802

10

 

------

------


------

------

Total

1,329

5

 

3,927

5

 

------

------


------

------

 

Q3 2011

Consumer Healthcare recorded sales growth of 5% for the quarter.  The combined net impact of the Maxinutrition acquisition and the disposal of some non-strategic brands was not significant. 

 

The process of divesting the non-core brands is continuing and GSK continues to target a conclusion of the bidding process by the end of the year, subject to delivering appropriate shareholder value.  Excluding the sales of the non-core OTC brands proposed for divestment, sales were up approximately 7%.

 

OTC sales were flat at £606 million.  The smoking control franchise grew 13% in the USA and 31% in Europe, in both cases primarily driven by restocking by retailers.  Core GI brands, Tums and Eno, also contributed strong growth but this was offset by declines in sales of Respiratory health products (resulting from weakened consumer demand and some retailer destocking) and alli.  In addition, GSK's heritage consumer dermatology portfolio, reported within Consumer Healthcare, contributed sales of £66 million in the quarter, level with Q3 2010.

 

Oral healthcare sales were up 10%.  Sensodyne up 23%, registered its tenth consecutive quarter of double-digit growth, driven by the successful launch of Repair & Protect and the ongoing geographic expansion of the Pronamel Acid Erosion business.  The denture care business grew 8%.  

 

Nutritional healthcare sales grew 9% in the quarter.  Excluding the acquisition of Maxinutrition, sales in this category grew 5%.  Strong growth in emerging markets across the Nutritionals portfolio was partly offset by the impact of poor macroeconomic conditions and increasing competitor activity in Europe affecting Lucozade.

 

9 months 2011

Consumer Healthcare sales growth was also 5% for the 9 months.  OTC sales grew 1% with strong growth of brands in several categories, particularly gastrointestinal and analgesics, offset by a decline in alli.

 

Oral healthcare sales increased 9%, again led by Sensodyne, and Nutritional healthcare grew by 10% as good gains in Horlicks and Ribena sales were only partly offset by a small decline in Lucozade sales.

 

Q3 2011


9 months 2011

 

---------------

 

---------------


£m

Growth
CER%


£m

Growth
CER%


------

------

 

------

------

Turnover

 

 

 

 

 

USA

256

5 

 

733

1 

Europe

490

(3)

 

1,455

(1)

ROW

583

13 

 

1,739

14 

 

------

------

 

------

------

Total

1,329

5 

 

3,927

5 

 

------

------

 

------

------

 

 

 

 

 

 

Operating profit before major restructuring

328

4 

 

852

14 

 

------

------

 

------

------

Operating margin before major restructuring

24.7%

 

 

21.7%

 

 

------

 

 

------

 

 

 

Q3 2011

The Rest of World markets led growth at 13% for the quarter.  Results were particularly strong in Africa (+21%), India (+21%), Middle East (+20%) and South America (+18%).

 

The USA grew 5%, helped by very strong results from Tums, up 16%, and Oral healthcare products, up 18% (reported growth benefited from comparison with a weak Q3 2010 when Oral healthcare was down 9%, in part due to weakened demand for some premium priced products).  Smoking control products grew 13%, benefiting from some retailer restocking in the quarter.  Sales of alli were down 15%.  

 

Europe reported a decline of 3%.  Smoking control products grew 31%, driven largely by retailers' restocking.  The environment in Europe continues to be challenging with weakened consumer demand and some increasing competitor activity.  The reported growth of the European business also continues to be negatively impacted by a decline in alli sales. 

 

Consumer Healthcare operating profit grew 4% in the quarter broadly in line with sales.

 

9 months 2011

The Rest of World markets continued to lead growth with a 14% increase in sales.  US sales increased 1% as gains in Oral healthcare outweighed a decline in OTC medicines sales.  Europe recorded a 1% decline in sales as a result of the difficult economic conditions in the area and lower sales of alli.

 

In addition, GSK's heritage consumer dermatology portfolio, reported within Consumer Healthcare, contributed sales of £199 million (+4%).

 

Operating profit grew 14% in the 9 months as a result of income from product disposals and trading margin leverage.

 

 

Research and development

 

GSK remains focused on delivering an improved return on its investment in R&D and sales contribution, reduced attrition and cost reduction are all important drivers of an improving internal rate of return.  R&D expenditure is not determined as a percentage of sales, but instead capital is allocated using strict returns based criteria.

 

The operations of Pharmaceuticals R&D are broadly split into Discovery activities (up to the completion of Phase IIa trials) and Development work (from Phase IIb onwards).  R&D expenditure for nine months 2011 is analysed below.

 

 



9 months 2011
£m




------

Discovery

 

 

601

Development

 

 

1,227

Facilities and central support functions

 

 

459

 

 

 

------

 

 

 

2,287

Vaccines

 

 

413

Consumer Healthcare

 

 

113

 



------

R&D before major restructuring

 

 

2,813

 



------

 

GSK's late-stage Pharmaceuticals and Vaccines pipeline

 

There were several news events for late-stage pipeline assets in this quarter and these are listed in the table below.  On the regulatory side, Horizant was filed with the FDA for post-herpetic neuralgia and GSK received a second complete response letter for Menhibrix.  Also, data on IPX066 (Parkinson's disease), Promacta in Hepatitis C and RTS,S were received in the quarter, and recruitment was completed in a variety of studies.

 

In February 2011, the following 15 assets were listed as expected to deliver Phase III data by the end of 2012:

1120212, 2118436, 2402968, 642444+573719, albiglutide, dolutegravir (1349572), IPX066, MAGE-A3 (event driven), migalastat HCl, RTS,S, otelixizumab, Promacta, Relovair, Tykerb, Votrient.  Phase III data were announced from studies on IPX066, otelixizumab and Votrient in Q1 and Promacta and Relovair in Q2.

 

Data were announced in Q3 from the final pivotal study for IPX066, a head-to-head study versus Stalevo in Parkinson's disease (ASCEND).  Additionally, the first data were announced from the Phase III study of Mosquirix for malaria prophylaxis in 5-17 month old children.  Of the 15 assets with data expected by the end of 2012, six have now reported data.  Of these, data have been filed for Votrient in sarcoma, data is in-house and being reviewed for Promacta (Hepatitis C) and IPX066 in Parkinson's disease and programmes are ongoing for Relovair and RTS,S.  One study, with otelixizumab, failed to show efficacy.  Overall, by the end of 2012 GSK expects more than 30 further Phase III read-outs on the ongoing assets.

 

The table below is provided as part of GSK's quarterly update to show events and changes to the late-stage pipeline during the quarter and up to the date of announcement.

 

Benlysta for systemic lupus erythematosus and Prolia/Xgeva (denosumab) for post-menopausal osteoporosis and skeletal related events in cancer were listed as approved in the last quarterly update and are no longer included in the table, although filings and approvals are currently taking place outside of the USA and EU.  Additionally, otelixizumab was listed as no longer being developed for established type 1 diabetes and has been removed from the table.

 

Biopharmaceuticals

USA

EU

News update in the quarter

Arzerra
(ofatumumab)

CLL (first line & relapsed)

Ph III

Ph III


NHL (FL)

Ph III

Ph III


NHL (DLBCL)

Ph III

Ph III


albiglutide

Type 2 diabetes

Ph III

Ph III


Cardiovascular & Metabolic

USA

EU

News update in the quarter

darapladib

Atherosclerosis

Ph III

Ph III

Recruitment for SOLID study is anticipated to complete by the end of October 2011.

Neurosciences


USA

EU

News update in the quarter

Potiga (ezogabine)/
Trobalt (retigabine)

Epilepsy

Approved

Jun 2011

Approved

Mar 2011

Launched in the EU; awaiting DEA scheduling in USA prior to launch.

Horizant

Post-herpetic neuralgia

Filed

Aug 2011

n/a


IPX066

Parkinson's disease

n/a

Ph III

Positive Phase III data from ASCEND study announced in August.  EU filing strategy under review.

Oncology


USA

EU

News update in the quarter

Promacta/Revolade

Hepatitis C

Ph III

Ph III

ENABLE-2 data in-house and under review.  ENABLE-1 data being presented at AASLD in November.

CLD

Ph III

Ph III

Awaiting full hepatitis C data before deciding next steps.

Votrient
(pazopanib)

Sarcoma

Filed

Jun 2011

Filed

Jul 2011


Ovarian

Ph III

Ph III



First-line metastatic breast cancer

Ph III

Ph III


Tykerb/Tyverb

Adjuvant breast cancer

Ph III

Ph III

Tykerb monotherapy arm of the ALTTO trial closed after recommendation by IDMC; other arms continue unchanged.


Head & neck cancer

Ph III

Ph III



Gastric cancer

Ph III

Ph III


1120212

(MEK inhibitor)

Metastatic melanoma

Ph III

Ph III

Recruitment completed in Phase III study.

2118436

(BRaf inhibitor)

Metastatic melanoma

Ph III

Ph III

Recruitment completed in Phase III study.

Respiratory & Immuno-inflammation

USA

EU

News update in the quarter

Relovair
('444+'698)

COPD

Ph III

Ph III


Asthma

Ph III

Ph III


1605786 (CCX282)

Crohn's disease

Ph III

Ph III


'444+'719

COPD

Ph III

Ph III


'698

Asthma

Ph III


Recruitment started in Phase III '698 monotherapy programme.

Rare Diseases


USA

EU

News update in the quarter

migalastat HCl

Fabry disease

Ph III

Ph III

Second Phase III study (012) commenced in September 2011.

2402968

Duchenne muscular dystrophy


Ph III


2696273
(Ex-vivo stem cell gene therapy)

Adenosine deaminase severe combined immune deficiency (ADA-SCID)


Ph II/III


Vaccines


USA

EU

News update in the quarter

Menhibrix
(HibMenCY-TT)

MenCY and Hib prophylaxis

Filed

n/a

Received second FDA Complete Response letter.

MAGE-A3

Melanoma

Ph III

Ph III



NSCLC

Ph III

Ph III


Nimenrix
(MenACWY)

MenACWY prophylaxis

Ph III

Filed

Mar 2011


Herpes zoster

Shingles prophylaxis

Ph III

Ph III


Mosquirix (RTS,S)

Malaria prophylaxis

n/a

n/a

Positive data in 5-17 month old children reported and published in NEJM.

HIV (ViiV Healthcare)

USA

EU

News update in the quarter

dolutegravir (S/GSK1349572)

HIV integrase inhibitor

Ph III

Ph III


'572-Trii

HIV integrase inhibitor + abacavir + lamivudine fixed dose combination

Ph III

Ph III


 

 

Definitions

 

Underlying sales growth

Underlying sales growth excludes the sales of pandemic related products, Avandia and Valtrex.  Management believes this measure assists shareholders in gaining a clearer understanding of the Group's sales performance and prospects because of the size and nature of the loss of sales from these products in 2010 and 2011.  Sales of these products were:

 

Q3 2011

Q3 2010

Growth


£m

£m

£m

£m

CER%


------

------

------

------

------

Group turnover


7,104


6,813

3

Pandemic related products

3


76



Avandia

22


70



Valtrex

87


95




------


------





112


241




------


------


Underlying Group turnover


6,992


6,572

6



------


------


 

Q3 2011

USA

Europe

Emerging
Markets

Asia
Pacific

Japan

Other
trading and
unallocated

Total


£m

£m

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

Pandemic related products

-

2 

-

-

2

(1)

3

Avandia

14

(1)

4

3

-

2 

22

Valtrex

22

11 

8

6

37

3 

87


------

------

------

------

------

------

------

Q3 2010



USA



Europe


Emerging
Markets


Asia
Pacific



Japan

Other
trading and
unallocated



Total


£m

£m

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

Pandemic related products

14

4

7

1

49

1

76

Avandia

33

20

2

5

-

10

70

Valtrex

27

14

7

11

35

1

95


------

------

------

------

------

------

------

 

9 months 2011

9 months 2010

Growth


£m

£m

£m

£m

CER%


------

------

------

------

------

Group turnover


20,409


21,195

(3)

Pandemic related products

33


1,141



Avandia

84


391



Valtrex

263


436




------


------





380


1,968




------


------


Underlying Group turnover


20,029


19,227

5 



------


------


 

9 months 2011

USA

Europe

Emerging
Markets

Asia
Pacific

Japan

Other
trading and
unallocated

Total


£m

£m

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

Pandemic related products

-

11 

-

12

9

1

33

Avandia

60

(3)

11

6

-

10

84

Valtrex

66

36 

22

28

106

5

263


------

------

------

------

------

------

------

9 months 2010

USA

Europe

Emerging
Markets

Asia
Pacific

Japan

Other
trading and
unallocated

Total


£m

£m

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

Pandemic related products

49

404

203

21

414

50

1,141

Avandia

197

92

39

25

-

38

391

Valtrex

228

53

20

32

97

6

436


------

------

------

------

------

------

------

 

Results before major restructuring

Results before major restructuring is a measure used by management to assess the Group's financial performance and is presented after excluding restructuring charges relating to the Operational Excellence programme, which commenced in October 2007 and the acquisitions of Reliant Pharmaceuticals in December 2007 and Stiefel in July 2009.  Management believes that this presentation assists shareholders in gaining a clearer understanding of the Group's financial performance and in making projections of future financial performance, as results that include such costs, by virtue of their size and nature, have limited comparative value.

 

Net income margin

Net income margin is profit after taxation before major restructuring as a percentage of sales.

 

CER growth

In order to illustrate underlying performance, it is the Group's practice to discuss its results in terms of constant exchange rate (CER) growth.  This represents growth calculated as if the exchange rates used to determine the results of overseas companies in Sterling had remained unchanged from those used in the comparative period.  All commentaries are presented in terms of CER growth, unless otherwise stated.

 

Free cash flow

Free cash flow is the net cash inflow from operating activities less capital expenditure, interest and dividends paid to non-controlling interests plus proceeds from the sale of property, plant and equipment and dividends received from joint ventures and associated undertakings.  It is used by management for planning and reporting purposes and in discussions with and presentations to investment analysts and rating agencies.  Free cash flow growth is calculated on a reported basis.

 

Free cash flow conversion

Free cash flow conversion is free cash flow as a percentage of earnings excluding after-tax legal charges and legal settlements.

 

Adjusted net cash inflow from operating activities

Adjusted net cash inflow from operating activities excludes payments made to settle legal disputes.

 

Working capital conversion cycle

The working capital conversion cycle is calculated as the number of days sales outstanding plus days inventory outstanding, less days purchases outstanding.

 

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.

 

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 on Form 20-F for 2010.

 

 

Contacts

 

 

UK Media enquiries:

 

 

David Mawdsley

Stephen Rea

Sarah Spencer

Janet Morgan

David Daley

 

+44 20 8047 5502

+44 20 8047 5502

+44 20 8047 5502

+44 20 8047 5502

+44 20 8047 5502

 

(London)

(London)

(London)

(London)

(London)





US Media enquiries:

Kevin Colgan

Mary Anne Rhyne

Sarah Alspach

Jennifer Armstrong

+1 (919) 483 2839

+1 (919) 483 2839

+1 (919) 483 2839

+1 (919) 483 2839

(North Carolina)

(North Carolina)

(Washington, DC)

(Philadelphia)





Analyst/Investor enquiries:

Sally Ferguson

Tom Curry

Gary Davies

Ziba Shamsi

Jeff McLaughlin

+44 20 8047 5543

+1 (215) 751 5419

+44 20 8047 5503

+44 20 8047 3289

+1 (215) 751 7002

(London)

(Philadelphia)

(London)

(London)

(Philadelphia)


 

GlaxoSmithKline (GSK) together with its subsidiary undertakings, the 'Group' - 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. GlaxoSmithKline's website www.gsk.com gives additional information on the Group. Information made available on the website does not constitute part of this document.

 

GlaxoSmithKline plc, 980 Great West Road, Brentford, Middlesex TW8 9GS, United Kingdom

Registered in England and Wales.  Registered number: 3888792

 

 

Financial information

 

Income statement

Three months ended 30th September 2011

 

Results
before major
restructuring
Q3 2011

Growth

Major
restructuring
Q3 2011

Total
Q3 2011

Results
before major
restructuring
Q3 2010

Major
restructuring
Q3 2010

Total
Q3 2010


£m

CER%

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

TURNOVER

7,104 

3


7,104 

6,813 


6,813 









Cost of sales

(1,978)

3

(20)

(1,998)

(1,875)

(31)

(1,906)


------

 

------

------

------

------

------

Gross profit

5,126 

3

(20)

5,106 

4,938 

(31)

4,907 









Selling, general and
   administration

(2,067)

4

(31)

(2,098)

(1,956)

(84)

(2,040)

Research and development

(971)

2

(13)

(984)

(948)

(56)

(1,004)

Other operating income

91 



91 

95 


95 


------

 

------

------

------

------

------

OPERATING PROFIT

2,179 

3

(64)

2,115 

2,129 

(171)

1,958 









Finance income

19 



19 

22 


22 

Finance expense

(190)


(1)

(191)

(196)

(1)

(197)

Share of after tax profits of
   associates and joint
   ventures

(2)



(2)

16 


16 


------

 

------

------

------

------

------

PROFIT BEFORE TAXATION

2,006 

2

(65)

1,941 

1,971 

(172)

1,799 









Taxation

(515)


17 

(498)

(480)

24 

(456)

Tax rate %

25.7%



25.7%

24.4%


25.3%


------

 

------

------

------

------

------

PROFIT AFTER TAXATION FOR THE PERIOD

1,491 

-

(48)

1,443 

1,491 

(148)

1,343 


------

 

------

------

------

------

------









Profit attributable to
   non-controlling interests

65 



65 

55 


55 

Profit attributable to
   shareholders

1,426 


(48)

1,378 

1,436 

(148)

1,288 


------

 

------

------

------

------

------


1,491 


(48)

1,443 

1,491 

(148)

1,343 


------

 

------

------

------

------

------









EARNINGS PER SHARE

28.5p

1


27.6p

28.2p


25.3p


------

 

 

------

------

 

------









Diluted earnings per share

28.2p



27.2p

28.0p


25.1p


------

 

 

------

------

 

------

 

 

Income statement

Nine months ended 30th September 2011

 

Results
before major
restructuring
9 months
2011

Growth

Major
restructuring
9 months 2011

Total
9 months
2011

Results
before major
restructuring
9 months
2010

Major
restructuring
9 months
2010

Total
9 months
2010


£m

CER%

£m

£m

£m

£m

£m


------

------

------

------

------

------

------

TURNOVER

20,409 

(3)


20,409 

21,195 


21,195 









Cost of sales

(5,383)

(1)

(54)

(5,437)

(5,425)

(90)

(5,515)


------

 

------

------

------

------

------

Gross profit

15,026 

(4)

(54)

14,972 

15,770 

(90)

15,680 









Selling, general and
   administration

(6,365)

(21)

(235)

(6,600)

(8,099)

(493)

(8,592)

Research and development

(2,813)

(1)

(101)

(2,914)

(2,881)

(479)

(3,360)

Other operating income

470 



470 

375 


375 


------

 

------

------

------

------

------

OPERATING PROFIT

6,318 

24 

(390)

5,928 

5,165 

(1,062)

4,103 









Finance income

61 



61 

58 


58 

Finance expense

(594)


(1)

(595)

(588)

(3)

(591)

Profit on disposal of interest
   in associate

584 



584 

- 


- 

Share of after tax profits of
   associates and joint
   ventures

19 

 

 

19 

63 


63 


------

 

------

------

------

------

------

PROFIT BEFORE TAXATION

6,388 

38 

(391)

5,997 

4,698 

(1,065)

3,633 









Taxation

(1,891)


68 

(1,823)

(1,410)

263 

(1,147)

Tax rate %

29.6%



30.4%

30.0%


31.6%


------

 

------

------

------

------

------

PROFIT AFTER TAXATION FOR THE PERIOD

4,497 

39 

(323)

4,174 

3,288 

(802)

2,486 


------

 

------

------

------

------

------









Profit attributable to
   non-controlling interests

165 



165 

162 


162 

Profit attributable to
   shareholders

4,332 


(323)

4,009 

3,126 

(802)

2,324 


------

 

------

------

------

------

------


4,497 

 

(323)

4,174 

3,288 

(802)

2,486 


------

 

------

------

------

------

------









EARNINGS PER SHARE

85.8p

41 


79.4p

61.5p


45.7p


------

 

 

------

------

 

------









Diluted earnings per share

84.6p

 

 

78.3p

61.0p


45.3p


------

 

 

------

------

 

------

 

 

Statement of comprehensive income

 

Q3 2011
£m

Q3 2010
£m

 

------

------

Profit for the period

1,443 

1,343 

 

 


Exchange movements on overseas net assets and net investment hedges

(307)

267 

Reclassification of exchange on disposal of overseas subsidiary

- 

(2)

Fair value movements on available-for-sale investments

(25)

63 

Deferred tax on fair value movements on available-for-sale investments

18 

(7)

Reclassification of fair value movements on available-for-sale investments

(15)

- 

Deferred tax reversed on reclassification of available-for-sale investments

(3)

- 

Actuarial (losses)/gains on defined benefit plans

(1,248)

182 

Deferred tax on actuarial movements in defined benefit plans

343 

(47)

Fair value movements on cash flow hedges

- 

(3)

Deferred tax on fair value movements on cash flow hedges

- 

2 

Reclassification of cash flow hedges to income statement

- 

(4)

 

------

------

Other comprehensive (expense)/income for the period

(1,237)

451 

 

------

------

Total comprehensive income for the period

206 

1,794 

 

------

------

 

 


Total comprehensive income for the period attributable to:

 


Shareholders

151 

1,750 

Non-controlling interests

55 

44 

 

------

------

 

206 

1,794 

 

------

------

 

 

Statement of comprehensive income

 

9 months 2011
£m

9 months 2010
£m

 

------

------

Profit for the period

4,174 

2,486 

 

 


Exchange movements on overseas net assets and net investment hedges

(186)

53 

Reclassification of exchange on disposal of overseas subsidiary

(1)

(2)

Fair value movements on available-for-sale investments

(62)

40 

Deferred tax on fair value movements on available-for-sale investments

21 

(4)

Reclassification of fair value movements on available-for-sale investments

(38)

(18)

Deferred tax reversed on reclassification of available-for-sale investments

4 

3 

Actuarial losses on defined benefit plans

(1,255)

(372)

Deferred tax on actuarial movements in defined benefit plans

345 

139 

Fair value movements on cash flow hedges

(2)

(5)

Deferred tax on fair value movements on cash flow hedges

(2)

2 

Reclassification of cash flow hedges to income statement

3 

- 

Share of other comprehensive income of associates and joint ventures

(8)

- 

 

------

------

Other comprehensive expense for the period

(1,181)

(164)

 

------

------

Total comprehensive income for the period

2,993

2,322 

 

------

------

 

 


Total comprehensive income for the period attributable to:

 


Shareholders

2,850 

2,142 

Non-controlling interests

143 

180 

 

------

------

 

2,993 

2,322 

 

------

------

 

 

Pharmaceuticals and Vaccines turnover

Three months ended 30th September 2011

 

Total 

USA 

Europe 

Emerging Markets 

Rest of World 


------------------------------ 

------------------------------ 

------------------------------ 

----------------------------- 

--------------------------- 


£m 

CER%

£m 

CER%

£m 

CER%

£m 

CER%

£m 

CER%

 

----------

----------

----------

----------

----------

----------

----------

----------

----------

----------

Respiratory

1,714

(2)

783 

(6)

502 

(1)

153 

8 

276 

7 

Avamys/Veramyst

50

23 

17 

13 

13 

20 

11 

38 

9 

29 

Flixonase/Flonase

28

(16)

2 

(63)

9 

- 

12 

33 

5 

(43)

Flixotide/Flovent

183

(3)

100 

(3)

35 

- 

11 

20 

37 

(10)

Seretide/Advair

1,217

(3)

593 

(7)

384 

- 

75 

- 

165 

7 

Serevent

43

(10)

15 

(6)

21 

(17)

1 

- 

6 

- 

Ventolin

136

5 

54 

10 

32 

(6)

27 

4 

23 

10 

Xyzal

12

>100 

- 

- 

- 

- 

2 

(33)

10 

>100 

Zyrtec

21

5 

- 

- 

- 

- 

5 

50 

16 

(7)












Anti-virals

202

(10)

40 

(28)

20 

(21)

65 

14 

77 

(11)

Hepsera

32

(6)

- 

- 

- 

- 

16 

- 

16 

(13)

Relenza

2

(94)

- 

(100)

- 

(100)

- 

(100)

2 

(50)

Valtrex

87

(12)

22 

(19)

11 

(14)

8 

14 

46 

(11)

Zeffix

63

11 

1 

(33)

7 

(14)

41 

25 

14 

- 

 











Central nervous system

458

3 

140 

16 

123 

(11)

65 

6 

130 

4 

Imigran/Imitrex

54

- 

21 

17 

20 

(14)

2 

100 

11 

(8)

Keppra

13

(13)

- 

- 

- 

- 

9 

(17)

4 

- 

Lamictal

153

18 

88 

29 

33 

(9)

14 

(7)

18 

64 

Requip

56

(7)

11 

(15)

29 

(9)

1 

- 

15 

8 

Seroxat/Paxil

109

(9)

- 

(100)

16 

(16)

21 

5 

72 

(4)

Treximet

14

- 

14 

- 

- 

- 

- 

- 

- 

- 

Wellbutrin

23

33 

5 

50 

12 

10 

6 

100 

- 

- 












Cardiovascular and urogenital

700

7 

404 

1 

165 

9 

45 

35 

86 

30 

Arixtra

71

(3)

39 

(9)

23 

5 

4 

33 

5 

- 

Avodart

188

19 

79 

(8)

58 

37 

12 

50 

39 

90 

Coreg

38

(11)

39 

(12)

- 

- 

- 

- 

(1)

- 

Fraxiparine

60

7 

- 

- 

42 

18 

17 

13 

1 

(80)

Lovaza

139

2 

139 

4 

- 

- 

- 

- 

- 

- 

Vesicare

33

21 

32 

22 

- 

- 

- 

- 

1 

- 

Volibris

25

>100 

- 

- 

18 

70 

1 

- 

6 

- 

 











Metabolic

83

(35)

14 

(56)

18 

(54)

16 

42 

35 

(25)

Avandia products

22

(67)

14 

(52)

(1)

<(100)

4 

100 

5 

(73)

Bonviva/Boniva

17

(6)

- 

- 

12 

(15)

1 

- 

4 

33

 











Anti-bacterials

323

(3)

13 

- 

112 

(12)

155 

5 

43 

(9)

Augmentin

139

(10)

(1)

(100)

54 

(7)

66 

(8)

20 

(22)

 











Oncology and emesis

196

13 

84 

(3)

66 

29 

20 

18 

26 

47 

Arzerra

12

33 

9 

13 

3 

>100 

- 

- 

- 

- 

Hycamtin

18

(49)

4 

(81)

11 

(9)

1 

(50)

2 

>100 

Promacta

22

>100 

10 

67 

6 

>100 

1 

- 

5 

- 

Tyverb/Tykerb

61

3 

19 

11 

24 

(4)

9 

11 

9 

- 

Votrient

30

>100 

16 

89 

12 

>100 

2 

- 

- 

(100)

 











Vaccines

1,142

14 

323 

20 

285 

(12)

238 

9 

296 

58 

Boostrix

62

7 

43 

10 

13 

- 

2 

- 

4 

- 

Cervarix

232

>100 

4 

(25)

12 

- 

18 

100 

198 

>100 

Fluarix, FluLaval

159

(2)

109 

40 

24 

(52)

9 

(53)

17 

6 

Flu Pandemic

1

(98)

- 

- 

2 

- 

- 

- 

(1)

<(100)

Hepatitis

178

(6)

82 

(14)

55 

(4)

23 

15 

18 

12 

Infanrix, Pediarix

192

12 

60 

61 

97 

(4)

12 

(25)

23 

28 

Rotarix

75

44 

25 

47 

11 

25 

29 

55 

10 

29 

Synflorix

107

14 

- 

- 

11 

11 

91 

18 

5 

(14)

 











Dermatology

283

4 

80 

(12)

62 

- 

93 

30 

48 

- 

Bactroban

36

9 

16 

14 

8 

14 

8 

13 

4 

(25)

Dermovate

22

17 

- 

- 

6 

20 

8 

29 

8 

- 

Duac

30

(12)

17 

(15)

6 

- 

3 

33 

4 

(40)

Soriatane

19

- 

19 

- 

- 

- 

- 

- 

- 

- 

Zovirax

25

(19)

1 

(88)

7 

17 

8 

33 

9 

(18)












Other

239

1 

11 

13 

57 

(12)

99 

2 

72 

11 


----------

----------

----------

----------

----------

----------

----------

----------

----------

----------


5,340

3 

1,892 

(1)

1,410 

(5)

949 

11 

1,089 

15 




----------

----------

----------

----------

----------

----------

----------

----------

ViiV Healthcare (HIV)

435

7 

177 

11 

145 

1 

79 

17 

34 

(6)

Combivir

112

17 

37 

8 

22 

(19)

47 

62 

6 

- 

Epivir

28

(10)

10 

- 

8 

(11)

8 

- 

2 

(50)

Epzicom/Kivexa

160

14 

61 

26 

69 

16 

13 

(7)

17 

(12)

Lexiva

35

(13)

19 

5 

11 

(23)

2 

(57)

3 

100 

Selzentry

28

40 

12 

63 

14 

40 

1 

- 

1 

(100)

Trizivir

33

(16)

17 

(5)

13 

(20)

2 

(33)

1 

(100)


----------

----------

----------

----------

----------

----------

----------

----------

----------

----------


5,775

3 










----------

----------









 

 

Pharmaceuticals and Vaccines turnover

Nine months ended 30th September 2011

 

Total 

USA 

Europe 

Emerging Markets 

Rest of World 


------------------------------ 

------------------------------ 

------------------------------ 

----------------------------- 

--------------------------- 


£m 

CER%

£m 

CER%

£m 

CER%

£m 

CER%

£m 

CER%

 

----------

----------

----------

----------

----------

----------

----------

----------

----------

----------

Respiratory

5,341

1 

2,382

(1)

1,591 

(2)

468

6 

900 

14 

Avamys/Veramyst

186

29 

49

(2)

51 

14 

32

45 

54 

>100 

Flixonase/Flonase

107

(17)

6

(78)

29 

(7)

33

21 

39 

(3)

Flixotide/Flovent

581

1 

313

4 

114 

(4)

35

3 

119 

(3)

Seretide/Advair

3,710

(1)

1,793

(3)

1,190 

(1)

232

(2)

495 

10 

Serevent

138

(9)

48

2 

65 

(14)

2

- 

23 

(15)

Ventolin

431

15 

167

35 

103 

(3)

87

10 

74 

11 

Xyzal

42

>100 

-

- 

- 

- 

6

- 

36 

>100 

Zyrtec

72

17 

-

- 

- 

- 

14

50 

58 

10 












Anti-virals

612

(30)

120

(62)

62 

(28)

178

10 

252 

(17)

Hepsera

90

(7)

-

- 

- 

- 

42

- 

48 

(13)

Relenza

23

(81)

-

- 

- 

- 

-

- 

23 

(61)

Valtrex

263

(41)

66

(70)

36 

(32)

22

10 

139 

(4)

Zeffix

181

7 

8

(10)

19 

(10)

114

18 

40 

(7)

 











Central nervous system

1,275

(3)

353

(6)

366 

(12)

182

16 

374 

3 

Imigran/Imitrex

156

(5)

62

5 

56 

(17)

4

- 

34 

- 

Keppra

36

20 

-

- 

1 

- 

23

20 

12 

22 

Lamictal

395

7 

207

13 

99 

(11)

41

2 

48 

39 

Requip

166

(5)

31

(6)

91 

(13)

3

50 

41 

18 

Seroxat/Paxil

319

(13)

(3)

<(100)

49 

(22)

59

11 

214 

(4)

Treximet

42

5 

42

5 

- 

- 

-

- 

- 

- 

Wellbutrin

65

10 

13

(18)

34 

18 

14

67 

4 

(40)












Cardiovascular and urogenital

2,021

10 

1,158

5 

495 

8 

123

30 

245 

34 

Arixtra

220

1 

124

1 

73 

(4)

10

57 

13 

9 

Avodart

542

21 

242

1 

163 

28 

30

29 

107 

98 

Coreg

114

(8)

114

(9)

- 

- 

-

- 

- 

- 

Fraxiparine

174

3 

-

- 

123 

3 

49

25 

2 

(82)

Lovaza

411

12 

409

12 

- 

- 

-

- 

2 

- 

Vesicare

94

18 

93

18 

- 

- 

-

- 

1 

- 

Volibris

69

>100 

-

- 

52 

89 

3

>100 

14 

>100 

 











Metabolic

259

(55)

60

(68)

51 

(67)

48

(34)

100 

(33)

Avandia products

84

(78)

60

(68)

(3)

<(100)

11

(72)

16 

(76)

Bonviva/Boniva

51

(17)

-

- 

38 

(26)

2

- 

11 

38 

 











Anti-bacterials

1,035

2 

48

(15)

390 

- 

468

8 

129 

(4)

Augmentin

468

3 

1

(91)

185 

6 

222

7 

60 

(3)

 











Oncology and emesis

511

- 

200

(24)

187 

25 

52

18 

72 

38 

Arzerra

32

50 

23

20 

9 

>100 

-

- 

- 

- 

Hycamtin

45

(62)

4

(94)

32 

(14)

4

(33)

5 

25 

Promacta

51

>100 

24

32 

15 

>100 

2

- 

10 

- 

Tyverb/Tykerb

172

3 

47

(8)

75 

6 

25

24 

25 

- 

Votrient

69

>100 

40

91 

25 

>100 

3

- 

1 

- 

 











Vaccines

2,687

(20)

656

16 

801 

(39)

610

(8)

620 

(25)

Boostrix

147

13 

85

9 

34 

3 

6

20 

22 

62 

Cervarix

406

>100 

7

(42)

41 

(56)

34

84 

324 

>100 

Fluarix, FluLaval

176

5 

115

46 

22 

(56)

15

(25)

24 

20 

Flu Pandemic

10

(99)

-

- 

11 

(97)

-

- 

(1)

<100 

Hepatitis

527

(4)

234

(2)

173 

(5)

59

(8)

61 

(5)

Infanrix, Pediarix

509

(1)

131

25 

288 

(9)

32

(14)

58 

4 

Rotarix

227

49 

85

66 

31 

3 

87

58 

24 

41 

Synflorix

283

61 

-

- 

36 

- 

232

100 

15 

(38)

 











Dermatology

821

4 

219

(13)

190 

2 

265

32 

147 

(3)

Bactroban

94

7 

38

3 

22 

10 

23

14 

11 

- 

Dermovate

63

21 

-

- 

18 

29 

24

37 

21 

- 

Duac

83

(6)

46

(8)

18 

- 

8

13 

11 

(17)

Soriatane

53

2 

53

2 

- 

- 

-

- 

- 

- 

Zovirax

83

(27)

11

(72)

20 

- 

21

5 

31 

(12)












Other

753

10 

23

17 

189 

(11)

313

22 

228 

16 


----------

----------

----------

----------

----------

----------

----------

----------

----------

----------


15,315

(5)

5,219

(6)

4,322 

(13)

2,707

7 

3,067 

(3)




----------

----------

----------

----------

----------

----------

----------

----------

ViiV Healthcare (HIV)

1,167

1 

484

2 

436 

(3)

149

22 

98 

(10)

Combivir

254

(3)

97

(6)

74 

(19)

68

36 

15 

(13)

Epivir

83

(2)

30

3 

25 

(14)

20

25 

8 

(27)

Epzicom/Kivexa

447

10 

165

12 

202 

9 

30

15 

50 

2 

Lexiva

104

(11)

54

(5)

35 

(17)

9

(9)

6 

(29)

Selzentry

77

34 

32

36 

39 

30 

2

100

4 

50 

Trizivir

94

(15)

49

(9)

39 

(17)

3

(25)

3 

(60)


----------

----------

----------

----------

----------

----------

----------

----------

----------

----------


16,482

(5)










----------

----------









 

 

Balance sheet

 

 

30th September 2011
£m

30th September 2010
£m

31st December 2010
£m

ASSETS

------

------

------

Non-current assets

 

 

 

Property, plant and equipment

8,747 

9,152 

9,045 

Goodwill

3,745 

3,484 

3,606 

Other intangible assets

7,847 

8,369 

8,532 

Investments in associates and joint ventures

599 

1,062 

1,081 

Other investments

551 

560 

711 

Deferred tax assets

2,919 

2,510 

2,566 

Derivative financial instruments

106 

125 

97 

Other non-current assets

503 

593 

556 

 

------

------

------

Total non-current assets

25,017 

25,855 

26,194 

 

------

------

------

Current assets

 

 

 

Inventories

4,035 

4,074 

3,837 

Current tax recoverable

72 

48 

56 

Trade and other receivables

5,892 

5,986 

5,793 

Derivative financial instruments

106 

215 

93 

Liquid investments

170 

216 

184 

Cash and cash equivalents

5,414 

6,229 

6,057 

Assets held for sale

704 

25 

16 

 

------

------

------

Total current assets

16,393 

16,793 

16,036 

 

------

------

------

TOTAL ASSETS

41,410 

42,648 

42,230 

 

------

------

------

LIABILITIES

 

 

 

Current liabilities

 

 

 

Short-term borrowings

(872)

(386)

(291)

Trade and other payables

(7,174)

(6,806)

(6,888)

Derivative financial instruments

(181)

(231)

(188)

Current tax payable

(1,634)

(1,172)

(1,047)

Short-term provisions

(3,245)

(2,648)

(4,380)

 

------

------

------

Total current liabilities

(13,106)

(11,243)

(12,794)

 

------

------

------

Non-current liabilities

 

 

 

Long-term borrowings

(14,209)

(14,851)

(14,809)

Deferred tax liabilities

(790)

(706)

(707)

Pensions and other post-employment benefits

(3,829)

(3,385)

(2,672)

Other provisions

(662)

(1,263)

(904)

Derivative financial instruments

(1)

(7)

(5)

Other non-current liabilities

(582)

(580)

(594)

 

------

------

------

Total non-current liabilities

(20,073)

(20,792)

(19,691)

 

------

------

------

TOTAL LIABILITIES

(33,179)

(32,035)

(32,485)

 

------

------

------

NET ASSETS

8,231 

10,613 

9,745 

 

------

------

------

 

 

 

 

EQUITY

 

 

 

Share capital

1,392 

1,417 

1,418 

Share premium account

1,552 

1,400 

1,428 

Retained earnings

3,147 

5,839 

4,779 

Other reserves

1,352 

1,153 

1,262 

 

------

------

------

Shareholders' equity

7,443 

9,809 

8,887 

 

 

 

 

Non-controlling interests

788 

804 

858 

 

------

------

------

TOTAL EQUITY

8,231 

10,613 

9,745 

 

------

------

------

 

 

Statement of changes in equity

 

Share
capital
£m

Share
premium
£m

Retained
earnings
£m

Other
reserves
£m

Share-
holder's
equity
£m

Total
equity
£m

 

-----

-----

-----

-----

-----

-----

At 1st January 2011

1,418 

1,428

4,779 

1,262 

8,887 

9,745 

 

 

 

 

 

 

 

 

Profit for the period

- 

-

4,009 

- 

4,009 

4,174 

Other comprehensive expense for
   the period

- 

-

(1,080)

(78)

(1,158)

(1,181)

Distributions to non-controlling interests

- 

-

- 

- 

- 

(231)

(231)

Dividends to shareholders

- 

-

(2,597)

- 

(2,597)

(2,597)

Changes in non-controlling interests

- 

-

- 

- 

- 

19 

19 

Forward contract relating to
   non-controlling interest

 

-

- 

(29)

(29)

- 

(29)

Shares issued

2 

124

- 

- 

126 

126 

Ordinary shares purchased and
   cancelled or held as Treasury shares

(28)

-

(1,927)

28 

(1,927)

- 

(1,927)

Consideration received for shares
   transferred by ESOP Trusts

- 

-

- 

19 

19 

- 

19 

Shares acquired by ESOP Trusts

- 

-

- 

(35)

(35)

(35)

Write-down on shares held by ESOP
   Trusts

- 

-

(185)

185 

- 

- 

Share-based incentive plans

- 

-

148 

- 

148 

- 

148 

 

-----

-----

-----

-----

-----

-----

At 30th September 2011

1,392 

1,552

3,147 

1,352 

7,443 

8,231 

 

-----

-----

-----

-----

-----

-----

 

At 1st January 2010

1,416 

1,368

6,321

900

10,005 

737

10,742

 








Profit for the period

- 

-

2,324 

- 

2,324 

162 

2,486 

Other comprehensive (expense)/income
   for the period

- 

-

(197)

15 

(182)

18 

(164)

Distributions to non-controlling interests

- 

-

- 

- 

- 

(113)

(113)

Dividends to shareholders

- 

-

(2,446)

- 

(2,446)

- 

(2,446)

Shares issued

1 

32

- 

- 

33 

- 

33 

Consideration received for shares
   transferred by ESOP Trusts

- 

-

- 

11 

11 

- 

11 

Shares acquired by ESOP Trusts

- 

-

- 

(66)

(66)

- 

(66)

Write-down on shares held by ESOP
   Trusts

- 

-

(293)

293 

- 

- 

- 

Share-based incentive plans

- 

-

130 

- 

130 

- 

130 

 

---

---

---

---

---

---

---

At 30th September 2010

1,417 

1,400

5,839 

1,153 

9,809 

804 

10,613 

 

-----

-----

-----

-----

-----

-----

-----

 

 

Cash flow statement

Nine months ended 30th September 2011

 

 

9 months 2011
£m

9 months 2010
£m

2010
£m

 

------

------

------

Profit after tax

4,174 

2,486 

1,853 

Tax on profits

1,823 

1,147 

1,304 

Share of after tax profits of associates and joint ventures

(19)

(63)

(81)

Profit on disposal of interest in associates

(584)

- 

(8)

Net finance expense

534 

533 

715 

Depreciation and other non-cash items

1,172 

1,494 

2,071 

(Increase)/decrease in working capital

(374)

555 

1,297 

(Decrease)/increase in other net liabilities

(1,496)

545 

1,480 

 

------

------

------

Cash generated from operations

5,230 

6,697 

8,631 

Taxation paid

(1,126)

(1,365)

(1,834)

 

------

------

------

Net cash inflow from operating activities

4,104 

5,332 

6,797 

 

------

------

------

Cash flow from investing activities

 

 

 

Purchase of property, plant and equipment

(594)

(725)

(1,014)

Proceeds from sale of property, plant and equipment

84 

57 

92 

Purchase of intangible assets

(269)

(464)

(621)

Proceeds from sale of intangible assets

237 

58 

126 

Purchase of equity investments

(39)

(160)

(279)

Proceeds from sale of equity investments

50 

24 

27 

Purchase of businesses, net of cash acquired

(243)

(167)

(354)

Investment in associates and joint ventures

(35)

(61)

(61)

Proceeds from disposal of subsidiary and interest in associate

1,034 

- 

- 

Decrease in liquid investments

44 

58 

91 

Interest received

68 

57 

107 

Dividends from associates and joint ventures

15 

9 

18 

 

------

------

------

Net cash inflow/(outflow) from investing activities

352 

(1,314)

(1,868)

 

------

------

------

Cash flow from financing activities

 

 

 

Proceeds from own shares for employee share options

19 

11 

17 

Issue of share capital

126 

33 

62 

Shares acquired by ESOP Trusts

(35)

(66)

(16)

Shares purchased and cancelled or held as Treasury shares

(1,826)

- 

-

Repayment of short-term loans

(5)

(1,300)

(1,296)

Increase in short-term loans

36 

8 

6 

Net repayment of obligations under finance leases

(27)

(35)

(45)

Interest paid

(402)

(398)

(775)

Dividends paid to shareholders

(2,597)

(2,446)

(3,205)

Distributions to non-controlling interests

(231)

(113)

(118)

Other financing items

2 

(245)

(201)

 

------

------

------

Net cash outflow from financing activities

(4,940)

(4,551)

(5,571)

 

------

------

------

 

 

 

 

Decrease in cash and bank overdrafts in the period

(484)

(533)

(642)

 

 

 

 

Exchange adjustments

(61)

51 

81 

Cash and bank overdrafts at beginning of period

5,807 

6,368 

6,368 

 

------

------

------

Cash and bank overdrafts at end of period

5,262 

5,886 

5,807 

 

------

------

------

Cash and bank overdrafts at end of period comprise:

 

 

 

 

Cash and cash equivalents

5,414 

6,229 

6,057 

 

Overdrafts

(152)

(343)

(250)

 

------

------

------

 

5,262 

5,886 

5,807

 

------

------

------

 

 

Segmental information


GSK has revised its segmental information disclosures to reflect changes in the internal reporting structures with effect from 1st January 2011.  The Pharmaceuticals and Vaccines business in Japan is now shown as a separate segment.  Comparative information has been restated on a consistent basis.

 

GSK's operating segments are being reported based on the financial information provided to the Chief Executive Officer and the responsibilities of the Corporate Executive Team (CET).  Individual members of the CET are responsible for each geographic segment of the Pharmaceuticals and Vaccines business, ViiV Healthcare and the Consumer Healthcare business as a whole, respectively.

 

R&D investment is essential for the sustainability of the pharmaceutical businesses.  However, for segment reporting, the USA, Europe, Emerging Markets, Asia Pacific and Japan Pharmaceuticals and Vaccines operating profits exclude allocations of globally funded R&D as well as central costs, principally corporate functions and unallocated manufacturing costs.  GSK'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.

 

Other trading and unallocated pharmaceuticals and vaccines includes Canada, Puerto Rico, central vaccine tender sales and contract manufacturing sales, together with costs such as vaccines R&D, central dermatology costs and central manufacturing costs not attributed to other segments.

 

The Pharmaceuticals R&D segment is the responsibility of the Chairman, Research & Development and is reported as a separate segment.

 

Corporate and other unallocated costs and disposal profits include corporate functions, costs for legal matters, fair value movements on financial instruments and investments and profits on global asset disposals.

 

 

Turnover


Q3 2011
£m

Q3 2010
(restated)
£m

Growth
CER%

 

------

------

------

USA

1,892

1,950

(1)

Europe

1,410

1,428

(5)

Emerging Markets

949

874

11 

Asia Pacific

311

280

6 

Japan

587

413

34 

ViiV Healthcare

435

401

7 

Other trading and unallocated pharmaceuticals and vaccines

191

208

(10)

 

------

------

 

Pharmaceuticals and Vaccines

5,775

5,554

3 

Consumer Healthcare

1,329

1,259

5 

 

------

------

 

 

7,104

6,813

3 

 

------

------

 

 

 

Operating profit by segment


Q3 2011
£m

Q3 2010
(restated)
£m

Growth
CER%

 

 

------

------

------

 

USA

1,262 

1,258 

3 

 

Europe

779 

792 

(6)

 

Emerging Markets

280 

293 

- 

 

Asia Pacific

136 

119 

8 

 

Japan

359 

257 

30 

 

ViiV Healthcare

248 

222 

10 

 

Pharmaceuticals R&D

(734)

(729)

2 

 

Other trading and unallocated pharmaceuticals and vaccines

(280)

(214)

16 

 

 

------

------

 

 

Pharmaceuticals and Vaccines

2,050 

1,998 

2 

 

Consumer Healthcare

328 

313 

4 

 

 

------

------

 

 

Segment profit

2,378 

2,311 

 

 

Corporate and other unallocated costs and disposal profits

(199)

(182)

 

 

 

------

------

 

 

Operating profit before major restructuring

2,179 

2,129 

3 

 

Major restructuring

(64)

(171)

 

 

 

------

------

 

 

Total operating profit

2,115 

1,958 

 

 

 

 

 

 

 

Finance income

19 

22 

 

 

Finance costs

(191)

(197)

 

 

Share of after tax profits of associates and joint ventures

(2)

16 

 

 

 

------

------

 

 

Profit before taxation

1,941 

1,799 

 

 

 

------

------

 

 

 

 

Turnover


9 months 2011
£m

9 months 2010
(restated)
£m

Growth
CER%

 

 

------

------

------

 

USA

5,219

5,794

(6)

 

Europe

4,322

4,900

(13)

 

Emerging Markets

2,707

2,590

7 

 

Asia Pacific

931

846

5 

 

Japan

1,520

1,460

(2)

 

ViiV Healthcare

1,167

1,163

1 

 

Other trading and unallocated pharmaceuticals and vaccines

616

702

(13)

 

 

------

------

 

 

Pharmaceuticals and Vaccines

16,482

17,455

(5)

 

Consumer Healthcare

3,927

3,740

5 

 

 

------

------

 

 

 

20,409

21,195

(3)

 

 

------

------

 

 

 

 

Operating profit by segment


9 months 2011
£m

9 months 2010
(restated)
£m

Growth
CER%

 

------

------

------

USA

3,592 

3,787 

- 

Europe

2,388 

2,816 

(17)

Emerging Markets

811 

920 

(7)

Asia Pacific

421 

377 

5 

Japan

922 

933 

(8)

ViiV Healthcare

651 

635 

3 

Pharmaceuticals R&D

(2,141)

(2,296)

(4)

Other trading and unallocated pharmaceuticals and vaccines

(508)

(391)

17 

 

------

------

 

Pharmaceuticals and Vaccines

6,136 

6,781 

(9)

Consumer Healthcare

852 

741 

14 

 

------

------

 

Segment profit

6,988 

7,522 

 

Corporate and other unallocated costs and disposal profits

(670)

(2,357)

 

 

------

------

 

Operating profit before major restructuring

6,318 

5,165 

24 

Major restructuring

(390)

(1,062)

 

 

------

------

 

Total operating profit

5,928 

4,103 

 

 

 

 

 

Finance income

61 

58 

 

Finance costs

(595)

(591)

 

Profit on disposal of interest in associate

584 

- 

 

Share of after tax profits of associates and joint ventures

19 

63 

 

 

------

------

 

Profit before taxation

5,997 

3,633 

 

 

------

------

 

 

 

Additional income statement information

 

Three months ended 30th September 2011

 



Turnover

Cost of sales

SG&A costs

R&D costs

Other operating income

Operating profit

Operating margin %




-----

-----

-----

-----

-----

-----

-----

USA

Q3 2011

£m

1,892 

259 

407 

- 

36 

1,262 

67

Q3 2010 (restated)

£m

1,950 

282 

418 

- 

8 

1,258 

65

Growth CER

%

(1)

(9)

(1)

- 

>100 

3 












Europe

Q3 2011

£m

1,410 

316 

320 

- 

5 

779 

55

Q3 2010 (restated)

£m

1,428 

326 

314 

- 

4 

792 

56

Growth CER

%

(5)

(6)

(3)

- 

25 

(6)












Emerging Markets

Q3 2011

£m

949 

375 

294 

1 

1 

280 

30

Q3 2010 (restated)

£m

874 

316 

266 

1 

2 

293 

34

Growth CER

%

11 

18 

13 

- 

(50)

- 












Asia Pacific

Q3 2011

£m

311 

90 

84 

1 

- 

136 

44

Q3 2010 (restated)

£m

280 

86 

75 

- 

- 

119 

43

Growth CER

%

6 

1 

7 

- 

- 

8 












Japan

Q3 2011

£m

587 

86 

132 

11 

1 

359 

61

Q3 2010 (restated)

£m

413 

54 

107 

7 

12 

257 

62

Growth CER

%

34 

56 

17 

43 

(92)

30 












ViiV Healthcare

Q3 2011

£m

435 

84 

76 

21 

(6)

248 

57

Q3 2010 (restated)

£m

401 

83 

51 

36 

(9)

222 

55

Growth CER

%

7 

2 

47 

(42)

33 

10 












Pharmaceuticals R&D

Q3 2011

£m

- 

- 

43 

693 

2 

(734)


Q3 2010 (restated)

£m

- 

1 

40 

689 

1 

(729)


Growth CER

%

- 

(100)

8 

2 

100 

2 












Other trading and unallocated pharmaceuticals

Q3 2011

£m

191 

252 

97 

190 

68 

(280)


Q3 2010 (restated)

£m

208 

243 

93 

159 

73 

(214)


Growth CER

%

(10)

(6)

(4)

19 

(5)

16 












Total Pharmaceuticals and Vaccines

Q3 2011

£m

5,775 

1,462 

1,453 

917 

107 

2,050 

36

Q3 2010 (restated)

£m

5,554 

1,391 

1,364 

892 

91 

1,998 

36

Growth CER

%

3 

2 

5 

4 

20 

2 












Consumer Healthcare

Q3 2011

£m

1,329 

501 

466 

34 

- 

328 

25

Q3 2010 (restated)

£m

1,259 

468 

441 

38 

1 

313 

25

Growth CER

%

5 

7 

5 

(11)

>(100)

4 












Corporate and other unallocated costs

Q3 2011

£m

- 

15 

148 

20 

(16)

(199)


Q3 2010 (restated)

£m

- 

16 

151 

18 

3 

(182)


Growth CER

%

- 

(19)

(6)

(44)

>(100)

- 












Results before major restructuring 

Q3 2011

£m

7,104 

1,978 

2,067 

971 

91 

2,179 

31

Q3 2010 (restated)

£m

6,813 

1,875 

1,956 

948 

95 

2,129 

31

Growth CER

%

3 

3 

4 

2 

(4)

3 



*  Note:  This excludes HIV discovery research (pre-Phase IIb) which is conducted by GSK and Pfizer and R&D expenditure related to the Shionogi JV and Phase IV clinical expenditure which are reported within the ViiV Healthcare OOI and SG&A lines respectively.

 

 

Nine months ended 30th September 2011

 



Turnover

Cost of sales

SG&A costs

R&D costs

Other operating income

Operating profit

Operating margin %




-----

-----

-----

-----

-----

-----

-----

USA

9 months 2011

£m

5,219 

661 

1,240 

- 

274 

3,592 

69 

9 months 2010 (restated)

£m

5,794 

710 

1,444 

- 

147 

3,787 

65 

Growth CER

%

(6)

(6)

(10)

- 

90 

- 












Europe

9 months 2011

£m

4,322 

953 

992 

- 

11 

2,388 

55 

9 months 2010 (restated)

£m

4,900 

1,044 

1,051 

- 

11 

2,816 

58 

Growth CER

%

(13)

(10)

(6)

- 

- 

(17)












Emerging Markets

9 months 2011

£m

2,707 

1,036 

859 

3 

2 

811 

30 

9 months 2010 (restated)

£m

2,590 

915 

786 

2 

33 

920 

36 

Growth CER

%

7 

14 

12 

50 

(94)

(7)












Asia Pacific

9 months 2011

£m

931 

260 

250 

2 

2 

421 

45 

9 months 2010 (restated)

£m

846 

245 

224 

1 

1 

377 

45 

Growth CER

%

5 

4 

8 

100 

100 

5 












Japan

9 months 2011

£m

1,520 

224 

348 

27 

1 

922 

61 

9 months 2010 (restated)

£m

1,460 

225 

299 

20 

17 

933 

64 

Growth CER

%

(2)

(3)

11 

25 

(94)

(8)












ViiV Healthcare

9 months 2011

£m

1,167 

219 

209 

69 

(19)

651 

56 

9 months 2010 (restated)

£m

1,163 

255 

194 

63 

(16)

635 

55 

Growth CER

%

1 

(13)

9 

10 

25 

3 












Pharmaceuticals R&D

9 months 2011

£m

- 

- 

114 

2,033 

6 

(2,141)


9 months 2010 (restated)

£m

- 

1 

120 

2,177 

2 

(2,296)


Growth CER

%

- 

(100)

(3)

(4)

>100 

(4)












Other trading and unallocated pharmaceuticals

9 months 2011

£m

616 

487 

323 

508 

194 

(508)


9 months 2010 (restated)

£m

702 

547 

298 

443 

195 

(391)


Growth CER

%

(13)

(13)

(6)

15 

1 

17 












Total Pharmaceuticals and Vaccines

9 months 2011

£m

16,482 

3,840 

4,335 

2,642 

471 

6,136 

37 

9 months 2010 (restated)

£m

17,455 

3,942 

4,416 

2,706 

390 

6,781 

39 

Growth CER

%

(5)

(3)

(2)

- 

23 

(9)












Consumer Healthcare

9 months 2011

£m

3,927 

1,480 

1,518 

113 

36 

852 

22 

9 months 2010 (restated)

£m

3,740 

1,425 

1,461 

116 

3 

741 

20 

Growth CER

%

5 

5 

4 

- 

>100 

14 












Corporate and other unallocated costs

9 months 2011

£m

- 

63 

512 

58 

(37)

(670)


9 months 2010 (restated)

£m

- 

58 

2,222 

59 

(18)

(2,357)


Growth CER

%

- 

(14)

(78)

(34)

>100 

(73)












Results before major restructuring 

9 months 2011

£m

20,409 

5,383 

6,365 

2,813 

470 

6,318 

31 

9 months 2010 (restated)

£m

21,195 

5,425 

8,099 

2,881 

375 

5,165 

24 

Growth CER

%

(3)

(1)

(21)

(1)

27 

24 



*  Note:  This excludes HIV discovery research (pre-Phase IIb) which is conducted by GSK and Pfizer and R&D expenditure related to the Shionogi JV and Phase IV clinical expenditure which are reported within the ViiV Healthcare OOI and SG&A lines respectively.

 

 

Legal matters

 

The Group is involved in significant legal and administrative proceedings, principally product liability, intellectual property, tax, anti-trust and governmental investigations as well as related private litigation, which are more fully described in the 'Legal Proceedings' note in the Annual Report 2010. 

 

At 30th September 2011, the Group's aggregate provision for legal and other disputes (not including tax matters described under 'Taxation' below) was £2.9 billion.  The Group may become involved in significant legal proceedings in respect of which it is not possible to make a reliable estimate of the expected financial effect, if any, that could result from ultimate resolution of the proceedings.  In these cases, the Group would provide appropriate disclosures about such cases, but no provision would be made.

 

The ultimate liability for legal claims may vary from the amounts provided and is dependent upon the outcome of litigation proceedings, investigations and possible settlement negotiations.  The Group's position could change over time, and, therefore, there can be no assurance that any losses that result from the outcome of any legal proceedings will not exceed by a material amount the amount of the provisions reported in the Group's financial accounts.

 

Significant developments since the Annual Report 2010 (as previously updated by the Legal matters section of the Results Announcements for Q1 and Q2 2011) are as follows:

 

As previously disclosed in the Group's Q2 2011 Results Announcement, on 27th June 2011, ViiV Healthcare received notice that Teva Pharmaceuticals ('Teva') had amended its ANDA for Epzicom (the combination of lamivudine and abacavir) to contain a Paragraph IV certification for two additional patents listed in the Orange Book, alleging the patents were invalid, unenforceable or not infringed.  On 5th August 2011, ViiV Healthcare filed suit against Teva under the challenged patents in the U.S. District Court for the District of Delaware.  A stay is in place against FDA approval of Teva's ANDA until the earlier of December 2013 or a decision adverse to ViiV Healthcare in the matter.

 

Developments with respect to tax matters are described in 'Taxation' below.

 

 

Taxation

 

Transfer pricing and other issues are as previously described in the 'Taxation' note to the Financial Statements included in the Annual Report 2010.  There have been no material changes to tax matters since the publication of the Annual Report.

 

The tax on profit before major restructuring charges amounted to £515 million and represented an effective tax rate of 25.7% (Q3 2010: 24.4%) which reflected the settlement of certain historical matters in 2011 and 2010.

 

During the first quarter, the company disposed of its investment in Quest Diagnostics and of intellectual property relating to Zovirax in the USA and Canada.  As a result of these transactions the tax rate for the year to date is 29.6%.  In line with previous guidance, the rate for the full year is expected to be around 29.5% excluding the effect of any tax on the proposed Consumer Healthcare divestments of non-core brands.

 

GSK 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.

 

A number of changes to the UK Corporation tax system were announced in the March 2011 Budget Statement.  The impact on the Group's future estimated tax rate will be considered in conjunction with the other announced reforms to the UK Corporation Tax system when enacted.

 

 

Additional information

 

Accounting policies and basis of preparation

This unaudited Results Announcement containing condensed financial information for the three and nine months ended 30th September 2011 is prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.  The Results Announcement should be read in conjunction with the Annual Report 2010, 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 2010.

 

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 balance sheet at 31st December 2010 has been derived from the full Group accounts published in the Annual Report 2010, which has been delivered to the Registrar of Companies and on which the report of the independent auditors was unqualified and did not contain a statement under section 498 of the Companies Act 2006.

 

 

Exchange rates

The Group 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:

 

Q3 2011

Q3 2010

9 months 2011

9 months 2010

2010

 

------

------

------

------

------

Average rates:

 

 

 

 

 

 

US$/£

1.59

1.56

1.61

1.54

1.55

 

Euro/£

1.12

1.18

1.14

1.16

1.16

 

Yen/£

126

134

130

138

136

 

 

 


 


 

Period end rates:

 

 


 


 

US$/£

1.56

1.58

1.56

1.58

1.56

 

Euro/£

1.16

1.15

1.16

1.15

1.17

 

Yen/£

120

132

120

132

127

 

During Q3, average Sterling exchange rates were stronger against the US Dollar but weaker against the Euro and the Yen compared with the same period in 2010.

 

During the nine months ended 30th September 2011 average Sterling exchange rates were stronger against the US Dollar, but weaker against the Euro and the Yen compared with the same period in 2010.  Period end Sterling exchange rates were stronger against the Euro but weaker against the US Dollar and the Yen.

 

 

Net assets

The book value of net assets decreased by £1,514 million from £9,745 million at 31st December 2010 to £8,231 million at 30th September 2011.  This reflects an increase in the pension deficit together with shares repurchased in the period in excess of profits retained.  At 30th September 2011, the net deficit on the Group's pension plans was £2,214 million compared with £1,224 million at 31st December 2010.  The increase in the deficit arose from a decrease in asset values and decreases in the rates used to discount UK pension liabilities from 5.5% to 5.0% and US pension liabilities from 5.2% to 4.4%, partly offset by a lower long-term inflation rate.

 

The carrying value of investments in associates and joint ventures at 30th September 2011 was £599 million, with a market value of £753 million.  Assets held for sale of £704 million at 30th September 2011 included £700 million related to the proposed disposal of the non-core OTC brands.

 

At 30th September 2011, the ESOP Trusts held 94 million GSK shares against the future exercise of share options and share awards.  The carrying value of £677 million has been deducted from other reserves.  The market value of these shares was £1,246 million.

 

During the period, GSK purchased £1,826 million of shares either to be held as Treasury shares or for cancellation and in addition an accrual of £101 million was provided to reflect the maximum potential commitment under an irrevocable purchase agreement to acquire shares for cancellation during the period from 1st October to 26th October 2011.  At 30th September 2011, the company held 505.4 million Treasury shares at a cost of £6,804 million, which has been deducted from retained earnings.

 

 

Contingent liabilities

There were contingent liabilities at 30th September 2011 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.

 

 

Reconciliation of cash flow to movements in net debt

 

9 months 2011
£m

9 months 2010
£m

2010
£m

 

------

------

------

Net debt at beginning of the period

(8,859)

(9,444)

(9,444)

 

 


 

Decrease in cash and bank overdrafts

(484)

(533)

(642)

Cash inflow from liquid investments

(44)

(58)

(91)

Net (increase in)/repayment of short-term loans

(31)

1,292 

1,290 

Net repayment of obligations under finance leases

27 

35 

45 

Debt of subsidiaries acquired

(2)

(18)

(20)

Exchange adjustments

(119)

12 

61 

Other non-cash movements

15 

(78)

(58)

 

------

------

------

(Increase)/decrease in net debt

(638)

652 

585 

 

------

------

------

Net debt at end of the period

(9,497)

(8,792)

(8,859)

 

------

------

------

 

 

Independent review report to GlaxoSmithKline plc

 

Introduction

We have been engaged by the company to review the condensed financial information in the Results Announcement for the nine months ended 30th September 2011 which comprises the income statement and statement of comprehensive income for the three and nine months ended 30th September 2011, the cash flow statement and statement of changes in equity for the nine months ended 30th September 2011, the balance sheet as at 30th September 2011 and related notes (excluding the late-stage pharmaceuticals and vaccines pipeline table, the additional income statement information and the pharmaceuticals and vaccines turnover tables).  We have read the other information contained in the Results Announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed financial information.

 

Directors' responsibilities

The Results Announcement is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the Results Announcement in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

The annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed financial information included in the Results Announcement for the nine months ended 30th September 2011 has been prepared in accordance with the accounting policies set out in the Accounting policies and basis of preparation section on page 38.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed financial information in the Results Announcement based on our review.  This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the United Kingdom Financial Services Authority 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 the 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 financial information in the Results Announcement for the nine months ended 30th September 2011 is not prepared, in all material respects, in accordance with the accounting policies set out in the Accounting policies and basis of preparation section on page 38 in the Results Announcement, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

PricewaterhouseCoopers LLP

Chartered Accountants

26th October 2011

London

 

Notes:

 

(a)

The maintenance and integrity of the GlaxoSmithKline plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the condensed financial information since it was initially presented on the website.

 

 

(b)

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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