6-K
GSK plc (GSK)
6-K
2021-02-03
For: 2021-02-03
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April 10, 2026
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of February 2021
Commission File Number 001-15170
GlaxoSmithKline plc
(Translation of registrant's name into English)
980 Great West Road, Brentford, Middlesex, TW8 9GS
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F . . . .X. . . . Form 40-F . . . . . . . .
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____
| Issued:<br>Wednesday, 3 February 2021, London U.K. | |
|---|---|
| GSK delivers FY 2020 reported sales of £34 billion, +1% AER,<br>+3% CER and Adjusted<br><br><br>EPS of 115.9p, -6% AER, -4% CER, in line with guidance; Total EPS<br>115.5p, +23% AER<br><br><br><br><br><br>Strong<br>growth of new and specialty products; on track to deliver two<br>exciting new companies | |
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| Highlights | |
| --- | --- |
| Strong sales performance from key growth drivers in HIV,<br>Respiratory, Oncology and Consumer Healthcare offset disruption<br>from COVID-19 to adult vaccinations | |
| ● | Pharmaceuticals<br>£17 billion -3% AER, -1% CER; new and specialty products<br>£9.7 billion +11% AER, +12% CER |
| ● | Vaccines<br>£7 billion -2% AER, -1% CER. Shingrix £2 billion +10% AER, +11%<br>CER |
| ● | Consumer<br>Healthcare £10 billion +12% AER, +14% CER (pro-forma -2%<br>CER*) |
| ● | New<br>Biopharma product portfolio strengthened with 9 approvals in 2020<br>and Cabenuva in the US in January 2021 |
| Effective cost control supports delivery of adjusted earnings per<br>share in line with FY 2020 guidance | |
| ● | Total<br>Group operating margin 22.8%. Total EPS 115.5p +23% AER, +26%<br>CER |
| ● | Adjusted<br>Group operating margin 26.1%. Adjusted EPS 115.9p -6% AER, -4%<br>CER |
| ● | Q4 net<br>cash flow from operations £4 billion. Free cash flow £3<br>billion |
| Significant progress on Biopharma pipeline with over 20 assets now<br>in late-stage clinical trials | |
| ● | 20+ new<br>product launches planned by 2026, 10+ with potential peak annual<br>revenues in excess of $1 billion |
| ● | Pivotal<br>study starts/data expected in 2021 for RSV vaccine in older adults,<br>COVID-19 assets, long-acting anti IL-5 antagonist, daprodustat and<br>dostarlimab |
| ● | Oncology<br>momentum building: 15 potential medicines in trials, including 9<br>immuno-oncology and 3 cell therapies |
| ● | 20+<br>deals executed, including acquisitions of new antibody, mRNA and<br>genetics/genomics technologies |
| On track for separation into new standalone Biopharma and Consumer<br>Healthcare companies in 2022 | |
| ● | 2020<br>targets met with £0.3 billion annual cost savings and<br>£1.1 billion divestment proceeds achieved |
| ● | Biopharma<br>investor update in June to set out progress on innovation,<br>commercial execution and growth outlook together with capital<br>allocation priorities |
| Sustained progress and leadership in ESG | |
| ● | Sector<br>leading in key indices, including DJSI and Sustainalytics, and #1<br>rank in 2021 Access to Medicines Index |
| ● | New<br>environmental targets set to achieve net zero impact on climate and<br>net positive impact on nature by 2030 |
| 2021 Adjusted EPS expected to decline by a mid to high-single digit<br>percentage in CER | |
| ● | Reflects<br>further growth in new and specialty products and Consumer<br>Healthcare, increased investment in our pipeline and deferral of<br>strong growth in Vaccines performance due to impact of COVID-19<br>immunisation programmes |
| ● | 2022<br>outlook remains unchanged. Continue to expect meaningful<br>improvement in revenues and margins |
| Dividend of 23p/share declared for Q4 2020; 80p/share for FY 2020.<br>Expected dividend of 80p/share for FY 2021 | |
| ● | Distribution<br>policy for new GSK to be implemented in 2022 to support growth and<br>investment. Aggregate distributions expected to be lower than at<br>present |
| Emma Walmsley, Chief Executive Officer, GSK: “2020 was an extraordinary year<br>for all of us, and one of significant progress for GSK. We invested<br>in our pipeline and new launches, readied the company for<br>separation, and had to rapidly mobilise and respond to the<br>pandemic. I am extremely proud of the agility and resilience our<br>teams have shown. We delivered our guidance for the year,<br>offsetting the significant impact of COVID-19 on adult<br>vaccinations, with strong performances of new products and<br>effective cost control.<br><br><br><br><br><br>“Importantly,<br>progress against our strategic goals remains firmly on track. We<br>are building a high value biopharma pipeline, have substantially<br>integrated our Consumer JV and have delivered all our first year<br>targets for our two year separation programme. This means we are in<br>a strong position to launch new competitive, standalone Biopharma<br>and Consumer healthcare companies in 2022. In doing so, we have<br>high confidence that we can achieve meaningful global impact to<br>health and significant value creation for<br>shareholders.” | |
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| The<br>Total results are presented in summary on page 2 and under<br>‘Financial performance’ on pages 12 and 29 and Adjusted<br>results reconciliations are presented on pages 24, 25, 39 and 40.<br>Adjusted results are a non-IFRS measure that may be considered in<br>addition to, but not as a substitute for, or superior to,<br>information presented in accordance with IFRS. Adjusted results are<br>defined on page 10 and % or AER% growth, CER% growth, free<br>cash flow and other non-IFRS measures are defined on page 63. GSK<br>provides guidance on an Adjusted results basis only, for the<br>reasons set out on page 11. All expectations, guidance and targets<br>regarding future performance and dividend payments should be read<br>together with ‘Outlook, assumptions and cautionary<br>statements’ on pages 64 and 65.<br><br>This announcement contains inside<br>information. | |
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| * |
All values are in British Pounds.
| 2020 results | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2020 | Growth | Q4 2020 | Growth | |||||
| £m | £% | CER% | £m | £% | CER% | |||
| Turnover | 34,099 | 1 | 3 | 8,739 | (2) | (1) | ||
| Total<br>operating profit | 7,783 | 12 | 15 | 1,061 | (44) | (44) | ||
| Total<br>earnings per share | 115.5p | 23 | 26 | 13.6p | (48) | (48) | ||
| Adjusted<br>operating profit | 8,906 | (1) | 2 | 1,817 | (2) | (1) | ||
| Adjusted<br>earnings per share | 115.9p | (6) | (4) | 23.3p | (6) | (5) | ||
| Net<br>cash from operating activities | 8,441 | 5 | 3,855 | 12 | ||||
| Free<br>cash flow | 5,406 | 7 | 3,106 | 20 | ||||
| 2021 guidance | ||||||||
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| We set out below earnings guidance for 2021.<br><br><br><br><br><br>We<br>delivered on our strategic priorities in 2020. In 2021, as planned<br>we will continue to increase investment in our pipeline, build on<br>our top-line momentum for key growth drivers and largely complete<br>readiness for separation. Assuming healthcare systems and consumer<br>trends approach normality in the second half of the year, we expect<br>Pharmaceutical revenue to grow flat to low-single digits and<br>Consumer Healthcare revenue to grow low to mid-single digits<br>excluding brands divested/under review with above market growth.<br>For our Vaccines business, we now anticipate further disruption<br>during the first half of the year, given governments’<br>prioritisation of COVID-19 vaccination programmes and the<br>resurgence in late 2020 of the pandemic. This is expected to impact<br>adult and adolescent immunisations, including Shingrix, notably in the US. Despite<br>this short-term impact we remain very confident in demand for these<br>products, and expect strong recovery and contribution to growth<br>from Shingrix in the second<br>half of the year. We expect Vaccines revenue for 2021 to grow flat<br>to low-single digits. Reflecting these factors, our guidance range<br>for 2021 is a decline of mid to high-single digit percent Adjusted<br>EPS at CER.<br><br><br><br><br><br>At our<br>Biopharma investor update in June we plan to set out in detail the<br>growth prospects and financial outlook for the new Biopharma<br>company over the medium term, including a detailed review of the<br>pipeline we have been building over recent years. Alongside these<br>we will provide details of a new distribution policy which reflects<br>the optimised capital structure and investment priorities focused<br>on delivering sustainable long-term shareholder value. We anticipate that this new policy will<br>deliver competitive and attractive returns informed by appropriate<br>earnings pay-out ratios through the investment cycle well covered<br>by Free Cash Flow and, importantly, expected growth potential. We<br>expect that aggregate distributions for GSK will be lower than at<br>present. This new policy will be implemented for dividends paid in<br>respect of 2022.<br><br><br><br><br><br>All<br>expectations, guidance and targets regarding future performance and<br>dividend payments should be read together with ‘Outlook,<br>assumptions and cautionary statements’ on pages 64 and 65. If<br>exchange rates were to hold at the closing rates on 31 January 2021<br>($1.37/£1, €1.13/£1 and Yen 144/£1) for the<br>rest of 2021, the estimated negative impact on 2021 Sterling<br>turnover growth would be 4% and if exchange gains or losses were<br>recognised at the same level as in 2020, the estimated negative<br>impact on 2021 Sterling Adjusted EPS growth would be around<br>7%. | ||||||||
| Results presentation | ||||||||
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| A<br>webcast of the quarterly results presentation hosted by Emma<br>Walmsley, GSK CEO, will be held at 2pm GMT on 3 February 2021.<br>Presentation materials will be published on www.gsk.com prior to<br>the webcast and a transcript of the webcast will be published<br>subsequently.<br><br><br><br><br><br>Information<br>available on GSK’s website does not form part of, and is not<br>incorporated by reference into, this Results<br>Announcement. | ||||||||
| Operating performance – 2020 | ||||||||
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| Turnover | 2020 | |||||||
| --- | --- | --- | --- | --- | ||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | Pro-forma<br><br><br>growth<br><br><br>CER% | |||||
| Pharmaceuticals | 17,056 | (3) | (1) | (1) | ||||
| Vaccines | 6,982 | (2) | (1) | (1) | ||||
| Consumer<br>Healthcare | 10,033 | 12 | 14 | (2) | ||||
| 34,071 | 1 | 3 | (2) | |||||
| Corporate<br>and other unallocated turnover | 28 | |||||||
| Group<br>turnover | 34,099 | 1 | 3 | (2) | ||||
| Group turnover was £34,099 million in the year, up 1% AER, 3%<br>CER but down 2% CER on a pro-forma basis. On a pro-forma basis,<br>Group turnover was down 2% CER, but up 1% at CER excluding the<br>impact of divestments in Vaccines and brands divested or under<br>review in Consumer Healthcare.<br><br><br><br><br><br>Pharmaceuticals<br>turnover in the year was £17,056 million, down 3% AER, 1% CER.<br>Respiratory sales were up 22% AER, 23% CER, to £3,749 million,<br>on growth of Trelegy,<br>Nucala and Relvar/Breo. HIV sales were flat at<br>AER, up 1% CER, to £4,876 million, with growth in Juluca and Dovato partly offset by declines in<br>Tivicay and Triumeq. Sales of Established<br>Pharmaceuticals declined 16% AER, 15% CER to £7,332<br>million.<br><br><br><br><br><br>Vaccines turnover declined 2% AER, 1% CER to £6,982 million,<br>primarily driven by the adverse impact of the COVID-19 pandemic on<br>Hepatitis vaccines, DTPa-containing vaccines, Synflorix and Bexsero, together with the divestment of<br>Rabipur<br>and Encepur. This decline was partly offset by higher sales<br>of Influenza vaccines across all regions and by Shingrix growth in Europe, China and the US together<br>with Cervarix strong performance in China.<br><br><br><br><br><br>Reported Consumer Healthcare sales grew 12% AER and 14% CER to<br>£10,033 million for the full year, largely driven by the<br>inclusion of the Pfizer portfolio, partly offset by brands<br>divested/under review. On a pro-forma basis, sales declined 2% CER,<br>but grew 4% CER excluding brands divested/under review, reflecting<br>the underlying strength of brands across the portfolio and<br>categories, strong growth in e-commerce, and successful execution<br>meeting evolving consumer demand as a result of the<br>pandemic.<br><br><br><br><br><br>Operating profit<br><br><br>Total<br>operating profit was £7,783 million in 2020 compared with<br>£6,961 million in 2019. The total operating margin was 22.8%.<br>Adjusted operating profit was £8,906 million, 1% lower than<br>2019 at AER and 2% higher at CER on a turnover increase of 3% CER.<br>The Adjusted operating margin of 26.1% was 0.5 percentage points<br>lower at AER, and 0.2 percentage points lower on a CER basis than<br>in 2019. This reflected the profit on disposal of the Horlicks and other Consumer Healthcare<br>brands and resultant sale of shares in Hindustan Unilever as well<br>as increased income from asset disposals. This was partly offset by<br>higher re-measurement charges on the contingent consideration<br>liabilities.<br><br><br><br><br><br>The<br>reduction in pro-forma Adjusted operating profit primarily<br>reflected the adverse impact from the reduction in sales in<br>Vaccines as a result of the COVID-19 pandemic, continuing price<br>pressure, particularly in Respiratory, investment in R&D, and<br>investments in promotional product support, particularly for new<br>launches in Vaccines, HIV and Respiratory. This was partly offset<br>by reduced promotional and variable spending across all three<br>businesses as a result of the COVID-19 lockdowns, the continuing<br>benefit of restructuring in Pharmaceuticals, Consumer Healthcare<br>and the tight control of ongoing costs, particularly in<br>non-promotional spending across all three businesses.<br><br><br><br><br><br>Earnings per share<br><br><br>Total<br>EPS was 115.5p, compared with 93.9p in 2019. The increase in EPS<br>primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare<br>brands as well as increased income from asset disposals, partly<br>offset by higher re-measurement charges on the contingent<br>consideration liabilities, higher major restructuring charges and a<br>one-off benefit in 2019 from increased share of after tax profits<br>of the associate Innoviva.<br><br><br><br><br><br>Adjusted<br>EPS was 115.9p compared with 123.9p in 2019, down 6% AER, 4% CER,<br>on a 2% CER increase in Adjusted operating profit. The reduction<br>primarily resulted from a higher non-controlling interest<br>allocation of Consumer Healthcare profits, higher investment in<br>R&D and reduced share of after tax profits of associates<br>resulting from a non-recurring income tax benefit in<br>Innoviva.<br><br><br><br><br><br>Cash flow<br><br><br>The net cash inflow from operating activities for the year was<br>£8,441 million (2019: £8,020 million). Free cash flow was<br>£5,406 million for the year (2019: £5,073 million). The<br>increase in free cash flow primarily reflected increased proceeds<br>from disposal of intangible assets, beneficial timing of payments<br>for returns and rebates, reduced legal payments and improved<br>operating profits, partly offset by higher dividends to<br>non-controlling interests, increase in trade receivables, increased<br>tax payments including tax on disposals and adverse exchange<br>impacts. | ||||||||
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| Operating performance – Q4 2020 | ||||||||
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| Turnover | Q4 2020 | |||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Pharmaceuticals | 4,366 | (4) | (3) | |||||
| Vaccines | 2,012 | 15 | 16 | |||||
| Consumer<br>Healthcare | 2,360 | (8) | (7) | |||||
| 8,738 | (1) | - | ||||||
| Corporate<br>and other unallocated turnover | 1 | |||||||
| Group<br>turnover | 8,739 | (2) | (1) | |||||
| Group turnover was £8,739 million in the quarter, down 2% AER,<br>1% CER. Excluding the impact of divestments in Vaccines and brands<br>divested or under review in Consumer Healthcare, Group turnover was<br>up 2% CER.<br><br><br><br><br><br>Pharmaceuticals<br>turnover in the quarter was £4,366 million, down 4% AER, 3%<br>CER. Respiratory sales were up 14% AER, 15% CER, to £1,017<br>million, on growth of Trelegy and Nucala. HIV sales were up 1% AER, 2%<br>CER, to £1,268 million, with growth in Juluca and Dovato partly offset by Tivicay and Triumeq. Sales of Established<br>Pharmaceuticals declined 19% AER, 18% CER, to £1,760<br>million.<br><br><br><br><br><br>Vaccines turnover grew 15% AER, 16% CER to £2,012 million,<br>primarily driven by double-digit growth in Shingrix and a strong demand across all regions for<br>Influenza vaccine. Meningitis vaccines<br>also contributed to growth mainly due to favourable CDC demand in<br>the US.<br><br><br><br><br><br>Reported<br>Consumer Healthcare sales declined 8%<br>AER and declined 7% CER to £2,360 million in the quarter.<br>Brands divested/under review declined 76% AER, 75% CER to<br>£62 million given successful execution of the divestment<br>programme. Sales grew 1% CER, excluding brands divested/under<br>review, with underlying brand strength combined with the strength<br>of the portfolio and successful execution driving growth, and<br>offsetting a weak quarter in Respiratory health.<br><br><br><br><br><br>Operating profit<br><br><br>Total operating profit was £1,061 million in Q4 2020 compared<br>with £1,902 million in Q4 2019. The total operating margin was<br>12.1%. Adjusted operating profit was £1,817 million, 2% lower<br>than Q4 2019 at AER, 1% lower at CER on a turnover decline of 1%<br>CER. The Adjusted operating margin of 20.8% was flat at AER, and<br>0.1 percentage points lower on a CER basis than in Q4<br>2019.<br><br><br><br><br><br>The decrease in Total operating profit primarily reflected lower<br>re-measurement credits on the contingent consideration liabilities,<br>lower profit on asset disposals and increased major restructuring<br>costs, partly offset by favourable comparisons to a decrease in<br>value of the shares in Hindustan Unilever and unwind of the fair<br>market value uplift on inventory arising on completion of the<br>Consumer Healthcare Joint Venture with Pfizer.<br><br><br><br><br><br>The reduction in Adjusted operating profit primarily reflected<br>increased investment in R&D as well as targeted investments in<br>promotional product support and increased costs for a number of<br>legal settlements, partly offset by benefits from continued<br>restructuring across the business and tight control of ongoing<br>costs including reduced promotional and variable spending across<br>all three businesses as a result of the COVID-19<br>lockdowns.<br><br><br><br><br><br>Earnings per share<br><br><br>Total<br>EPS was 13.6p, compared with 26.2p in Q4 2019. The reduction in EPS<br>primarily reflected lower re-measurement credits on the contingent<br>consideration liabilities, lower profit on asset disposals and<br>increased major restructuring costs, partly offset by favourable<br>comparisons to a decrease in value of the shares in Hindustan<br>Unilever and lower unwind of the fair market value uplift on<br>inventory arising on completion of the Consumer Healthcare Joint<br>Venture with Pfizer.<br><br><br><br><br><br>Adjusted<br>EPS was 23.3p compared with 24.8p in Q4 2019, down 6% AER and 5%<br>CER, on a 1% CER decrease in Adjusted operating profit reflecting<br>higher investment in R&D, higher interest costs and a higher<br>effective tax rate partly offset by a lower non-controlling<br>interest allocation of Consumer Healthcare and ViiV<br>profits.<br><br><br><br><br><br>Cash flow<br><br><br>The net cash inflow from operating activities for the quarter was<br>£3,855 million (Q4 2019: £3,453 million). Free cash flow<br>was £3,106 million for the quarter (Q4 2019: £2,599<br>million). The increase in free cash flow primarily reflected<br>increased proceeds from disposal of intangible assets and reduced<br>legal and tax payments, partly offset by a lower seasonal reduction<br>in inventory and trade receivables and higher dividends to<br>non-controlling interests. | ||||||||
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| R&D pipeline | ||||||||
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| Our<br>approach to R&D focuses on the science of the immune system,<br>genetics and advanced technologies. The pipeline currently<br>comprises 57 vaccines and medicines, predominantly in the areas of<br>infectious diseases, oncology and immune-mediated<br>diseases. | ||||||||
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| As<br>detailed in the FY 2020 presentation to analysts and investors on<br>3 February 2021,<br>the company has identified over 20 potential product approvals<br>which could take place by 2026, of which more than 10 could<br>significantly change medical practice and potentially generate peak<br>annual sales in excess of one billion dollars. | ||||||||
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| Pipeline news flow highlights since Q3 2020 | ||||||||
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| COVID-19 | ||||||||
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| Vaccine collaborations | ||||||||
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| ● | Medicago<br>and GSK announced the start of Phase II/III clinical trials of the<br>adjuvanted COVID-19 vaccine candidate. | |||||||
| ● | Sanofi<br>and GSK announced a delay with their adjuvanted recombinant<br>protein-based COVID-19 vaccine programme to improve immune response<br>in the elderly. On track to initiate Phase IIb start in Q1<br>2021. | |||||||
| ● | Clover<br>and GSK announced they will not continue with their collaboration.<br>Clover to move into Phase II/III studies with an alternative<br>adjuvant. | |||||||
| ● | Announced<br>new strategic partnership with CureVac to develop a next generation<br>mRNA vaccine for COVID-19 and to support manufacture of 100 million<br>doses of CureVac’s first generation COVID-19 vaccine<br>candidate in 2021 | |||||||
| VIR-7831 (GSK4182136) / VIR-7832 | ||||||||
| --- | --- | |||||||
| ● | Phase<br>III study started of NIH-sponsored ACTIV-3 trial evaluating the<br>safety and efficacy of VIR-7831 in hospitalised adults with<br>COVID-19. | |||||||
| ● | Agreement<br>reached with the UK-based AGILE initiative to evaluate VIR-7832 in<br>patients with mild to moderate COVID-19 in a Phase Ib/IIa clinical<br>trial. | |||||||
| ● | Announced<br>a collaboration with Lilly to expand the BLAZE-4 trial to evaluate<br>a combination of bamlanivimab (LY-CoV555) with VIR-7831<br>(GSK4182136) in low-risk patients with mild to moderate<br>COVID-19. | |||||||
| Oncology | ||||||||
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| Blenrep<br>(GSK2857916, anti-BCMA immunoconjugate) | ||||||||
| --- | --- | |||||||
| ● | New<br>data at the American Society of Hematology Annual Meeting<br>highlighted progress from the Blenrep (belantamab mafodotin-blmf)<br>development programme in multiple myeloma. The 13 abstracts<br>included data from GSK’s extensive DREAMM (DRiving Excellence<br>in Approaches to Multiple Myeloma) clinical trial programme, which<br>is evaluating belantamab mafodotin in different lines of therapy,<br>and in combination with standard of care and novel<br>therapies. | |||||||
| ● | Phase<br>III start of the DREAMM-8 trial (belantamab mafodotin in<br>combination with pomalidomide and dexamethasone) in 2L+ multiple<br>myeloma. | |||||||
| Zejula<br>(GSK3985771, PARP inhibitor) | ||||||||
| --- | --- | |||||||
| ● | Phase<br>III start of the ZEAL-1L trial (niraparib in combination with<br>pembrolizumab) as maintenance therapy in 1L NSCLC. | |||||||
| ● | EU<br>Marketing Authorisation received for first line maintenance<br>treatment in advanced ovarian cancer; becoming the first PARP<br>inhibitor approved as monotherapy in Europe for patients with<br>platinum-responsive advanced ovarian cancer, regardless of<br>biomarker status. | |||||||
| Dostarlimab (TSR-042, PD-1) | ||||||||
| --- | --- | |||||||
| ● | Positive<br>efficacy data of dostarlimab in mismatch repair-deficient (dMMR)<br>solid cancers were presented at ASCO Gastrointestinal Cancers<br>Symposium. | |||||||
| Bintrafusp alfa (TGF beta trap/ PD-1 agonist) | ||||||||
| --- | --- | |||||||
| ● | Merck<br>KGaA announced the decision to discontinue the clinical trial<br>INTR@PID Lung 037 in the first-line treatment of patients with<br>stage IV non-small cell lung cancer that have high expression of<br>PD-L1, as the study is unlikely to meet the primary efficacy<br>endpoint. | |||||||
| Cobolimab (TSR-022, TIM-3 antagonist) | ||||||||
| --- | --- | |||||||
| ● | Phase<br>II start of the COSTAR Lung trial (cobolimab in combination with<br>dostarlimab) in advanced NSCLC. | |||||||
| GSK3174998 (OX40 agonist) | ||||||||
| --- | --- | |||||||
| ● | GSK’998<br>was terminated due to lack of sufficient clinical<br>activity. | |||||||
| HIV/Infectious diseases | ||||||||
| --- | ||||||||
| Cabotegravir (long acting integrase inhibitor) | ||||||||
| --- | --- | |||||||
| ● | Investigational<br>injectable cabotegravir was superior to oral standard of care for<br>HIV prevention in women. The study showed cabotegravir was 89% more<br>effective than daily oral FTC/TDF for pre-exposure prophylaxis<br>(PrEP). | |||||||
| ● | US FDA<br>granted Breakthrough Therapy Designation for long-acting,<br>injectable cabotegravir for HIV pre-exposure prophylaxis<br>(PrEP). | |||||||
| Cabenuva (cabotegravir + rilpivirine) | ||||||||
| --- | --- | |||||||
| ● | EU<br>Marketing Authorisation received for Vocabria (cabotegravir<br>injection and tablets) to be used with Janssen’s Rekambys<br>(rilpivirine injection) and Edurant (rilpivirine<br>tablets). | |||||||
| ● | US FDA<br>approved Cabenuva as the first and only complete long-acting<br>regimen for the treatment of HIV-1 infection in<br>adults. | |||||||
| Tivicay<br>(dolutegravir) | ||||||||
| --- | --- | |||||||
| ● | CHMP<br>positive opinion announced for the first-ever dispersible-tablet<br>formulation of dolutegravir, Tivicay, a treatment for children<br>living with HIV in Europe. The positive opinion followed an FDA<br>approval for Tivicay PD in<br>June 2020. | |||||||
| ● | EU<br>Marketing Authorisation received for the first-ever<br>dispersible-tablet formulation of dolutegravir, Tivicay, a treatment for children<br>living with HIV in Europe. | |||||||
| Rukobia<br>(fostemsavir) | ||||||||
| --- | --- | |||||||
| ● | CHMP<br>positive opinion announced for Rukobia (fostemsavir), a first-in-class<br>attachment inhibitor for the treatment of adults with<br>multidrug-resistant HIV with few treatment options<br>available. | |||||||
| Kozenis<br>(tafenoquine) | ||||||||
| --- | --- | |||||||
| ● | Positive<br>data on treatment for Plasmodium vivax (P. vivax) malaria in<br>children from 6 months up to 15 years of age presented at American<br>Society of Tropical Medicine & Hygiene 2020. | |||||||
| ● | Australian<br>Therapeutic Goods Administration (TGA) accepted submission of a<br>Category 1 application to extend the indication of single-dose<br>Kozenis (tafenoquine) to<br>paediatric populations for the radical cure (prevention of relapse)<br>of Plasmodium vivax (P. vivax) malaria. | |||||||
| GSK2556286 (Mtb inhibitor) | ||||||||
| --- | --- | |||||||
| ● | The<br>first patient was dosed in a Phase I study of GSK’286 for the<br>treatment of tuberculosis. | |||||||
| GSK3729098 (Ethionamide booster) | ||||||||
| --- | --- | |||||||
| ● | The<br>first patient was dosed in a Phase I study of GSK’098 for the<br>treatment of tuberculosis. | |||||||
| Immuno-inflammation | ||||||||
| --- | ||||||||
| Benlysta<br>(belimumab) | ||||||||
| --- | --- | |||||||
| ● | US FDA<br>approved Benlysta as the<br>first medicine for adult patients with active lupus nephritis in<br>the US. | |||||||
| ● | The<br>Benlysta-Rituxan<br>combination in Sjogren’s Syndrome was terminated for not<br>meeting efficacy criteria. | |||||||
| GSK2330811 (OSM antagonist) | ||||||||
| --- | --- | |||||||
| ● | GSK’811<br>in systemic sclerosis was terminated for meeting the proof of<br>mechanism study’s stop criteria. | |||||||
| GSK2831781 (aLAG3 depleting) in ulcerative<br>colitis | ||||||||
| --- | --- | |||||||
| ● | Termination<br>of GSK Study 204869 in patients with active ulcerative colitis as<br>pre-determined futility criteria were met. | |||||||
| GSK3915393 (TG2 inhibitor) | ||||||||
| --- | --- | |||||||
| ● | The<br>first patient was dosed in a Phase I study of GSK’393 for the<br>treatment of coeliac disease. | |||||||
| Respiratory | ||||||||
| --- | ||||||||
| Nucala<br>(mepolizumab) | ||||||||
| --- | --- | |||||||
| ● | US FDA<br>accepted a regulatory submission seeking approval for the use of<br>its anti-IL5 biologic Nucala (mepolizumab) as a treatment for<br>patients with chronic rhinosinusitis with nasal<br>polyps. | |||||||
| ● | European<br>Medicines Agency accepted filing for three additional<br>eosinophil-driven diseases (hypereosinophilic syndrome, chronic<br>rhinosinusitis with nasal polyps and eosinophilic granulomatosis<br>with polyangiitis). | |||||||
| Vaccines | ||||||||
| --- | ||||||||
| Respiratory Syncytial Virus (RSV) | ||||||||
| --- | --- | |||||||
| ● | RSV<br>candidate vaccine for maternal immunisation (GSK3888550A) started<br>Phase III after presentation of positive Phase I/II safety,<br>reactogenicity and immunogenicity data. | |||||||
| RTS,S (malaria) | ||||||||
| --- | --- | |||||||
| ● | Announced<br>product transfer of RTS,S malaria vaccine to Bharat (India) to<br>ensure long term viability and sustainability of supply of the<br>vaccine. | |||||||
| Other Pharmaceuticals | ||||||||
| --- | ||||||||
| Linerixibat | ||||||||
| --- | --- | |||||||
| ● | Phase<br>IIb data on linerixibat for the treatment of cholestatic pruritus<br>in primary biliary cholangitis (PBC) was presented as a<br>late-breaking session at The Liver Meeting® 2020. Plans<br>underway to progress linerixibat to Phase III in 2021 with<br>potential to be the first new treatment in 60 years for cholestatic<br>pruritus in PBC. | |||||||
| Contents | Page | |||||||
| --- | --- | |||||||
| Total<br>and Adjusted results | 10 | |||||||
| Financial<br>performance – 2020 | 12 | |||||||
| Financial<br>performance – three months ended 31 December<br>2020 | 29 | |||||||
| Cash<br>generation | 43 | |||||||
| Returns<br>to shareholders | 44 | |||||||
| Income<br>statements | 46 | |||||||
| Statement<br>of comprehensive income – year ended 31 December<br>2020 | 47 | |||||||
| Statement<br>of comprehensive income – three months ended 31 December<br>2020 | 48 | |||||||
| Pharmaceuticals<br>turnover – year ended 31 December 2020 | 49 | |||||||
| Pharmaceuticals<br>turnover – three months ended 31 December 2020 | 50 | |||||||
| Vaccines<br>turnover – year ended 31 December 2020 | 51 | |||||||
| Vaccines<br>turnover – three months ended 31 December 2020 | 52 | |||||||
| Balance<br>sheet | 53 | |||||||
| Statement<br>of changes in equity | 54 | |||||||
| Cash<br>flow statement – year ended 31 December 2020 | 55 | |||||||
| Segment<br>information | 56 | |||||||
| Legal<br>matters | 58 | |||||||
| Additional<br>information | 59 | |||||||
| Reconciliation<br>of cash flow to movements in net debt | 62 | |||||||
| Net<br>debt analysis | 62 | |||||||
| Free<br>cash flow reconciliation | 62 | |||||||
| Reporting<br>definitions | 63 | |||||||
| Outlook,<br>assumptions and cautionary statements | 64 | |||||||
| Contacts | ||||||||
| --- | ||||||||
| GSK –<br>one of the world’s leading research-based pharmaceutical and<br>healthcare companies – is committed to improving the quality<br>of human life by enabling people to do more, feel better and live<br>longer. For further information please visit www.gsk.com. | ||||||||
| --- | ||||||||
| GSK enquiries: | ||||||||
| --- | --- | --- | --- | |||||
| Media<br>enquiries: | Simon<br>Steel | +44 (0)<br>20 8047 5502 | (London) | |||||
| Tim<br>Foley | +44 (0)<br>20 8047 5502 | (London) | ||||||
| Kristen<br>Neese | +1 215<br>751 3335 | (Philadelphia) | ||||||
| Kathleen<br>Quinn | +1 202<br>603 5003 | (Washington) | ||||||
| Analyst/Investor<br>enquiries: | Sarah<br>Elton-Farr | +44 (0)<br>20 8047 5194 | (London) | |||||
| Sonya<br>Ghobrial | +44 (0)<br>7392 784784 | (Consumer) | ||||||
| James<br>Dodwell | +44 (0)<br>20 8047 2406 | (London) | ||||||
| Jeff<br>McLaughlin | +1 215<br>751 7002 | (Philadelphia) | ||||||
| Frannie<br>DeFranco | +1 215<br>751 4855 | (Philadelphia) | ||||||
| Registered in England &<br>Wales:<br><br><br>No. 3888792 | ||||||||
| --- | ||||||||
| Registered Office:<br><br><br>980 Great West<br>Road<br><br><br>Brentford,<br>Middlesex<br><br><br>TW8<br>9GS | ||||||||
| Total and Adjusted results | ||||||||
| --- | ||||||||
| Total<br>reported results represent the Group’s overall<br>performance.<br><br><br><br><br><br>GSK<br>also uses a number of adjusted, non-IFRS, measures to report the<br>performance of its business. Adjusted results and other non-IFRS<br>measures may be considered in addition to, but not as a substitute<br>for or superior to, information presented in accordance with IFRS.<br>Adjusted results are defined below and pro-forma growth and other<br>non-IFRS measures are defined on page 63.<br><br><br><br><br><br>GSK<br>believes that Adjusted results, when considered together with Total<br>results, provide investors, analysts and other stakeholders with<br>helpful complementary information to understand better the<br>financial performance and position of the Group from period to<br>period, and allow the Group’s performance to be more easily<br>compared against the majority of its peer companies. These measures<br>are also used by management for planning and reporting purposes.<br>They may not be directly comparable with similarly described<br>measures used by other companies.<br><br><br><br><br><br>GSK<br>encourages investors and analysts not to rely on any single<br>financial measure but to review GSK’s quarterly results<br>announcements, including the financial statements and notes, in<br>their entirety.<br><br><br><br><br><br>GSK is<br>committed to continuously improving its financial reporting, in<br>line with evolving regulatory requirements and best practice. In<br>line with this practice, GSK expects to continue to review and<br>refine its reporting framework.<br><br><br><br><br><br>Adjusted<br>results exclude the following items from Total results, together<br>with the tax effects of all of these items: | ||||||||
| --- | ||||||||
| ● | amortisation<br>of intangible assets (excluding computer software) | |||||||
| --- | --- | |||||||
| ● | impairment<br>of intangible assets (excluding computer software) and<br>goodwill | |||||||
| ● | Major<br>restructuring costs, which include impairments of tangible assets<br>and computer software, (under specific Board approved programmes<br>that are structural, of a significant scale and where the costs of<br>individual or related projects exceed £25 million), including<br>integration costs following material acquisitions | |||||||
| ● | transaction-related<br>accounting or other adjustments related to significant<br>acquisitions | |||||||
| ● | proceeds<br>and costs of disposal of associates, products and businesses;<br>significant legal charges (net of insurance recoveries) and<br>expenses on the settlement of litigation and government<br>investigations; other operating income other than royalty income,<br>and other items | |||||||
| ● | separation<br>costs | |||||||
| ● | the<br>impact of the enactment of the US Tax Cuts and Jobs Act in<br>2017 | |||||||
| Costs<br>for all other ordinary course smaller scale restructuring and legal<br>charges and expenses are retained within both Total and Adjusted<br>results.<br><br><br><br><br><br>As<br>Adjusted results include the benefits of Major restructuring<br>programmes but exclude significant costs (such as significant<br>legal, major restructuring and transaction items) they should not<br>be regarded as a complete picture of the Group’s financial<br>performance, which is presented in Total results. The exclusion of<br>other Adjusting items may result in Adjusted earnings being<br>materially higher or lower than Total earnings. In particular, when<br>significant impairments, restructuring charges and legal costs are<br>excluded, Adjusted earnings will be higher than Total<br>earnings.<br><br><br><br><br><br>GSK has<br>undertaken a number of Major restructuring programmes in response<br>to significant changes in the Group’s trading environment or<br>overall strategy, or following material acquisitions. Costs, both<br>cash and non-cash, of these programmes are provided for as<br>individual elements are approved and meet the accounting<br>recognition criteria. As a result, charges may be incurred over a<br>number of years following the initiation of a Major restructuring<br>programme.<br><br><br><br><br><br>Significant<br>legal charges and expenses are those arising from the settlement of<br>litigation or government investigations that are not in the normal<br>course and materially larger than more regularly occurring<br>individual matters. They also include certain major legacy<br>matters.<br><br><br><br><br><br>Reconciliations<br>between Total and Adjusted results, providing further information<br>on the key Adjusting items, are set out on pages 24, 25, 39 and<br>40.<br><br><br><br><br><br>GSK<br>provides earnings guidance to the investor community on the basis<br>of Adjusted results. This is in line with peer companies and<br>expectations of the investor community, supporting easier<br>comparison of the Group’s performance with its peers. GSK is<br>not able to give guidance for Total results as it cannot reliably<br>forecast certain material elements of the Total results,<br>particularly the future fair value movements on contingent<br>consideration and put options that can and have given rise to<br>significant adjustments driven by external factors such as currency<br>and other movements in capital markets. | ||||||||
| --- | ||||||||
| Pro-forma growth<br><br><br>The<br>acquisition of the Pfizer consumer healthcare business completed on<br>31 July 2019 and so GSK’s reported results for the year ended<br>31 December 2019 include five months of results of the former<br>Pfizer consumer healthcare business compared with twelve months in<br>2020.<br><br><br><br><br><br>The<br>Group has presented pro-forma growth rates at CER for turnover,<br>Adjusted operating profit and operating profit by business taking<br>account of this transaction. Pro-forma growth rates at CER for the<br>year ended 31 December 2020 are calculated comparing reported<br>results for the year ended 31 December 2020, calculated applying<br>the exchange rates used in the comparative period, with the results<br>for the year ended 31 December 2019, adjusted to include the<br>equivalent seven months of results to 31 July 2019 of the former<br>Pfizer consumer healthcare business, as consolidated (in US$) and<br>included in Pfizer’s US GAAP results.<br><br><br><br><br><br>ViiV Healthcare<br><br><br>ViiV<br>Healthcare is a subsidiary of the Group and 100% of its operating<br>results (turnover, operating profit, profit after tax) are included<br>within the Group income statement.<br><br><br><br><br><br>Earnings<br>are allocated to the three shareholders of ViiV Healthcare on the<br>basis of their respective equity shareholdings (GSK 78.3%, Pfizer<br>11.7% and Shionogi 10%) and their entitlement to preferential<br>dividends, which are determined by the performance of certain<br>products that each shareholder contributed. As the relative<br>performance of these products changes over time, the proportion of<br>the overall earnings allocated to each shareholder also changes. In<br>particular, the increasing proportion of sales of<br>dolutegravir-containing products has a favourable impact on the<br>proportion of the preferential dividends that is allocated to GSK.<br>Adjusting items are allocated to shareholders based on their equity<br>interests. GSK was entitled to approximately 86% of the Total<br>earnings and 83% of the Adjusted earnings of ViiV Healthcare for<br>2020.<br><br><br><br><br><br>As<br>consideration for the acquisition of Shionogi’s interest in<br>the former Shionogi-ViiV Healthcare joint venture in 2012, Shionogi<br>received the 10% equity stake in ViiV Healthcare and ViiV<br>Healthcare also agreed to pay additional future cash consideration<br>to Shionogi, contingent on the future sales performance of the<br>products being developed by that joint venture, principally<br>dolutegravir. Under IFRS 3 ‘Business combinations’, GSK<br>was required to provide for the estimated fair value of this<br>contingent consideration at the time of acquisition and is required<br>to update the liability to the latest estimate of fair value at<br>each subsequent period end. The liability for the contingent<br>consideration recognised in the balance sheet at the date of<br>acquisition was £659 million. Subsequent re-measurements are<br>reflected within other operating income/(expense) and within<br>Adjusting items in the income statement in each period. At 31<br>December 2020, the liability, which is discounted at 8.5%, stood at<br>£5,359 million, on a post-tax basis.<br><br><br><br><br><br>Cash<br>payments to settle the contingent consideration are made to<br>Shionogi by ViiV Healthcare each quarter, based on the actual sales<br>performance of the relevant products in the previous quarter. These<br>payments reduce the balance sheet liability and hence are not<br>recorded in the income statement. The cash payments made to<br>Shionogi by ViiV Healthcare in 2020 were £858<br>million.<br><br><br><br><br><br>Because<br>the liability is required to be recorded at the fair value of<br>estimated future payments, there is a significant timing difference<br>between the charges that are recorded in the Total income statement<br>to reflect movements in the fair value of the liability and the<br>actual cash payments made to settle the liability.<br><br><br><br><br><br>Further<br>explanation of the acquisition-related arrangements with ViiV<br>Healthcare are set out on pages 41 and 42 of the Annual Report<br>2019. | ||||||||
| --- | ||||||||
| Financial performance – 2020 | ||||||||
| --- | ||||||||
| Total results | ||||||||
| --- | ||||||||
| The<br>Total results for the Group are set out below. | ||||||||
| --- | ||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||
| --- | --- | --- | --- | --- | ||||
| Turnover | 34,099 | 33,754 | 1 | 3 | ||||
| Cost of<br>sales | (11,704) | (11,863) | (1) | - | ||||
| Gross<br>profit | 22,395 | 21,891 | 2 | 4 | ||||
| Selling,<br>general and administration | (11,456) | (11,402) | - | 2 | ||||
| Research<br>and development | (5,098) | (4,568) | 12 | 12 | ||||
| Royalty income | 318 | 351 | (9) | (9) | ||||
| Other<br>operating income/(expense) | 1,624 | 689 | ||||||
| Operating<br>profit | 7,783 | 6,961 | 12 | 15 | ||||
| Finance<br>income | 44 | 98 | ||||||
| Finance<br>expense | (892) | (912) | ||||||
| Share<br>of after tax profits of<br><br><br>associates<br>and joint ventures | 33 | 74 | ||||||
| Profit before taxation | 6,968 | 6,221 | 12 | 16 | ||||
| Taxation | (580) | (953) | ||||||
| Tax rate % | 8.3% | 15.3% | ||||||
| Profit after taxation | 6,388 | 5,268 | 21 | 25 | ||||
| Profit<br>attributable to non-controlling<br><br><br>interests | 639 | 623 | ||||||
| Profit<br>attributable to shareholders | 5,749 | 4,645 | ||||||
| 6,388 | 5,268 | 21 | 25 | |||||
| Earnings per share | 115.5p | 93.9p | 23 | 26 | ||||
| Adjusted results | ||||||||
| --- | ||||||||
| The<br>Adjusted results for the Group are set out below. Reconciliations<br>between Total results and Adjusted results for 2020 and 2019 are<br>set out on pages 24 and 25. | ||||||||
| --- | ||||||||
| 2020 | ||||||||
| --- | --- | --- | --- | --- | --- | |||
| £m | %<br>of<br><br><br>turnover | Growth<br><br><br>£% | Reported<br><br><br>growth<br><br><br>CER% | Pro-forma<br><br><br>growth<br><br><br>CER% | ||||
| Turnover | 34,099 | 100 | 1 | 3 | (2) | |||
| Cost of<br>sales | (10,191) | (29.9) | 1 | 2 | (3) | |||
| Selling,<br>general and<br><br><br>administration | (10,717) | (31.4) | - | 2 | (3) | |||
| Research<br>and development | (4,603) | (13.5) | 6 | 7 | 6 | |||
| Royalty<br>income | 318 | 0.9 | (9) | (9) | (9) | |||
| Adjusted<br>operating profit | 8,906 | 26.1 | (1) | 2 | (3) | |||
| Adjusted<br>profit before tax | 8,095 | (2) | 1 | |||||
| Adjusted<br>profit after tax | 6,800 | (2) | 1 | |||||
| Adjusted<br>profit attributable to<br><br><br>shareholders | 5,769 | (6) | (3) | |||||
| Adjusted<br>earnings per share | 115.9p | (6) | (4) | |||||
| Operating profit by business | 2020 | |||||||
| --- | --- | --- | --- | --- | --- | |||
| £m | %<br>of<br><br><br>turnover | Growth<br><br><br>£% | Reported<br><br><br>growth<br><br><br>CER% | Pro-forma<br><br><br>growth<br><br><br>CER% | ||||
| Pharmaceuticals | 7,723 | 45.3 | (3) | (2) | (2) | |||
| Pharmaceuticals<br>R&D* | (3,538) | 5 | 6 | 6 | ||||
| Total<br>Pharmaceuticals | 4,185 | 24.5 | (9) | (7) | (7) | |||
| Vaccines | 2,713 | 38.9 | (9) | (6) | (6) | |||
| Consumer<br>Healthcare | 2,213 | 22.1 | 18 | 22 | (1) | |||
| 9,111 | 26.7 | (3) | (1) | (5) | ||||
| Corporate<br>& other unallocated<br><br><br>costs | (205) | |||||||
| Adjusted<br>operating profit | 8,906 | 26.1 | (1) | 2 | (3) | |||
| * | Operating<br>profit of Pharmaceuticals R&D segment, which is the<br>responsibility of the Chief Scientific Officer and President,<br>R&D. It excludes ViiV Healthcare R&D expenditure, which is<br>reported within the Pharmaceuticals segment. | |||||||
| --- | --- | |||||||
| Turnover | ||||||||
| --- | ||||||||
| Pharmaceuticals turnover | ||||||||
| --- | ||||||||
| 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Respiratory | 3,749 | 22 | 23 | |||||
| HIV | 4,876 | - | 1 | |||||
| Immuno-inflammation | 727 | 19 | 20 | |||||
| Oncology | 372 | 62 | 62 | |||||
| 9,724 | 11 | 12 | ||||||
| Established<br>Pharmaceuticals | 7,332 | (16) | (15) | |||||
| 17,056 | (3) | (1) | ||||||
| US | 7,451 | 1 | 2 | |||||
| Europe | 4,104 | (1) | (1) | |||||
| International | 5,501 | (9) | (5) | |||||
| 17,056 | (3) | (1) | ||||||
| Pharmaceuticals<br>turnover in the year was £17,056 million, down 3% AER, 1% CER.<br>Respiratory sales were up 22% AER, 23% CER, to £3,749 million,<br>on growth of Trelegy,<br>Nucala and Relvar/Breo. HIV sales were flat at<br>AER, up 1% CER, to £4,876 million, with growth in Juluca and Dovato partly offset by Tivicay and Triumeq. Sales of Established<br>Pharmaceuticals declined 16% AER, 15% CER to £7,332<br>million.<br><br><br><br><br><br>Towards<br>the end of the first quarter, additional demand related to the<br>COVID-19 pandemic had a positive impact on growth of HIV and<br>Respiratory products. This effect broadly reversed in the second<br>quarter, which saw lower levels of new patient prescriptions in the<br>US and Europe and reduced market demand for allergy and antibiotic<br>products in International and Europe. These effects have continued<br>to be seen in the second half of the year.<br><br><br><br><br><br>In the<br>US, sales grew 1% AER, 2% CER. Continued growth of Nucala, Trelegy, Benlysta, Zejula and the HIV two-drug<br>regimens was partly offset by the decline in Tivicay, Triumeq and Established Products,<br>including the impact of generic albuterol substitutes.<br><br><br><br><br><br>In<br>Europe, sales declined 1% AER, 1% CER, with growth from<br>Respiratory, HIV and Oncology offset by the decline of Established<br>Pharmaceutical sales, impacted by generic competition and lower<br>demand for antibiotics during the COVID-19 pandemic period.<br>Approximately one percentage point of decline was due to the impact<br>of a one-off UK Relenza<br>contract in the comparator.<br><br><br><br><br><br>International<br>declined 9% AER, 5% CER, with Respiratory and Benlysta growth partly offset by lower<br>Established Pharmaceutical sales. This included the impact of a<br>weaker allergy season and generic competition for Avolve in Japan, slower market growth<br>during the COVID-19 pandemic period and government mandated changes<br>increasing the use of generics in China.<br><br><br><br><br><br>Respiratory<br><br><br>Total<br>Respiratory sales were up 22% AER, 23% CER, with strong growth in<br>all regions. International Respiratory sales grew 24% AER, 27% CER<br>including Nucala, up 45%<br>AER 46% CER and Relvar/Breo, up 6% AER, 9% CER to<br>£328 million. In Europe, Respiratory sales grew to £944<br>million up 21% AER, 20% CER. In the US, Respiratory grew 21% AER,<br>23% CER including Trelegy<br>and Nucala. US Relvar/Breo sales grew 24% AER, 25%<br>CER, mainly due to the effect of a prior period RAR<br>adjustment.<br><br><br><br><br><br>Sales<br>of Nucala were £994<br>million in the year and grew 29% AER, 30% CER, with US sales up 32%<br>AER, 33% CER to £598 million. Europe sales of £238<br>million grew 16% AER, 15% CER and International sales of £158<br>million grew 45% AER, 46% CER.<br><br><br><br><br><br>Trelegy sales were up 58% AER, 59% CER to £819 million<br>driven by growth in all regions. In the US, the new asthma<br>indication was approved and launched in Q3 2020, with sales up 47%<br>AER, 48% CER to £561 million. In Europe, sales grew 65% AER,<br>65% CER and in International, where Trelegy asthma was approved in Japan in<br>the quarter, sales grew to £90 million in the<br>year.<br><br><br><br><br><br>Relvar/Breo sales were up 16% AER, 17% CER to £1,124<br>million in the year. In the US, Relvar/Breo grew 24% AER, 25% CER,<br>mainly due to the effect of a prior period RAR adjustment. In<br>Europe and International, Relvar/Breo continued to grow, up 14%<br>AER, 13% CER and 6% AER, 9% CER respectively.<br><br><br><br><br><br>HIV<br><br><br>HIV<br>sales were £4,876 million, flat at AER, up 1% CER in the<br>twelve months. The dolutegravir franchise grew 1% AER, 2% CER,<br>delivering sales of £4,702 million. The remaining portfolio,<br>with sales of £174 million and 4% of total HIV sales, declined<br>21% AER, 20% CER and reduced the overall growth of total HIV by one<br>percentage point.<br><br><br><br><br><br>Sales<br>of dolutegravir products were £4,702 million in the twelve<br>months. Tivicay delivered<br>sales of £1,527 million, down 8% AER, 7% CER and Triumeq sales were £2,306 million,<br>down 10% AER, 9% CER. The two-drug regimens, Juluca and Dovato delivered sales of £869<br>million in the twelve months, with combined growth more than<br>offsetting decline in the three-drug regimen, Triumeq.<br><br><br><br><br><br>In the<br>US, dolutegravir sales were flat at AER, up 1% CER, and in Europe<br>dolutegravir sales grew 7% AER, 6% CER. Following recent launches<br>of Dovato, combined sales<br>of the two-drug regimens were £616 million in the US and<br>£227 million in Europe, with growth offsetting the decline in<br>Triumeq. International<br>dolutegravir sales declined 2% AER but grew 3% CER driven by<br>Tivicay tender<br>business.<br><br><br><br><br><br>Oncology<br><br><br>Sales<br>of Zejula, the PARP<br>inhibitor asset acquired from Tesaro in Q1 2019 were £339<br>million in the year, up 48% AER, 48% CER, driven by volume growth<br>compared with the prior year.<br><br><br><br><br><br>Blenrep for the treatment of patients with relapsed or<br>refractory multiple myeloma was approved and launched in the US and<br>Europe in Q3 2020 and reported sales of £33<br>million.<br><br><br><br><br><br>Immuno-inflammation<br><br><br>Sales<br>of Benlysta in the year<br>were up 17% AER, 19% CER to £719 million, including sales of<br>the sub-cutaneous formulation of £354 million up 32% AER, 33%<br>CER.<br><br><br><br><br><br>Duvroq for patients with anaemia due to chronic kidney<br>disease was launched in Japan in Q3 2020 and reported sales in the<br>International region of £8 million.<br><br><br><br><br><br>Established Pharmaceuticals<br><br><br>Sales<br>of Established Pharmaceuticals in the year were £7,332<br>million, down 16% AER, 15% CER.<br><br><br><br><br><br>Established<br>Respiratory products declined 17% AER, 15% CER to £3,251<br>million. Advair/Seretide<br>and Ventolin were impacted<br>by generic substitutes in the US and Europe, and Flovent experienced price pressure in<br>the US. In the International region, allergy sales were impacted by<br>market contraction and generic launch in Japan.<br><br><br><br><br><br>The<br>remainder of the Established Pharmaceuticals portfolio declined 16%<br>AER, 14% CER to £4,081 million on lower demand for antibiotics<br>during the COVID-19 pandemic period, the impact of government<br>mandated changes increasing the use of generics in markets<br>including Japan, France and China, and a strong comparator,<br>including a European Relenza contract. | ||||||||
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| Vaccines turnover | ||||||||
| --- | ||||||||
| 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Meningitis | 1,029 | 1 | 3 | |||||
| Influenza | 733 | 35 | 37 | |||||
| Shingles | 1,989 | 10 | 11 | |||||
| Established<br>Vaccines | 3,231 | (15) | (14) | |||||
| 6,982 | (2) | (1) | ||||||
| US | 3,697 | (5) | (4) | |||||
| Europe | 1,441 | (3) | (4) | |||||
| International | 1,844 | 5 | 7 | |||||
| 6,982 | (2) | (1) | ||||||
| Vaccines turnover declined 2% AER, 1% CER to £6,982 million,<br>primarily driven by the adverse impact of the COVID-19 pandemic on<br>Hepatitis vaccines, DTPa-containing vaccines, Synflorix and Bexsero, together with the divestment of<br>Rabipur<br>and Encepur. This decline was partly offset by higher sales<br>of Influenza vaccines across all regions and by Shingrix growth in Europe, China and the US together<br>with Cervarix strong performance in China.<br><br><br><br><br><br>Vaccines performance across all regions was affected by lower<br>demand due to limited visits to healthcare practitioners and points<br>of vaccination during the pandemic and government stay-at-home<br>directives. In areas where lockdowns were lifted, wellness visits<br>and vaccination rates recovered, with paediatric vaccination near<br>pre-COVID levels by the end of Q2 2020, while adolescent and adult<br>immunisations improved at a slower pace. US back-to-school vaccinations were disrupted<br>because schools and universities delayed or reversed in-person<br>tuition, which elongated the back-to-school vaccination season into<br>Q4 2020. Adult wellness visits returned to prior year levels<br>at the end of Q3 2020 supported by seasonal flu vaccination and<br>declined late in Q4 2020 as pandemic conditions<br>worsened.<br><br><br><br><br><br>Lower demand year-to-date was related to COVID-19 pandemic<br>conditions unless stated otherwise.<br><br><br><br><br><br>Meningitis<br><br><br>Meningitis sales grew 1% AER, 3% CER to £1,029 million.<br>Bexsero<br>sales declined 4% AER, 2% CER to<br>£650 million, reflecting lower demand in the US and International, partly<br>offset by lower US returns and rebates.<br><br><br><br><br><br>Menveo sales declined 1% AER but grew 1% CER to<br>£265 million, primarily driven by higher demand in Europe and<br>lower US returns and rebates, partly<br>offset by lower demand in the US and competitive pressure in<br>International.<br><br><br><br><br><br>In the US, Bexsero and Menveo both grew market share.<br><br><br><br><br><br>Influenza<br><br><br>Fluarix/FluLaval sales were<br>£733 million, up 35% AER, 37% CER, primarily reflecting robust<br>demand across all regions resulting from strong government<br>recommendations that prioritised flu vaccination during COVID-19<br>pandemic conditions, together with the reversal of a prior<br>year returns provision in the<br>US.<br><br><br><br><br><br>Shingles<br><br><br>Shingrix grew 10% AER, 11% CER to £1,989<br>million, primarily driven by a strong performance in Europe<br>reflecting robust underlying demand in Germany. The launch of<br>Shingrix in China also<br>contributed to sales growth. In the US, a decline in demand in Q2<br>and Q3 2020 due to lower adult wellness visits and vaccination<br>rates was partially offset by strong uptake in Q1 2020 and return<br>to growth, as expected, in Q4 2020 supported by co-administration<br>with seasonal flu vaccination programmes.<br><br><br><br><br><br>Established Vaccines<br><br><br>Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) declined by 16% AER, 15% CER.<br>Infanrix/Pediarix<br>sales declined 14% AER, 13% CER to<br>£629 million, reflecting lower demand in the US, unfavourable<br>year-on-year US CDC stockpile movements, together with supply<br>constraints and competitive pressures in<br>Europe.<br><br><br><br><br><br>Boostrix sales were down 18%<br>AER 18% CER to £476 million primarily due to lower vaccination<br>rates across all regions.<br><br><br><br><br><br>Hepatitis vaccines declined 34% AER, 33% CER to £576 million,<br>adversely impacted in the US and Europe by lower demand and travel<br>restrictions, together with competition returning to the market in<br>the US.<br><br><br><br><br><br>Synflorix sales declined by 14%<br>AER, 14% CER to £402 million, primarily due to lower demand in<br>International and supply constraints in Emerging<br>Markets.<br><br><br><br><br><br>Rotarix sales were flat<br>at AER but grew 1% at CER to £559 million, reflecting improved supply in Emerging Markets<br>and higher demand in Europe, partly offset by lower channel<br>inventory in the US.<br><br><br><br><br><br>MMRV vaccines sales grew 13% AER, 14% CER to £261 million,<br>largely driven by improved supply and increased market shares in<br>Europe. | ||||||||
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| Consumer Healthcare turnover | ||||||||
| --- | ||||||||
| 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Oral<br>health | 2,753 | 3 | 6 | |||||
| Pain<br>relief | 2,219 | 25 | 27 | |||||
| Vitamins,<br>minerals and supplements | 1,506 | >100 | >100 | |||||
| Respiratory<br>health | 1,209 | 2 | 4 | |||||
| Digestive<br>health and other | 1,824 | 11 | 14 | |||||
| 9,511 | 20 | 23 | ||||||
| Brands<br>divested/under review | 522 | (52) | (51) | |||||
| 10,033 | 12 | 14 | ||||||
| US | 3,408 | 32 | 33 | |||||
| Europe | 2,619 | 7 | 6 | |||||
| International | 4,006 | 1 | 7 | |||||
| 10,033 | 12 | 14 | ||||||
| Pro-forma<br>growth/(decline) | (2) | |||||||
| On a reported basis, sales grew 12% AER and 14% CER to £10,033<br>million for the full year, largely driven by the inclusion of the<br>Pfizer portfolio, partly offset by brands divested/under<br>review.<br><br><br><br><br><br>On a pro-forma basis, sales declined 2% CER, but grew 4% CER<br>excluding brands divested/under review, reflecting the underlying<br>strength of brands across the portfolio and categories, strong<br>growth in e-commerce, and successful execution meeting evolving<br>consumer demand as a result of the pandemic.<br><br><br><br><br><br>Overall results benefited from very strong growth in Vitamins,<br>minerals and supplements as well as continued growth in Oral<br>health, Pain relief and Digestive health and other. Although<br>Respiratory health sales were up 4% CER for the full year this<br>benefited from increased consumption in the first quarter, with<br>sales declines throughout the rest of the year which were<br>particularly pronounced in the fourth quarter as a result of the<br>historically weak cold and flu season.<br><br><br><br><br><br>Quarterly performance was volatile during the year as a direct<br>result of the COVID-19 pandemic, with sales pro-forma CER excluding<br>brands divested/under review up 14% in the first quarter given<br>accelerated purchases, flat in the second quarter as most of this<br>reversed, up 3% in the third quarter, and up 1% in the final<br>quarter of the year.<br><br><br><br><br><br>Oral health<br><br><br>Oral health sales grew 3% AER, 6% CER to £2,753<br>million. Sensodyne continued to outperform with low double digit<br>growth, reflecting underlying brand strength, successful innovation<br>including Sensodyne Sensitivity & Gum<br>and strong consumer up take in<br>traditional retail and e-commerce channels in the<br>US. Gum health continued to deliver double digit<br>growth, consistent with trends throughout the year, whilst Denture<br>care declined in low single digits given challenging market<br>conditions consistent with prior quarters.<br><br><br><br><br><br>Pain relief<br><br><br>Pain relief grew 25% AER, 27% CER to £2,219 million. On a<br>pro-forma basis, sales grew in mid-single digits, driven by the<br>successful Rx to OTC switch with Voltaren in the US. Panadol increased in mid-single digits with increased<br>consumption earlier in the year offsetting brand decline in the<br>final quarter. Advil delivered improved performance in the US in the<br>second half of the year and ended the year up in low single<br>digits.<br><br><br><br><br><br>Vitamins, minerals and supplements<br><br><br>Vitamins,<br>minerals and supplements more than doubled at AER and CER to<br>£1,506 million. On a pro-forma basis, sales continued to grow<br>in the high-teens per cent, consistent with prior quarters, due to<br>strong performance by Centrum,<br>Caltrate and Emergen-C. The particularly strong<br>category growth reflected the continued consumer focus on health<br>and wellness, consistent with previous quarters and as a result of<br>the COVID-19 pandemic, combined with the business’s ability<br>to successfully and quickly adapt, execute and deliver to meet<br>consumer needs.<br><br><br><br><br><br>Respiratory health<br><br><br>Respiratory health sales grew 2% AER, 4% CER to £1,209<br>million. On a pro-forma basis, sales declined in mid-single digits,<br>driven by a lower cold and flu season in the final quarter which<br>more than offset the benefit from increased consumption in the<br>first quarter due to the COVID-19 pandemic, as a result<br>Robitussin,<br>Contac and Theraflu all declined for the full year. Allergy and nasal<br>product performance was more mixed with Flonase growth in low single digits and<br>Otrivin<br>declining in mid-single<br>digits.<br><br><br><br><br><br>Digestive health and other<br><br><br>Digestive health and other brands grew 11% AER, 14% CER to<br>£1,824 million. On a pro-forma basis, sales declined in<br>low-single digits with growth in Digestive health products offset<br>by a decline in Skin health products and other non-strategic<br>brands. Smokers’ health products were flat for the<br>year. | ||||||||
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| Operating performance | ||||||||
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| Cost of sales<br><br><br>Total<br>cost of sales as a percentage of turnover was 34.3%, 0.8 percentage<br>points lower at AER and 1.0 percentage points lower in CER terms<br>compared with 2019. This primarily reflected lower unwinding of the<br>fair market value uplift on inventory arising on completion of the<br>Consumer Healthcare Joint Venture with Pfizer in Q3<br>2019.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted cost of sales as a<br>percentage of turnover was 29.9%, flat at AER, but 0.1 percentage<br>points lower at CER compared with 2019. On a pro-forma basis,<br>Adjusted cost of sales as a percentage of turnover was 29.9%, 0.3<br>percentage points lower at CER, compared with 2019. This reflected<br>a more favourable product mix in Pharmaceuticals and a further<br>contribution from restructuring savings in Pharmaceuticals and<br>Vaccines and integration savings in Consumer Healthcare, partly<br>offset by adverse product mix in Vaccines and continued adverse<br>pricing pressure in Pharmaceuticals, principally in Established<br>Respiratory.<br><br><br><br><br><br>Selling, general and administration<br><br><br>Total<br>SG&A costs as a percentage of turnover were 33.6%, 0.2<br>percentage points lower at AER and 0.2 percentage points lower at<br>CER compared with 2019. This reflected increased Major<br>restructuring costs and separation costs partly offset by lower<br>significant legal and transaction costs.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted SG&A costs as a<br>percentage of turnover were 31.4%, 0.3 percentage points lower at<br>AER than in 2019 and 0.3 percentage points lower on a CER basis. On<br>a pro-forma basis, Adjusted SG&A costs as a percentage of<br>turnover were 31.4%, 0.4 percentage points lower at CER, compared<br>with 2019.<br><br><br><br><br><br>The<br>growth in Adjusted SG&A costs, although flat at AER, grew 2%<br>CER. On a pro-forma basis costs reduced 3% CER and reflected the<br>benefits from restructuring including one-off benefits from<br>restructuring of post-retirement benefits and the continuing<br>benefit of restructuring in Pharmaceuticals, Consumer Healthcare<br>and support functions, reduced variable spending across all three<br>businesses as a result of the COVID-19 lockdowns and the tight<br>control of ongoing costs, particularly in non-promotional spending<br>across all three businesses. This was partly offset by increased<br>investment in promotional product support, particularly for new<br>launches in Vaccines, Respiratory and HIV.<br><br><br><br><br><br>Research and development<br><br><br>Total<br>R&D expenditure was £5,098 million (15.0% of turnover), up<br>12% AER, 12% CER, including an increase in Major restructuring<br>costs and intangible impairments. Adjusted R&D expenditure was<br>£4,603 million (13.5% of turnover), 6% higher at AER, 7%<br>higher at CER than in 2019. On a pro-forma basis, Adjusted R&D<br>expenditure grew 6% CER compared with 2019.<br><br><br><br><br><br>Pharmaceuticals<br>R&D expenditure was £3,636 million, up 9% AER, 9% CER,<br>primarily driven by the significant increase in investment in<br>Oncology, reflecting the progression of a number of key programmes<br>including Blenrep,<br>feladilimab and bintrafusp alfa, as well as progression of COVID-19<br>treatment programmes (VIR-7831, otilimab). This has been partly<br>offset by a reduction in investment in research and several<br>Specialty and Primary Care programmes (daprodustat, Trelegy, HIV) as well as efficiency<br>savings from the implementation of the One Development programme<br>for Pharma and Vaccines as part of the Separation Preparation<br>restructuring programme and reductions in variable spending as a<br>result of COVID-19 lockdowns.<br><br><br><br><br><br>R&D<br>expenditure in Vaccines was £686 million, down 4% AER, 4% CER<br>reflecting efficiency savings from the implementation of the One<br>Development programme and reductions in variable spending as a<br>result of COVID-19 lockdowns. R&D expenditure in Consumer<br>Healthcare was £281 million.<br><br><br><br><br><br>Royalty income<br><br><br>Royalty<br>income was £318 million (2019: £351 million), down 9%<br>AER, 9% CER, primarily reflecting genericisation of Transderm Scop in Consumer Healthcare<br>and lower sales of Gardasil. | ||||||||
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| Other operating income/(expense)<br><br><br>Net<br>other operating income of £1,624 million (2019: £689<br>million) primarily reflected the net profit on disposal of the<br>Horlicks and other Consumer<br>Healthcare brands of £2,815 million in Q2 2020, which was<br>after reversal of £240 million of embedded derivative gains on<br>the value of the shares taken in prior years. This was partly<br>offset by the related loss on sale of the shares in Hindustan<br>Unilever in Q2 2020 of £476 million. Other operating income<br>also included an increase in profit and milestone income from a<br>number of asset disposals.<br><br><br><br><br><br>This<br>was partly offset by accounting charges of £1,234 million<br>(2019: £127 million credits) arising from the re-measurement<br>of the contingent consideration liabilities related to the<br>acquisitions of the former Shionogi-ViiV Healthcare joint venture<br>and the former Novartis Vaccines business and the liabilities for<br>the Pfizer put option and Pfizer and Shionogi preferential<br>dividends in ViiV Healthcare. This included a re-measurement charge<br>of £1,114 million (2019: £31 million) for the contingent<br>consideration liability due to Shionogi, primarily arising from<br>changes in sales forecasts, exchange rate assumptions and the<br>unwind of discounting. | ||||||||
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| Operating profit<br><br><br>Total<br>operating profit was £7,783 million in 2020 compared with<br>£6,961 million in 2019. This reflected the profit on disposal<br>of the Horlicks and other<br>Consumer Healthcare brands and resultant sale of shares in<br>Hindustan Unilever as well as increased income from asset<br>disposals. This was partly offset by higher re-measurement charges<br>on the contingent consideration liabilities.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted operating profit was<br>£8,906 million, 1% lower than 2019 at AER and 2% higher at CER<br>on a turnover increase of 3% CER. The Adjusted operating margin of<br>26.1% was 0.5 percentage points lower at AER, and 0.2 percentage<br>points lower on a CER basis than in 2019. On a pro-forma basis,<br>Adjusted operating profit was 3% lower at CER on a turnover<br>decrease of 2% at CER. The Adjusted pro-forma operating margin of<br>26.1% was 0.4 percentage points lower on a CER basis than in<br>2019.<br><br><br><br><br><br>The<br>reduction in pro-forma Adjusted operating profit reflects the<br>adverse impact from the reduction in sales in Vaccines as a result<br>of the COVID-19 pandemic, investment in R&D including a<br>significant increase in Oncology, partly on the assets from the<br>Tesaro acquisition and initiation of several COVID-19 programmes,<br>continuing price pressure, principally in Established Respiratory,<br>including the impact of the launch of a generic version of<br>Advair in the US in<br>February 2019 and investments in promotional product support,<br>particularly for new launches in Vaccines, HIV and Respiratory.<br>This was offset by reduced promotional and variable spending across<br>all three businesses as a result of the COVID-19 lockdowns, a<br>one-off benefit in Q3 2020 from restructuring of post-retirement<br>benefits and the continuing benefit of restructuring in<br>Pharmaceuticals, Consumer Healthcare and support functions and the<br>tight control of ongoing costs, particularly in non-promotional<br>spending across all three businesses.<br><br><br><br><br><br>Contingent<br>consideration cash payments which are made to Shionogi and other<br>companies reduce the balance sheet liability and hence are not<br>recorded in the income statement. Total contingent consideration<br>cash payments in 2020 amounted to £885 million (2019:<br>£893 million). This included cash payments made to Shionogi of<br>£858 million (2019: £865 million).<br><br><br><br><br><br>Operating profit by business<br><br><br>Pharmaceuticals<br>operating profit was £4,185 million, down 9% AER, 7% CER on a<br>turnover decrease of 1% CER. The operating margin of 24.5% was 1.6<br>percentage points lower at AER than in 2019 and 1.5 percentage<br>points lower on a CER basis. This primarily reflected a significant<br>increase in Oncology R&D as well as the continued impact of<br>lower prices, including the impact of the launch of a generic<br>version of Advair in the US<br>in February 2019, and investment in new product support and<br>targeted priority markets. This was partly offset by the reduced<br>promotional and variable spending as a result of the COVID-19<br>lockdowns and the continued benefit of restructuring and tight<br>control of ongoing costs.<br><br><br><br><br><br>Vaccines operating profit was £2,713 million, down 9% AER, 6%<br>CER on a turnover decrease of 1% CER. The operating margin of 38.9%<br>was 2.6 percentage points lower at AER than in 2019 and 1.9<br>percentage points lower on a CER basis. This was primarily driven<br>by the negative operating leverage from the COVID-19 related sales<br>decline and investment behind key brands.<br><br><br><br><br><br>Consumer<br>Healthcare operating profit was £2,213 million, up 18% AER,<br>22% CER on a turnover increase of 14% CER. On a pro-forma basis,<br>operating profit was £2,213 million, 1% CER lower on a<br>turnover decrease of 2% CER. The operating margin of 22.1% was 1.2<br>percentage points higher at AER and 1.5 percentage points higher on<br>a CER basis than in 2019. The pro-forma operating margin of 22.1%<br>was 0.3 percentage points higher on a CER basis. The higher margin<br>was driven by higher than normal sales growth in Q1 2020 due to<br>COVID-19 and synergy delivery from the Pfizer integration. This was<br>partially offset by the impact of divestments and increased<br>targeted promotional investment.<br><br><br><br><br><br>Net finance costs<br><br><br>Total<br>net finance costs were £848 million compared with £814<br>million in 2019. Adjusted net finance costs were £844 million<br>compared with £810 million in 2019. The increase reflects<br>lower interest income on overseas cash post-closing of the<br>divestment of Horlicks and other Consumer Healthcare nutrition<br>products in India and a number of other countries, a premium paid<br>on early repayment and refinancing of bond debt in Q4 2020 and a<br>fair value gain on interest rate swaps in the 2019 comparator,<br>partly offset by reduced interest expense from lower debt levels<br>and refinancing at lower rates.<br><br><br><br><br><br>Share of after tax profits of associates and joint<br>ventures<br><br><br>The<br>share of after tax profits of associates was £33 million<br>(2019: £74 million). 2019 included a one-off adjustment of<br>£51 million to reflect GSK’s share of increased after<br>tax profits of Innoviva primarily as a result of a non-recurring<br>income tax benefit.<br><br><br><br><br><br>Taxation<br><br><br>The<br>charge of £580 million represented an effective tax rate on<br>Total results of 8.3% (2019: 15.3%) and reflected the different tax<br>effects of the various Adjusting items, including the disposal of<br>Horlicks and other Consumer<br>Healthcare brands to Unilever and subsequent disposal of shares<br>received in Hindustan Unilever. Tax on Adjusted profit amounted to<br>£1,295 million and represented an effective Adjusted tax rate<br>of 16.0% (2019: 16.0%).<br><br><br><br><br><br>Issues<br>related to taxation are described in Note 14,<br>‘Taxation’ in the Annual Report 2019. The Group<br>continues to believe it has made adequate provision for the<br>liabilities likely to arise from periods which are open and not yet<br>agreed by tax authorities. The ultimate liability for such matters<br>may vary from the amounts provided and is dependent upon the<br>outcome of agreements with relevant tax authorities.<br><br><br><br><br><br>Non-controlling interests<br><br><br>The<br>allocation of Total earnings to non-controlling interests amounted<br>to £639 million (2019: £623 million). The increase was<br>primarily due to an increased allocation of Consumer Healthcare<br>profits of £374 million (2019: £70 million) following the<br>completion of the new Consumer Healthcare Joint Venture with Pfizer<br>on 31 July 2019, and which included the unwind of the fair value<br>uplift on acquired inventory and major restructuring costs. This<br>was partly offset by a reduced allocation of ViiV Healthcare<br>profits of £223 million (2019: £482 million), including<br>increased charges for re-measurement of contingent consideration<br>liabilities.<br><br><br><br><br><br>The<br>allocation of Adjusted earnings to non-controlling interests<br>amounted to £1,031 million (2019: £787 million). The<br>increase in allocation primarily reflected an increased allocation<br>of Consumer Healthcare profits of £515 million (2019:<br>£204 million) following the completion of the new Consumer<br>Healthcare Joint Venture with Pfizer on 31 July 2019 partly offset<br>by a reduced allocation of ViiV Healthcare profits of £474<br>million (2019: £512 million), and lower net profits in some of<br>the Group’s other entities with non-controlling interests,<br>primarily Consumer Healthcare India following the Horlicks and other Consumer brands<br>disposal.<br><br><br><br><br><br>Earnings per share<br><br><br>Total<br>EPS was 115.5p, compared with 93.9p in 2019. The increase in EPS<br>primarily reflected the net profit on disposal of Horlicks and other Consumer Healthcare<br>brands as well as increased income from asset disposals, partly<br>offset by higher re-measurement charges on the contingent<br>consideration liabilities, higher major restructuring charges and a<br>one-off benefit in 2019 from increased share of after tax profits<br>of the associate Innoviva.<br><br><br><br><br><br>Adjusted<br>EPS was 115.9p compared with 123.9p in 2019, down 6% AER, 4% CER,<br>on a 2% CER increase in Adjusted operating profit. The reduction<br>primarily resulted from a higher non-controlling interest<br>allocation of Consumer Healthcare profits and reduced share of<br>after tax profits of associates resulting from a non-recurring<br>income tax benefit in Innoviva.<br><br><br><br><br><br>Currency impact on 2020 results<br><br><br>The<br>results for 2020 are based on average exchange rates, principally<br>£1/$1.29, £1/€1.13 and £1/Yen 137. Comparative<br>exchange rates are given on page 59. The period-end exchange rates<br>were £1/$1.36, £1/€1.11 and £1/Yen<br>141.<br><br><br><br><br><br>In<br>2020, turnover increased 1% AER, 3% CER. Total EPS was 115.5p<br>compared with 93.9p in 2019. Adjusted EPS was 115.9p compared with<br>123.9p in 2019, down 6% AER, 4% CER. The adverse currency impact<br>primarily reflected strengthening of Sterling against the US$ and<br>weakness in emerging market currencies relative to 2019. Exchange<br>gains or losses on the settlement of intercompany transactions had<br>a negligible impact on the adverse currency impact of two<br>percentage points on Adjusted EPS. | ||||||||
| --- | ||||||||
| Adjusting items<br><br><br>The<br>reconciliations between Total results and Adjusted results for 2020<br>and 2019 are set out below. | ||||||||
| --- | ||||||||
| Year ended 31 December 2020 | ||||||||
| --- | ||||||||
| Total<br><br><br>results<br><br><br>£m | Intangible<br><br><br>amort-<br><br><br>isation<br><br><br>£m | Intangible<br><br><br>impair-<br><br><br>ment<br><br><br>£m | Major<br><br><br>restruct-<br><br><br>uring<br><br><br>£m | Trans-<br><br><br>action-<br><br><br>related<br><br><br>£m | Divest-<br><br><br>ments,<br><br><br>significant<br><br><br>legal and<br><br><br>other items<br><br><br>£m | Separation<br><br><br>costs<br><br><br>£m | Adjusted<br><br><br>results<br><br><br>£m | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Turnover | 34,099 | 34,099 | ||||||
| Cost of sales | (11,704) | 699 | 31 | 667 | 116 | (10,191) | ||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Gross profit | 22,395 | 699 | 31 | 667 | 116 | 23,908 | ||
| Selling, general and administration | (11,456) | 1 | 18 | 659 | (23) | 16 | 68 | (10,717) |
| Research and development | (5,098) | 75 | 214 | 206 | (4,603) | |||
| Royalty income | 318 | 318 | ||||||
| Other operating income/(expense) | 1,624 | 1,215 | (2,839) | - | ||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Operating profit | 7,783 | 775 | 263 | 1,532 | 1,308 | (2,823) | 68 | 8,906 |
| Net finance costs | (848) | 2 | 2 | (844) | ||||
| Share of after tax profits of associates and joint<br>ventures | 33 | 33 | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit before taxation | 6,968 | 775 | 263 | 1,534 | 1,308 | (2,821) | 68 | 8,095 |
| Taxation | (580) | (150) | (47) | (292) | (229) | 17 | (14) | (1,295) |
| Tax rate % | 8.3% | 16.0% | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit after taxation | 6,388 | 625 | 216 | 1,242 | 1,079 | (2,804) | 54 | 6,800 |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit<br>attributable to non-controlling interests | 639 | 392 | 1,031 | |||||
| Profit attributable to shareholders | 5,749 | 625 | 216 | 1,242 | 687 | (2,804) | 54 | 5,769 |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Earnings per share | 115.5p | 12.6p | 4.4p | 25.0p | 13.8p | (56.5)p | 1.1p | 115.9p |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Weighted average number of shares (millions) | 4,976 | 4,976 | ||||||
| –––––––––––– | –––––––––––– | |||||||
| Year ended 31 December 2019 | ||||||||
| --- | ||||||||
| Total<br><br><br>results<br><br><br>£m | Intangible<br><br><br>amort-<br><br><br>isation<br><br><br>£m | Intangible<br><br><br>impair-<br><br><br>ment<br><br><br>£m | Major<br><br><br>restruct-<br><br><br>uring<br><br><br>£m | Transaction-<br><br><br>related<br><br><br>£m | Divestments,<br><br><br>significant<br><br><br>legal and<br><br><br>other items<br><br><br>£m | Adjusted<br><br><br>results<br><br><br>£m | ||
| --- | --- | --- | --- | --- | --- | --- | --- | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Turnover | 33,754 | 33,754 | ||||||
| Cost of sales | (11,863) | 713 | 30 | 658 | 383 | (10,079) | ||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Gross profit | 21,891 | 713 | 30 | 658 | 383 | 23,675 | ||
| Selling, general and administration | (11,402) | 4 | 332 | 104 | 247 | (10,715) | ||
| Research and development | (4,568) | 64 | 49 | 114 | 2 | (4,339) | ||
| Royalty income | 351 | 351 | ||||||
| Other operating income/(expense) | 689 | 1 | (142) | (548) | - | |||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Operating profit | 6,961 | 777 | 83 | 1,105 | 345 | (299) | 8,972 | |
| Net finance costs | (814) | 5 | (1) | (810) | ||||
| Share of after tax profits of associates and joint<br>ventures | 74 | 74 | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit before taxation | 6,221 | 777 | 83 | 1,110 | 345 | (300) | 8,236 | |
| Taxation | (953) | (156) | (17) | (208) | (124) | 140 | (1,318) | |
| Tax rate % | 15.3% | 16.0% | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit after taxation | 5,268 | 621 | 66 | 902 | 221 | (160) | 6,918 | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit<br>attributable to non-controlling interests | 623 | 164 | 787 | |||||
| Profit attributable to shareholders | 4,645 | 621 | 66 | 902 | 57 | (160) | 6,131 | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Earnings per share | 93.9p | 12.6p | 1.3p | 18.2p | 1.2p | (3.3)p | 123.9p | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Weighted average number of shares (millions) | 4,947 | 4,947 | ||||||
| –––––––––––– | –––––––––––– | |||||||
| Major restructuring and integration<br><br><br>Within<br>the Pharmaceuticals sector, the highly regulated manufacturing<br>operations and supply chains and long lifecycle of the business<br>mean that restructuring programmes, particularly those that involve<br>the rationalisation or closure of manufacturing or R&D sites<br>are likely to take several years to complete. | ||||||||
| --- | ||||||||
| Total<br>Major restructuring charges incurred in 2020 were £1,532<br>million (2019: £1,105 million), analysed as<br>follows: | ||||||||
| --- | ||||||||
| 2020 | 2019 | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||
| Cash<br><br><br>£m | Non-cash<br><br><br>£m | Total<br><br><br>£m | Cash<br><br><br>£m | Non-cash<br><br><br>£m | Total<br><br><br>£m | |||
| 2018<br>major restructuring programme (incl. Tesaro) | 105 | 210 | 315 | 227 | 572 | 799 | ||
| Consumer<br>Healthcare Joint Venture integration programme | 298 | 28 | 326 | 248 | 4 | 252 | ||
| Separation<br>Preparation restructuring programme | 625 | 216 | 841 | - | - | - | ||
| Combined<br>restructuring and integration programme | 39 | 11 | 50 | 10 | 44 | 54 | ||
| 1,067 | 465 | 1,532 | 485 | 620 | 1,105 | |||
| Cash<br>charges of £625 million under the Separation Preparation<br>programme primarily arose from restructuring of Vaccines<br>manufacturing and R&D functions as part of building the One<br>Development organisation for Pharma and Vaccines as well as<br>restructuring of commercial pharmaceuticals and some administrative<br>functions. Non-cash charges of £216 million were related to<br>write-down of assets in sites in the Pharmaceuticals Supply<br>Chain.<br><br><br><br><br><br>Cash<br>charges of £298 million under the Consumer Healthcare Joint<br>Venture programme primarily related to severance and integration<br>costs. The commercial integration of Consumer Healthcare is now<br>largely completed and the manufacturing integration is well<br>underway.<br><br><br><br><br><br>The<br>2018 major restructuring programme incurred cash charges of<br>£105 million in relation to severance costs for restructuring<br>of the manufacturing organisation, R&D and some administrative<br>functions as well as the integration of Tesaro and non-cash charges<br>of £210 million for write-downs on disposal of<br>sites.<br><br><br><br><br><br>Total<br>cash payments made in 2020 were £737 million (2019: £645<br>million), £115 million for the existing Combined restructuring<br>and integration programme (2019: £316 million), £179<br>million (2019: £164 million) under the 2018 major<br>restructuring programme including the settlement of certain charges<br>accrued in previous quarters, a further £291 million (2019:<br>£165 million) relating to the Consumer Healthcare Joint<br>Venture integration programme and £152 million relating to the<br>Separation Preparation restructuring programme.<br><br><br><br><br><br>The<br>analysis of Major restructuring charges by business was as<br>follows: | ||||||||
| --- | ||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||
| --- | --- | --- | ||||||
| Pharmaceuticals | 671 | 651 | ||||||
| Vaccines | 214 | 58 | ||||||
| Consumer<br>Healthcare | 374 | 321 | ||||||
| 1,259 | 1,030 | |||||||
| Corporate<br>& central functions | 273 | 75 | ||||||
| Total<br>Major restructuring costs | 1,532 | 1,105 | ||||||
| The<br>analysis of Major restructuring charges by Income statement line<br>was as follows: | ||||||||
| --- | ||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||
| --- | --- | --- | ||||||
| Cost of<br>sales | 667 | 658 | ||||||
| Selling,<br>general and administration | 659 | 332 | ||||||
| Research<br>and development | 206 | 114 | ||||||
| Other<br>operating income/(expense) | - | 1 | ||||||
| Total<br>Major restructuring costs | 1,532 | 1,105 | ||||||
| The<br>benefit in the year from the 2018 major restructuring programme was<br>£0.1 billion and the benefit from the Consumer Healthcare<br>Joint Venture integration was £0.2 billion and the benefit<br>from the Separation Preparation restructuring programme was<br>£0.1 billion.<br><br><br><br><br><br>The<br>2018 major restructuring programme, including Tesaro, is expected<br>to cost £1.75 billion over the period to 2021, with cash costs<br>of £0.85 billion and non-cash costs of £0.9 billion, and<br>is expected to deliver annual savings of around £450 million<br>by 2021 (at 2019 rates). These savings are intended to be fully<br>re-invested to help fund targeted increases in R&D and<br>commercial support of new products.<br><br><br><br><br><br>The<br>completion of the Consumer Healthcare Joint Venture with Pfizer is<br>expected to realise substantial cost synergies, generating total<br>annual cost savings of £0.5 billion by 2022 for expected cash<br>costs of £0.7 billion and non-cash charges now expected to be<br>£0.1 billion, plus additional capital expenditure of £0.2<br>billion. Up to 25% of the cost savings are intended to be<br>reinvested in the business to support innovation and other growth<br>opportunities.<br><br><br><br><br><br>The<br>Group initiated in Q1 2020 a two-year Separation Preparation<br>programme to prepare for the separation of GSK into two companies:<br>New GSK, a biopharma company with an R&D approach focused on<br>science related to the immune system, the use of genetics and new<br>technologies, and a new leader in Consumer Healthcare. The<br>programme aims to: | ||||||||
| --- | ||||||||
| ● | Drive a<br>common approach to R&D with improved capital<br>allocation | |||||||
| --- | --- | |||||||
| ● | Align<br>and improve the capabilities and efficiency of global support<br>functions to support New GSK | |||||||
| ● | Further<br>optimise the supply chain and product portfolio, including the<br>divestment of non-core assets. A strategic review of prescription<br>dermatology is underway | |||||||
| ● | Prepare<br>Consumer Healthcare to operate as a standalone company | |||||||
| The<br>programme continues to target delivery of £0.7 billion of<br>annual savings by 2022 and £0.8 billion by 2023, with total<br>costs estimated at £2.4 billion, of which £1.6 billion is<br>expected to be cash costs. The proceeds of anticipated divestments<br>are largely expected to cover the cash costs of the<br>programme. | ||||||||
| --- | ||||||||
| Transaction-related adjustments<br><br><br>Transaction-related<br>adjustments resulted in a net charge of £1,308 million (2019:<br>£345 million). This included a net £1,234 million<br>accounting charge for the re-measurement of the contingent<br>consideration liabilities related to the acquisitions of the former<br>Shionogi-ViiV Healthcare joint venture and the former Novartis<br>Vaccines business and the liabilities for the Pfizer put option and<br>Pfizer and Shionogi preferential dividends in ViiV<br>Healthcare. | ||||||||
| --- | ||||||||
| Charge/(credit) | 2020<br><br><br>£m | 2019<br><br><br>£m | ||||||
| --- | --- | --- | ||||||
| Contingent<br>consideration on former Shionogi-ViiV Healthcare joint<br>venture<br><br><br>(including<br>Shionogi preferential dividends) | 1,114 | 31 | ||||||
| ViiV<br>Healthcare put options and Pfizer preferential<br>dividends | (52) | (234) | ||||||
| Contingent<br>consideration on former Novartis Vaccines business | 172 | 76 | ||||||
| Release<br>of fair value uplift on acquired Pfizer inventory | 91 | 366 | ||||||
| Other<br>adjustments | (17) | 106 | ||||||
| Total<br>transaction-related charges | 1,308 | 345 | ||||||
| The<br>£1,114 million charge relating to the contingent consideration<br>for the former Shionogi-ViiV Healthcare joint venture represented<br>an increase in the valuation of the contingent consideration due to<br>Shionogi, as a result of a £408 million unwind of the discount<br>and £706 million primarily from adjustments to sales forecasts<br>as well as updated exchange rate assumptions. The £52 million<br>credit relating to the ViiV Healthcare put options and Pfizer<br>preferential dividends represented a decrease in the valuation of<br>the put option as a result of adjustments to multiples and sales<br>forecasts and updated exchange rate assumptions.<br><br><br><br><br><br>The<br>ViiV Healthcare contingent consideration liability is fair valued<br>under IFRS. The potential impact of the COVID-19 pandemic remains<br>uncertain and, at 31 December 2020, it has been assumed that there<br>will be no significant impact on the long-term value of the<br>liability. This position remains under review and the amount of the<br>liability will be updated in future quarters as further information<br>on the impact of the pandemic becomes available. An explanation of<br>the accounting for the non-controlling interests in ViiV Healthcare<br>is set out on page 11.<br><br><br><br><br><br>Divestments, significant legal charges and other items<br><br><br>Divestments<br>and other items included a gain in the year of £2,339 million<br>arising from the net profit on disposal of the Horlicks and other Consumer Healthcare<br>brands of £2,815 million in Q2 2020, after reversal of<br>£240 million of embedded derivative gains on the value of the<br>shares taken in prior years. This was partly offset by the related<br>loss on sale of the shares in Hindustan Unilever in Q2 2020 of<br>£476 million. Divestments and other items also included<br>milestone income and gains from a number of asset disposals and<br>certain other Adjusting items. A charge of £7 million (2019:<br>£251 million) for significant legal matters included the<br>settlement of existing matters as well as provisions for ongoing<br>litigation. Significant legal cash payments were £9 million<br>(2019: £294 million).<br><br><br><br><br><br>Separation costs<br><br><br>From Q2<br>2020, the Group has started to report additional costs to prepare<br>Consumer Healthcare for separation. These are estimated at<br>£600-700 million, excluding transaction costs. | ||||||||
| --- | ||||||||
| Financial performance – Q4 2020 | ||||||||
| --- | ||||||||
| Total results | ||||||||
| --- | ||||||||
| The<br>Total results for the Group are set out below. | ||||||||
| --- | ||||||||
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||
| --- | --- | --- | --- | --- | ||||
| Turnover | 8,739 | 8,899 | (2) | (1) | ||||
| Cost of<br>sales | (3,171) | (3,248) | (2) | (2) | ||||
| Gross<br>profit | 5,568 | 5,651 | (1) | - | ||||
| Selling,<br>general and administration | (3,162) | (3,443) | (8) | (6) | ||||
| Research<br>and development | (1,470) | (1,243) | 18 | 19 | ||||
| Royalty income | 91 | 82 | 11 | 12 | ||||
| Other<br>operating income/(expense) | 34 | 855 | ||||||
| Operating<br>profit | 1,061 | 1,902 | (44) | (44) | ||||
| Finance<br>income | 5 | 11 | ||||||
| Finance<br>expense | (239) | (206) | ||||||
| Share<br>of after tax (losses)/profits of associates and joint<br>ventures | (6) | 4 | ||||||
| Profit before taxation | 821 | 1,711 | (52) | (52) | ||||
| Taxation | 18 | (194) | ||||||
| Tax rate % | (2.2)% | 11.3% | ||||||
| Profit after taxation | 839 | 1,517 | (45) | (45) | ||||
| Profit<br>attributable to non-controlling interests | 162 | 218 | ||||||
| Profit<br>attributable to shareholders | 677 | 1,299 | ||||||
| 839 | 1,517 | (45) | (45) | |||||
| Earnings per share | 13.6p | 26.2p | (48) | (48) | ||||
| Adjusted results<br><br><br><br><br><br>The<br>Adjusted results for the Group are set out below. Reconciliations<br>between Total results and Adjusted results for Q4 2020 and Q4 2019<br>are set out on pages 39 and 40. | ||||||||
| --- | ||||||||
| Q4 2020 | ||||||||
| --- | --- | --- | --- | --- | ||||
| £m | %<br>of<br><br><br>turnover | Growth<br><br><br>£% | Reported<br><br><br>growth<br><br><br>CER% | |||||
| Turnover | 8,739 | 100 | (2) | (1) | ||||
| Cost of<br>sales | (2,792) | (31.9) | (2) | (2) | ||||
| Selling,<br>general and administration | (2,924) | (33.5) | (6) | (4) | ||||
| Research<br>and development | (1,297) | (14.8) | 11 | 12 | ||||
| Royalty<br>income | 91 | 1.0 | 11 | 12 | ||||
| Adjusted<br>operating profit | 1,817 | 20.8 | (2) | (1) | ||||
| Adjusted<br>profit before tax | 1,578 | (5) | (5) | |||||
| Adjusted<br>profit after tax | 1,358 | (6) | (6) | |||||
| Adjusted<br>profit attributable to shareholders | 1,163 | (5) | (5) | |||||
| Adjusted<br>earnings per share | 23.3p | (6) | (5) | |||||
| Operating profit by business | Q4 2020 | |||||||
| --- | --- | --- | --- | --- | ||||
| £m | %<br>of<br><br><br>turnover | Growth<br><br><br>£% | Reported<br><br><br>growth<br><br><br>CER% | |||||
| Pharmaceuticals | 1,874 | 42.9 | (3) | (3) | ||||
| Pharmaceuticals<br>R&D* | (1,023) | 10 | 12 | |||||
| Total<br>Pharmaceuticals | 851 | 19.5 | (16) | (16) | ||||
| Vaccines | 691 | 34.3 | 20 | 26 | ||||
| Consumer<br>Healthcare | 385 | 16.3 | (13) | (12) | ||||
| 1,927 | 22.1 | (5) | (3) | |||||
| Corporate<br>& other unallocated costs | (110) | |||||||
| Adjusted<br>operating profit | 1,817 | 20.8 | (2) | (1) | ||||
| * | Operating<br>profit of Pharmaceuticals R&D segment, which is the<br>responsibility of the Chief Scientific Officer and President,<br>R&D. It excludes ViiV Healthcare R&D expenditure, which is<br>reported within the Pharmaceuticals segment. | |||||||
| --- | --- | |||||||
| Turnover | ||||||||
| --- | ||||||||
| Pharmaceuticals turnover | ||||||||
| --- | ||||||||
| Q4 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Respiratory | 1,017 | 14 | 15 | |||||
| HIV | 1,268 | 1 | 2 | |||||
| Immuno-inflammation | 206 | 21 | 24 | |||||
| Oncology | 115 | 74 | 74 | |||||
| 2,606 | 9 | 10 | ||||||
| Established<br>Pharmaceuticals | 1,760 | (19) | (18) | |||||
| 4,366 | (4) | (3) | ||||||
| US | 1,974 | 1 | 3 | |||||
| Europe | 1,057 | 1 | (3) | |||||
| International | 1,335 | (14) | (12) | |||||
| 4,366 | (4) | (3) | ||||||
| Pharmaceuticals<br>turnover in the quarter was £4,366 million, down 4% AER, 3%<br>CER. Respiratory sales were up 14% AER, 15% CER, to £1,017<br>million, on growth of Trelegy and Nucala. HIV sales were up 1% AER, 2%<br>CER, to £1,268 million, with growth in Juluca and Dovato partly offset by Tivicay and Triumeq. Sales of Established<br>Pharmaceuticals declined 19% AER, 18% CER, to £1,760<br>million.<br><br><br><br><br><br>In the<br>quarter, results continued to reflect the COVID-19 pandemic<br>environment, with lower levels of new patient prescriptions in US<br>and Europe, reduced market size for allergy and antibiotic products<br>in International and Europe, and pressure on net prices in<br>US.<br><br><br><br><br><br>In the<br>US, sales grew 1% AER and 3% CER. Continued growth of Nucala, Trelegy, Benlysta and the HIV two-drug regimens<br>was partially offset by the decline in Triumeq and Established<br>Pharmaceuticals, including the ongoing impact of generic<br>Advair/Seretide and<br>Flovent price<br>pressure.<br><br><br><br><br><br>In<br>Europe, sales grew 1% AER but declined 3% CER, with growth in<br>Ellipta Brands,<br>Nucala and HIV two-drug<br>regimens. This was offset<br>by the impacts of generic competition including ongoing<br>Seretide decline and a<br>one-off UK Relenza contract<br>last year in the Established Pharmaceuticals<br>portfolio.<br><br><br><br><br><br>International<br>declined 14% AER, 12% CER. Growth from the Respiratory portfolio<br>was offset by declines in HIV and Established Pharmaceuticals which<br>was impacted by COVID-19 suppressed antibiotics and dermatology<br>markets, and increased generic competition in Japan and<br>China.<br><br><br><br><br><br>Respiratory<br><br><br>Total<br>Respiratory sales were up 14% AER, 15% CER, with growth from<br>Trelegy and Nucala in all regions. International<br>Respiratory sales grew 21% AER, 22% CER including Nucala, up 50% AER, 53% CER, and<br>Trelegy continued to grow<br>with ongoing launches through the Region. In Europe, Respiratory<br>grew 18% AER, 14% CER including Trelegy growing 45% AER, 42% CER. In<br>the US, Respiratory grew 10% AER, 12% CER, driven by Trelegy and Nucala and the impact of a prior period<br>RAR adjustment.<br><br><br><br><br><br>Sales<br>of Nucala were £292<br>million in the quarter and grew 34% AER, 34% CER, with US sales up<br>39% AER, 42% CER to £184 million, Europe sales of £63<br>million grew 13% AER, 7% CER and International sales of £45<br>million grew 50% AER, 53% CER.<br><br><br><br><br><br>Trelegy sales were up 38% AER, 40% CER to £238 million<br>driven by growth in all regions. In the US, sales benefited from<br>the new asthma indication approved and launched in Q3 2020, with<br>sales up 28% AER, 30% CER. In Europe, sales grew 45% AER, 42% CER<br>and in International, where Trelegy asthma was approved in Japan in<br>the quarter, sales grew to £29 million.<br><br><br><br><br><br>HIV<br><br><br>HIV<br>sales were £1,268 million, up 1% AER, 2% CER in the quarter.<br>The dolutegravir franchise grew 1% AER, 2% CER, delivering sales of<br>£1,225 million. The remaining portfolio, with sales of<br>£43 million and 3% of total HIV sales, declined 12% AER, 6%<br>CER.<br><br><br><br><br><br>Sales<br>of dolutegravir products were £1,225 million in the quarter.<br>Tivicay delivered sales of<br>£365 million and declined 14% AER, 13% CER. Triumeq delivered sales of £580<br>million and declined 9% AER, 9% CER. The two-drug regimens,<br>Juluca and Dovato delivered sales of £280<br>million in the quarter, with combined growth more than offsetting<br>the decline of the three-drug regimen Triumeq.<br><br><br><br><br><br>In the<br>US, dolutegravir sales grew 2% AER, 4% CER and in Europe<br>dolutegravir sales grew 13% AER, 8% CER. Following recent launches<br>of Dovato, combined sales<br>of the two-drug regimens were £187 million in the US and<br>£84 million in Europe, with growth more than offsetting the<br>decline in Triumeq.<br>International dolutegravir sales declined 23% AER, 19% CER driven<br>by phasing of Tivicay<br>tender business.<br><br><br><br><br><br>Oncology<br><br><br>Sales<br>of Zejula, the PARP<br>inhibitor asset acquired from Tesaro in Q1 2019 were £89<br>million in the quarter, up 35% AER, 35% CER. Sales comprised<br>£54 million in the US and £32 million in<br>Europe.<br><br><br><br><br><br>Blenrep for the treatment of patients with relapsed or<br>refractory multiple myeloma was approved and launched in the US and<br>Europe in Q3 2020 and reported sales of £25 million in the<br>first full quarter of sales.<br><br><br><br><br><br>Immuno-inflammation<br><br><br>Sales<br>of Benlysta in the quarter<br>were up 21% AER, 23% CER to £205 million, including sales of<br>the sub-cutaneous formulation of £105 million up 33% AER, 35%<br>CER.<br><br><br><br><br><br>Established Pharmaceuticals<br><br><br>Sales<br>of Established Pharmaceuticals in the quarter were £1,760<br>million, down 19% AER, 18% CER.<br><br><br><br><br><br>Established<br>Respiratory products declined 22% AER, 21% CER to £756<br>million. This includes the impact of generics in Japan and price<br>pressure on Flovent in the<br>US. Advair/Seretide sales<br>declined 15% AER and CER with all regions impacted by generic<br>competition.<br><br><br><br><br><br>The<br>remainder of the Established Pharmaceuticals portfolio declined by<br>17% AER, 16% CER to £1,004 million on lower demand for<br>antibiotics during the COVID-19 pandemic period, the impact of<br>government mandated changes increasing use of generics in markets<br>including France, Japan and China, and a strong comparator,<br>including a European Relenza contract. | ||||||||
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| Vaccines turnover | ||||||||
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| Q4 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Meningitis | 274 | 35 | 36 | |||||
| Influenza | 252 | 83 | 85 | |||||
| Shingles | 645 | 21 | 23 | |||||
| Established<br>Vaccines | 841 | (3) | (3) | |||||
| 2,012 | 15 | 16 | ||||||
| US | 1,085 | 19 | 22 | |||||
| Europe | 422 | 21 | 17 | |||||
| International | 505 | 5 | 5 | |||||
| 2,012 | 15 | 16 | ||||||
| Vaccines turnover grew 15% AER, 16% CER to £2,012 million,<br>primarily driven by double-digit growth in Shingrix and a strong demand across all regions for<br>Influenza vaccine. Meningitis vaccines<br>also contributed to growth mainly due to favourable CDC demand in<br>the US.<br><br><br><br><br><br>Established Vaccines declined 3% AER, 3% CER to £841 million,<br>reflecting the adverse impact of the COVID-19 pandemic on Hepatitis<br>and Synflorix, together with the divestment of<br>Rabipur<br>and Encepur. This was partly offset by Cervarix strong performance in China.<br><br><br><br><br><br>Lower demand in the quarter was related to COVID-19 pandemic<br>conditions unless stated otherwise.<br><br><br><br><br><br>Meningitis<br><br><br>Meningitis sales grew 35% AER, 36% CER to £274 million<br>. Bexsero<br>sales grew 42% AER, 44% CER to<br>£159 million and Menveo 26% AER, 27% CER to £83<br>million, mostly driven by favourable<br>CDC demand related to an elongated back-to-school season in the US,<br>partly offset by Menveo competitive pressures in<br>International.<br><br><br><br><br><br>Influenza<br><br><br>Fluarix/FluLaval sales were<br>£252 million, up 83% AER, 85% CER, reflecting robust demand<br>across all regions resulting from strong government recommendations<br>that prioritised supporting flu vaccination during COVID-19<br>pandemic conditions.<br><br><br><br><br><br>Shingles<br><br><br>Shingrix recorded sales of<br>£645 million, up 21% AER, 23% CER, primarily driven by a<br>strong performance in Europe reflecting robust underlying<br>demand in Germany. US sales growth was supported by seasonal flu<br>vaccination, but wellness visits declined late in Q4 2020 as<br>pandemic conditions worsened. The launch of Shingrix in China also contributed to<br>growth.<br><br><br><br><br><br>Established Vaccines<br><br><br>Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) were up 4% AER, 5% CER. Infanrix/Pediarix<br>sales grew 10% AER, 12% CER to<br>£172 million, primarily due to favourable CDC purchase<br>patterns in the US, partly offset by competitive pressures and<br>supply constraints in Europe together with lower demand in<br>International.<br><br><br><br><br><br>Boostrix sales were down 4%<br>AER, 3% CER to £125 million, reflecting lower demand in<br>International.<br><br><br><br><br><br>Hepatitis vaccines declined 29% AER, 28% CER to £139 million,<br>adversely impacted in the US and Europe by lower demand and travel<br>restrictions, together with competition returning to market in the<br>US.<br><br><br><br><br><br>Synflorix sales declined by 25%<br>AER, 27% CER to £93 million, primarily due supply constraints<br>in Emerging Markets and lower demand in<br>International.<br><br><br><br><br><br>Rotarix sales grew 5% AER, 6%<br>CER to £148 million, reflecting favourable CDC purchases in<br>the US.<br><br><br><br><br><br>MMRV<br>vaccines sales were up 11% AER, 10% CER to £78 million,<br>largely driven by improved supply and increased market shares in<br>Europe. | ||||||||
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| Consumer Healthcare turnover | ||||||||
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| Q4 2020 | ||||||||
| --- | --- | --- | --- | |||||
| £m | Growth<br><br><br>£% | Growth<br><br><br>CER% | ||||||
| Oral<br>health | 679 | 4 | 6 | |||||
| Pain<br>relief | 542 | 8 | 10 | |||||
| Vitamins,<br>minerals and supplements | 386 | 16 | 17 | |||||
| Respiratory<br>health | 262 | (26) | (24) | |||||
| Digestive<br>health and other | 429 | (9) | (7) | |||||
| 2,298 | (1) | 1 | ||||||
| Brands<br>divested/under review | 62 | (76) | (75) | |||||
| 2,360 | (8) | (7) | ||||||
| US | 825 | (7) | (5) | |||||
| Europe | 617 | (1) | (4) | |||||
| International | 918 | (13) | (10) | |||||
| 2,360 | (8) | (7) | ||||||
| On a<br>reported basis, sales declined 8% AER<br>and declined 7% CER to £2,360 million in the quarter.<br>Brands divested/under review declined 76% AER, 75% CER to<br>£62 million given successful execution of the divestment<br>programme. Sales grew 1% CER, excluding brands divested/under<br>review, with underlying brand strength combined with the strength<br>of the portfolio and successful execution driving growth, and<br>offsetting a weak quarter in Respiratory health. Double digit<br>growth excluding brands divested/under review in Emerging markets<br>was driven by strong performance in China and also the retained<br>business in India.<br><br><br><br><br><br>Vitamins, minerals and supplements brands continue to<br>benefit from strong demand given increased consumer focus on health<br>and wellness as a result of the COVID-19 pandemic. Pain relief and<br>Oral health delivered good growth, however Respiratory heath was<br>adversely impacted by a lower cold and flu season as a result of<br>the pandemic and social distancing as highlighted in the previous<br>quarter. Digestive health and other declined, with growth in<br>Digestive health offset by weaker Smokers’ health and Skin<br>health.<br><br><br><br><br><br>Oral health<br><br><br>Oral<br>health sales increased 4% AER and grew<br>6% CER to £679 million. Sensodyne continued to perform strongly, delivering double<br>digit growth reflecting the underlying strength of the brand and<br>with broad based growth across most markets. Gum health continued<br>to deliver double digit growth, consistent with performance in the<br>previous quarter. Denture care declined in low-single digits due to<br>continued challenging market conditions. Overall growth was also<br>impacted by a low-single digit decline in non-strategic<br>brands.<br><br><br><br><br><br>Pain relief<br><br><br>Pain relief grew 8% AER, 10% CER to £542 million. Sales growth<br>was largely driven by strong Voltaren performance in the US following the successful Rx<br>to OTC launch in the US earlier this year. Panadol performance was adversely impacted by weaker<br>performance in South East Asia largely related to the COVID-19<br>pandemic.<br><br><br><br><br><br>Vitamins, minerals and supplements<br><br><br>Vitamins,<br>minerals and supplements grew 16% AER, 17% CER to £386<br>million. Centrum,<br>Caltrate and Emergen-C all saw double digit growth,<br>demonstrating the strength of the brands. The category continued to benefit<br>from consumer focus on health and wellness, a trend consistent with<br>prior quarters and as a result of the COVID-19<br>pandemic.<br><br><br><br><br><br>Respiratory health<br><br><br>Respiratory health sales declined 26% AER, 24% CER to £262<br>million. The category was particularly negatively impacted by<br>weaker than expected demand for cold and flu products in a key<br>quarter given seasonality. Theraflu, Robitussin<br>and Contac all declined in double digits as a result of a<br>significant decline in the global demand for seasonal cold and flu<br>remedies. Allergy and nasal products Flonase and Otrivin declined in low single digits.<br><br><br><br><br><br>Digestive health and other<br><br><br>Digestive<br>health and other brands declined 9% AER, 7% CER to £429<br>million. Digestive health brands grew in the quarter, with double<br>digit growth in Eno more<br>than offsetting declines in Tums and Nexium. Smokers’ health products<br>also declined in double digits given weaker performance in the US.<br>Skin health continued to be impacted by reduced impulse purchases<br>in retail stores as a result of lower footfall due to the COVID-19<br>pandemic. | ||||||||
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| Operating performance | ||||||||
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| Cost of sales<br><br><br>Total<br>cost of sales as a percentage of turnover was 36.3%, 0.2 percentage<br>points lower at AER and 0.5 percentage points lower in CER terms<br>compared with Q4 2019. This primarily reflected the unwind in Q4<br>2019 of the fair market value uplift on inventory arising on<br>completion of the Consumer Healthcare Joint Venture with Pfizer,<br>partly offset by increased write downs in a number of manufacturing<br>sites.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted cost of sales as a<br>percentage of turnover was 31.9%, 0.1 percentage points lower at<br>AER and 0.3 percentage points lower at CER compared with Q4 2019.<br>This reflected a favourable comparison to a non-restructuring<br>related write down in a manufacturing site in Q4 2019 in<br>Pharmaceuticals, restructuring savings across all three businesses<br>and favourable product mix in Vaccines, partly offset by continued<br>adverse pricing pressure in Pharmaceuticals, primarily in<br>Established Respiratory.<br><br><br><br><br><br>Selling, general and administration<br><br><br>Total<br>SG&A costs as a percentage of turnover were 36.2%, 2.5<br>percentage points lower at AER and 2.1 percentage points lower at<br>CER compared with Q4 2019. This included lower significant legal<br>costs partly offset by increased major restructuring costs and<br>separation costs.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted SG&A costs as a<br>percentage of turnover were 33.5%, 1.6 percentage points lower at<br>AER than in Q4 2019 and 1.1 percentage points lower on a CER basis.<br>Adjusted SG&A costs declined 6% AER, 4% CER which reflected the<br>continuing benefit of restructuring in Pharmaceuticals, Consumer<br>Healthcare and support functions, reduced variable spending across<br>all three businesses as a result of the COVID-19 lockdowns and the<br>tight control of ongoing costs. This was partly offset by increased<br>investment for new launches in Respiratory, HIV and Vaccines and<br>increased costs for a number of legal settlements in Q4<br>2020.<br><br><br><br><br><br>Research and development<br><br><br>Total<br>R&D expenditure was £1,470 million (16.8% of turnover), up<br>18% AER, 19% CER, including an increase in major restructuring<br>charges. Adjusted R&D expenditure was £1,297 million<br>(14.8% of turnover), 11% higher at AER, 12% higher at CER than in<br>Q4 2019.<br><br><br><br><br><br>Pharmaceuticals<br>R&D expenditure was £1,056 million, up 17% AER, 19% CER,<br>primarily driven by the significant increase in investment in<br>Oncology, reflecting the progression of a number of key programmes<br>including Blenrep,<br>feladilimab and bintrafusp alfa, as well as the progression of<br>COVID-19 treatment programmes (VIR-7831, otilimab) and a number of<br>other Phase II and III programs including HBV antisense<br>oligonucleotide (GSK3228836) and anti-IL5 for asthma (GSK3511294).<br>This has been partly offset by efficiency savings from the<br>implementation of the One Development programme for Pharma and<br>Vaccines as part of the Separation Preparation restructuring<br>programme and variable spending as a result of COVID-19<br>lockdowns.<br><br><br><br><br><br>R&D<br>expenditure in Vaccines was £178 million, down 4% AER, 6% CER,<br>reflecting efficiency savings from the implementation of the One<br>Development programme for Pharma and Vaccines and variable spending<br>as a result of COVID-19 lockdowns. R&D expenditure in Consumer<br>Healthcare was £63 million.<br><br><br><br><br><br>Royalty income<br><br><br>Royalty<br>income was £91 million (Q4 2019: £82 million), up 11%<br>AER, 12% CER. | ||||||||
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| Other operating income/(expense)<br><br><br>Net<br>other operating income of £34 million (Q4 2019: £855<br>million income) primarily reflected a number of asset disposals<br>together with accounting credits of £2 million (Q4 2019:<br>£535 million credits) arising from the re-measurement of the<br>contingent consideration liabilities related to the acquisitions of<br>the former Shionogi-ViiV Healthcare joint venture and the former<br>Novartis Vaccines business and the liabilities for the Pfizer put<br>option and Pfizer and Shionogi preferential dividends in ViiV<br>Healthcare. This included a re-measurement credit of £3<br>million (Q4 2019: £390 million credit) for the contingent<br>consideration liability due to Shionogi, primarily arising from<br>changes in exchange rate assumptions offset by changes in sales<br>forecasts as well as the unwind of discounting. | ||||||||
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| Operating profit<br><br><br>Total<br>operating profit was £1,061 million in Q4 2020 compared with<br>£1,902 million in Q4 2019. This primarily reflected lower<br>re-measurement credits on the contingent consideration liabilities,<br>lower profit on asset disposals and increased major restructuring<br>costs, partly offset by favourable comparisons to a decrease in<br>value of the shares in Hindustan Unilever and unwind of the fair<br>market value uplift on inventory arising on completion of the<br>Consumer Healthcare Joint Venture with Pfizer.<br><br><br><br><br><br>Excluding<br>these and other Adjusting items, Adjusted operating profit was<br>£1,817 million, 2% lower than Q4 2019 at AER, 1% lower at CER<br>on a turnover decline of 1% CER. The Adjusted operating margin of<br>20.8% was flat at AER, and 0.1 percentage points lower on a CER<br>basis than in Q4 2019.<br><br><br><br><br><br>The reduction in Adjusted operating profit primarily reflected<br>increased investment in R&D as well as targeted investments in<br>promotional product support and increased costs for a number of<br>legal settlements, partly offset by benefits from continued<br>restructuring across the business, tight control of ongoing costs<br>including reduced promotional and variable spending across all<br>three businesses as a result of the COVID-19<br>lockdowns.<br><br><br><br><br><br>Contingent<br>consideration cash payments which are made to Shionogi and other<br>companies reduce the balance sheet liability and hence are not<br>recorded in the income statement. Total contingent consideration<br>cash payments in Q4 2020 amounted to £221 million (Q4 2019:<br>£233 million). This included cash payments made to Shionogi of<br>£210 million (Q4 2019: £220 million).<br><br><br><br><br><br>Operating profit by business<br><br><br>Pharmaceuticals<br>operating profit was £851 million, down 16% AER, 16% CER on a<br>turnover decrease of 3% CER. The operating margin of 19.5% was 2.6<br>percentage points lower at AER than in Q4 2019 and 3.0 percentage<br>points lower on a CER basis. This primarily reflected increased<br>investment in Oncology R&D and several COVID-19 programmes,<br>investment in new product support and targeted priority markets,<br>the continued impact of lower prices, particularly in Respiratory<br>and increased costs for a number of legal settlements. This was<br>partly offset by the continuing benefit of restructuring, reduced<br>variable spending across all three businesses as a result of the<br>COVID-19 lockdowns and the tight control of ongoing costs and a<br>favourable comparison to a non-restructuring related write down in<br>a manufacturing site in Q4 2019.<br><br><br><br><br><br>Vaccines<br>operating profit was £691 million, up 20% AER, 26% CER on a<br>turnover increase of 16% CER. The operating margin of 34.3% was 1.2<br>percentage points higher at AER than in Q4 2019 and 3.0 percentage<br>points higher on a CER basis. This was primarily driven by enhanced<br>operating leverage from strong sales growth with positive mix due<br>to Shingrix and lower<br>R&D spend, partly offset by higher inventory<br>adjustments.<br><br><br><br><br><br>Consumer<br>Healthcare operating profit was £385 million, down 13% AER,<br>12% CER on a turnover decrease of 7% CER. The operating margin of<br>16.3% was 0.8 percentage points lower at AER and 1.0 percentage<br>points lower on a CER basis than in Q4 2019. This primarily<br>reflected the impact of divestments as well as increased<br>investments in power brands in the quarter, partially offset by<br>synergy benefits from the Pfizer integration.<br><br><br><br><br><br>Net finance costs<br><br><br>Total<br>net finance costs were £234 million compared with £195<br>million in Q4 2019. Adjusted net finance costs were £233<br>million compared with £197 million in Q4 2019. The increase<br>primarily reflects lower interest income on reduced overseas cash<br>post-closing of the divestment of Horlicks and other Consumer<br>Healthcare nutrition products in India and a number of other<br>countries and a premium paid on the early repayment and refinancing<br>of bond debt in the quarter.<br><br><br><br><br><br>Share of after tax (losses)/profits of associates and joint<br>ventures<br><br><br>The<br>share of after tax losses of associates and joint ventures was<br>£6 million (Q4 2019: £4 million profits).<br><br><br><br><br><br>Taxation<br><br><br>The<br>credit of £18 million represented an effective tax rate on<br>Total results of (2.2)% (Q4 2019: 11.3%) and reflected the<br>different tax effects of the various Adjusting items including a<br>reduction of £92 million in the estimated impact of the US tax<br>reform in 2017. Tax on Adjusted profit amounted to £220<br>million and represented an effective Adjusted tax rate of 13.9% (Q4<br>2019: 12.5%).<br><br><br><br><br><br>Issues<br>related to taxation are described in Note 14,<br>‘Taxation’ in the Annual Report 2019. The Group<br>continues to believe it has made adequate provision for the<br>liabilities likely to arise from periods which are open and not yet<br>agreed by tax authorities. The ultimate liability for such matters<br>may vary from the amounts provided and is dependent upon the<br>outcome of agreements with relevant tax authorities.<br><br><br><br><br><br>Non-controlling interests<br><br><br>The<br>allocation of Total earnings to non-controlling interests amounted<br>to £162 million (Q4 2019: £218 million). The reduction<br>was primarily due to reduced allocation of ViiV Healthcare profits<br>of £97 million (Q4 2019: £192 million), including reduced<br>credits for re-measurement of contingent consideration liabilities,<br>partly offset by increased allocation of Consumer Healthcare<br>profits of £64 million (Q4 2019: £23<br>million).<br><br><br><br><br><br>The<br>allocation of Adjusted earnings to non-controlling interests<br>amounted to £195 million (Q4 2019: £225 million). The<br>reduction in allocation primarily reflected a reduced allocation of<br>Consumer Healthcare profits of £91 million (Q4 2019: £101<br>million) and a reduced allocation of ViiV Healthcare profits of<br>£103 million (Q4 2019: £121 million).<br><br><br><br><br><br>Earnings per share<br><br><br>Total<br>EPS was 13.6p, compared with 26.2p in Q4 2019. The reduction in EPS<br>primarily reflected lower re-measurement credits on the contingent<br>consideration liabilities, lower profit on asset disposals and<br>increased major restructuring costs, partly offset by favourable<br>comparisons to a decrease in value of the shares in Hindustan<br>Unilever and unwind of the fair market value uplift on inventory<br>arising on completion of the Consumer Healthcare Joint Venture with<br>Pfizer.<br><br><br><br><br><br>Adjusted<br>EPS was 23.3p compared with 24.8p in Q4 2019, down 6% AER and 5%<br>CER, on a 1% CER decrease in Adjusted operating profit reflecting<br>higher interest costs and a higher effective tax rate partly offset<br>by a lower non-controlling interest allocation of Consumer<br>Healthcare and ViiV profits.<br><br><br><br><br><br>Currency impact on Q4 2020 results<br><br><br>The<br>results for Q4 2020 are based on average exchange rates,<br>principally £1/$1.33, £1/€1.11 and £1/Yen 138.<br>Comparative exchange rates are given on page 59. The period-end<br>exchange rates were £1/$1.36, £1/€1.11 and<br>£1/Yen 141.<br><br><br><br><br><br>In the<br>quarter, turnover decreased 2% AER, 1% CER. Total EPS was 13.6p<br>compared with 26.2p in Q4 2019. Adjusted EPS was 23.3p compared<br>with 24.8p in Q4 2019, down 6% AER and 5% CER. The adverse currency<br>impact primarily reflected the strengthening in Sterling,<br>particularly against the US$, partly offset by weakness against the<br>Euro. Exchange gains or losses on the settlement of intercompany<br>transactions had a one percentage point positive impact on the<br>negative currency impact of one percentage point on Adjusted<br>EPS. | ||||||||
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| Adjusting items<br><br><br>The<br>reconciliations between Total results and Adjusted results for Q4<br>2020 and Q4 2019 are set out below. | ||||||||
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| Three months ended 31 December 2020 | ||||||||
| --- | ||||||||
| Total<br><br><br>results<br><br><br>£m | Intangible<br><br><br>amort-<br><br><br>isation<br><br><br>£m | Intangible<br><br><br>impair-<br><br><br>ment<br><br><br>£m | Major<br><br><br>restruct-<br><br><br>uring<br><br><br>£m | Transaction-<br><br><br>related<br><br><br>£m | Divestments,<br><br><br>significant<br><br><br>legal and<br><br><br>other items<br><br><br>£m | Separation<br><br><br>costs<br><br><br>£m | Adjusted<br><br><br>results<br><br><br>£m | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Turnover | 8,739 | 8,739 | ||||||
| Cost of sales | (3,171) | 170 | 3 | 199 | 7 | (2,792) | ||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Gross profit | 5,568 | 170 | 3 | 199 | 7 | 5,947 | ||
| Selling, general and administration | (3,162) | 1 | 1 | 211 | 2 | (2) | 25 | (2,924) |
| Research and development | (1,470) | 25 | 38 | 110 | (1,297) | |||
| Royalty income | 91 | 91 | ||||||
| Other operating income/(expense) | 34 | (8) | (26) | - | ||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Operating profit | 1,061 | 196 | 42 | 520 | 1 | (28) | 25 | 1,817 |
| Net<br>finance costs | (234) | 1 | (233) | |||||
| Share<br>of after tax losses of associates and joint ventures | (6) | (6) | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit before taxation | 821 | 196 | 42 | 520 | 1 | (27) | 25 | 1,578 |
| Taxation | 18 | (40) | (8) | (51) | (43) | (90) | (6) | (220) |
| Tax rate % | (2.2)% | 13.9% | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit after taxation | 839 | 156 | 34 | 469 | (42) | (117) | 19 | 1,358 |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Profit<br>attributable to non-controlling interests | 162 | 33 | 195 | |||||
| Profit attributable to shareholders | 677 | 156 | 34 | 469 | (75) | (117) | 19 | 1,163 |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Earnings per share | 13.6p | 3.2p | 0.7p | 9.3p | (1.5)p | (2.4)p | 0.4p | 23.3p |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | |
| Weighted<br>average number of shares (millions) | 4,981 | 4,981 | ||||||
| –––––––––––– | –––––––––––– | |||||||
| Three months ended 31 December 2019 | ||||||||
| --- | ||||||||
| Total<br><br><br>results<br><br><br>£m | Intangible<br><br><br>amort-<br><br><br>isation<br><br><br>£m | Intangible<br><br><br>impair-<br><br><br>ment<br><br><br>£m | Major<br><br><br>restruct-<br><br><br>uring<br><br><br>£m | Transaction-<br><br><br>related<br><br><br>£m | Divestments,<br><br><br>significant<br><br><br>legal and<br><br><br>other items<br><br><br>£m | Adjusted<br><br><br>results<br><br><br>£m | ||
| --- | --- | --- | --- | --- | --- | --- | --- | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Turnover | 8,899 | 8,899 | ||||||
| Cost of sales | (3,248) | 163 | 3 | 11 | 223 | (2,848) | ||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Gross profit | 5,651 | 163 | 3 | 11 | 223 | 6,051 | ||
| Selling, general and administration | (3,443) | (1) | 163 | 4 | 160 | (3,117) | ||
| Research and development | (1,243) | 16 | 19 | 43 | 1 | (1,164) | ||
| Royalty income | 82 | 82 | ||||||
| Other operating income/(expense) | 855 | (557) | (298) | - | ||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Operating profit | 1,902 | 179 | 21 | 217 | (330) | (137) | 1,852 | |
| Net finance costs | (195) | 1 | (3) | (197) | ||||
| Share of after tax profits of associates and joint<br>ventures | 4 | 4 | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit before taxation | 1,711 | 179 | 21 | 218 | (330) | (140) | 1,659 | |
| Taxation | (194) | (41) | (6) | (58) | 15 | 77 | (207) | |
| Tax rate % | 11.3% | 12.5% | ||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit after taxation | 1,517 | 138 | 15 | 160 | (315) | (63) | 1,452 | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Profit<br>attributable to non-controlling interests | 218 | 7 | 225 | |||||
| Profit attributable to shareholders | 1,299 | 138 | 15 | 160 | (322) | (63) | 1,227 | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Earnings per share | 26.2p | 2.8p | 0.3p | 3.2p | (6.5)p | (1.2)p | 24.8p | |
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||
| Weighted average number of shares (millions) | 4,953 | 4,953 | ||||||
| –––––––––––– | –––––––––––– | |||||||
| Major restructuring and integration<br><br><br>Within<br>the Pharmaceuticals sector, the highly regulated manufacturing<br>operations and supply chains and long lifecycle of the business<br>mean that restructuring programmes, particularly those that involve<br>the rationalisation or closure of manufacturing or R&D sites<br>are likely to take several years to complete. | ||||||||
| --- | ||||||||
| Total<br>Major restructuring charges incurred in Q4 2020 were £520<br>million (Q4 2019: £217 million), analysed as<br>follows: | ||||||||
| --- | ||||||||
| Q4 2020 | Q4<br>2019 | |||||||
| --- | --- | --- | --- | --- | --- | --- | ||
| Cash<br><br><br>£m | Non-cash<br><br><br>£m | Total<br><br><br>£m | Cash<br><br>m | Non-cash<br><br><br>£m | Total<br><br><br>£m | |||
| 2018<br>major restructuring programme (incl. Tesaro) | 30 | 15 | 45 | 48 | 23 | 71 | ||
| Consumer<br>Healthcare Joint Venture integration programme | 53 | 4 | 57 | 113 | 4 | 117 | ||
| Separation<br>Preparation restructuring programme | 273 | 104 | 377 | - | - | - | ||
| Combined<br>restructuring and integration programme | 26 | 15 | 41 | 18 | 11 | 29 | ||
| 382 | 138 | 520 | 179 | 38 | 217 |
All values are in British Pounds.
| Cash<br>charges of £273 million under the Separation Preparation<br>programme primarily arose from restructuring of R&D functions<br>across Pharma and Vaccines and some administrative functions.<br>Non-cash charges of £104 million were related to write-down of<br>assets on disposal and closure of sites in the Pharmaceuticals<br>Supply Chain.<br><br><br><br><br><br>Cash<br>charges of £53 million on the Consumer Healthcare Joint<br>Venture programme primarily related to severance and integration<br>costs.<br><br><br><br><br><br>The<br>2018 major restructuring programme incurred cash charges of<br>£30 million in relation to severance costs for restructuring<br>within central functions and non-cash charges of £15 million<br>for write-downs of assets on sites.<br><br><br><br><br><br>Total<br>cash payments made in Q4 2020 were £194 million (Q4 2019:<br>£255 million), £22 million for the existing Combined<br>restructuring and integration programme (Q4 2019: £69<br>million), £34 million (Q4 2019: £79 million) under the<br>2018 major restructuring programme including the settlement of<br>certain charges accrued in previous quarters, a further £67<br>million (Q4 2019: £107 million) relating to the Consumer<br>Healthcare Joint Venture integration programme and £71 million<br>relating to the Separation Preparation restructuring<br>programme.<br><br><br><br><br><br>The<br>analysis of Major restructuring charges by business was as<br>follows: | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Pharmaceuticals | 309 | 36 | ||||||||||
| Vaccines | 11 | 10 | ||||||||||
| Consumer<br>Healthcare | 71 | 134 | ||||||||||
| 391 | ||||||||||||
| 180 | ||||||||||||
| Corporate<br>& central functions | 129 | 37 | ||||||||||
| Total<br>Major restructuring costs | 520 | 217 | ||||||||||
| The<br>analysis of Major restructuring charges by Income statement line<br>was as follows: | ||||||||||||
| --- | ||||||||||||
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Cost of<br>sales | 199 | 11 | ||||||||||
| Selling,<br>general and administration | 211 | 163 | ||||||||||
| Research<br>and development | 110 | 43 | ||||||||||
| Total<br>Major restructuring costs | 520 | 217 | ||||||||||
| The<br>benefit from the Consumer Healthcare Joint Venture integration was<br>£0.1 billion. Given its early stage the benefit from the<br>Separation Preparation restructuring programme was less than<br>£0.1 billion. | ||||||||||||
| --- | ||||||||||||
| Transaction-related adjustments<br><br><br>Transaction-related<br>adjustments resulted in a net charge of £1 million (Q4 2019:<br>£330 million credit). This included a net £2 million<br>accounting credit for the re-measurement of the contingent<br>consideration liabilities related to the acquisitions of the former<br>Shionogi-ViiV Healthcare joint venture and the former Novartis<br>Vaccines business and the liabilities for the Pfizer put option and<br>Pfizer and Shionogi preferential dividends in ViiV<br>Healthcare. | ||||||||||||
| --- | ||||||||||||
| Charge/(credit) | Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | ||||||||||
| --- | --- | --- | ||||||||||
| Contingent<br>consideration on former Shionogi-ViiV Healthcare joint venture<br>(including Shionogi preferential dividends) | (3) | (390) | ||||||||||
| ViiV<br>Healthcare put options and Pfizer preferential<br>dividends | (10) | (153) | ||||||||||
| Contingent<br>consideration on former Novartis Vaccines business | 11 | 8 | ||||||||||
| Release<br>of fair value uplift on acquired Pfizer inventory | - | 218 | ||||||||||
| Other<br>adjustments | 3 | (13) | ||||||||||
| Total<br>transaction-related charges | 1 | (330) | ||||||||||
| The<br>£3 million credit relating to the contingent consideration for<br>the former Shionogi-ViiV Healthcare joint venture represented an<br>increase in the valuation of the contingent consideration due to<br>Shionogi, primarily as a result of a £110 million unwind of<br>the discount offset by a £113 million credit primarily from<br>updated exchange rate assumptions partly offset by adjustments to<br>sales forecasts.<br><br><br><br><br><br>The<br>ViiV Healthcare contingent consideration liability is fair valued<br>under IFRS. The potential impact of the COVID-19 pandemic remains<br>uncertain and at 31 December 2020, it has been assumed that there<br>will be no significant impact on the long-term value of the<br>liability. This position remains under review and the amount of the<br>liability will be updated in future quarters as further information<br>on the impact of the pandemic becomes available. An explanation of<br>the accounting for the non-controlling interests in ViiV Healthcare<br>is set out on page 11.<br><br><br><br><br><br>Divestments, significant legal charges and other items<br><br><br>Divestments<br>and other items also included gains from a number of asset<br>disposals and certain other Adjusting items. There was a £1<br>million charge (Q4 2019: £164 million) for significant legal<br>matters arising in the quarter. Significant legal cash payments<br>were £2 million (Q4 2019: £281 million).<br><br><br><br><br><br>Separation costs<br><br><br>From Q2<br>2020, the Group started to report additional costs to prepare for<br>Consumer Healthcare separation. | ||||||||||||
| --- | ||||||||||||
| Cash generation | ||||||||||||
| --- | ||||||||||||
| Cash flow | ||||||||||||
| --- | ||||||||||||
| 2020 | 2019 | Q4<br>2020 | ||||||||||
| --- | --- | --- | --- | |||||||||
| Net<br>cash inflow from operating activities (£m) | 8,441 | 8,020 | 3,855 | |||||||||
| Free<br>cash flow* (£m) | 5,406 | 5,073 | 3,106 | |||||||||
| Free<br>cash flow growth (%) | 7% | (11)% | 20% | |||||||||
| Free<br>cash flow conversion* (%) | 94% | >100% | >100% | |||||||||
| Net<br>debt** (£m) | 20,780 | 25,215 | 20,780 | |||||||||
| * | Free<br>cash flow and free cash flow conversion are defined on page<br>63. | |||||||||||
| --- | --- | |||||||||||
| ** | Net<br>debt is analysed on page 62. | |||||||||||
| 2020<br><br><br>The net cash inflow from operating activities for the year was<br>£8,441 million (2019: £8,020 million). The increase<br>primarily reflected beneficial timing of payments for returns and<br>rebates, reduced legal payments and improved operating profits,<br>partly offset by an increase in trade receivables, increased tax<br>payments including tax on disposals and adverse exchange impacts.<br>There has not been any significant impact on trade collections or<br>payables as a result of the COVID-19 pandemic.<br><br><br><br><br><br>Total cash payments to Shionogi in relation to the ViiV Healthcare<br>contingent consideration liability in the year were £858<br>million (2019: £865 million), of which £751 million was<br>recognised in cash flows from operating activities and £107<br>million was recognised in contingent consideration paid within<br>investing cash flows. These payments are deductible for tax<br>purposes.<br><br><br><br><br><br>Free cash flow was £5,406 million for the year (2019:<br>£5,073 million). The increase primarily reflected increased<br>proceeds from disposal of intangible assets, beneficial timing of<br>payments for returns and rebates, reduced legal payments and<br>improved operating profits, partly offset by higher dividends to<br>non-controlling interests, increase in trade receivables, increased<br>tax payments including tax on disposals and adverse exchange<br>impacts. | ||||||||||||
| --- | ||||||||||||
| Q4 2020<br><br><br>The net cash inflow from operating activities for the quarter was<br>£3,855 million (Q4 2019: £3,453 million). The increase<br>primarily reflected reduced legal and tax payments partly offset by<br>a lower seasonal reduction in inventory and trade<br>receivables.<br><br><br><br><br><br>Total cash payments to Shionogi in relation to the ViiV Healthcare<br>contingent consideration liability in the quarter were £210<br>million (Q4 2019: £220 million), of which £185 million<br>was recognised in cash flows from operating activities and £25<br>million was recognised in contingent consideration paid within<br>investing cash flows. These payments are deductible for tax<br>purposes.<br><br><br><br><br><br>Free<br>cash flow was £3,106 million for the quarter (Q4 2019:<br>£2,599 million). The increase primarily reflected increased proceeds from disposal of intangible<br>assets and reduced legal and tax payments, partly offset by a lower<br>seasonal reduction in inventory and trade receivables and<br>higher dividends to non-controlling interests. | ||||||||||||
| --- | ||||||||||||
| Net debt<br><br><br>At 31 December 2020, net debt was £20.8 billion, compared with<br>£25.2 billion at 31 December 2019, comprising gross debt of<br>£27.2 billion and cash and liquid investments of £6.4<br>billion. Net debt decreased due to the £3.3 billion proceeds<br>from the Horlicks and other Consumer brands disposal including<br>shares in Hindustan Unilever of £2.7 billion and £0.6<br>billion of other assets, £0.6 billion of other business and<br>asset disposals together with £5.4 billion free cash flow,<br>partly offset by cash divested of £0.5 billion, dividends paid<br>to shareholders of £4.0 billion and £0.4 billion in<br>additional investments.<br><br><br><br><br><br>At 31 December 2020, GSK had short-term borrowings (including<br>overdrafts and lease liabilities) repayable within 12 months of<br>£3.7 billion with loans of £2.6 billion repayable in the<br>subsequent year. | ||||||||||||
| --- | ||||||||||||
| Returns to shareholders | ||||||||||||
| --- | ||||||||||||
| Quarterly dividends<br><br><br><br><br><br>The<br>Board has declared a fourth interim dividend for 2020 of 23 pence<br>per share (Q4 2019: 23 pence per share).<br><br><br><br><br><br>GSK<br>recognises the importance of dividends to shareholders and aims to<br>distribute regular dividend payments that will be determined<br>primarily with reference to the free cash flow generated by the<br>business after funding the investment necessary to support the<br>Group’s future growth.<br><br><br><br><br><br>The<br>Board currently intends to maintain the dividend for 2021 at the<br>current level of 80p per share, subject to any material change in<br>the external environment or performance expectations.<br><br><br><br><br><br>At our<br>Biopharma investor update in June we plan to set out in detail the<br>growth prospects and financial outlook for the new Biopharma<br>company over the medium term, including a detailed review of the<br>pipeline we have been building over recent years. Alongside these<br>we will provide details of a new distribution policy which reflects<br>the optimised capital structure and investment priorities focused<br>on delivering sustainable long-term shareholder value. We anticipate that this new policy will<br>deliver competitive and attractive returns informed by appropriate<br>earnings pay-out ratios through the investment cycle well covered<br>by Free Cash Flow and, importantly, expected growth potential. We<br>expect that aggregate distributions for GSK will be lower than at<br>present. This new policy will be implemented for dividends paid in<br>respect of 2022.<br><br><br><br><br><br>Payment of dividends<br><br><br>The<br>equivalent interim dividend receivable by ADR holders will be<br>calculated based on the exchange rate on 6 April 2021. An annual<br>fee of $0.03 per ADS (or $0.0075 per ADS per quarter) is charged by<br>the Depositary.<br><br><br><br><br><br>The<br>ex-dividend date will be 18 February 2021, with a record date of 19<br>February 2021 and a payment date of 8 April 2021. | ||||||||||||
| --- | ||||||||||||
| Paid/payable | Pence<br>per share | £m | ||||||||||
| --- | --- | --- | --- | |||||||||
| 2020 | ||||||||||||
| First<br>interim | 9 July<br>2020 | 19 | 946 | |||||||||
| Second<br>interim | 8<br>October 2020 | 19 | 946 | |||||||||
| Third<br>interim | 14<br>January 2021 | 19 | 946 | |||||||||
| Fourth<br>interim | 8 April<br>2021 | 23 | 1,146 | |||||||||
| 80 | 3,984 | |||||||||||
| 2019 | ||||||||||||
| --- | --- | --- | --- | |||||||||
| First<br>interim | 11 July<br>2019 | 19 | 940 | |||||||||
| Second<br>interim | 10 October<br>2019 | 19 | 941 | |||||||||
| Third<br>interim | 9 January<br>2020 | 19 | 941 | |||||||||
| Fourth<br>interim | 9 April<br>2020 | 23 | 1,144 | |||||||||
| 80 | 3,966 | |||||||||||
| Weighted average number of shares | ||||||||||||
| --- | --- | --- | ||||||||||
| 2020<br><br><br>millions | 2019<br><br><br>millions | |||||||||||
| Weighted<br>average number of shares – basic | 4,976 | 4,947 | ||||||||||
| Dilutive<br>effect of share options and share awards | 62 | 69 | ||||||||||
| Weighted<br>average number of shares – diluted | 5,038 | 5,016 | ||||||||||
| Weighted average number of shares | ||||||||||||
| --- | --- | --- | ||||||||||
| Q4 2020<br><br><br>millions | Q4<br>2019<br><br><br>millions | |||||||||||
| Weighted<br>average number of shares – basic | 4,981 | 4,953 | ||||||||||
| Dilutive<br>effect of share options and share awards | 61 | 69 | ||||||||||
| Weighted<br>average number of shares – diluted | 5,042 | 5,022 | ||||||||||
| At 31<br>December 2020, 4,981 million shares (2019: 4,953 million) were in<br>free issue (excluding Treasury shares and shares held by the ESOP<br>Trusts). GSK made no share repurchases during the period. The<br>company issued 2.1 million shares under employee share schemes in<br>the year for proceeds of £29 million (2019: £51<br>million). | ||||||||||||
| --- | ||||||||||||
| At 31<br>December 2020, the ESOP Trust held 48.6 million GSK shares against<br>the future exercise of share options and share awards. The carrying<br>value of £195 million has been deducted from other reserves.<br>The market value of these shares was £657<br>million.<br><br><br><br><br><br>At 31<br>December 2020, the company held 355.2 million Treasury shares at a<br>cost of £4,969 million, which has been deducted from retained<br>earnings. | ||||||||||||
| --- | ||||||||||||
| Financial information | ||||||||||||
| --- | ||||||||||||
| Income statements | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| TURNOVER | 34,099 | 33,754 | 8,739 | 8,899 | ||||||||
| Cost of<br>sales | (11,704) | (11,863) | (3,171) | (3,248) | ||||||||
| Gross<br>profit | 22,395 | 21,891 | 5,568 | 5,651 | ||||||||
| Selling,<br>general and administration | (11,456) | (11,402) | (3,162) | (3,443) | ||||||||
| Research<br>and development | (5,098) | (4,568) | (1,470) | (1,243) | ||||||||
| Royalty income | 318 | 351 | 91 | 82 | ||||||||
| Other<br>operating income/(expense) | 1,624 | 689 | 34 | 855 | ||||||||
| OPERATING PROFIT | 7,783 | 6,961 | 1,061 | 1,902 | ||||||||
| Finance<br>income | 44 | 98 | 5 | 11 | ||||||||
| Finance<br>expense | (892) | (912) | (239) | (206) | ||||||||
| Share<br>of after tax profits/(losses) of<br><br><br>associates<br>and joint ventures | 33 | 74 | (6) | 4 | ||||||||
| PROFIT BEFORE TAXATION | 6,968 | 6,221 | 821 | 1,711 | ||||||||
| Taxation | (580) | (953) | 18 | (194) | ||||||||
| Tax rate % | 8.3% | 15.3% | (2.2)% | 11.3% | ||||||||
| PROFIT AFTER TAXATION | 6,388 | 5,268 | 839 | 1,517 | ||||||||
| Profit<br>attributable to non-controlling<br><br><br>interests | 639 | 623 | 162 | 218 | ||||||||
| Profit<br>attributable to shareholders | 5,749 | 4,645 | 677 | 1,299 | ||||||||
| 6,388 | 5,268 | 839 | 1,517 | |||||||||
| EARNINGS PER SHARE | 115.5p | 93.9p | 13.6p | 26.2p | ||||||||
| Diluted<br>earnings per share | 114.1p | 92.6p | 13.4p | 25.9p | ||||||||
| Statement of comprehensive income | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Profit<br>for the year | 6,388 | 5,268 | ||||||||||
| Items that may be reclassified subsequently to income<br>statement: | ||||||||||||
| Exchange<br>movements on overseas net assets and net investment<br>hedges | (59) | (832) | ||||||||||
| Reclassification<br>of exchange movements on liquidation or disposal of overseas<br>subsidiaries | 36 | (75) | ||||||||||
| Fair<br>value movements on cash flow hedges | (19) | (20) | ||||||||||
| Reclassification<br>of cash flow hedges to income statement | 54 | 3 | ||||||||||
| Tax on<br>fair value movements on cash flow hedges | (18) | 16 | ||||||||||
| (6) | (908) | |||||||||||
| Items that will not be reclassified to income<br>statement: | ||||||||||||
| Exchange<br>movements on overseas net assets of non-controlling<br>interests | (34) | (75) | ||||||||||
| Fair<br>value movements on equity investments | 1,348 | 372 | ||||||||||
| Tax on<br>fair value movements on equity investments | (220) | (95) | ||||||||||
| Re-measurement<br>losses on defined benefit plans | (187) | (1,050) | ||||||||||
| Tax on<br>re-measurement losses on defined benefit plans | 69 | 189 | ||||||||||
| 976 | (659) | |||||||||||
| Other<br>comprehensive income/(expense) for the year | 970 | (1,567) | ||||||||||
| Total<br>comprehensive income for the year | 7,358 | 3,701 | ||||||||||
| Total<br>comprehensive income for the year attributable to: | ||||||||||||
| Shareholders | 6,753 | 3,153 | ||||||||||
| Non-controlling<br>interests | 605 | 548 | ||||||||||
| 7,358 | 3,701 | |||||||||||
| Statement of comprehensive income | ||||||||||||
| --- | ||||||||||||
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Profit<br>for the period | 839 | 1,517 | ||||||||||
| Items that may be reclassified subsequently to income<br>statement: | ||||||||||||
| Exchange<br>movements on overseas net assets and net investment<br>hedges | (248) | (637) | ||||||||||
| Reclassification<br>of exchange movements on liquidation or disposal of overseas<br>subsidiaries | - | (75) | ||||||||||
| Fair<br>value movements on cash flow hedges | 4 | 86 | ||||||||||
| Reclassification<br>of cash flow hedges to income statement | 1 | - | ||||||||||
| Tax on<br>fair value movements on cash flow hedges | (16) | 16 | ||||||||||
| (259) | (610) | |||||||||||
| Items that will not be reclassified to income<br>statement: | ||||||||||||
| Exchange<br>movements on overseas net assets of non-controlling<br>interests | (64) | (103) | ||||||||||
| Fair<br>value movements on equity investments | 635 | 276 | ||||||||||
| Tax on<br>fair value movements on equity investments | (104) | (68) | ||||||||||
| Re-measurement<br>gains on defined benefit plans | 195 | 142 | ||||||||||
| Tax on<br>re-measurement gains on defined benefit plans | (9) | (26) | ||||||||||
| 653 | 221 | |||||||||||
| Other<br>comprehensive income/(expense) for the period | 394 | (389) | ||||||||||
| Total<br>comprehensive income for the period | 1,233 | 1,128 | ||||||||||
| Total<br>comprehensive income for the period attributable to: | ||||||||||||
| Shareholders | 1,135 | 1,013 | ||||||||||
| Non-controlling<br>interests | 98 | 115 | ||||||||||
| 1,233 | 1,128 | |||||||||||
| Pharmaceuticals turnover – year ended 31 December<br>2020 | ||||||||||||
| --- | ||||||||||||
| Total | US | Europe | International | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | |||||||||
| Growth | Growth | Growth | Growth | |||||||||
| ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | |||||||||
| £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Respiratory | 3,749 | 22 | 23 | 2,114 | 21 | 23 | 944 | 21 | 20 | 691 | 24 | 27 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Ellipta<br>products | 2,755 | 19 | 20 | 1,516 | 18 | 19 | 706 | 22 | 22 | 533 | 19 | 22 |
| Anoro Ellipta | 547 | 6 | 8 | 327 | 1 | 2 | 142 | 18 | 17 | 78 | 11 | 17 |
| Arnuity Ellipta | 45 | (6) | (6) | 37 | (10) | (7) | - | - | - | 8 | 14 | - |
| Incruse Ellipta | 220 | (16) | (15) | 117 | (27) | (27) | 74 | 1 | 1 | 29 | 4 | 7 |
| Relvar/Breo Ellipta | 1,124 | 16 | 17 | 474 | 24 | 25 | 322 | 14 | 13 | 328 | 6 | 9 |
| Trelegy Ellipta | 819 | 58 | 59 | 561 | 47 | 48 | 168 | 65 | 65 | 90 | >100 | >100 |
| Nucala | 994 | 29 | 30 | 598 | 32 | 33 | 238 | 16 | 15 | 158 | 45 | 46 |
| HIV | 4,876 | - | 1 | 3,005 | - | 1 | 1,213 | 5 | 4 | 658 | (5) | (1) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Dolutegravir<br>products | 4,702 | 1 | 2 | 2,941 | - | 1 | 1,163 | 7 | 6 | 598 | (2) | 3 |
| Tivicay | 1,527 | (8) | (7) | 871 | (11) | (10) | 368 | (7) | (8) | 288 | (1) | 5 |
| Triumeq | 2,306 | (10) | (9) | 1,454 | (10) | (9) | 568 | (9) | (10) | 284 | (9) | (6) |
| Juluca | 495 | 35 | 36 | 387 | 28 | 29 | 97 | 73 | 71 | 11 | 57 | 71 |
| Dovato | 374 | >100 | >100 | 229 | >100 | >100 | 130 | >100 | >100 | 15 | >100 | >100 |
| Epzicom/Kivexa | 31 | (59) | (59) | 1 | (67) | (67) | 9 | (61) | (61) | 21 | (57) | (57) |
| Selzentry | 91 | (6) | (5) | 47 | (11) | (11) | 27 | (7) | (7) | 17 | 13 | 20 |
| Rukobia | 11 | - | - | 11 | - | - | - | - | - | - | - | - |
| Other | 41 | (16) | (12) | 5 | (50) | (40) | 14 | (22) | (17) | 22 | 5 | 5 |
| Immuno-Inflammation and other specialty | 727 | 19 | 20 | 612 | 14 | 16 | 56 | 22 | 20 | 59 | 84 | 91 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Benlysta | 719 | 17 | 19 | 612 | 14 | 16 | 56 | 22 | 20 | 51 | 59 | 66 |
| Oncology | 372 | 62 | 62 | 231 | 72 | 74 | 136 | 42 | 40 | 5 | - | - |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Zejula | 339 | 48 | 48 | 206 | 54 | 55 | 128 | 35 | 33 | 5 | - | - |
| Blenrep | 33 | - | - | 25 | - | - | 8 | - | - | - | - | - |
| Pharmaceuticals excluding established products | 9,724 | 11 | 12 | 5,962 | 10 | 11 | 2,349 | 13 | 12 | 1,413 | 10 | 14 |
| Established Pharmaceuticals | 7,332 | (16) | (15) | 1,489 | (25) | (24) | 1,755 | (14) | (15) | 4,088 | (14) | (11) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Established Respiratory | 3,251 | (17) | (15) | 1,048 | (26) | (25) | 738 | (9) | (9) | 1,465 | (13) | (10) |
| Seretide/Advair | 1,535 | (11) | (10) | 434 | (14) | (13) | 449 | (11) | (11) | 652 | (10) | (7) |
| Flixotide/Flovent | 419 | (33) | (32) | 183 | (50) | (50) | 80 | (9) | (10) | 156 | (10) | (5) |
| Ventolin | 785 | (16) | (14) | 430 | (21) | (20) | 116 | (3) | (4) | 239 | (12) | (7) |
| Avamys/Veramyst | 297 | (8) | (6) | - | - | - | 66 | (4) | (4) | 231 | (10) | (7) |
| Other<br>Respiratory | 215 | (23) | (23) | 1 | >100 | >100 | 27 | (4) | - | 187 | (25) | (26) |
| Dermatology | 425 | (4) | (1) | 1 | (67) | (67) | 140 | (12) | (13) | 284 | - | 6 |
| Augmentin | 490 | (19) | (15) | - | - | - | 145 | (16) | (16) | 345 | (20) | (15) |
| Avodart | 466 | (19) | (17) | 5 | 25 | 25 | 158 | (24) | (25) | 303 | (16) | (13) |
| Imigran/Imitrex | 118 | (14) | (14) | 42 | (29) | (29) | 51 | (2) | (4) | 25 | (7) | (4) |
| Lamictal | 537 | (5) | (4) | 269 | (5) | (5) | 120 | 7 | 6 | 148 | (13) | (9) |
| Seroxat/Paxil | 146 | (9) | (6) | - | - | - | 37 | - | (3) | 109 | (11) | (7) |
| Valtrex | 103 | (4) | (2) | 15 | 7 | 7 | 32 | 3 | - | 56 | (10) | (5) |
| Other | 1,796 | (21) | (20) | 109 | (48) | (47) | 334 | (28) | (28) | 1,353 | (16) | (14) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Pharmaceuticals | 17,056 | (3) | (1) | 7,451 | 1 | 2 | 4,104 | (1) | (1) | 5,501 | (9) | (5) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––––– | –––––––– | –––––––– | ––––––––– | –––––––– | –––––––– | ––––––––– | –––––––– | |
| Pharmaceuticals turnover – three months ended 31 December<br>2020 | ||||||||||||
| --- | ||||||||||||
| Total | US | Europe | International | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | |||||||||
| Growth | Growth | Growth | Growth | |||||||||
| ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | |||||||||
| £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Respiratory | 1,017 | 14 | 15 | 574 | 10 | 12 | 253 | 18 | 14 | 190 | 21 | 22 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Ellipta<br>products | 725 | 8 | 8 | 390 | - | 2 | 190 | 20 | 17 | 145 | 14 | 15 |
| Anoro Ellipta | 151 | 7 | 8 | 90 | (1) | 1 | 39 | 18 | 15 | 22 | 29 | 29 |
| Arnuity Ellipta | 14 | (7) | (13) | 11 | (15) | (8) | - | - | - | 3 | 50 | (50) |
| Incruse Ellipta | 48 | (38) | (38) | 21 | (60) | (58) | 19 | 6 | - | 8 | 14 | 14 |
| Relvar/Breo Ellipta | 274 | 2 | 2 | 107 | - | 1 | 84 | 14 | 11 | 83 | (6) | (3) |
| Trelegy Ellipta | 238 | 38 | 40 | 161 | 28 | 30 | 48 | 45 | 42 | 29 | >100 | >100 |
| Nucala | 292 | 34 | 34 | 184 | 39 | 42 | 63 | 13 | 7 | 45 | 50 | 53 |
| HIV | 1,268 | 1 | 2 | 805 | 3 | 5 | 327 | 10 | 6 | 136 | (24) | (21) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Dolutegravir<br>products | 1,225 | 1 | 2 | 786 | 2 | 4 | 315 | 13 | 8 | 124 | (23) | (19) |
| Tivicay | 365 | (14) | (13) | 229 | (6) | (4) | 88 | (12) | (17) | 48 | (41) | (35) |
| Triumeq | 580 | (9) | (9) | 370 | (9) | (7) | 143 | (7) | (10) | 67 | (13) | (13) |
| Juluca | 139 | 25 | 25 | 108 | 21 | 22 | 28 | 47 | 37 | 3 | - | 33 |
| Dovato | 141 | >100 | >100 | 79 | >100 | >100 | 56 | >100 | >100 | 6 | >100 | >100 |
| Epzicom/Kivexa | 6 | (60) | (67) | (1) | >(100) | >(100) | 2 | (60) | (60) | 5 | (50) | (60) |
| Selzentry | 21 | (9) | (9) | 12 | (8) | (8) | 7 | - | - | 2 | (33) | (33) |
| Rukobia | 8 | - | - | 8 | - | - | - | - | - | - | - | - |
| Other | 8 | (27) | 18 | - | - | - | 3 | (50) | (17) | 5 | 25 | 25 |
| Immuno-Inflammation and other specialty | 206 | 21 | 24 | 175 | 18 | 21 | 15 | 25 | 17 | 16 | 60 | 70 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Benlysta | 205 | 21 | 23 | 175 | 18 | 21 | 15 | 25 | 17 | 15 | 50 | 60 |
| Oncology | 115 | 74 | 74 | 75 | >100 | >100 | 37 | 28 | 21 | 3 | - | - |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Zejula | 89 | 35 | 35 | 54 | 46 | 51 | 32 | 10 | 3 | 3 | - | - |
| Blenrep | 25 | - | - | 20 | - | - | 5 | - | - | - | - | - |
| Pharmaceuticals excluding established products | 2,606 | 9 | 10 | 1,629 | 9 | 12 | 632 | 15 | 10 | 345 | - | 3 |
| Established Pharmaceuticals | 1,760 | (19) | (18) | 345 | (27) | (25) | 425 | (14) | (18) | 990 | (18) | (16) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Established Respiratory | 756 | (22) | (21) | 234 | (31) | (30) | 175 | (11) | (14) | 347 | (19) | (17) |
| Seretide/Advair | 351 | (15) | (15) | 73 | (30) | (28) | 105 | (12) | (16) | 173 | (9) | (7) |
| Flixotide/Flovent | 87 | (53) | (52) | 34 | (70) | (69) | 20 | (9) | (18) | 33 | (33) | (29) |
| Ventolin | 211 | (7) | (5) | 125 | 1 | 3 | 29 | (6) | (13) | 57 | (20) | (15) |
| Avamys/Veramyst | 70 | (3) | (1) | - | - | - | 15 | - | - | 55 | (7) | (5) |
| Other<br>Respiratory | 37 | (45) | (48) | 2 | >100 | >100 | 6 | (33) | (11) | 29 | (50) | (53) |
| Dermatology | 109 | (3) | - | - | - | - | 36 | (10) | (12) | 73 | 1 | 7 |
| Augmentin | 115 | (27) | (24) | - | - | - | 37 | (21) | (26) | 78 | (30) | (23) |
| Avodart | 96 | (31) | (31) | 1 | >100 | >100 | 34 | (29) | (31) | 61 | (34) | (33) |
| Imigran/Imitrex | 27 | (23) | (26) | 6 | (60) | (60) | 14 | 8 | - | 7 | - | - |
| Lamictal | 140 | (3) | (3) | 73 | - | - | 30 | 7 | 4 | 37 | (16) | (11) |
| Seroxat/Paxil | 36 | (5) | (3) | - | - | - | 10 | 11 | - | 26 | (10) | (3) |
| Valtrex | 26 | (4) | (4) | 4 | - | - | 8 | - | (13) | 14 | (7) | - |
| Other | 455 | (18) | (17) | 27 | (27) | (16) | 81 | (25) | (25) | 347 | (15) | (14) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Pharmaceuticals | 4,366 | (4) | (3) | 1,974 | 1 | 3 | 1,057 | 1 | (3) | 1,335 | (14) | (12) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––––– | –––––––– | –––––––– | ––––––––– | –––––––– | –––––––– | ––––––––– | –––––––– | |
| Vaccines turnover – year ended 31 December 2020 | ||||||||||||
| --- | ||||||||||||
| Total | US | Europe | International | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | |||||||||
| Growth | Growth | Growth | Growth | |||||||||
| ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | |||||||||
| £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Meningitis | 1,029 | 1 | 3 | 433 | 1 | 2 | 356 | 4 | 3 | 240 | (2) | 4 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Bexsero | 650 | (4) | (2) | 260 | - | 1 | 324 | 2 | 1 | 66 | (34) | (20) |
| Menveo | 265 | (1) | 1 | 173 | 2 | 3 | 26 | 44 | 39 | 66 | (16) | (13) |
| Other | 114 | 58 | 57 | - | - | - | 6 | - | - | 108 | 64 | 62 |
| Influenza | 733 | 35 | 37 | 535 | 30 | 31 | 98 | 75 | 73 | 100 | 37 | 42 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Fluarix, FluLaval | 733 | 35 | 37 | 535 | 30 | 31 | 98 | 75 | 73 | 100 | 37 | 42 |
| Shingles | 1,989 | 10 | 11 | 1,675 | - | 1 | 186 | >100 | >100 | 128 | 47 | 49 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Shingrix | 1,989 | 10 | 11 | 1,675 | - | 1 | 186 | >100 | >100 | 128 | 47 | 49 |
| Established Vaccines | 3,231 | (15) | (14) | 1,054 | (24) | (24) | 801 | (23) | (23) | 1,376 | 1 | 3 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Infanrix, Pediarix | 629 | (14) | (13) | 311 | (14) | (13) | 174 | (18) | (19) | 144 | (10) | (6) |
| Boostrix | 476 | (18) | (18) | 257 | (14) | (13) | 140 | (10) | (11) | 79 | (39) | (36) |
| Hepatitis | 576 | (34) | (33) | 333 | (37) | (36) | 140 | (39) | (39) | 103 | (10) | (6) |
| Rotarix | 559 | - | 1 | 123 | (12) | (11) | 119 | 6 | 6 | 317 | 4 | 5 |
| Synflorix | 402 | (14) | (14) | - | - | - | 53 | (2) | (2) | 349 | (16) | (15) |
| Priorix, Priorix Tetra,Varilrix | 261 | 13 | 14 | - | - | - | 126 | 26 | 25 | 135 | 2 | 5 |
| Cervarix | 139 | >100 | >100 | - | - | - | 30 | 43 | 43 | 109 | >100 | >100 |
| Other | 189 | (35) | (35) | 30 | (55) | (56) | 19 | (87) | (87) | 140 | 87 | 85 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Vaccines | 6,982 | (2) | (1) | 3,697 | (5) | (4) | 1,441 | (3) | (4) | 1,844 | 5 | 7 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Vaccines turnover – three months ended 31 December<br>2020 | ||||||||||||
| --- | ||||||||||||
| Total | US | Europe | International | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | ––––––––––––––––––––––––––––––––––––– | |||||||||
| Growth | Growth | Growth | Growth | |||||||||
| ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | ––––––––––––––––––––––– | |||||||||
| £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | £m | £% | CER% | |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Meningitis | 274 | 35 | 36 | 110 | >100 | >100 | 91 | 10 | 5 | 73 | (23) | (20) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Bexsero | 159 | 42 | 44 | 60 | >100 | >100 | 82 | 8 | 4 | 17 | (29) | (17) |
| Menveo | 83 | 26 | 27 | 50 | >100 | >100 | 8 | 33 | 17 | 25 | (47) | (45) |
| Other | 32 | 28 | 24 | - | - | - | 1 | - | - | 31 | 29 | 25 |
| Influenza | 252 | 83 | 85 | 154 | 67 | 71 | 65 | >100 | >100 | 33 | 38 | 42 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Fluarix, FluLaval | 252 | 83 | 85 | 154 | 67 | 71 | 65 | >100 | >100 | 33 | 38 | 42 |
| Shingles | 645 | 21 | 23 | 520 | 5 | 7 | 69 | >100 | >100 | 56 | >100 | >100 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Shingrix | 645 | 21 | 23 | 520 | 5 | 7 | 69 | >100 | >100 | 56 | >100 | >100 |
| Established Vaccines | 841 | (3) | (3) | 301 | 1 | 3 | 197 | (13) | (15) | 343 | (1) | (1) |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Infanrix, Pediarix | 172 | 10 | 12 | 100 | 47 | 50 | 38 | (14) | (18) | 34 | (23) | (18) |
| Boostrix | 125 | (4) | (3) | 70 | 6 | 8 | 36 | 6 | 3 | 19 | (37) | (33) |
| Hepatitis | 139 | (29) | (28) | 85 | (23) | (23) | 29 | (45) | (47) | 25 | (19) | (13) |
| Rotarix | 148 | 5 | 6 | 39 | 15 | 18 | 31 | 11 | 7 | 78 | (1) | - |
| Synflorix | 93 | (25) | (27) | - | - | - | 11 | 10 | - | 82 | (28) | (29) |
| Priorix, Priorix Tetra,Varilrix | 78 | 11 | 10 | - | - | - | 31 | 19 | 15 | 47 | 7 | 7 |
| Cervarix | 44 | >100 | >100 | - | - | - | 16 | >100 | >100 | 28 | >100 | >100 |
| Other | 42 | (36) | (42) | 7 | (63) | (58) | 5 | (81) | (77) | 30 | 43 | 14 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Vaccines | 2,012 | 15 | 16 | 1,085 | 19 | 22 | 422 | 21 | 17 | 505 | 5 | 5 |
| –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | –––––––– | |
| Balance sheet | ||||||||||||
| --- | ||||||||||||
| 31 December 2020<br><br><br>£m | 31<br>December 2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| ASSETS | ||||||||||||
| Non-current assets | ||||||||||||
| Property,<br>plant and equipment | 10,176 | 10,348 | ||||||||||
| Right<br>of use assets | 830 | 966 | ||||||||||
| Goodwill | 10,597 | 10,562 | ||||||||||
| Other<br>intangible assets | 29,824 | 30,955 | ||||||||||
| Investments<br>in associates and joint ventures | 364 | 314 | ||||||||||
| Other<br>investments | 3,060 | 1,837 | ||||||||||
| Deferred<br>tax assets | 4,287 | 4,096 | ||||||||||
| Derivative<br>financial instruments | 5 | 103 | ||||||||||
| Other<br>non-current assets | 1,041 | 1,020 | ||||||||||
| Total non-current assets | 60,184 | 60,201 | ||||||||||
| Current assets | ||||||||||||
| Inventories | 5,996 | 5,947 | ||||||||||
| Current<br>tax recoverable | 671 | 262 | ||||||||||
| Trade<br>and other receivables | 6,952 | 7,202 | ||||||||||
| Derivative<br>financial instruments | 152 | 421 | ||||||||||
| Liquid<br>investments | 78 | 79 | ||||||||||
| Cash<br>and cash equivalents | 6,292 | 4,707 | ||||||||||
| Assets<br>held for sale | 106 | 873 | ||||||||||
| Total current assets | 20,247 | 19,491 | ||||||||||
| TOTAL ASSETS | 80,431 | 79,692 | ||||||||||
| LIABILITIES | ||||||||||||
| Current liabilities | ||||||||||||
| Short-term<br>borrowings | (3,725) | (6,918) | ||||||||||
| Contingent<br>consideration liabilities | (765) | (755) | ||||||||||
| Trade<br>and other payables | (15,840) | (14,939) | ||||||||||
| Derivative<br>financial instruments | (221) | (188) | ||||||||||
| Current<br>tax payable | (545) | (629) | ||||||||||
| Short-term<br>provisions | (1,052) | (621) | ||||||||||
| Total current liabilities | (22,148) | (24,050) | ||||||||||
| Non-current liabilities | ||||||||||||
| Long-term<br>borrowings | (23,425) | (23,590) | ||||||||||
| Corporation<br>tax payable | (176) | (189) | ||||||||||
| Deferred<br>tax liabilities | (3,600) | (3,810) | ||||||||||
| Pensions<br>and other post-employment benefits | (3,650) | (3,457) | ||||||||||
| Other<br>provisions | (707) | (670) | ||||||||||
| Derivative<br>financial instruments | (10) | (1) | ||||||||||
| Contingent<br>consideration liabilities | (5,104) | (4,724) | ||||||||||
| Other<br>non-current liabilities | (803) | (844) | ||||||||||
| Total non-current liabilities | (37,475) | (37,285) | ||||||||||
| TOTAL LIABILITIES | (59,623) | (61,335) | ||||||||||
| NET ASSETS | 20,808 | 18,357 | ||||||||||
| EQUITY | ||||||||||||
| Share<br>capital | 1,346 | 1,346 | ||||||||||
| Share<br>premium account | 3,281 | 3,174 | ||||||||||
| Retained<br>earnings | 6,755 | 4,530 | ||||||||||
| Other<br>reserves | 3,205 | 2,355 | ||||||||||
| Shareholders’ equity | 14,587 | 11,405 | ||||||||||
| Non-controlling<br>interests | 6,221 | 6,952 | ||||||||||
| TOTAL EQUITY | 20,808 | 18,357 | ||||||||||
| Statement of changes in equity | ||||||||||||
| --- | ||||||||||||
| Share<br><br><br>capital<br><br><br>£m | Share<br><br><br>premium<br><br><br>£m | Retained<br><br><br>earnings<br><br><br>£m | Other<br><br><br>reserves<br><br><br>£m | Share-holder’s<br><br><br>equity<br><br><br>£m | Non-controlling<br><br><br>interests<br><br><br>£m | Total<br><br><br>equity<br><br><br>£m | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | |||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| At 1<br>January 2020 | 1,346 | 3,174 | 4,530 | 2,355 | 11,405 | 6,952 | 18,357 | |||||
| Profit<br>for the year | 5,749 | 5,749 | 639 | 6,388 | ||||||||
| Other<br>comprehensive (expense)/income for the year | (133) | 1,137 | 1,004 | (34) | 970 | |||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||||
| Total<br>comprehensive income for the year | 5,616 | 1,137 | 6,753 | 605 | 7,358 | |||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||||
| Distributions<br>to non-controlling interests | (1,208) | (1,208) | ||||||||||
| Contributions<br>from non-controlling interests | 3 | 3 | ||||||||||
| Changes<br>to non-controlling interests | (131) | (131) | ||||||||||
| Dividends<br>to shareholders | (3,977) | (3,977) | (3,977) | |||||||||
| Shares<br>issued | 29 | 29 | 29 | |||||||||
| Realised<br>after tax profits on disposal of equity investments | 163 | (163) | - | |||||||||
| Share<br>of associates and joint ventures realised profits on disposal of<br>equity investments | 44 | (44) | - | |||||||||
| Shares<br>acquired by ESOP Trusts | 78 | 531 | (609) | - | ||||||||
| Write-down<br>on shares held by ESOP Trusts | (529) | 529 | - | |||||||||
| Share-based<br>incentive plans | 381 | 381 | 381 | |||||||||
| Tax on<br>share-based incentive plans | (4) | (4) | (4) | |||||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| At 31 December 2020 | 1,346 | 3,281 | 6,755 | 3,205 | 14,587 | 6,221 | 20,808 | |||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| As<br>previously reported | 1,345 | 3,091 | (2,137) | 2,061 | 4,360 | (688) | 3,672 | |||||
| Adjustment<br>to non-controlling interest | (579) | (579) | 579 | - | ||||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| As<br>revised | 1,345 | 3,091 | (2,716) | 2,061 | 3,781 | (109) | 3,672 | |||||
| Implementation<br>of IFRS16 | (93) | (93) | (93) | |||||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| At 1<br>January 2019, as adjusted | 1,345 | 3,091 | (2,809) | 2,061 | 3,688 | (109) | 3,579 | |||||
| Profit<br>for the year | 4,645 | 4,645 | 623 | 5,268 | ||||||||
| Other<br>comprehensive (expense)/income for the year | (1,766) | 274 | (1,492) | (75) | (1,567) | |||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||||
| Total<br>comprehensive income/(expense) for the year | 2,879 | 274 | 3,153 | 548 | 3,701 | |||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||||
| Distributions<br>to non-controlling interests | (364) | (364) | ||||||||||
| Changes<br>in non-controlling interests | (10) | (10) | ||||||||||
| Dividends<br>to shareholders | (3,953) | (3,953) | (3,953) | |||||||||
| Recognition<br>of interest in Consumer Healthcare Joint Venture | 8,082 | 8,082 | 6,887 | 14,969 | ||||||||
| Shares<br>issued | 1 | 50 | 51 | 51 | ||||||||
| Realised<br>profits on disposal of equity investments | (4) | 4 | - | |||||||||
| Shares<br>acquired by ESOP Trusts | 33 | 295 | (328) | - | ||||||||
| Write-down<br>on shares held by ESOP Trusts | (344) | 344 | - | |||||||||
| Share-based<br>incentive plans | 365 | 365 | 365 | |||||||||
| Tax on<br>share-based incentive plans | 19 | 19 | 19 | |||||||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| At 31<br>December 2019 | 1,346 | 3,174 | 4,530 | 2,355 | 11,405 | 6,952 | 18,357 | |||||
| –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | –––––––––––– | ||||||
| Cash flow statement – year ended 31 December<br>2020 | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||||||
| --- | --- | --- | --- | |||||||||
| Profit after tax | 6,388 | 5,268 | ||||||||||
| Tax on<br>profits | 580 | 953 | ||||||||||
| Share<br>of after tax profits of associates and joint ventures | (33) | (74) | ||||||||||
| Net<br>finance expense | 848 | 814 | ||||||||||
| Depreciation,<br>amortisation and other adjusting items | 624 | 2,996 | ||||||||||
| Decrease<br>in working capital | 120 | 531 | ||||||||||
| Contingent<br>consideration paid | (765) | (780) | ||||||||||
| Increase/(decrease)<br>in other net liabilities (excluding contingent consideration<br>paid) | 2,334 | (176) | ||||||||||
| Cash generated from operations | 10,096 | 9,532 | ||||||||||
| Taxation<br>paid | (1,655) | (1,512) | ||||||||||
| Net cash inflow from operating activities | 8,441 | 8,020 | ||||||||||
| Cash flow from investing activities | ||||||||||||
| Purchase<br>of property, plant and equipment | (1,226) | (1,265) | ||||||||||
| Proceeds<br>from sale of property, plant and equipment | 68 | 95 | ||||||||||
| Purchase<br>of intangible assets | (1,013) | (898) | ||||||||||
| Proceeds<br>from sale of intangible assets | 1,255 | 404 | ||||||||||
| Purchase<br>of equity investments | (411) | (258) | ||||||||||
| Proceeds<br>from sale of equity investments | 3,269 | 69 | ||||||||||
| Purchase<br>of businesses, net of cash acquired | 15 | (3,571) | ||||||||||
| Contingent<br>consideration paid | (120) | (113) | ||||||||||
| Disposal<br>of businesses | 259 | 104 | ||||||||||
| Investment<br>in associates and joint ventures | (4) | (11) | ||||||||||
| Interest<br>received | 39 | 82 | ||||||||||
| (Increase)/decrease<br>in liquid investments | (1) | 1 | ||||||||||
| Dividends<br>from associates and joint ventures | 31 | 7 | ||||||||||
| Net cash inflow/(outflow) from investing activities | 2,161 | (5,354) | ||||||||||
| Cash flow from financing activities | ||||||||||||
| Issue<br>of share capital | 29 | 51 | ||||||||||
| Increase<br>in short-term loans | - | 3,095 | ||||||||||
| Increase<br>in long-term loans | 3,298 | 4,794 | ||||||||||
| Repayment<br>of short-term loans | (7,305) | (4,160) | ||||||||||
| Repayment<br>of lease liabilities | (227) | (214) | ||||||||||
| Purchase<br>of non-controlling interests | - | (7) | ||||||||||
| Interest<br>paid | (864) | (895) | ||||||||||
| Dividends<br>paid to shareholders | (3,977) | (3,953) | ||||||||||
| Distributions<br>to non-controlling interests | (1,208) | (364) | ||||||||||
| Contributions<br>from non-controlling interests | 3 | - | ||||||||||
| Other<br>financing items | 119 | (187) | ||||||||||
| Net cash outflow from financing activities | (10,132) | (1,840) | ||||||||||
| Increase in cash and bank overdrafts in the year | 470 | 826 | ||||||||||
| Cash<br>and bank overdrafts at beginning of the year | 4,831 | 4,087 | ||||||||||
| Exchange<br>adjustments | (39) | (82) | ||||||||||
| Increase<br>in cash and bank overdrafts | 470 | 826 | ||||||||||
| Cash and bank overdrafts at end of the year | 5,262 | 4,831 | ||||||||||
| Cash<br>and bank overdrafts at end of the period comprise: | ||||||||||||
| Cash<br>and cash equivalents | 6,292 | 4,707 | ||||||||||
| Cash<br>and cash equivalents reported in assets held for sale | - | 507 | ||||||||||
| 6,292 | 5,214 | |||||||||||
| Overdrafts | (1,030) | (383) | ||||||||||
| 5,262 | 4,831 | |||||||||||
| Segment information | ||||||||||||
| --- | ||||||||||||
| Operating<br>segments are reported based on the financial information provided<br>to the Chief Executive Officer and the responsibilities of the<br>Corporate Executive Team (CET). GSK reports results under four<br>segments: Pharmaceuticals; Pharmaceuticals R&D; Vaccines and<br>Consumer Healthcare, and individual members of the CET are<br>responsible for each segment.<br><br><br><br><br><br>The<br>Pharmaceuticals R&D segment is the responsibility of the Chief<br>Scientific Officer and President, R&D and is reported as a<br>separate segment. The operating profit of this segment excludes the<br>ViiV Healthcare operating profit (including R&D expenditure)<br>that is reported within the Pharmaceuticals segment.<br><br><br><br><br><br>The<br>Group’s management reporting process allocates intra-Group<br>profit on a product sale to the market in which that sale is<br>recorded, and the profit analyses below have been presented on that<br>basis.<br><br><br><br><br><br>Corporate<br>and other unallocated turnover and costs include the results of<br>certain Consumer Healthcare products which are being held for sale<br>in a number of markets in order to meet anti-trust approval<br>requirements, together with the costs of corporate<br>functions. | ||||||||||||
| Turnover by segment | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| Pharmaceuticals | 17,056 | 17,554 | (3) | (1) | ||||||||
| Vaccines | 6,982 | 7,157 | (2) | (1) | ||||||||
| Consumer<br>Healthcare | 10,033 | 8,995 | 12 | 14 | ||||||||
| 34,071 | 33,706 | 1 | 3 | |||||||||
| Corporate<br>and other unallocated turnover | 28 | 48 | ||||||||||
| Total<br>turnover | 34,099 | 33,754 | 1 | 3 | ||||||||
| Operating profit by segment | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| Pharmaceuticals | 7,723 | 7,964 | (3) | (2) | ||||||||
| Pharmaceuticals<br>R&D | (3,538) | (3,369) | 5 | 6 | ||||||||
| Pharmaceuticals<br>including R&D | 4,185 | 4,595 | (9) | (7) | ||||||||
| Vaccines | 2,713 | 2,966 | (9) | (6) | ||||||||
| Consumer<br>Healthcare | 2,213 | 1,874 | 18 | 22 | ||||||||
| Segment<br>profit | 9,111 | 9,435 | (3) | (1) | ||||||||
| Corporate<br>and other unallocated costs | (205) | (463) | ||||||||||
| Adjusted<br>operating profit | 8,906 | 8,972 | (1) | 2 | ||||||||
| Adjusting<br>items | (1,123) | (2,011) | ||||||||||
| Total<br>operating profit | 7,783 | 6,961 | 12 | 15 | ||||||||
| Finance<br>income | 44 | 98 | ||||||||||
| Finance<br>costs | (892) | (912) | ||||||||||
| Share<br>of after tax profits of associates and joint ventures | 33 | 74 | ||||||||||
| Profit<br>before taxation | 6,968 | 6,221 | 12 | 16 | ||||||||
| Turnover by segment | ||||||||||||
| --- | ||||||||||||
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| Pharmaceuticals | 4,366 | 4,558 | (4) | (3) | ||||||||
| Vaccines | 2,012 | 1,742 | 15 | 16 | ||||||||
| Consumer<br>Healthcare | 2,360 | 2,571 | (8) | (7) | ||||||||
| 8,738 | 8,871 | (1) | - | |||||||||
| Corporate<br>and other unallocated turnover | 1 | 28 | ||||||||||
| Total<br>turnover | 8,739 | 8,899 | (2) | (1) | ||||||||
| Operating profit by segment | ||||||||||||
| --- | ||||||||||||
| Q4 2020<br><br><br>£m | Q4<br>2019<br><br><br>£m | Growth<br><br><br>£% | Growth<br><br><br>CER% | |||||||||
| --- | --- | --- | --- | --- | ||||||||
| Pharmaceuticals | 1,874 | 1,935 | (3) | (3) | ||||||||
| Pharmaceuticals<br>R&D | (1,023) | (927) | 10 | 12 | ||||||||
| Pharmaceuticals<br>including R&D | 851 | 1,008 | (16) | (16) | ||||||||
| Vaccines | 691 | 578 | 20 | 26 | ||||||||
| Consumer<br>Healthcare | 385 | 440 | (13) | (12) | ||||||||
| Segment<br>profit | 1,927 | 2,026 | (5) | (3) | ||||||||
| Corporate<br>and other unallocated costs | (110) | (174) | ||||||||||
| Adjusted<br>operating profit | 1,817 | 1,852 | (2) | (1) | ||||||||
| Adjusting<br>items | (756) | 50 | ||||||||||
| Total<br>operating profit | 1,061 | 1,902 | (44) | (44) | ||||||||
| Finance<br>income | 5 | 11 | ||||||||||
| Finance<br>costs | (239) | (206) | ||||||||||
| Share<br>of after tax (losses)/profits of associates and joint<br>ventures | (6) | 4 | ||||||||||
| Profit<br>before taxation | 821 | 1,711 | (52) | (52) | ||||||||
| Legal matters<br><br><br><br><br><br>The Group is involved in significant legal and<br>administrative proceedings, principally product liability,<br>intellectual property, tax, anti-trust, consumer fraud and<br>governmental investigations, which are more fully described in the<br>‘Legal Proceedings’ note in the Annual Report 2019, as<br>updated in subsequent quarterly results announcements for any<br>significant legal developments. At 31 December 2020, the<br>Group’s aggregate provision for legal and other disputes (not<br>including tax matters described on page 22) was £0.3 billion<br>(31 December 2019: £0.2 billion).<br><br><br><br><br><br>The<br>Group may become involved in significant legal proceedings in<br>respect of which it is not possible to make a reliable estimate of<br>the expected financial effect, if any, that could result from<br>ultimate resolution of the proceedings. In these cases, the Group<br>would provide appropriate disclosures about such cases, but no<br>provision would be made.<br><br><br><br><br><br>The<br>ultimate liability for legal claims may vary from the amounts<br>provided and is dependent upon the outcome of litigation<br>proceedings, investigations and possible settlement negotiations.<br>The Group’s position could change over time, and, therefore,<br>there can be no assurance that any losses that result from the<br>outcome of any legal proceedings will not exceed by a material<br>amount the amount of the provisions reported in the Group’s<br>financial accounts.<br><br><br><br><br><br>There<br>have been no significant legal developments this<br>quarter. | ||||||||||||
| --- | ||||||||||||
| Additional information | ||||||||||||
| --- | ||||||||||||
| Accounting policies and basis of preparation | ||||||||||||
| --- | ||||||||||||
| This<br>unaudited Results Announcement contains condensed financial<br>information for the year-end and three months ended 31 December 2020, and should be read in<br>conjunction with the Annual Report 2019, which was prepared<br>in accordance with International Financial Reporting Standards as<br>adopted by the European Union. This Results Announcement has been<br>prepared applying consistent accounting policies to those applied<br>by the Group in the Annual Report 2019.<br><br><br><br><br><br>The<br>Group has not identified any changes to its key sources of<br>accounting judgements or estimations of uncertainty compared with<br>those disclosed in the Annual Report 2019. | ||||||||||||
| This<br>Results Announcement does not constitute statutory accounts of the<br>Group within the meaning of sections 434(3) and 435(3) of the<br>Companies Act 2006. The full Group accounts for 2019 were published<br>in the Annual Report 2019, which has been delivered to the<br>Registrar of Companies and on which the report of the independent<br>auditor was unqualified and did not contain a statement under<br>section 498 of the Companies Act 2006.<br><br><br><br><br><br>COVID-19 pandemic<br><br><br>The<br>potential impact of the COVID-19 pandemic on GSK’s trading<br>performance and all our principal risks has been assessed with<br>mitigation plans put in place. Up to the date of this report, the<br>pandemic has, as anticipated, impacted the Group performance during<br>the year primarily in demand for Vaccines as a result of ongoing<br>containment measures impacting customers’ ability and<br>willingness to access vaccination services across all regions. We<br>anticipate that governments’ prioritisation of COVID-19<br>vaccination programmes will continue to impact our Vaccines<br>business. We continue to monitor the situation closely, as this<br>continues to be a very dynamic and uncertain situation, with the<br>ultimate severity, duration and impact unknown at this point<br>including potential impacts on trading results, clinical trials,<br>supply continuity and our employees. The situation could change at<br>any time and there can be no assurance that the COVID-19 pandemic<br>will not have a material adverse impact on the future results of<br>the Group. | ||||||||||||
| --- | ||||||||||||
| Exchange rates | ||||||||||||
| --- | ||||||||||||
| GSK<br>operates in many countries, and earns revenues and incurs costs in<br>many currencies. The results of the Group, as reported in Sterling,<br>are affected by movements in exchange rates between Sterling and<br>other currencies. Average exchange rates, as modified by specific<br>transaction rates for large transactions, prevailing during the<br>period, are used to translate the results and cash flows of<br>overseas subsidiaries, associates and joint ventures into Sterling.<br>Period-end rates are used to translate the net assets of those<br>entities. The currencies which most influenced these translations<br>and the relevant exchange rates were: | ||||||||||||
| 2020 | 2019 | Q4 2020 | Q4<br>2019 | |||||||||
| --- | --- | --- | --- | --- | --- | |||||||
| Average<br>rates: | ||||||||||||
| US$/£ | 1.29 | 1.28 | 1.33 | 1.30 | ||||||||
| Euro/£ | 1.13 | 1.14 | 1.11 | 1.17 | ||||||||
| Yen/£ | 137 | 139 | 138 | 141 | ||||||||
| Period-end<br>rates: | ||||||||||||
| US$/£ | 1.36 | 1.32 | 1.36 | 1.32 | ||||||||
| Euro/£ | 1.11 | 1.18 | 1.11 | 1.18 | ||||||||
| Yen/£ | 141 | 143 | 141 | 143 | ||||||||
| During Q4 2020 average Sterling exchange rates were stronger<br>against the US Dollar but weaker against the Euro and Yen compared<br>with the same period in 2019. Similarly, during the year ended 31<br>December 2020, average Sterling exchange rates were stronger<br>against the US Dollar but weaker against the Euro and Yen.<br>Period-end Sterling exchange rates were also stronger against the<br>US Dollar but weaker against the Euro and the Yen compared with the<br>2019 period-end rates. | ||||||||||||
| --- | ||||||||||||
| Net assets | ||||||||||||
| --- | ||||||||||||
| The<br>book value of net assets increased by £2,451 million from<br>£18,357 million at 31 December 2019 to £20,808 million at<br>31 December 2020. This primarily reflected the Total profit for the<br>year and the increase in the fair value of equity investments<br>exceeding the dividends paid during the year.<br><br><br><br><br><br>The<br>carrying value of investments in associates and joint ventures at<br>31 December 2020 was £364 million (31 December 2019: £314<br>million), with a market value of £364 million (31 December<br>2019: £396 million).<br><br><br><br><br><br>At 31<br>December 2020, the net deficit on the Group’s pension plans<br>was £2,104 million compared with £1,921 million at 31<br>December 2019. The increase in the net deficit primarily arose from<br>decreases in the rates used to discount UK pension liabilities from<br>2.0% to 1.4%, and US pension liabilities from 3.2% to 2.3%, partly<br>offset by higher UK assets and a decrease in the UK inflation rate<br>from 3.0% to 2.8%. The Group continues to monitor and review the<br>pension asset portfolios in response to the pandemic given the<br>elevated uncertainty inherent for valuations particularly for the<br>property asset class.<br><br><br><br><br><br>The<br>estimated present value of the potential redemption amount of the<br>Pfizer put option related to ViiV Healthcare, recorded in Other<br>payables in Current liabilities, was £960 million (31 December<br>2019: £1,011 million).<br><br><br><br><br><br>Contingent<br>consideration amounted to £5,869 million at 31 December 2020<br>(31 December 2019: £5,479 million), of which £5,359<br>million (31 December 2019: £5,103 million) represented the<br>estimated present value of amounts payable to Shionogi relating to<br>ViiV Healthcare and £477 million (31 December 2019: £339<br>million) represented the estimated present value of contingent<br>consideration payable to Novartis related to the Vaccines<br>acquisition.<br><br><br><br><br><br>Of the<br>contingent consideration payable (on a post-tax basis) to Shionogi<br>at 31 December 2020, £745 million (31 December 2019: £730<br>million) is expected to be paid within one year. | ||||||||||||
| Movements in contingent consideration are as follows: | ||||||||||||
| --- | ||||||||||||
| 2020 | ViiV Healthcare<br><br><br>£m | Group<br><br><br>£m | ||||||||||
| --- | --- | --- | ||||||||||
| Contingent<br>consideration at beginning of the year | 5,103 | 5,479 | ||||||||||
| Re-measurement<br>through income statement | 1,114 | 1,275 | ||||||||||
| Cash<br>payments: operating cash flows | (751) | (765) | ||||||||||
| Cash<br>payments: investing activities | (107) | (120) | ||||||||||
| Contingent<br>consideration at end of the year | 5,359 | 5,869 | ||||||||||
| 2019 | ViiV<br>Healthcare<br><br><br>£m | Group<br><br><br>£m | ||||||||||
| --- | --- | --- | ||||||||||
| Contingent<br>consideration at beginning of the year | 5,937 | 6,286 | ||||||||||
| Additions | - | 4 | ||||||||||
| Re-measurement<br>through income statement | 31 | 82 | ||||||||||
| Cash<br>payments: operating cash flows | (767) | (780) | ||||||||||
| Cash<br>payments: investing activities | (98) | (113) | ||||||||||
| Contingent<br>consideration at end of the year | 5,103 | 5,479 | ||||||||||
| The<br>liabilities for the Pfizer put option and the contingent<br>consideration at 31 December 2020 have been calculated based on the<br>period-end exchange rates, primarily US$1.36/£1 and<br>€1.11/£1. Sensitivity analyses for the Pfizer put option<br>and each of the largest contingent consideration liabilities are<br>set out below. | ||||||||||||
| --- | ||||||||||||
| Increase/(decrease) in liability | ViiV<br><br><br>Healthcare<br><br><br>put<br>option | Shionogi-<br><br><br>ViiV<br>Healthcare<br><br><br>contingent<br><br><br>consideration | Novartis<br><br><br>Vaccines<br><br><br>contingent<br><br><br>consideration | |||||||||
| --- | --- | --- | --- | |||||||||
| £m | £m | £m | ||||||||||
| 10%<br>increase in sales forecasts | 117 | 515 | 80 | |||||||||
| 10%<br>decrease in sales forecasts | (116) | (516) | (78) | |||||||||
| 1% (100<br>basis points) increase in discount rate | (41) | (207) | (39) | |||||||||
| 1% (100<br>basis points) decrease in discount rate | 45 | 223 | 45 | |||||||||
| 5%<br>increase in probability of milestone success | 7 | |||||||||||
| 5%<br>decrease in probability of milestone success | (7) | |||||||||||
| 5 cent<br>appreciation of US Dollar | 25 | 147 | 1 | |||||||||
| 5 cent<br>depreciation of US Dollar | (23) | (137) | (1) | |||||||||
| 10 cent<br>appreciation of US Dollar | 52 | 305 | 4 | |||||||||
| 10 cent<br>depreciation of US Dollar | (45) | (262) | (2) | |||||||||
| 5 cent<br>appreciation of Euro | 20 | 58 | 14 | |||||||||
| 5 cent<br>depreciation of Euro | (18) | (56) | (13) | |||||||||
| 10 cent<br>appreciation of Euro | 42 | 125 | 30 | |||||||||
| 10 cent<br>depreciation of Euro | (34) | (105) | (24) | |||||||||
| Contingent liabilities | ||||||||||||
| --- | ||||||||||||
| There<br>were contingent liabilities at 31 December 2020 in respect of<br>guarantees and indemnities entered into as part of the ordinary<br>course of the Group’s business. No material losses are<br>expected to arise from such contingent liabilities. Provision is<br>made for the outcome of legal and tax disputes where it is both<br>probable that the Group will suffer an outflow of funds and it is<br>possible to make a reliable estimate of that outflow. Descriptions<br>of the significant legal disputes to which the Group is a party are<br>set out on page 58. | ||||||||||||
| Reconciliation of cash flow to movements in net debt | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Net<br>debt, as previously reported | (25,215) | (21,621) | ||||||||||
| Implementation<br>of IFRS 16 | - | (1,303) | ||||||||||
| Net<br>debt at beginning of the year, as adjusted | (25,215) | (22,924) | ||||||||||
| Increase<br>in cash and bank overdrafts | 470 | 826 | ||||||||||
| Increase/(decrease)<br>in liquid investments | 1 | (1) | ||||||||||
| Net<br>decrease in short-term loans | 7,305 | 1,065 | ||||||||||
| Increase<br>in long-term loans | (3,298) | (4,794) | ||||||||||
| Repayment<br>of lease liabilities | 227 | 214 | ||||||||||
| Debt of<br>subsidiary undertakings acquired | - | (524) | ||||||||||
| Exchange<br>adjustments | (135) | 1,015 | ||||||||||
| Other<br>non-cash movements | (135) | (92) | ||||||||||
| Decrease/(increase)<br>in net debt | 4,435 | (2,291) | ||||||||||
| Net<br>debt at end of the year | (20,780) | (25,215) | ||||||||||
| Net debt analysis | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | |||||||||||
| --- | --- | --- | ||||||||||
| Liquid<br>investments | 78 | 79 | ||||||||||
| Cash<br>and cash equivalents | 6,292 | 4,707 | ||||||||||
| Cash<br>and cash equivalents reported in assets held for sale | - | 507 | ||||||||||
| Short-term<br>borrowings | (3,725) | (6,918) | ||||||||||
| Long-term<br>borrowings | (23,425) | (23,590) | ||||||||||
| Net<br>debt at end of the period | (20,780) | (25,215) | ||||||||||
| Free cash flow reconciliation | ||||||||||||
| --- | ||||||||||||
| 2020<br><br><br>£m | 2019<br><br><br>£m | Q4<br>2020<br><br><br>£m | ||||||||||
| --- | --- | --- | --- | |||||||||
| Net<br>cash inflow from operating activities | 8,441 | 8,020 | 3,855 | |||||||||
| Purchase<br>of property, plant and equipment | (1,226) | (1,265) | (514) | |||||||||
| Proceeds<br>from sale of property, plant and equipment | 68 | 95 | 33 | |||||||||
| Purchase<br>of intangible assets | (1,013) | (898) | (331) | |||||||||
| Proceeds<br>from disposals of intangible assets | 1,255 | 404 | 618 | |||||||||
| Net<br>finance costs | (825) | (813) | (341) | |||||||||
| Dividends<br>from joint ventures and associates | 31 | 7 | 17 | |||||||||
| Contingent<br>consideration paid (reported in investing<br><br><br>activities) | (120) | (113) | (29) | |||||||||
| Distributions<br>to non-controlling interests | (1,208) | (364) | (202) | |||||||||
| Contributions<br>from non-controlling interests | 3 | - | - | |||||||||
| Free<br>cash flow | 5,406 | 5,073 | 3,106 | |||||||||
| Reporting definitions | ||||||||||||
| --- | ||||||||||||
| Total and Adjusted results<br><br><br>Total<br>reported results represent the Group’s overall<br>performance.<br><br><br><br><br><br>GSK<br>also uses a number of adjusted, non-IFRS, measures to report the<br>performance of its business. Adjusted results and other non-IFRS<br>measures may be considered in addition to, but not as a substitute<br>for or superior to, information presented in accordance with IFRS.<br>Adjusted results are defined on page 10 and other non-IFRS measures<br>are defined below.<br><br><br><br><br><br>Free cash flow<br><br><br>Free<br>cash flow is defined as the net cash inflow from operating<br>activities less capital expenditure on property, plant and<br>equipment and intangible assets, contingent consideration payments,<br>net finance costs, and dividends paid to non-controlling interests<br>plus proceeds from the sale of property, plant and equipment and<br>intangible assets, and dividends received from joint ventures and<br>associates. It is used by management for planning and reporting<br>purposes and in discussions with and presentations to investment<br>analysts and rating agencies. Free cash flow growth is calculated<br>on a reported basis. A reconciliation of net cash inflow from<br>operations to free cash flow is set out on page 62.<br><br><br><br><br><br>Free cash flow conversion<br><br><br>Free<br>cash flow conversion is free cash flow as a percentage of<br>earnings.<br><br><br><br><br><br>Working capital<br><br><br>Working<br>capital represents inventory and trade receivables less trade<br>payables.<br><br><br><br><br><br>CER and AER growth<br><br><br>In<br>order to illustrate underlying performance, it is the Group’s<br>practice to discuss its results in terms of constant exchange rate<br>(CER) growth. This represents growth calculated as if the exchange<br>rates used to determine the results of overseas companies in<br>Sterling had remained unchanged from those used in the comparative<br>period. CER% represents growth at constant exchange rates. £%<br>or AER% represents growth at actual exchange rates.<br><br><br><br><br><br>Pro-forma growth<br><br><br>The<br>acquisition of the Pfizer consumer healthcare business completed on<br>31 July 2019 and so GSK’s reported results for the year ended<br>31 December 2019 include five months of results of the former<br>Pfizer consumer healthcare business compared with twelve months in<br>2020.<br><br><br><br><br><br>The<br>Group has presented pro-forma growth rates at CER for turnover,<br>Adjusted operating profit and operating profit by business taking<br>account of this transaction. Pro-forma growth rates at CER for the<br>year ended 31 December 2020 are calculated comparing reported<br>results for the year ended 31 December 2020, calculated applying<br>the exchange rates used in the comparative period, with the results<br>for the year ended 31 December 2019 adjusted to include the<br>equivalent seven months of results to 31 July 2019 of the former<br>Pfizer consumer healthcare business, as consolidated (in US$) and<br>included in Pfizer’s US GAAP results. | ||||||||||||
| --- | ||||||||||||
| Brand names and partner acknowledgements<br><br><br>Brand<br>names appearing in italics throughout this document are trademarks<br>of GSK or associated companies or used under licence by the<br>Group. | ||||||||||||
| --- | ||||||||||||
| Outlook, assumptions and cautionary statements | ||||||||||||
| --- | ||||||||||||
| 2021 guidance<br><br><br><br><br><br>Our<br>guidance range for 2021 is a decline of mid to high-single digit<br>percent adjusted EPS at CER.<br><br><br><br><br><br>Assumptions related to 2021 guidance<br><br><br>In<br>outlining the guidance for 2021, the Group has made certain<br>assumptions about the healthcare sector, the different markets in<br>which the Group operates and the delivery of revenues and financial<br>benefits from its current portfolio, pipeline and restructuring<br>programmes.<br><br><br><br><br><br>The<br>Group has made planning assumptions for 2021 that healthcare<br>systems and consumer trends will approach normality in the second<br>half of the year, and we expect turnover to be flat to low single<br>digit growth for the Pharmaceuticals and Vaccines businesses and<br>low to mid-single digit growth for Consumer Healthcare excluding<br>brands divested/under review. These planning assumptions as well as<br>earnings guidance and dividend expectations assume no material<br>interruptions to supply of the Group’s products, no material<br>mergers, acquisitions or disposals, no material litigation or<br>investigation costs for the Company (save for those that are<br>already recognised or for which provisions have been made), no<br>share repurchases by the Company, and no change in the<br>Group’s shareholdings in ViiV Healthcare. The assumptions<br>also assume no material changes in the healthcare environment. The<br>2021 guidance factors in all divestments and product exits<br>announced to date, including product divestments planned in<br>connection with the formation of the Consumer Healthcare Joint<br>Venture with Pfizer, and the non-core divestments planned to fund<br>the cash costs of the Separation Preparation restructuring<br>programme.<br><br><br><br><br><br>The<br>Group’s guidance assumes successful delivery of the<br>Group’s integration and restructuring plans. It also assumes<br>that the integration and investment programmes following the<br>creation of the Consumer Healthcare Joint Venture with Pfizer are<br>delivered successfully. Material costs for investment in new<br>product launches and R&D have been factored into the<br>expectations given. Given the potential development options in the<br>Group’s pipeline, the outlook may be affected by additional<br>data-driven R&D investment decisions. The guidance is given on<br>a constant currency basis.<br><br><br><br><br><br>Assumptions and cautionary statement regarding forward-looking<br>statements<br><br><br>The<br>Group’s management believes that the assumptions outlined<br>above are reasonable, and that the aspirational targets described<br>in this report are achievable based on those assumptions. However,<br>given the forward-looking nature of these assumptions and targets,<br>they are subject to greater uncertainty, including potential<br>material impacts if the above assumptions are not realised, and<br>other material impacts related to foreign exchange fluctuations,<br>macro-economic activity, the impact of outbreaks, epidemics or<br>pandemics, such as the COVID-19 pandemic and ongoing challenges and<br>uncertainties posed by the COVID-19 pandemic for businesses and<br>governments around the world, changes in regulation, government<br>actions or intellectual property protection, actions by our<br>competitors, and other risks inherent to the industries in which we<br>operate.<br><br><br><br><br><br>This<br>document contains statements that are, or may be deemed to be,<br>“forward-looking statements”. Forward-looking<br>statements give the Group’s current expectations or forecasts<br>of future events. An investor can identify these statements by the<br>fact that they do not relate strictly to historical or current<br>facts. They use words such as ‘anticipate’,<br>‘estimate’, ‘expect’, ‘intend’,<br>‘will’, ‘project’, ‘plan’,<br>‘believe’, ‘target’ and other words and<br>terms of similar meaning in connection with any discussion of<br>future operating or financial performance. In particular, these<br>include statements relating to future actions, prospective products<br>or product approvals, future performance or results of current and<br>anticipated products, sales efforts, expenses, the outcome of<br>contingencies such as legal proceedings, dividend payments and<br>financial results. Other than in accordance with its legal or<br>regulatory obligations (including under the Market Abuse<br>Regulation, the UK Listing Rules and the Disclosure and<br>Transparency Rules of the Financial Conduct Authority), the Group<br>undertakes no obligation to update any forward-looking statements,<br>whether as a result of new information, future events or otherwise.<br>The reader should, however, consult any additional disclosures that<br>the Group may make in any documents which it publishes and/or files<br>with the SEC. All readers, wherever located, should take note of<br>these disclosures. Accordingly, no assurance can be given that any<br>particular expectation will be met and investors are cautioned not<br>to place undue reliance on the forward-looking<br>statements.<br><br><br><br><br><br>Forward-looking<br>statements are subject to assumptions, inherent risks and<br>uncertainties, many of which relate to factors that are beyond the<br>Group’s control or precise estimate. The Group cautions<br>investors that a number of important factors, including those in<br>this document, could cause actual results to differ materially from<br>those expressed or implied in any forward-looking statement. Such<br>factors include, but are not limited to, those discussed under Item<br>3.D ‘Risk Factors’ in the Group’s Annual Report<br>on Form 20-F for 2019 and any impacts of the COVID-19 pandemic. Any<br>forward looking statements made by or on behalf of the Group speak<br>only as of the date they are made and are based upon the knowledge<br>and information available to the Directors on the date of this<br>report.<br><br><br><br><br><br>Cautionary statement regarding pro-forma growth rates<br><br><br>The<br>pro-forma growth rates at CER in this Results Announcement have<br>been provided to illustrate the position in 2020 relative to the<br>position in 2019 as if, for the purposes of the 2020 results, the<br>acquisition of the Pfizer consumer healthcare business had taken<br>place as at 31 July 2018 and that, accordingly, seven months of<br>results of the former Pfizer consumer healthcare business were<br>included in the year ended 31 December 2019. The results of the<br>former Pfizer consumer healthcare business included for the year<br>ended 31 December 2019 are as consolidated (in US$) and included in<br>Pfizer’s US GAAP results. The results for the year ended 31<br>December 2020 used to calculate the pro-forma growth rates are as<br>reported at CER.<br><br><br><br><br><br>The<br>pro-forma growth rates have been provided for illustrative purposes<br>only and, by their nature, address a hypothetical situation and<br>therefore do not represent the Group’s actual growth rates.<br>The pro-forma growth rates do not purport to represent what the<br>Group’s results of operations actually would have been if the<br>Pfizer acquisition had been completed on the date indicated, nor do<br>they purport to represent the results of operations at any future<br>date. In addition, the pro-forma growth rates do not reflect the<br>effect of anticipated synergies and efficiencies or accounting and<br>reporting differences associated with the acquisition of the Pfizer<br>consumer healthcare business.<br><br><br><br><br><br>Inside information<br><br><br>This<br>announcement contains inside information. The person responsible<br>for arranging the release of this announcement on behalf of GSK is<br>Victoria Whyte, Company Secretary. | ||||||||||||
| --- |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.
| GlaxoSmithKline plc | |
|---|---|
| (Registrant) | |
| Date: February<br>03, 2021 | |
| By:/s/ VICTORIA<br>WHYTE<br><br><br>-------------------------- | |
| Victoria Whyte | |
| Authorised<br>Signatory for and on | |
| behalf<br>of GlaxoSmithKline plc |