China Sales Hurt Glaxo 3Q
GSK announces Q3 core EPS growth of 16% and dividend of 19p
- Core EPS 28.9p (+16%) benefiting from operating, financial and long-term cost efficiencies
- Pharma & Vaccines sales flat: US +2%, Europe +5%, Japan +2% offset by EMAP -9%,
- Consumer Healthcare +4%
- Four approvals in three markets; Tivicay for HIV and FluLaval Q-IV vaccine for flu; Tafinlar for metastatic melanoma; Relvar Ellipta for asthma
- Q3 dividend of 19p (+6%)
- Full year 2013 guidance reaffirmed
■ Broadly-based sales growth with Group turnover +1% CER:
– Pharmaceuticals and Vaccines sales flat: US +2%, Europe +5%, Japan +2% offset by EMAP -9%,
impacted by decline in China sales and Vaccines phasing
– Consumer Healthcare +4%
– Total Group turnover ex-divestments +1%
■ Further significant pipeline approvals and filings:
– 4 approvals; US: Tivicay for HIV and FluLaval Q-IV vaccine for flu; Europe: Tafinlar for metastatic
melanoma; Japan: Relvar Ellipta for asthma
– Positive FDA Adcom recommendation for Anoro Ellipta in COPD and positive CHMP opinion for
Relvar Ellipta in asthma & COPD
– 3 FDA filings: Arzerra for first-line CLL; dolutegravir-Trii for HIV; fluticasone furoate monotherapy
■ Continued delivery of operating and financial efficiencies, strong cash generation and returns to
– Net cash inflow from operating activities of £2.1 billion; core tax rate 23.5%
– Core EPS 28.9p (+16%) benefiting from operating, financial and long-term cost efficiencies
– Q3 dividend: 19p (+6%)
– £1 billion of shares repurchased by the end of Q3; continue to target £1-2 billion for the year
■ Successful implementation of measures to drive strategic focus and improve growth outlook:
– Agreement to divest Lucozade and Ribena to Suntory for £1.35 billion and Arixtra/Fraxiparine and
related manufacturing site to Aspen for £700 million
■ Full year 2013 guidance reaffirmed:
– Core EPS growth of 3-4% on sales growth of around 1% (both CER)
GSK’s strategic priorities
We have focused our business around the delivery of three strategic priorities, which aim to increase growth,
reduce risk and improve our long term financial performance:
Grow a diversified global business
Deliver more products of value
Simplify the operating model
Chief Executive Officer’s review
This quarter marks continued delivery for GSK of broadly-based sales growth, significant new product output
from the pipeline and further growth in returns to shareholders.
In R&D, we received four approvals and importantly, we are making substantive progress to expand our
Total sales grew 1%, core operating profit was up 11% and core earnings per share was up 16% at 28.9p.
The increase in core operating profit was driven by continued strong cost control, including a reduction in
R&D expenditure, and the delivery of a further benefit from a programme of initiatives we started in 2012 to
re-shape and reduce certain long-term operating expenses. As we saw last year, contributions from this
programme are unevenly phased. We will continue to look for more of these opportunities to help deliver
sustained reductions in costs and balance sheet liabilities.
As far as full year 2013 is concerned, we continue to expect core EPS growth of 3-4% on sales growth of
around 1% (both at CER).
Contributions from across the Group helped to deliver sales growth in Q3 despite a significant decline in
sales from our Chinese business and lower vaccine shipments in emerging markets due to the phasing of
In the US, Pharmaceuticals and Vaccines sales grew 2%, negatively impacted by wholesaler and retailer
de-stocking in the quarter. Excluding this impact, growth is estimated at 5%. This continues the momentum
demonstrated by the US recently, and is encouraging given the intensifying price competition we are seeing.
With our substantial new product flow and the changes we have made to our commercial model, we continue
to be optimistic about future growth in this market.
I am also pleased with the performance of our European Pharmaceuticals and Vaccines business, with sales
up 5%. Some of this improvement reflects the annualisation of government price cuts and it is clear that the
commercial environment in Europe remains challenging. Nevertheless, I believe we are now seeing benefits
from the measures we have taken to restructure and focus this business around core assets such as
Seretide and key growth opportunities such as vaccines and our oncology portfolio.
EMAP Pharmaceuticals and Vaccines sales were down 9%, impacted by the timing of vaccine tender
shipments and a significant sales decline in China (-61%), where operations have been disrupted by the
ongoing investigation into our business. We continue to co-operate with the authorities and we remain fully
committed to supplying our products to patients in the country. At this stage, it is still too early for us to
quantify the longer-term impact of the investigation on our performance in China. Excluding the decline in
China sales, our EMAP Pharmaceuticals business grew 5%.
As we have previously highlighted, 2013 is a key year for R&D delivery.
Of the 6 assets we highlighted at the beginning of the year, 4 have now been approved. We have also
received approvals for our quadrivalent flu vaccine, FluLaval, and significant new indications for 3 other
products. These represent substantial new growth opportunities in key areas of our portfolio.
CEO review Group performance Divisional performance Research & development Financial information
Issued: Wednesday, 23 October 2013, London, U.K. 3
In Oncology, we have launched both Tafinlar and Mekinist for metastatic melanoma in the US and have
started to launch Tafinlar in Europe as well. We also received European approval for use of Tyverb in
combination with trastuzumab for metastatic breast cancer in the quarter, and filed Arzerra, one of several
biologic medicines we are developing, for first-line chronic lymphocytic leukaemia, in the US and Europe.
This quarter also saw the launch of Tivicay, a new treatment for HIV. This is a positive step forward for a
disease area in which new drug development has proved challenging and is testament to the success of
ViiV Healthcare, the company we established to focus on HIV treatment and research in 2009. We have
also filed a once-daily single tablet combination of dolutegravir, abacavir and lamivudine to offer an additional
potential new treatment regimen for patients with HIV.
In Respiratory, I am pleased to report that last week we began the shipping to wholesalers in the US of Breo
Ellipta for treatment of COPD. The medicine is now approved in Japan for the treatment of asthma and we
received a positive opinion for both COPD and asthma in Europe. In the US, an FDA Advisory Committee
also voted positively to recommend approval of Anoro Ellipta for COPD and a regulatory decision is expected
before the end of the year. Today, we have announced the US filing of fluticasone furoate monotherapy for
treatment of asthma. All these milestones are clear indicators of our ability to expand our current respiratory
portfolio with new medicines and inhaler technology to build on more than 40 years of leadership in this
Of the 14 Phase III assets we highlighted at the beginning of this year, we have received all data on 5. Three
of these assets have progressed to filing and 2 reported negative data: drisapersen for Duchenne’s Muscular
Dystrophy and vercirnon for Crohn’s disease. Both of these were disappointing given the need for new
treatments in these areas. As we previously highlighted, data with our Zoster vaccine is now expected to
read-out in 2015. We continue to expect Phase III data on 8 more assets before the end of 2014.
Finally in R&D, we took another major step forward this month in development of the world’s first vaccine to
prevent malaria, with positive 18 month follow-up data generated for the candidate vaccine. This vaccine
has the potential to make a significant contribution to public health in Africa and we now intend to file it for
approval in 2014.
As we focus on launching our new pipeline, we continue to make progress on the sale of non-core assets
and parts of the business where we can realise attractive value for our shareholders. This quarter we
announced agreements for divestitures totalling more than £2 billion. We have agreed to sell Lucozade
and Ribena to Suntory for £1.35 billion and have accepted an offer of £700 million from Aspen for our
anticoagulant products Arixtra and Fraxiparine and their related manufacturing site.
We continue to improve shareholder returns through both dividend payments and our long-term share
buy-back programme. Today, we announced a dividend of 19p, up 6%. By the end of the third quarter we
had repurchased £1 billion of shares and we continue to target share repurchases of £1-2 billion by the end
See full report here
Posted: October 2013