REG - GSK PLC - 2nd Quarter Results
27/07/2022 07:00
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RNS Number : 8358T GSK PLC 27 July 2022
Issued: Wednesday, 27 July 2022, London U.K.
GSK delivers strong Q2 2022 sales of £6.9 billion +19% at AER, +13% at CER
and Total EPS(1) from continuing operations(2) 17.5p -42% AER, -58% CER;
Adjusted EPS
of 34.7p +23% AER, +6% CER
Highlights
Strong commercial execution across Specialty Medicines, Vaccines and General
Medicines drives double-digit sales growth
· Total sales: £6.9 billion +19% AER, +13% CER, excluding COVID-19 solutions
+16% AER, +10% CER
- Specialty Medicines £2.7 billion +44% AER, +35% CER; HIV +14% AER, +7% CER;
Oncology +29% AER, +23% CER; Immuno-inflammation and other specialty +32% AER
+24% CER; COVID-19 solutions (Xevudy) sales £0.5 billion
- Vaccines £1.7 billion +9% AER, +3% CER; Shingrix £731 million >100% AER,
>100% CER
- General Medicines £2.5 billion +5% AER, +2% CER
Continued cost discipline supports delivery of improved adjusted operating
margin
· Total continuing operating margin 16%. Total EPS 20.8p -40% AER, -53% CER;
Total continuing EPS 17.5p -42% AER, -58% CER; primarily reflecting increased
contingent consideration charges driven by exchange rates and adverse
comparison due to a credit for the revaluation of deferred tax in Q2 2021
· Adjusted operating margin 29%. Adjusted operating profit growth +22% AER, +7%
CER. The impact on growth from lower margin COVID-19 solutions was
approximately -16% AER, -14% CER
· Adjusted EPS 34.7p +23% AER, +6% CER. The impact on growth from lower margin
COVID-19 solutions was approximately -20% AER, -18% CER
· Q2 2022 continuing cash generated from operations £1.6 billion. Free cash
flow £0.3 billion
Strengthening late-stage R&D pipeline with positive data read-outs and
strategic business development
· US FDA approval for Priorix (MMR vaccine); Vocabria plus rilpivirine approval
in Japan for HIV; Cervarix approval in China for cancer-causing human
papillomavirus
· Positive phase III high-level results for respiratory syncytial virus vaccine
candidate in older adults. Full results to be presented at an upcoming
scientific meeting with regulatory submissions anticipated in H2 2022
· Proposed acquisition of Affinivax provides access to next-generation phase II
24-valent pneumococcal vaccine candidate and innovative MAPS(TM) technology
· Promising phase IIb interim data presented for bepirovirsen, a potential new
treatment for chronic hepatitis B. Phase III monotherapy trial is anticipated
to start in H1 2023
· Completed acquisition of Sierra Oncology on 1 July 2022. Data from
momelotinib's MOMENTUM phase III trial presented at 2022 ASCO Annual Meeting;
results showed a statistically significant and clinically meaningful benefit
on symptoms, splenic response, and anaemia. NDA submitted to the US FDA
· Phase III data readouts expected in H2 2022: pentavalent (MenABCWY) meningitis
vaccine candidate, otilimab in rheumatoid arthritis, Jemperli in 1L
endometrial cancer, and Blenrep in 3L multiple myeloma
Improving revenues and margin support confidence in full-year outlooks
· Expect 2022 sales growth of between 6% to 8% (previously 5% to 7%) and
Adjusted operating profit growth of between 13% to 15% (previously 12% to
14%); both at CER. Adjusted EPS expected to grow by around 1% lower than
operating profit. 2022 guidance excludes any contribution from COVID-19
solutions
· Dividend of 16.25p/share (13p before Share Consolidation) declared for Q2
2022. No change to expected dividend of 61.25p/share (49p before Share
Consolidation) for FY 2022
Successful demerger and listing of Haleon on 18 July, creating a new global
leader in consumer health
· Balance sheet strengthened for GSK, through dividend of more than £7 billion
from Haleon
Emma Walmsley, Chief Executive Officer, GSK:
"This is GSK's first set of results as a newly focused biopharma company, and
we have delivered an excellent second quarter performance, with strong growth
in Specialty Medicines, including HIV, and a record quarter for our shingles
vaccine Shingrix. With this momentum in sales and operating profit growth, we
have raised our full-year guidance and are confident in delivering the
long-term growth outlooks we set out for shareholders last year. We continue
to strengthen our pipeline, notably with very positive high-level results from
our late-stage RSV vaccine candidate, together with targeted business
development acquisitions of Sierra Oncology and Affinivax. These improvements
in R&D and operating performance, together with a strengthened
post-demerger balance sheet, create new capacity and flexibility for GSK to
invest in growth and innovation for patients and shareholders."
The Total results are presented in summary on page 2 and under 'Financial
performance' on pages 9 and 21 and Adjusted results reconciliations are
presented on pages 17, 18, 29 and 30. Adjusted results are a non-IFRS measure
excluding discontinued operations that may be considered in addition to, but
not as a substitute for, or superior to, information presented in accordance
with IFRS. Adjusted results are defined on page 37 and £% or AER% growth,
CER% growth, free cash flow and other non-IFRS measures are defined on page
68, COVID-19 solutions are also defined on page 68. GSK provides guidance on
an Adjusted results basis only, for the reasons set out on page 37. All
expectations, guidance and targets regarding future performance and dividend
payments should be read together with 'Guidance, assumptions and cautionary
statements' on pages 69 and 70.
(1) Earnings per share have been retrospectively adjusted to reflect the GSK Share
Consolidation on 18 July 2022, see details on page 53.
(2) Consumer Healthcare is now accounted for as a discontinued operation, see
details on page 20.
Q2 2022 results
Q2 2022 Growth H1 2022 Growth
£m £% CER% £m £% CER%
Turnover 6,929 19 13 14,119 28 25
Total continuing operating profit* 1,081 (15) (35) 3,374 36 26
Total EPS 20.8p (40) (53) 65.7p 6 (1)
Total continuing EPS 17.5p (42) (58) 54.8p 9 -
Total discontinued EPS* 3.3p (27) (24) 10.9p (4) (8)
Adjusted operating profit 2,008 22 7 3,951 33 26
Adjusted EPS 34.7p 23 6 67.0p 36 27
Cash flow from operations attributable 1,584 17 3,936 >100
to continuing operations
Free cash flow 264 >100 1,741 >100
(*) The amounts presented in the table above for continuing operations and
Adjusted results excludes the Consumer Healthcare business discontinued
operation. The amounts presented for discontinued EPS are for the Consumer
Healthcare business. The presentation of continuing and discontinued
operations under IFRS 5 are set out on page 50.
2022 guidance
With the momentum from the business performance to date, GSK now expects 2022
sales to increase between 6 to 8 per cent and Adjusted operating profit to
increase between 13 to 15 per cent, excluding any contributions from COVID-19
solutions. Adjusted Earnings per share is expected to grow around 1 per cent
lower than Operating Profit. We have delivered first half performance ahead of
our full year guidance, slightly better than expected, informed by strong
business delivery and the dynamics of prior year comparators.
Predominantly reflecting a more challenging H2 2021 sales comparator as well
as an expected increase in R&D spend, we expect lower reported growth in
the second half. Key external factors that will influence the second half of
2022 include the continued risk from COVID-19 dynamics and possible
developments in the current uncertain global economic environment.
Notwithstanding uncertain economic conditions across many markets in which we
operate, we observe evidence of healthcare systems recovering and continue to
expect full year sales of Specialty Medicines to grow approximately 10% CER
and sales of General Medicines to show a slight decrease, primarily reflecting
the increased genericisation of established Respiratory medicines. Vaccines
sales are now expected to grow at a low to mid-teens percentage at CER for the
year. Specifically for Shingrix, we continue to expect strong double-digit
growth and record annual sales in 2022, based on strong demand in existing
markets and continued geographical expansion, however we do expect sales in
the second half to be slightly lower than in H1 2022 due to some channel
stocking in the first half in the US.
From Q2 2022, the Group presents the Haleon plc (Haleon) business as a
discontinued operation according to IFRS 5. Adjusted results excludes profits
from discontinued operations. Comparatives have been restated to reflect
adjusted results from continuing operations, and guidance is provided on this
basis.
Dividend policies and expected pay-out ratios are unchanged for GSK, but the
dividends per share have been adjusted for the GSK Share Consolidation
completed on 18 July 2022. The future dividend policies and guidance in
relation to the expected dividend pay-out in 2022 for GSK are provided on page
35.
2022 COVID-19 solutions expectations
The majority of expected COVID-19 solutions sales for 2022 have been achieved
in the first half of this year. Based on known binding agreements with
governments, we expect that sales of COVID-19 solutions will be substantially
lower in the second half. Compared with 2021, sales will be at a reduced
profit contribution due to the increased proportion of lower margin Xevudy
sales. Given the higher than expected sales achieved in the year to date we
now expect this to reduce Adjusted Operating profit growth (including COVID-19
solutions in both years) by between 4% to 6%. We continue to discuss future
opportunities to support governments, healthcare systems, and patients whereby
our COVID-19 solutions can address the emergence of any new COVID-19 variant
of concern.
All expectations, guidance and targets regarding future performance and
dividend payments should be read together with 'Guidance, assumptions and
cautionary statements' on page 69. If exchange rates were to hold at the
closing rates on 30 June 2022 ($1.21/£1, €1.16/£1 and Yen 165/£1) for the
rest of 2022, the estimated positive impact on 2022 Sterling turnover growth
for GSK would be 5% and if exchange gains or losses were recognised at the
same level as in 2021, the estimated positive impact on 2022 Sterling Adjusted
Operating Profit growth for GSK would be 9%.
Demerger of Consumer Healthcare
On 18 July 2022, GSK plc separated its Consumer Healthcare business from the
GSK Group to form Haleon, an independent listed company. The separation was
effected by way of a demerger of 80.1% of GSK's 68% holding in the Consumer
Healthcare business to GSK shareholders. Following the demerger, 54.5% of
Haleon is held in aggregate by GSK Shareholders, 6.0% is held by GSK
(including shares received by GSK's consolidated ESOT trusts) and 7.5% is held
by certain Scottish limited partnerships (SLPs) set up to provide a funding
mechanism pursuant to which GSK will provide additional funding for GSK's UK
Pension Schemes. The aggregate ownership by GSK (including ownership by the
ESOT trusts and SLPs) after the demerger of 13.5% will be initially measured
at fair value with changes through profit or loss. Pfizer continues to hold
32% of Haleon after the demerger.
The gain on demerger distribution will be recognised in Q3 2022. The asset
distributed was the 54.5% ownership of the Consumer Healthcare business. The
assets distributed were reduced by Consumer Healthcare transactions up to 18
July 2022 that included pre-separation dividends declared and settled after
the end of Q2 2022 and before 18 July 2022. Those dividends included: £10.4
billion (£7.1 billion attributable to GSK) of dividends funded by Consumer
Healthcare debt that was partially on-lent during Q1 2022 and dividends of
£0.6 billion (£0.4 billion attributable to GSK) from available cash
balances. GSK's share of the pre-separation dividends funded by debt will
result in a reduction of net debt for GSK on demerger (GSK's share of the
pre-separation dividends and loans are eliminated in the consolidated
financial statements until demerger).
Share consolidation
Following completion of the Consumer Healthcare business demerger on 18 July
2022, GSK plc Ordinary shares were consolidated in order to maintain share
price comparability before and after demerger on 18 July 2022. Shareholders of
GSK plc received 4 new Ordinary shares for every 5 existing Ordinary shares.
Earnings per share, diluted earnings per share, adjusted earnings per share
and dividends per share have been retrospectively adjusted to reflect the
Share Consolidation in all the periods presented.
Results presentation
A conference call and webcast for investors and analysts of the half-year and
Q2 2022 results will be hosted by Emma Walmsley, CEO, at 12pm BST on 27 July
2022. Presentation materials will be published on www.gsk.com prior to the
webcast and a transcript of the webcast will be published subsequently.
Information available on GSK's website does not form part of, and is not
incorporated by reference into, this Results Announcement.
The amounts below are from continuing operations unless otherwise specified.
Operating performance - Q2 2022
Turnover Q2 2022
£m Growth Growth
£% CER%
Specialty Medicines 2,704 44 35
Vaccines 1,715 9 3
General Medicines 2,510 5 2
Commercial Operations 6,929 19 13
Total turnover in the quarter was £6,929 million, up 19% at AER, 13% at CER,
reflecting strong performance in all three product groups. Commercial
Operations turnover excluding pandemic sales grew 16% at AER, 10% at CER.
Specialty Medicines
Specialty Medicines sales in the quarter were £2,704 million, up 44% at AER,
35% at CER, driven by consistent growth in all therapy areas. Specialty
Medicines excluding sales of Xevudy were £2,238 million up 20% at AER, 13% at
CER. In the quarter, HIV sales were £1,404 million with growth up 14% at AER,
7% at CER. Oncology sales in the quarter were £154 million, up 29% at AER,
23% at CER. Immuno-inflammation, Respiratory and Other sales were £680
million up 32% at AER, 24% at CER.
Vaccines
Vaccine sales were £1,715 million, up 9% at AER, 3% at CER in total and up
31% at AER, 24% at CER excluding unrepeated 2021 pandemic adjuvant sales. The
performance reflected a favourable comparator to Q2 2021, which was impacted
by COVID-19 related disruptions in several markets, and the strong commercial
execution of Shingrix. The growth, however, was partially offset by lower
paediatric and adolescent vaccine sales that reflected the normalisation of
the US Center for Disease Control (CDC) purchasing patterns.
General Medicines
General Medicines sales in the quarter were £2,510 million, up 5% at AER, 2%
at CER, with the impact of generic competition in US, Europe, and Japan offset
by Trelegy growth in respiratory and the post-pandemic rebound of the
antibiotic market since Q3 2021 in Other General Medicines. General medicines
includes £33 million (Q2 2021: £34 million) of turnover between GSK and
Haleon recorded in continuing operations with an offsetting amount recorded in
discontinuing operations.
Operating profit
Total operating profit was £1,081 million compared with £1,275 million in Q2
2021. The reduction primarily reflected the higher re-measurement charges for
contingent consideration liabilities, partly offset by increased profits on
turnover growth of 13% at CER and increased milestone income.
Adjusted operating profit was £2,008 million, 22% higher than Q2 2021 at AER
and 7% at CER on a turnover increase of 13% at CER. The Adjusted operating
margin of 29.0% was 0.9% percentage points higher at AER and 1.5% percentage
points lower at CER than in Q2 2021. This primarily reflected higher COVID-19
solutions sales at low margin, which reduced Adjusted Operating profit growth
by approximately 16% at AER, 14% at CER and reduced the Adjusted operating
margin by approximately 4.5 percentage points at AER and 4.4 percentage points
at CER. This was offset by leverage from strong sales growth across all
product groups, beneficial mix, and higher royalty income.
Earnings per share (adjusted to reflect the Share Consolidation on 18 July
2022)
Total EPS was 17.5p compared with 30.3p in Q2 2021. The reduction primarily
reflects increased charges for remeasurement of contingent consideration
liabilities as well as an unfavourable comparison due to a credit of £325
million to Taxation in Q2 2021. Adjusted EPS was 34.7p compared with 28.2p in
Q2 2021, up 23% at AER, 6% at CER, on a 7% CER increase in Adjusted operating
profit. This primarily reflected higher COVID-19 solutions sales at low margin
with the reduction to growth from COVID-19 solutions being approximately 20%
at AER, 18% at CER. Leverage from growth in sales of Specialty Medicines,
beneficial mix, higher royalty income and a lower effective tax rate was
partly offset by higher supply chain, freight and distribution costs and
higher non-controlling interests.
Cash flow
Cash generated from operations attributable to continuing operations for the
quarter was £1,584 million (Q2 2021: £1,357 million). The increase primarily
reflected the increase in operating profit including beneficial exchange and
favourable timing of collections partly offset by increased contingent
consideration payments, adverse timing of profit share payments for Xevudy
sales, a higher seasonal increase in inventory and adverse timing of returns
and rebates.
Operating performance - H1 2022
Turnover H1 2022
£m Growth Growth
£% CER%
Specialty Medicines 5,839 69 63
Vaccines 3,384 21 17
General Medicines 4,896 3 2
Commercial Operations 14,119 28 25
Total turnover in the half year was £14,119 million, up 28% at AER, 25% at
CER, reflecting strong performance in all three product groups. Commercial
Operations turnover, excluding pandemic sales, grew 15% at AER, 12% at CER.
Specialty Medicines
Specialty Medicines sales were £5,839 million, up 69% at AER, 63% at CER,
driven by consistent growth in all therapy areas. Specialty Medicines,
excluding sales of Xevudy, were £4,066 million up 18% at AER, 14% at CER. HIV
sales were £2,585 million with growth of 14% at AER,10% at CER. Oncology
sales were £281 million, up 23% at AER, 19% at CER. Immuno-inflammation,
Respiratory and Other sales were £1,200 million up 26% at AER, 21% at CER.
Vaccines
Vaccines turnover was £3,384 million, up 21% at AER, 17% at CER. Excluding
unrepeated 2021 pandemic adjuvant sales, vaccine sales increased 33% at AER,
30% at CER, reflecting a favourable comparator to H1 2021, which was adversely
impacted by COVID-19 related disruptions in several markets, and the strong
commercial execution of Shingrix, particularly in the US and Europe.
General Medicines
General Medicines sales in the half year were £4,896 million, up 3% at AER,
2% at CER, with the impact of generic competition in US, Europe and Japan
offset by Trelegy growth in respiratory and the post-pandemic rebound of the
antibiotic market since H2 2021 in Other General Medicines. General medicines
includes £76 million (H1 2021: £79 million) of turnover between GSK and
Haleon recorded in continuing operations with an offsetting amount recorded in
discontinued operations.
Operating profit
Total operating profit was £3,374 million compared with £2,485 million in H1
2021. This included the £0.9 billion upfront income received from the
settlement with Gilead Sciences, Inc. (Gilead) and increased profits on
turnover growth of 25% at CER, partly offset by higher re-measurement charges
for contingent consideration liabilities.
Adjusted operating profit was £3,951 million, 33% higher at AER and 26% at
CER than H1 2021 on a turnover increase of 25% at CER. The Adjusted operating
margin of 28.0% was 1.0 percentage points higher at AER and stable at CER
compared to H1 2021. This primarily reflected the impact from low margin
COVID-19 solutions sales (Xevudy), which reduced Adjusted Operating profit
growth by approximately 2% at AER, 1% at CER and reduced the Adjusted
operating margin by approximately 3.3 percentage points at AER and at CER.
This was offset by operating leverage from strong sales growth, beneficial
mix, and higher royalty income.
Earnings per share (adjusted to reflect the Share Consolidation on 18 July
2022)
Total EPS from continuing operations was 54.8p compared with 50.3p in H1 2021.
This primarily reflected the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 25% at CER,
partly offset by higher re-measurement charges for contingent consideration
liabilities as well as an unfavourable comparison due to a credit of £325
million to Taxation in Q2 2021. Adjusted EPS was 67.0p compared with 49.3p in
H1 2021, up 36% at AER, 27% at CER, on a 26% CER increase in Adjusted
operating profit. This included higher COVID-19 solutions sales at low margin
with the reduction to growth from COVID-19 solutions being approximately 2% at
AER, 2% at CER. Leverage from growth in sales of Specialty Medicines,
beneficial mix, higher royalty income and a lower effective tax rate was
partly offset by higher supply chain, freight and distribution costs, lower
associate income and higher non-controlling interests.
Cash flow
Cash generated from operations attributable to continuing operations for H1
was £3,936 million (H1 2021: £1,759 million). The increase primarily
reflected a significant increase in operating profit including the upfront
income from the settlement with Gilead, favourable exchange and favourable
timing of collections and profit share payments for Xevudy sales, partly
offset by increased contingent consideration payments reflecting the Gilead
settlement and a higher seasonal increase in inventory.
Q2 2022 pipeline highlights (since 27 April 2022)
Medicine/vaccine Trial (indication, presentation) Event
Regulatory approvals or other regulatory action Nucala Severe eosinophilic asthma, Regulatory approval (EU)
40mg prefilled syringe for
6-11 year olds
Vocabria/Rekambys (cabotegravir/rilpivirine) HIV Regulatory approval (Japan)
Priorix Measles-mumps-rubella Regulatory approval (US)
Cervarix Human papillomavirus, two-dose vaccine schedule for girls aged 9-14 years Regulatory approval (China)
Regulatory submissions or acceptances momelotinib MOMENTUM (myelofibrosis with anaemia) Regulatory submission (US)
Shingrix Shingles, at-risk adults aged 18+ years Regulatory acceptance (Japan)
Phase III data readouts or other significant events bepirovirsen B-Clear (hepatitis B virus) Positive phase IIb interim data
RSV older adult vaccine candidate RSV, older adults aged 60+ years Positive phase III data
COVID-19 vaccine candidate (SK Bioscience) COVID-19 Positive phase III data
Anticipated news flow
Timing Medicine/vaccine Trial (indication, presentation) Event
H2 2022 otilimab contRAst programme (rheumatoid arthritis) Phase III data readout
Blenrep DREAMM-3 (3L+ multiple myeloma) Phase III data readout
Blenrep DREAMM-3 (3L+ multiple myeloma) Regulatory submission (US, EU)
Jemperli RUBY (1L endometrial cancer) Phase III data readout (interim analysis)
Jemperli PERLA (non-small cell lung cancer) Phase II data readout
momelotinib MOMENTUM (myelofibrosis with anaemia) Regulatory submission (EU)
gepotidacin EAGLE (uncomplicated urinary tract infection) Phase III data readout (interim analysis)
MenABCWY (gen 1) vaccine candidate Meningitis ABCWY Phase III data readout
RSV older adult vaccine candidate RSV, older adults aged 60+ years Regulatory submission (US)
Menveo Invasive meningococcal disease, liquid formulation Regulatory decision (US)
Rotarix Rotavirus, liquid formulation Regulatory decision (US)
COVID-19 vaccine candidate (SK Bioscience) COVID-19 Regulatory submission (EU)
COVID-19 vaccine candidate (SK Bioscience) COVID-19 Regulatory decision (EU)
COVID-19 vaccine candidate (Sanofi) COVID-19 Regulatory submission (US)
COVID-19 vaccine candidate (Sanofi) COVID-19 Regulatory decision (US)
H1 2023 bepirovirsen B-Together (hepatitis B virus) Phase IIb data readout
daprodustat ASCEND (anaemia of chronic kidney disease) Regulatory decision (US, EU)
momelotinib MOMENTUM (myelofibrosis with anaemia) Regulatory decision (US)
Blenrep DREAMM-8 (2L+ multiple myeloma) Phase III data readout
Blenrep DREAMM-7 (2L+ multiple myeloma) Phase III data readout
Jemperli RUBY (1L endometrial cancer) Regulatory submission (US, EU)
letetresgene-autoleucel IGNYTE-ESO (2L+ synovial sarcoma) Phase II data readout
RSV older adult vaccine candidate RSV, older adults aged 60+ years Regulatory decision (US)
MenABCWY (gen 1) vaccine candidate Meningitis ABCWY Regulatory submission (US)
Malaria (fractional dose) vaccine Malaria Phase II data readout
Covifenz (Medicago) COVID-19 Regulatory submission (US)
Covifenz (Medicago) COVID-19 Regulatory decision (US)
H2 2023 otilimab contRAst programme (rheumatoid arthritis) Regulatory submission (US, EU)
linerixibat GLISTEN (cholestatic pruritus in primary biliary cholangitis) Phase III data readout
Blenrep DREAMM-3 (3L+ multiple myeloma) Regulatory decision (US, EU)
Blenrep DREAMM-8 (2L+ multiple myeloma) Regulatory submission (US, EU)
Blenrep DREAMM-7 (2L+ multiple myeloma) Regulatory submission (US, EU)
Jemperli RUBY (1L endometrial cancer) Regulatory decision (US)
momelotinib MOMENTUM (myelofibrosis with anaemia) Regulatory decision (EU)
Zejula FIRST (1L maintenance ovarian cancer) Phase III data readout
gepotidacin EAGLE (uncomplicated urinary tract infection) Regulatory submission (US, EU)
Refer to pages 59 to 66 for further details on several key medicines and
vaccines in development by therapy area.
Contents Page
Q2 2022 R&D pipeline highlights 2
Financial performance - Q2 2022 9
Financial performance - H1 2022 21
Cash generation 33
Returns to shareholders 35
Total and Adjusted results 37
Income statement - three months and six months ended 30 June 2022 39
Statement of comprehensive income - three months and six months ended 30 June 40
2022
Balance sheet 44
Statement of changes in equity 45
Cash flow statement - six months ended 30 June 2022 46
Segment information 47
Legal matters 49
Additional information 50
Reconciliation of cash flow to movements in net debt 58
Net debt analysis 58
Free cash flow reconciliation 58
R&D commentary 59
Principal risks and uncertainties 67
Reporting definitions 68
Guidance, assumptions and cautionary statements 69
Directors' responsibility statement 71
Independent review report 72
Contacts
GSK plc (LSE/NYSE:GSK) is a global biopharma company with a purpose to unite
science, technology, and talent to get ahead of disease together. Find out
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Financial performance - Q2 2022
Total results
The Total results for the Group are set out below.
Q2 2022 Q2 2021 Growth Growth
£m £m £% CER%
Continuing Operations 6,929 5,838 19 13
Turnover
Cost of sales (2,176) (1,708) 27 28
Gross profit 4,753 4,130 15 7
Selling, general and administration (2,066) (1,689) 22 19
Research and development (1,242) (1,167) 6 2
Royalty income 159 77 >100 >100
Other operating income/(expense) (523) (76)
Operating profit 1,081 1,275 (15) (35)
Finance income 21 4
Finance expense (204) (189)
Loss on disposal of interest in associates - (36)
Share of after tax (losses)/profits of associates and (2) 16
joint ventures
Profit before taxation 896 1,070 (16) (40)
Taxation (150) 201
Tax rate % 16.7% (18.8)%
Profit after taxation from continuing operations 746 1,271 (41) (58)
Profit after taxation from discontinued operations 229 267 (14) (16)
Profit after taxation for the period 975 1,538 (37) (51)
Profit attributable to non-controlling interest from 40 57
continuing operations
Profit attributable to shareholders from continuing 706 1,214
operations
Profit attributable to non-controlling interest from 97 86
discontinued operations
Profit attributable to shareholders from discontinued 132 181
operations
975 1,538 (37) (51)
Total profit attributable to non-controlling interest 137 143
Total profit attributable to shareholders 838 1,395
975 1,538
Earnings per share from continuing operations 17.5p 30.3p (42) (58)
Earnings per share from discontinued operations 3.3p 4.5p (27) (24)
Total earnings per share 20.8p 34.8p (40) (53)
Adjusted results
The Adjusted results for the Group are set out below. Adjusted results are
from continuing operations and exclude the Consumer Healthcare business (see
details in page 52). Reconciliations between Total results and Adjusted
results for Q2 2022 and Q2 2021 are set out on pages 17 and 18.
Q2 2022 % of Growth Growth
£m turnover £% CER%
Turnover 6,929 100 19 13
Cost of sales (1,970) (28.4) 29 31
Selling, general and administration (1,955) (28.2) 19 16
Research and development (1,155) (16.7) 4 (1)
Royalty income 159 2.3 >100 100
Adjusted operating profit 2,008 29.0 22 7
Adjusted profit before tax 1,825 24 7
Adjusted profit after tax 1,548 26 9
Adjusted profit attributable to shareholders 1,398 24 7
Adjusted earnings per share 34.7p 23 6
Operating profit by segment
Q2 2022 % of Growth Growth
£m turnover £% CER%
Commercial Operations 3,304 47.7 15 6
Research and Development (1,152) 3 (2)
Segment profit 2,152 31.1 23 10
Corporate & other unallocated costs (144) 31 66
Adjusted operating profit 2,008 29.0 22 7
Turnover
Commercial Operations
Q2 2022
£m Growth Growth
£% CER%
HIV 1,404 14 7
Oncology 154 29 23
Immuno-inflammation, respiratory and other 680 32 24
2,238 20 13
Pandemic 466 >100 >100
Specialty Medicines 2,704 44 35
Meningitis 235 4 -
Influenza 32 (3) (9)
Shingles 731 >100 >100
Established Vaccines 717 (5) (9)
1,715 31 24
Pandemic Vaccines - (100) (100)
Vaccines 1,715 9 3
Respiratory 1,649 9 4
Other General Medicines 861 (1) (2)
General Medicines 2,510 5 2
Commercial Operations 6,929 19 13
US 3,317 19 7
Europe 1,549 23 25
International 2,063 15 14
Commercial Operations by region 6,929 19 13
Total turnover in the quarter was £6,929 million, up 19% at AER, 13% at CER,
reflecting strong performance in all three product groups. Commercial
Operations turnover, excluding pandemic sales, grew 16% at AER, 10% at CER.
Specialty Medicines included £466 million sales of Xevudy, which contributed
24 percentage points of growth in the quarter at AER, 22 percentage points at
CER. Vaccines growth reflected strong Shingrix performance assisted by demand
recovery and channel inventory build in the US, partially offset by pandemic
adjuvant sales in Q2 2021. General Medicines reflected the recovery of the
antibiotics market and in particular the strong performance of Trelegy in
respiratory in all regions.
Specialty Medicines
Specialty Medicines sales in the quarter were £2,704 million, up 44% at AER,
35% at CER, driven by consistent growth in all therapy areas. Specialty
Medicines excluding sales of Xevudy were £2,238 million up 20% at AER, 13% at
CER.
HIV
HIV sales were £1,404 million with growth up 14% at AER, 7% at CER in the
quarter. The performance benefitted from strong patient demand for the new HIV
medicines (Dovato, Cabenuva, Juluca, Rukobia, and Apretude) and a favourable
US pricing mix, however, this was partially offset by the unfavourable phasing
of Tivicay tenders. US pricing contributed 7% at AER, 4% at CER, with tenders
reducing growth by 5% at AER, 6% at CER in the quarter.
New HIV medicines delivered for the first-time quarterly sales of over half a
billion pounds at £571 million, up 73% at AER, 63% at CER, representing 41%
of the total HIV portfolio compared to 27% in the same quarter last year.
Sales of the oral two drug regimens Dovato and Juluca were £320 million and
£152 million, respectively, with a combined growth of 49% at AER, 41% at CER.
Cabenuva, the first long-acting injectable for the treatment of human
immunodeficiency virus type-1 (HIV-1) infection, recorded sales of £72
million. Apretude, the first long-acting prevention injectable for the
prevention of HIV-1, delivered sales of £8 million.
Oncology
Oncology sales in the quarter were £154 million, up 29% at AER, 23% at CER.
Zejula sales were £120 million, up 22% at AER, 16% at CER, and Blenrep, sales
of £30 million up 43% at AER, 33% at CER; the performance reflected growth in
recently launched markets.
Immuno-inflammation, Respiratory and Other
Immuno-inflammation, Respiratory and Other sales were £680 million up 32% at
AER, 24% at CER. Benlysta sales were £297 million, up 39% at AER, 29% at CER
reflecting strong underlying demand in US and worldwide. Nucala sales were
£367 million, up 26% at AER, 19% at CER including US sales of £236 million
up 30% at AER, 18% at CER on continued strong demand and launch of additional
indications.
Pandemic
In the period, sales of Xevudy were £466 million, with the overwhelming
majority of sales achieved in Europe £123 million and International £320
million. In the US, the government contract was completed in Q1 2022.
Vaccines
Vaccine sales were £1,715 million, up 9% at AER, 3% at CER in total and up
31% at AER, 24% at CER excluding unrepeated 2021 pandemic adjuvant sales. The
performance reflected a favourable comparator to Q2 2021, which was adversely
impacted by COVID-19 related disruptions in several markets, and the strong
commercial execution of Shingrix, particularly in the US and Europe. The
growth, however, was partially offset by lower paediatric and adolescent
vaccine sales that reflected the normalisation of the US CDC purchasing
patterns.
Shingles
Shingrix sales more than doubled to £731 million primarily due to demand
recovery, strong commercial execution aimed at shifting the shingles
vaccination season forward, and earlier-than- expected channel inventory build
in the US, and higher demand in Germany. All regions grew significantly in Q2
2022, with 40% of the growth contributed from outside of the US. Shingrix is
now available in 23 countries including four new launches in the last quarter.
Established Vaccines
Established Vaccines decreased 5% at AER, 9% at CER to £717 million
reflecting unfavourable CDC purchasing patterns and competitive pressure for
Infanrix/Pediarix in the US, lower International sales of Cervarix, MMR/V
vaccines and Synflorix, and the negative impact of a CDC stockpile borrow for
Rotarix, partially offset by hepatitis vaccines growth in the US and Europe.
General Medicines
General Medicines sales in the quarter were £2,510 million, up 5% at AER, 2%
at CER, with the adverse impact of generic competition in US, Europe, and
Japan offset by Trelegy growth in respiratory and the post-pandemic rebound of
the antibiotic market since Q3 2021 in Other General Medicines.
Respiratory
Respiratory sales were £1,649 million, up 9% at AER, 4% at CER. The
performance was driven by Trelegy sales of £467 million, up 60% at AER, 50%
at CER with strong growth in all regions and some benefit of prior period
Returns and Rebates (RAR) adjustments in the US. Advair/Seretide sales of
£262 million continue to be adversely impacted by generic competition,
decreasing 24% at AER, 27% at CER. Overall, there was no significant impact of
prior period RAR adjustments in the quarter.
Other General Medicines
Other General Medicines sales were £861 million, down 1% at AER, 2% at CER.
Augmentin sales were £130 million, up 43% at AER, 45% at CER reflecting the
post-pandemic rebound of the antibiotic since Q3 2021. This offsets the
ongoing adverse impact of generic competition and approximately two percentage
points impact from the divestment of cephalosporin products in Q4 2021.
General medicines includes £33 million (Q2 2021: £34 million) of turnover
between GSK and Haleon recorded in continuing operations with an offsetting
amount recorded in discontinuing operations.
By Region
US
In the US, sales were £3,317 million, up 19% at AER, 7% at CER. There were
£23 million sales of Xevudy in the quarter following completion of the
government contract in Q1 2022.
In Specialty Medicines, HIV sales of £894 million were up 25% at AER, 13% at
CER. New HIV medicines delivered sales of £377 million up 75% at AER, 59% at
CER driven by strong patient demand for Dovato, Cabenuva, Juluca, Apretude,
and Rukobia as well as favourable pricing mix. Nucala and Benlysta both
continued to grow double digits reflecting ongoing strong demand. Oncology
sales increased 22% at AER, 10% at CER, despite diagnosis and treatment rates
continuing to be adversely impacted by the pandemic.
Vaccine sales were £897 million, up 13% at AER, 2% at CER. Vaccine sales
excluding the impact of COVID-19 vaccine adjuvant sales in Q2 2021 grew 53% at
AER, 38% at CER. Growth was driven by Shingrix reflecting demand recovery,
strong commercial execution, and channel inventory build. Growth was reduced
by lower paediatric and adolescent vaccines sales reflecting the normalisation
of CDC purchasing patterns.
General Medicines sales were £933 million, up 11% at AER, stable at CER,
driven by strong Trelegy performance, up 74% at AER, 58% at CER on growth of
the single inhaler triple therapy market and demand.
Europe
In Europe, sales were £1,549 million, up 23% at AER, 25% at CER, including
Xevudy sales of £123 million contributing ten percentage points of growth at
AER and CER.
In Specialty Medicines, HIV sales were £336 million, up 15% at AER, 17% at
CER. The performance predominantly reflected strong patient demand for Dovato
with sales of £118 million during the period. Benlysta in immunology, Nucala
in respiratory, and several Oncology medicines also delivered strong
double-digit growth in the quarter.
Vaccine sales were £414 million, up 39% at AER, 42% at CER. Shingrix sales of
£151 million, >100% at AER and CER, drove the growth particularly in
Germany, which benefitted from strong demand.
General Medicines sales were £522 million, decreasing 3% at AER, 2% at CER,
with ongoing generic competitive pressures adversely impacting Seretide in
respiratory; the performance was partly offset by strong demand for Trelegy.
Augmentin grew due to the post-pandemic rebound of the antibiotic market since
Q3 2021.
International
International sales were £2,063 million, up 15% at AER, 14% at CER, including
Xevudy sales of £320 million contributing 15 percentage points of growth.
In Specialty Medicines, HIV sales were £174 million, decreasing 23% at AER,
27% at CER driven by tender phasing. The performance, however, was partially
offset by strong Dovato growth. Combined Tivicay and Triumeq sales were £130
million, declining 35% at AER, 40% at CER. Nucala in respiratory and Benlysta
in immunology both continued to grow strongly reflecting growth in the
biologics market in Japan and inclusion on China's National Reimbursement Drug
List.
Vaccine sales were £404 million, decreasing 15% at AER, 18% at CER. Vaccine
sales excluding the impact of COVID-19 vaccine adjuvant sales in Q2 2021
decreased 6% at AER, 8% at CER, primarily reflecting phasing of public
tenders.
General Medicines sales were £1,055 million up 6% at AER, 5% at CER.
Respiratory sales of £455 million were up 8% at AER, 7% at CER reflecting
strong growth of Trelegy, particularly in Japan, China, and Canada. This
performance offset the impact of generic competition and lower allergy season
in Japan. Other General Medicines sales increased 4% at AER and at CER to
£600 million, reflecting the growth of Augmentin following the post-pandemic
rebound of the antibiotic market since Q3 2022.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 31.4%, and increased 2.1
percentage points higher at AER and 4.0 percentage points higher in CER terms
than Q2 2021. Adjusted cost of sales as a percentage of turnover was 28.4%, up
2.4 percentage points AER and 4.1 at CER compared with Q2 2021. This primarily
reflected higher sales of lower margin COVID-19 solutions (Xevudy) compared to
Q2 2021, which included £258 million of pandemic adjuvant sales, increasing
cost of sales margin by 4.7 percentage points at AER and at CER as well as the
impact of increased commodity prices and freight costs. This was partially
offset by a favourable mix primarily from increased sales of Shingrix in the
US and Europe and increased sales of HIV medicines in the US.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 29.8%, 0.9 percentage
points higher at AER and 1.7 percentage points higher at CER than in Q2 2021
primarily reflected increased investment in the launch of innovative vaccines
and medicines.
Adjusted SG&A costs as a percentage of turnover were 28.2%, stable at AER,
0.7 percentage points higher at CER. Adjusted SG&A costs increased 19% at
AER, 16% at CER which primarily reflected an increased level of launch
investment in Specialty Medicines particularly HIV and Vaccines including
Shingrix to drive post-pandemic recovery demand and support market expansion.
The growth in Adjusted SG&A also reflected increased freight and
distribution costs and exchange losses on the Vir Biotechnology, Inc.
collaboration profit share. This growth was partly offset by the continuing
benefit of restructuring and tight control of ongoing costs.
Research and development
Group R&D expenditure from continuing operations was £1,242 million
(17.9% of turnover), up 6% at AER and 2% at CER. Adjusted R&D expenditure
increased in the quarter by 4% at AER, broadly stable at CER, to £1,155
million. This reflected the continued efficiencies delivered from the One
R&D restructuring programme, the completion of several late-stage clinical
development programmes, and a favourable comparator to Q2 2021, which saw
increased levels of R&D investment due to COVID-19 pandemic solutions.
In the quarter, GSK increased investment across Vaccine clinical development,
including its mRNA technology platforms, continued investment in the
late-stage portfolio, and accelerated several early discovery programmes;
these investments partly offset the decreases above. In addition, the level of
investment increased in Specialty Medicines to support the early-stage HIV
portfolio and in respiratory, the phase III programme for depemokimab, a
potential new medicine to treat severe asthma. The expenditure in the quarter
does not reflect the impact of the acquisition of Sierra Oncology, Inc. which
completed on 1 July 2022.
Royalty income
Royalty income was £159 million (Q2 2021: £77 million), up >100% at AER,
>100% at CER, primarily reflecting royalty income from Gilead under the
settlement and licensing agreement with Gilead and higher sales of Gardasil.
Other operating income/(expense)
Net other operating expense was £523 million (Q2 2021: £76 million)
primarily reflecting accounting charges of £699 million (Q2 2021: £101
million) arising from the re-measurement of contingent consideration
liabilities and the liabilities for the Pfizer, Inc. (Pfizer) put option and
Pfizer and Shionogi & Co., Ltd. (Shionogi) preferential dividends in ViiV
Healthcare. This included a re-measurement charge of £585 million (Q2 2021:
£125 million) for the contingent consideration liability due to Shionogi,
including the unwinding of the discount for £95 million and a charge for
£490 million primarily from changes to exchange rates as well as adjustments
to sales forecasts. This was partly offset by increased milestone income.
Operating profit
Total operating profit was £1,081 million compared with £1,275 million in Q2
2021. The reduction primarily reflected the higher re-measurement charges for
contingent consideration liabilities, partly offset by increased profits on
turnover growth of 13% at CER and increased milestone income.
Adjusted operating profit was £2,008 million, 22% higher than Q2 2021 at AER
and 7% at CER on a turnover increase of 13% at CER. The Adjusted operating
margin of 29.0% was 0.9% percentage points higher at AER and 1.5% percentage
points lower at CER than in Q2 2021. This primarily reflected the impact from
low margin COVID-19 solutions sales (Xevudy), which reduced Adjusted Operating
profit growth by approximately 16% at AER, 14% at CER and reduced the Adjusted
operating margin by approximately 4.5 percentage points at AER and 4.4
percentage points at CER. This was offset by operating leverage from sales
growth across all product groups, beneficial mix, and higher royalty income.
Contingent consideration cash payments made to Shionogi and other companies
reduce the balance sheet liability and hence are not recorded in the income
statement. Total contingent consideration cash payments in Q2 2022 amounted to
£404 million (Q2 2021: £205 million). These included cash payments made to
Shionogi of £395 million (Q2 2021: £203 million).
Adjusted operating profit by business
Commercial Operations operating profit was £3,304 million, up 15% at AER and
6% at CER on a turnover increase of 13% at CER. The operating margin of 47.7%
was 1.5 percentage points lower at AER and 3.2 percentage points lower at CER
than in Q2 2021. This primarily reflected sales of lower margin Xevudy in the
quarter compared to Q2 2021 which included higher margin pandemic adjuvant
sales. This also reflected increased investment behind launches in Specialty
Medicines including HIV and Vaccines plus higher commodity, freight and
distribution costs. This was partly offset by continued tight control of
ongoing costs, benefits from continued restructuring and increased royalty
income from Biktarvy sales following the settlement with Gilead in February
2022 and Gardasil sales.
R&D segment operating expenses were £1,152 million, up 3% at AER, down 2%
at CER, primarily reflecting continued efficiencies delivered from the One
R&D restructuring programme, the completion of several late-stage clinical
development programmes, and a favourable comparator to Q2 2021, which saw
increased levels of R&D investment due to COVID-19 pandemic solutions.
This was partly offset by increased investment in Vaccines including priority
investments for mRNA and late stage portfolio and Specialty in early stage HIV
and depemokimab.
Net finance costs
Total net finance costs were £183 million compared with £185 million in Q2
2021. Adjusted net finance costs were £181 million compared with £185
million in Q2 2021.
Taxation
The charge of £150 million represented an effective tax rate on Total results
of 16.7% (Q2 2021: 18.8% credit) and reflected the different tax effects of
the various Adjusting items. Included in Q2 2021 was a credit of £325 million
resulting from the revaluation of deferred tax assets following enactment of
the proposed change of UK corporation tax from 19% to 25%. Tax on Adjusted
profit amounted to £277 million and represented an effective Adjusted tax
rate of 15.2% (Q2 2021: 16.6%).
Issues related to taxation are described in Note 14, 'Taxation' in the Annual
Report 2021. The Group continues to believe it has made adequate provision for
the liabilities likely to arise from periods that are open and not yet agreed
by relevant tax authorities. The ultimate liability for such matters may vary
from the amounts provided and is dependent upon the outcome of agreements with
relevant tax authorities.
Non-controlling interests
The allocation of Total earnings to non-controlling interests amounted to £40
million (Q2 2021: £57 million). The decrease was primarily due to an reduced
allocation of ViiV Healthcare profits of £41 million (Q2 2021: £60 million)
including increased credits for re-measurement of contingent consideration
liabilities.
The allocation of Adjusted earnings to non-controlling interests amounted to
£150 million (Q2 2021: £99 million). The increase in allocation primarily
reflected an increased allocation of ViiV Healthcare profits of £151 million
(Q2 2021: £102 million).
Earnings per share from continuing operations
Total EPS was 17.5p compared with 30.3p in Q2 2021. The reduction primarily
reflected increased charges for remeasurement of contingent consideration
liabilities as well as an unfavourable comparison due to a credit of £325
million to Taxation in Q2 2021 resulting from the revaluation of deferred tax
assets.
Adjusted EPS was 34.7p compared with 28.2p in Q2 2021, up 23% at AER, 6% at
CER, on a 7% CER increase in Adjusted operating profit primarily reflecting
higher COVID-19 solutions sales at low margin, with the reduction to growth
from COVID-19 solutions being approximately 20% at AER, 18% at CER. Operating
leverage from growth in sales of Specialty Medicines including HIV and
Vaccines, beneficial mix, higher royalty income and a lower effective tax rate
was partly offset by higher supply chain, freight and distribution costs and
higher non-controlling interests.
Profit and earnings per share from discontinued operations
Discontinued operations include the Consumer Healthcare business and certain
Corporate costs directly attributable to the Consumer Healthcare. Profit after
taxation from discontinued operations amounted to £229 million (Q2 2021:
£267 million) and EPS from discontinued operations was 3.3p, compared with
4.5p in Q2 2021. The reduction in profit and EPS primarily reflected increased
separation costs and increased interest costs. For further details see page
52, discontinued operations.
Total earnings per share
Total EPS was 20.8p compared with 34.8p in Q2 2021. The reduction primarily
reflects increased charges for remeasurement of contingent consideration
liabilities as well as an unfavourable comparison due to a credit of £325
million to Taxation in Q2 2021 resulting from the revaluation of deferred tax
assets.
Currency impact on Q2 2022 results
The results for Q2 2022 are based on average exchange rates, principally
£1/$1.26, £1/€1.18 and £1/Yen 162. Comparative exchange rates are given
on page 50. The period-end exchange rates were £1/$1.21, £1/€1.16 and
£1/Yen 165.
In Q2 2022, turnover was up 19% at AER and 13% at CER. Total EPS from
continuing operations was 17.5p compared with 30.3p in Q2 2021. Adjusted EPS
was 34.7p compared with 28.2p in Q2 2021, up 23% at AER and 6% at CER. The
favourable currency impact primarily reflected the weakening of Sterling
against the US Dollar, partly offset by the strengthening in Sterling against
the Euro and Japanese Yen. Exchange gains or losses on the settlement of
intercompany transactions had a one percent favourable impact on the 17
percentage points currency impact on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for Q2 2022 and
Q2 2021 are set out below.
Three months ended 30 June 2022
Total Profit from Intangible Intangible Major Trans- Divest- Adjusted
results discon- amort- impair- restruct- action- ments, results
£m tinued isation ment uring related significant £m
operations £m £m £m £m legal and
£m other
items
£m
Turnover 6,929 6,929
Cost of sales (2,176) 166 21 10 9 (1,970)
Gross profit 4,753 166 21 10 9 4,959
Selling, general and (2,066) 107 4 (1,955)
administration
Research and development (1,242) 26 55 6 (1,155)
Royalty income 159 159
Other operating (523) 675 (152) -
income/(expense)
Operating profit 1,081 192 55 134 685 (139) 2,008
Net finance cost (183) 1 1 (181)
Share of after tax losses (2) (2)
of associates and joint
ventures
Profit before taxation 896 192 55 135 685 (138) 1,825
Taxation (150) (41) (10) (24) (78) 26 (277)
Tax rate % 16.7% 15.2%
Profit after taxation from 746 151 45 111 607 (112) 1,548
continuing operations
Profit after taxation from 229 (229) -
discontinued operations
Total profit after taxation 975 (229) 151 45 111 607 (112) 1,548
for the period
Profit attributable to non- 40 110 150
controlling interest from
continuing operations
Profit attributable to 706 151 45 111 497 (112) 1,398
shareholders from
continuing operations
Profit attributable to non- 97 (97) -
controlling interest from
discontinued operations
Profit attributable to 132 (132) -
shareholders from
discontinued operations
975 (229) 151 45 111 607 (112) 1,548
Total profit attributable to 137 (97) 110 150
non-controlling interests
Total profit attributable to 838 (132) 151 45 111 497 (112) 1,398
shareholders
975 (229) 151 45 111 607 (112) 1,548
Earnings per share from 17.5p 3.8p 1.1p 2.8p 12.3p (2.8)p 34.7p
continuing operations
Earnings per share from 3.3p (3.3)p -
discontinued operations
Total earnings per share 20.8p (3.3)p 3.8p 1.1p 2.8p 12.3p (2.8)p 34.7p
Weighted average number 4,025 4,025
of shares (millions)
Three months ended 30 June 2021
Total Profit from Intangible Intangible Major Trans- Divest- Adjusted
results discon- amort- impair- restruct- action- ments, results
£m tinued isation ment uring related significant £m
operations £m £m £m £m legal and
£m other
items
£m
Turnover 5,838 5,838
Cost of sales (1,708) 161 18 7 (1,522)
Gross profit 4,130 161 18 7 4,316
Selling, general and (1,689) 55 (12) (1,646)
administration
Research and development (1,167) 25 7 29 (1,106)
Royalty income 77 77
Other operating (76) 123 (47) -
income/(expense)
Operating profit 1,275 186 7 102 130 (59) 1,641
Net finance cost (185) (185)
Loss on disposal of interest (36) 36 -
in associates
Share of after tax losses 16 16
of associates and joint
ventures
Profit before taxation 1,070 186 7 102 130 (23) 1,472
Taxation 201 (37) (2) (22) (34) (350) (244)
Tax rate % (18.8)% 16.6%
Profit after taxation from 1,271 149 5 80 96 (373) 1,228
continuing operations
Profit after taxation from 267 (267) -
discontinued operations
Total profit after taxation 1,538 (267) 149 5 80 96 (373) 1,228
for the period
Profit attributable to non- 57 42 99
controlling interest from
continuing operations
Profit attributable to 1,214 149 5 80 54 (373) 1,129
shareholders from
continuing operations
Profit attributable to non- 86 (86)
controlling interest from
discontinued operations
Profit attributable to 181 (181)
shareholders from
discontinued operations
1,538 (267) 149 5 80 96 (373) 1,228
Total profit attributable to 143 (86) 42 99
non-controlling interests
Total profit attributable to 1,395 (181) 149 5 80 54 (373) 1,129
shareholders
1,538 (267) 149 5 80 96 (373) 1,228
Earnings per share from 30.3p 3.7 0.1 2.0 1.4 (9.3) 28.2p
continuing operations
Earnings per share from 4.5p (4.5)p
discontinued operations
Total earnings per share 34.8p (4.5)p 3.7 0.1 2.0 1.4 (9.3) 28.2p
Weighted average number 4,003 4,003
of shares (millions)
Major restructuring and integration
Total Major restructuring charges from continuing operations incurred in Q2
2022 were £134 million (Q2 2021: £102 million), analysed as follows:
Q2 2022 Q2 2021
Cash Non- Total Cash Non- Total
£m cash £m £m cash £m
£m £m
Separation Preparation restructuring 28 105 133 102 (10) 92
programme
Legacy programmes (1) 2 1 8 2 10
27 107 134 110 (8) 102
Cash charges of £28 million under the Separation Preparation programme
primarily arose from the restructuring of some administrative functions as
well as global Supply Chain and R&D functions. The non-cash charges of
£105 million primarily reflected the write-down of assets in administrative
locations and impairment of IT assets.
Total cash payments made in Q2 2022 were £78 million (Q2 2021: £146
million), £70 million (Q2 2021: £113 million) relating to the Separation
Preparation restructuring programme and £8 million (Q2 2021: £33 million)
relating to other legacy programmes including the settlement of certain
charges accrued in previous quarters.
The analysis of Major restructuring charges by Income statement line was as
follows:
Q2 2022 Q2 2021
£m £m
Cost of sales 21 18
Selling, general and administration 106 55
Research and development 7 29
Total major restructuring costs from continuing operations 134 102
Materially all of the Separation Preparation restructuring programme has been
included as part of continuing operations. The legacy Consumer Healthcare
Joint Venture integration programme is now included as part of discontinued
operations.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of £685 million (Q2
2021: £130 million). This included a net £699 million accounting charge for
the re-measurement of contingent consideration liabilities and the liabilities
for the Pfizer put option and Pfizer and Shionogi preferential dividends in
ViiV Healthcare.
Charge/(credit) Q2 2022 Q2 2021
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint Venture 585 125
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 118 (37)
Contingent consideration on former Novartis Vaccines business (4) 13
Other adjustments (14) 29
Total transaction-related charges 685 130
The £585 million charge relating to the contingent consideration for the
former Shionogi-ViiV Healthcare joint venture represented an increase in the
valuation of the contingent consideration due to Shionogi, as a result of the
unwind of the discount for £95 million and a charge of £490 million
primarily from exchange rates as well as adjustments to sales forecasts. The
£118 million charge relating to the ViiV Healthcare put option and Pfizer
preferential dividends represented an increase in the valuation of the put
option primarily as a result of updated exchange rates and adjustments to
sales forecasts.
The ViiV Healthcare contingent consideration liability is fair valued under
IFRS. An explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 38.
Divestments, significant legal charges, and other items
Divestments, significant legal charges and other items primarily include
milestone income gains and certain other Adjusting items.
Discontinued operations
GSK satisfied the criteria in IFRS 5 for treating Consumer Healthcare as a
'discontinued operation' effective from 30 June 2022, as it was expected that
the carrying amount of the disposal group will be recovered principally
through disposal and a distribution, it was available for distribution in its
present condition (subject only to the steps to be completed that are usual
and customary for the demerger of a business) and it was considered highly
probable (the date of the demerger being 18 July 2022).
From Q2 2020, the Group started to report additional costs to prepare for
establishment of the Consumer Healthcare business as an independent entity
("Separation costs") and these have been presented as part of discontinued
operations. Total separation costs incurred in Q2 2022 were £163 million (Q2
2021: £74 million). This includes £30 million relating to transaction costs
incurred in connection with the demerger and preparatory admission costs
related to the listing of Haleon.
Financial performance - H1 2022
Total results
The Total results for the Group are set out below.
H1 2022 H1 2021 Growth Growth
£m £m £% CER%
Turnover 14,119 10,993 28 25
Cost of sales (4,893) (3,362) 46 45
Gross profit 9,226 7,631 21 17
Selling, general and administration (3,878) (3,198) 21 19
Research and development (2,345) (2,227) 5 3
Royalty income 297 166 79 77
Other operating income/(expense) 74 113
Operating profit 3,374 2,485 36 26
Finance income 28 10
Finance expense (409) (387)
Loss on disposal of interest in associates - (36)
Share of after tax profits of associates and joint ventures (3) 32
Profit before taxation 2,990 2,104 42 32
Taxation (473) 46
Tax rate % 15.8% (2.2)%
Profit after taxation from continuing operations 2,517 2,150 17 8
Profit after taxation from discontinued operations 625 648 (4) (8)
Total Profit after taxation for the period 3,142 2,798 12 5
Profit attributable to non-controlling interests 315 137
from continuing operations
Profit attributable to shareholders from 2,202 2,013
continuing operations
Profit attributable to non-controlling interests 187 193
from discontinued operations
Profit attributable to shareholders from 438 455
discontinued operations
3,142 2,798 12 5
Total Profit attributable to non-controlling interests 502 330
Total Profit attributable to shareholders 2,640 2,468
3,142 2,798
Earnings per share from continuing operations(1) 54.8p 50.3p 9 -
Earnings per share from discontinued operations(1) 10.9p 11.4p (4) (8)
Total earnings per share 65.7p 61.7p 6 (1)
(1) Earnings per share have been retrospectively adjusted to reflect the Share
Consolidation on 18 July 2022.
Adjusted results
The Adjusted results for the Group are set out below. Adjusted results are
from continuing operations and excludes the Consumer Healthcare business (see
details in page 52). Reconciliations between Total results and Adjusted
results for H1 2022 and H1 2021 are set out on pages 29 to 30.
H1 2022 % of Growth Growth
£m turnover £% CER%
Turnover 14,119 100 28 25
Cost of sales (4,497) (31.9) 52 52
Selling, general and administration (3,725) (26.4) 20 18
Research and development (2,243) (15.9) 5 3
Royalty income 297 2.2 79 77
Adjusted operating profit 3,951 28.0 33 26
Adjusted profit before tax 3,569 36 28
Adjusted profit after tax 3,005 38 29
Adjusted profit attributable to shareholders 2,694 37 28
Adjusted earnings per share 67.0p 36 27
Operating profit by segment
H1 2022 % of Growth Growth
£m turnover £% CER%
Commercial Operations 6,421 45.5 21 16
Research and Development (2,247) 5 2
Segment profit 4,174 29.6 32 26
Corporate & other unallocated costs (223)
Adjusted operating profit 3,951 28.0 33 26
Turnover
Commercial Operations
H1 2022
£m Growth Growth
£% CER%
HIV 2,585 14 10
Oncology 281 23 19
Immuno-inflammation, respiratory and other 1,200 26 21
4,066 18 14
Pandemic 1,773 >100 >100
Specialty Medicines 5,839 69 63
Meningitis 447 8 6
Influenza 50 (2) (6)
Shingles 1,429 >100 >100
Established Vaccines 1,458 1 (1)
3,384 33 30
Pandemic Vaccines - (100) (100)
Vaccines 3,384 21 17
Respiratory 3,184 6 3
Other General Medicines 1,712 (1) -
General Medicines 4,896 3 2
Commercial Operations 14,119 28 25
US 6,903 38 29
Europe 3,209 27 30
International 4,007 16 16
Commercial Operations by region 14,119 28 25
Total turnover in the half year was £14,119 million, up 28% at AER, 25% at
CER, reflecting strong performance in all three product groups. Commercial
Operations turnover, excluding pandemic sales, grew 15% at AER, 12% at CER.
Specialty Medicines included £1,773 million sales of Xevudy, which
contributed 13 percentage points of growth at AER and CER. Vaccines growth
reflected strong Shingrix performance assisted by demand recovery and channel
inventory build in the US, partially offset by pandemic adjuvant sales in H1
2021. General Medicines reflected the post-pandemic recovery of the
antibiotics market and the strong performance of Trelegy in respiratory across
all regions.
Specialty Medicines
Specialty Medicines sales were £5,839 million, up 69% at AER, 63% at CER,
driven by consistent growth in all therapy areas. Specialty Medicines
excluding sales of Xevudy, were £4,066 million, up 18% at AER, 14% at CER.
HIV
HIV sales were £2,585 million with growth of 14% at AER,10% at CER. The
performance benefited from strong patient demand for the new HIV medicines
(Dovato, Cabenuva, Juluca, Rukobia, and Apretude). Unfavourable international
tender phasing was broadly offset by favourable US channel inventory
movements.
New HIV medicines delivered for the first-time half year sales of over one
billion pounds to £1,017 million, up 72% at AER, 66% at CER, representing 39%
of the total HIV portfolio compared to 26% in H1 2021. Sales of the oral two
drug regimens Dovato and Juluca were £577 million and £285 million,
respectively, with combined growth of 51% at AER, 47% at CER. Cabenuva, the
first long-acting injectable for the treatment of HIV-1 infection, recorded
sales of £110 million. Apretude, the first long-acting injectable for the
prevention of HIV-1 delivered sales of £10 million.
Oncology
Oncology sales were £281 million, up 23% at AER, 19% at CER. Zejula sales of
£218 million were up 17% at AER, 14% at CER with diagnosis and treatment
rates continuing to be impacted by the pandemic especially in the US. Sales of
Blenrep of £55 million increased 31% at AER, 26% at CER, reflecting ongoing
launches and growth in launched markets.
Immuno-inflammation, Respiratory and Other
Immuno-inflammation, Respiratory and Other sales were £1,200 million up 26%
at AER, 21% at CER. Benlysta sales were £512 million, up 31% at AER, 24% at
CER, representing strong underlying demand worldwide. Nucala sales were £662
million, up 21% at AER, 18% at CER, including US sales of £413 million up 24%
at AER, 16% at CER. The performance reflected continued strong patient demand
and the launch of several additional indications.
Pandemic
Sales of Xevudy were £1,773 million, compared to £16 million sales in the
first half of last year. Sales were delivered in all regions; £793 million in
the US, £434 million in Europe, and £546 million in International.
Vaccines
Vaccines turnover was £3,384 million, up 21% at AER, 17% at CER. Excluding
unrepeated 2021 pandemic adjuvant sales, vaccine sales increased 33% at AER,
30% at CER. The performance reflected a favourable comparator to H1 2021,
which was impacted by COVID-19 related disruptions in several markets, and the
strong commercial execution of Shingrix, particularly in the US and Europe.
Meningitis
Meningitis vaccines sales grew 8% at AER, 6% at CER to £447 million mainly
driven by Bexsero (10% at AER, 9% at CER to £328 million) resulting from
higher CDC purchasing and increased share in the US, partially offset by
phasing of tenders in Europe.
Shingles
Shingrix sales more than doubled to £1,429 million primarily due to demand
recovery, strong commercial execution aimed at shifting the shingles
vaccination season forward and earlier-than-expected channel inventory build
in the US, and higher demand in Germany. All regions grew significantly in H1
2022, with 41% of the growth contributed from outside of the US. Shingrix is
now available in 23 countries.
Established Vaccines
Established Vaccines grew 1% AER but decreased 1% at CER to £1,458 million
mainly as a result of lower International tender demand and unfavourable
phasing for Synflorix, lower sales for Cervarix, and MMR/V vaccines in
International, and the negative impact of a CDC stockpile borrow for Rotarix.
This decrease was partially offset by higher demand for hepatitis vaccines and
Boostrix in the US and Europe.
General Medicines
General Medicines sales in the half year were £4,896 million, up 3% at AER,
2% at CER, with the impact of generic competition in US, Europe and Japan
offset by Trelegy growth in respiratory and the post-pandemic rebound of the
antibiotic market since H2 2021, in Other General Medicines.
Respiratory
Respiratory sales were £3,184 million, up 6% at AER, 3% at CER. The
performance was driven by Trelegy sales of £807 million, up 50% AER, 43% CER,
including strong growth across all regions. The performance also benefitted
from prior period RAR adjustments in the US. Advair/Seretide sales of £564
million decreased 19% at AER, 20% at CER predominately reflecting the adverse
impact of generic competition; growth in certain International markets due to
targeted promotion offset the decrease.
Other General Medicines
Other General Medicines sales were £1,712 million, and decreased 1% at AER,
stable at CER. Augmentin sales were £259 million, up 42% at AER, 48% at CER,
reflecting the post pandemic rebound of the antibiotic market since Q3 2021 in
the International and Europe regions. This offsets the ongoing adverse impact
of generic competition and approximately two percentage points impact from the
divestment of cephalosporin products in Q4 2021.
By Region
US
In the US, sales were £6,903 million, up 38% at AER, 29% at CER, including
Xevudy sales of £793 million contributing ten percentage points of growth.
In Specialty Medicines, HIV sales were £1,591 million up 21% at AER, 13% at
CER driven by strong patient demand from all new HIV products with sales of
£662 million up 73% at AER, 62% at CER, and favourable channel inventory
movements. HIV medicines, Dovato delivered sales of £309 million and Cabenuva
£95 million. Nucala in respiratory and Benlysta in immunology both continued
to grow double-digit and reflected ongoing and strong patient demand. Oncology
sales increased 14% at AER, 7% at CER with diagnosis and treatment rates
continuing to be impacted by the pandemic.
Vaccine sales were £1,789 million, up 38% at AER, 29% at CER. Excluding the
impact of COVID-19 vaccine adjuvant sales during the first half of 2021, sales
increased 64% at AER, 53% at CER. The performance was primarily driven by
Shingrix and reflected demand recovery and the benefit of a favourable
comparator in the first half of 2021 when sales were impacted by COVID-19
related disruptions. Meningitis, Hepatitis, Infanrix/Pediarix, and Boostrix
sales all grew reflecting CDC purchasing patterns and demand recovery.
General Medicines sales were £1,744 million up 9% at AER, 2% at CER, driven
by strong respiratory sales of Trelegy, which increased 57% at AER, 47% at
CER, and reflected increased patient demand and growth of the single inhaler
triple therapy market.
Europe
In Europe, sales were £3,209 million, up 27% at AER, 30% at CER, including
Xevudy sales of £434 million contributing 17 percentage points of growth.
In Specialty Medicines, HIV sales were £635 million up 10% at AER, 13% at CER
primarily driven by strong patient demand from two drug regimens Dovato and
Juluca. Dovato delivered sales of £216 million and Juluca £63 million.
Benlysta in immunology, Nucala in respiratory, and several Oncology medicines
continued to show strong double-digit growth.
Vaccine sales were £823 million, up 36% at AER, 40% at CER. The performance
was driven by Shingrix sales of £311 million, >100% at AER, >100% at
CER, particularly in Germany.
General Medicines sales were £1,025 million and decreased 5% at AER, 3% at
CER, reflecting the ongoing and adverse impact of generic competitive
pressures on Seretide. This was partly offset, however, by strong demand for
Trelegy in respiratory and the growth of Augmentin following the post-pandemic
rebound of the antibiotic market since H2 2021.
International
International sales were £4,007 million, up 16% at AER, 17% at CER, including
Xevudy sales of £546 million contributing 14 percentage points of growth.
In Specialty Medicines, HIV sales were £359 million and decreased 4% at AER,
5% at CER, primarily driven by tender phasing; strong Dovato growth partially
offset the performance. Combined Tivicay and Triumeq sales were £278 million
decreasing 14% at AER, 15% at CER. Nucala in respiratory and Benlysta in
immunology both continued to grow strongly reflecting biologic market growth
in Japan and addition to China's National Reimbursement Drug List.
Vaccine sales were £772 million and decreased 13% at AER, 14% at CER. Vaccine
sales excluding the impact of COVID-19 vaccine adjuvant sales in H1 2021
decreased 8% at AER, 9% at CER, primarily reflecting the phasing of public
tenders and the lower sales of divested brands.
General Medicines sales were £2,127 million up 4% at AER, 5% at CER.
Respiratory sales of £935 million increased 4% at AER, 5% at CER reflecting
strong growth of Trelegy, particularly in Japan, China, and Canada. This
performance, however, was offset by the adverse impact of generic competition
and a lower allergy season in Japan. Other General Medicines sales of £1,192
million increased 4% at AER, 5% at CER, and reflected growth of Augmentin
following the post-pandemic rebound of the antibiotic market since H2 2021.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 34.7%, 4.1 percentage
points higher at AER and 4.9 percentage points higher in CER terms than H1
2021. This included lower write-downs on sites from major restructuring
programmes compared to 2021.
Excluding these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 31.9%, 5.0 percentage points higher at AER and 5.7
percentage points higher at CER compared with H1 2021. This primarily
reflected higher sales of lower margin Xevudy compared to H1 2021 which
included higher margin pandemic adjuvant sales, increasing cost of sales
margin by 7.7 percentage points at AER and 7.6 percentage points at CER, as
well as the impact of increased commodity prices and freight costs. This was
partially offset by a favourable mix primarily from increased sales of
Shingrix in the US and Europe and increased sales of HIV medicines in the US.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 27.5%, 1.6 percentage
points lower at AER and 1.4 percentage points lower at CER than in H1 2021 as
the growth in sales outweighed SG&A expenditure growth.
Adjusted SG&A costs as a percentage of turnover were 26.4%, 1.9 percentage
points lower at AER than in H1 2021 and 1.6 percentage points lower at CER.
Adjusted SG&A costs increased 20% at AER, 18% at CER which primarily
reflected an increased level of launch investment in Specialty Medicines
particularly HIV and Vaccines including Shingrix to drive post-pandemic
recovery demand and support market expansion. The growth in Adjusted SG&A
also reflected an unfavourable comparison to a beneficial legal settlement in
2021, exchange losses on the Vir Biotechnology, Inc. collaboration profit
share and impairment provisions relating to Ukraine. This growth, however was
partly offset by the continuing benefit of restructuring and tight control of
ongoing costs.
Research and development
Group R&D expenditure was £2,345 million (16.6% of turnover), up 5% at
AER and 3% at CER. Adjusted R&D expenditure in the year-to-date was
£2,243 million, up 5% at AER, 3% at CER. This reflected continued
efficiencies driven by the One R&D restructuring programme, the completion
of several late-stage clinical development programmes, and a favourable
comparator to H1 2021, which saw increased levels of R&D investment due to
COVID-19 pandemic solutions.
In the half year, GSK increased investment across Vaccine clinical
development, including investments into its emerging mRNA technology platform,
continued investment in the late-stage portfolio and accelerated several early
discovery programmes. In addition, in Specialty Medicines, the level of
R&D investment increased to support the early-stage HIV portfolio and in
respiratory, the phase III programme for depemokimab, a potential new medicine
to treat severe asthma. The expenditure in the year to date does not reflect
the impact of the acquisition of Sierra Oncology, Inc. which completed on 1
July 2022.
Royalty income
Royalty income was £297 million (H1 2021: £166 million), up 79% at AER, 77%
at CER, primarily reflecting royalty income from Gilead under the settlement
and licensing agreement with Gilead announced on 1 February 2022 and higher
sales of Gardasil.
Other operating income/(expense)
Net other operating income was £74 million (H1 2021: £113 million) including
£0.9 billion upfront income received from the settlement with Gilead, partly
offset by accounting charges of £1,031 million (H1 2021: £208 million)
arising from the re-measurement of contingent consideration liabilities and
the liabilities for the Pfizer put option and Pfizer and Shionogi preferential
dividends in ViiV Healthcare. This included a re-measurement charge of £841
million (H1 2021: £259 million) for the contingent consideration liability
due to Shionogi, including the unwinding of the discount for £196 million and
a charge for £645 million primarily from changes to exchange rates as well as
adjustments to sales forecasts.
Operating profit
Total operating profit was £3,374 million compared with £2,485 million in H1
2021. This included the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 25% at CER,
partly offset by higher re-measurement charges for contingent consideration
liabilities. Adjusted operating profit was £3,951 million, 33% higher at AER
and 26% at CER than H1 2021 on a turnover increase of 25% at CER. The Adjusted
operating margin of 28.0% was 1.0 percentage points higher at AER and stable
at CER compared to H1 2021. This primarily reflected the impact from low
margin COVID-19 solutions sales (Xevudy), which reduced Adjusted Operating
profit growth by approximately 2% at AER, 1% at CER and reduced the Adjusted
operating margin by approximately 3.3 percentage points at AER and CER. This
was offset by operating leverage from strong sales growth, mix benefit and
higher royalty income.
Contingent consideration cash payments made to Shionogi and other companies
reduce the balance sheet liability and hence are not recorded in the income
statement. Total contingent consideration cash payments in H1 2022 amounted to
£615 million (H1 2021: £426 million). These included cash payments made to
Shionogi of £603 million (H1 2021: £419 million).
Adjusted operating profit by business
Commercial Operations operating profit was £6,421 million, up 21% at AER and
16% at CER on a turnover increase of 25% at CER. The operating margin of 45.5%
was 2.8 percentage points lower at AER, 3.5 percentage points lower at CER
than in H1 2021. This primarily reflected strong sales of lower margin Xevudy
in the period, increased investment behind launches in Specialty Medicines
including HIV and Vaccines plus higher commodity, freight and distribution
costs as well as an adverse comparison to a favourable legal settlement in H1
2021. This was partly offset by continued tight control of ongoing costs,
benefits from continued restructuring and increased royalty income from
Biktarvy sales following the settlement with Gilead in February 2022 and
Gardasil sales.
R&D segment operating expenses were £2,247 million, up 5% at AER, 2% at
CER, primarily reflecting increased investment in Vaccines including priority
investments for mRNA and late stage portfolio and Specialty in early stage HIV
and depemokimab. This was partly offset by continued efficiencies driven by
the R&D restructuring programme, the completion of several late-stage
clinical development programmes, and a favourable comparator to H1 2021, which
saw increased levels of R&D investment due to COVID-19 pandemic solutions.
Net finance costs
Total net finance costs were £381 million compared with £377 million in H1
2021. Adjusted net finance costs were £379 million compared with £375
million in H1 2021.
Share of after tax profits of associates and joint ventures
The share of after tax loss of associates and joint ventures was £3 million
(H1 2021: £32 million share of profit). In H1 2021, the Group also reported a
net loss on disposal of interests in associates of £36 million, primarily
driven by a loss on disposal of our interest in the associate Innoviva Inc.
Taxation
The charge of £473 million represented an effective tax rate on Total results
of 15.8% (H1 2021: 2.2% credit) and reflected the different tax effects of the
various Adjusting items. Included in H1 2021 is a credit of £325 million
resulting from the revaluation of deferred tax assets following enactment of
the proposed change of UK corporation tax rates from 19% to 25%. Tax on
Adjusted profit amounted to £564 million and represented an effective
Adjusted tax rate of 15.8% (H1 2021: 16.7%).
Issues related to taxation are described in Note 14, 'Taxation' in the Annual
Report 2021. The Group continues to believe it has made adequate provision for
the liabilities likely to arise from periods that are open and not yet agreed
by relevant tax authorities. The ultimate liability for such matters may vary
from the amounts provided and is dependent upon the outcome of agreements with
relevant tax authorities.
Non-controlling interests
The allocation of Total earnings to non-controlling interests amounted to
£315 million (H1 2021: £137 million). The increase was primarily due to an
increased allocation of ViiV Healthcare profits of £268 million (H1 2021:
£136 million), including the Gilead upfront settlement income partly offset
by increased credits for re-measurement of contingent consideration
liabilities, as well as higher net profits in some of the Group's other
entities with non-controlling interests.
The allocation of Adjusted earnings to non-controlling interests amounted to
£311 million (Q2 2021: £211 million). The increase in allocation primarily
reflected an increased allocation of ViiV Healthcare profits of £264 million
(H1 2021: £210 million), as well as higher net profits in some of the Group's
other entities with non-controlling interests.
Earnings per share from continuing operations
Total EPS from continuing operations was 54.8p compared with 50.3p in H1 2021.
This primarily reflected the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 25% at CER,
partly offset by higher re-measurement charges for contingent consideration
liabilities as well as an unfavourable comparison due to a credit of £325
million to Taxation in Q2 2021 resulting from the revaluation of deferred tax
assets.
Adjusted EPS was 67.0p compared with 49.3p in H1 2021, up 36% at AER, 27% at
CER, on a 25% CER turnover increase. Adjusted operating profit reflected
higher COVID-19 solutions sales at low margin with the reduction to growth
from COVID-19 solutions being approximately 2% at AER, 2% at CER. Operating
leverage from growth in sales of Specialty Medicines including HIV and
Vaccines, beneficial mix, higher royalty income and a lower effective tax rate
was partly offset by higher supply chain, freight and distribution costs and
higher non-controlling interests.
Profit and earnings per share from discontinued operations
Discontinued operations include the Consumer Healthcare business and certain
Corporate costs directly attributable to Consumer Healthcare. Profit after
taxation from discontinued operations amounted to £625 million (H1 2021:
£648 million) and EPS from discontinued operations was 10.9p, compared with
11.4p in H1 2021. The reduction in profit and EPS primarily reflected
increased separation costs and increased interest costs. For further details
see page 52, discontinued operations.
Currency impact on H1 2022 results
The results for H1 2022 are based on average exchange rates, principally
£1/$1.30, £1/€1.19 and £1/Yen 159. Comparative exchange rates are given
on page 50. The period-end exchange rates were £1/$1.21, £1/€1.16 and
£1/Yen 165.
In H1 2022, turnover was up 28% at AER and 25% at CER. Total EPS was 54.8p
compared with 50.3p in H1 2021. Adjusted EPS was 67.0p compared with 49.3p in
H1 2021, up 36% at AER and 27% at CER. The favourable currency impact
reflected the weakening of Sterling against the US Dollar, partly offset by
strengthening in Sterling against the Euro and Japanese Yen. Exchange gains or
losses on the settlement of intercompany transactions had a one percent
favourable impact on the nine percentage point favourable currency impact on
Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for H1 2022 and
H1 2021 are set out below.
Six months ended 30 June 2022
Total Profit from Intangible Intangible Major Trans- Divest- Adjusted
results discon- amort- impair- restruct- action- ments, results
£m tinued isation ment uring related significant £m
operations £m £m £m £m legal and
£m other
items
£m
Turnover 14,119 14,119
Cost of sales (4,893) 329 36 22 9 (4,497)
Gross profit 9,226 329 36 22 9 9,622
Selling, general and (3,878) 135 18 (3,725)
administration
Research and development (2,345) 49 39 14 (2,243)
Royalty income 297 297
Other operating 74 1,010 (1,084) -
income/(expense)
Operating profit 3,374 378 39 185 1,032 (1,057) 3,951
Net finance cost (381) 1 1 (379)
Share of after tax losses (3) (3)
of associates and joint
ventures
Profit before taxation 2,990 378 39 186 1,032 (1,056) 3,569
Taxation (473) (80) (7) (36) (131) 163 (564)
Tax rate % 15.8% 15.8%
Profit after taxation from 2,517 298 32 150 901 (893) 3,005
continuing operations
Profit after taxation from 625 (625) -
discontinued operations
Total profit after taxation 3,142 (625) 298 32 150 901 (893) 3,005
for the period
Profit attributable to non- 315 (4) 311
controlling interest from
continuing operations
Profit attributable to 2,202 298 32 150 905 (893) 2,694
shareholders from
continuing operations
Profit attributable to non- 187 (187) -
controlling interest from
discontinued operations
Profit attributable to 438 (438) -
shareholders from
discontinued operations
3,142 (625) 298 32 150 901 (893) 3,005
Total profit attributable to 502 (187) (4) 311
non-controlling interests
Total profit attributable to 2,640 (438) 298 32 150 905 (893) 2,694
shareholders
3,142 (625) 298 32 150 901 (893) 3,005
Earnings per share from 54.8p 7.4p 0.8p 3.7p 22.5p (22.2)p 67.0p
continuing operations
Earnings per share from 10.9p (10.9)p -
discontinued operations
Total earnings per share 65.7p (10.9)p 7.4p 0.8p 3.7p 22.5p (22.2)p 67.0p
Weighted average number 4,021 4,021
of shares (millions)
Six months ended 30 June 2021
Total Profit from Intangible Intangible Major Trans- Divest- Adjusted
results discon- amort- impair- restruct- action- ments, results
£m tinued isation ment uring related significant £m
operations £m £m £m £m legal and
£m other
items
£m
Turnover 10,993 10,993
Cost of sales (3,362) 326 38 14 27 (2,957)
Gross profit 7,631 326 38 14 27 8,036
Selling, general and (3,198) 100 (10) (3,108)
administration
Research and development (2,227) 50 19 30 (2,128)
Royalty income 166 166
Other operating 113 232 (345) -
income/(expense)
Operating profit 2,485 376 19 168 246 (328) 2,966
Net finance cost (377) 1 (375)
Loss on disposal of interest (36) 36 -
in associates
Share of after tax losses 32 32
of associates and joint
ventures
Profit before taxation 2,104 376 19 169 246 (291) 2,623
Taxation 46 (73) (4) (36) (64) (308) (439)
Tax rate % (2.2%) 16.7%
Profit after taxation from 2,150 303 15 133 182 (599) 2,184
continuing operations
Profit after taxation from 648 (648) -
discontinued operations
Total profit after taxation 2,798 (648) 303 15 133 182 (599) 2,184
for the period
Profit attributable to non- 137 74 211
controlling interest from
continuing operations
Profit attributable to 2,013 303 15 133 108 (599) 1,973
shareholders from
continuing operations
Profit attributable to non- 193 (193) -
controlling interest from
discontinued operations
Profit attributable to 455 (455) -
shareholders from
discontinued operations
2,798 (648) 303 15 133 182 (599) 2,184
Total profit attributable to 330 (193) 74 211
non-controlling interests
Total profit attributable to 2,468 (455) 303 15 133 108 (599) 1,973
shareholders
2,798 (648) 303 15 133 182 (599) 2,184
Earnings per share from 50.3p 7.6 0.4 3.3 2.7 (15.0) 49.3p
continuing operations
Earnings per share from 11.4p (11.4)p -
discontinued operations
Total earnings per share 61.7p (11.4)p 7.6 0.4 3.3 2.7 (15.0) 49.3p
Weighted average number 3,999 3,999
of shares (millions)
Major restructuring and integration
Total Major restructuring charges from continuing operations incurred in H1
2022 were £185 million (H1 2021: £168 million), analysed as follows:
H1 2022 H1 2021
Cash Non- Total Cash Non- Total
£m cash £m £m cash £m
£m £m
Separation Preparation restructuring 39 142 181 180 (1) 179
programme
Legacy programmes 1 3 4 19 (30) (11)
40 145 185 199 (31) 168
Cash charges of £39 million under the Separation Preparation programme
primarily arose from the restructuring of some administrative functions as
well as global Supply Chain and R&D functions. The non-cash charges of
£142 million primarily reflected the write-down of assets in administrative
locations and impairment of IT assets.
Total cash payments made in H1 2022 were £213 million (H1 2021: £290
million), £189 million (H1 2021: £213 million) relating to the Separation
Preparation restructuring programme and £24 million (H1 2021: £77 million)
relating to other legacy programmes including the settlement of certain
charges accrued in previous quarters.
The analysis of Major restructuring charges by Income statement line was as
follows:
H1 2022 H1 2021
£m £m
Cost of sales 36 38
Selling, general and administration 135 100
Research and development 14 30
Total Major restructuring costs from continuing operations 185 168
The benefit in H1 2022 from restructuring programmes was £0.2 billion,
primarily relating to the Separation Preparation restructuring programme.
The Group initiated in Q1 2020 a two-year Separation Preparation programme to
prepare for the separation of GSK into two companies. The programme aims to:
· Drive a common approach to R&D with improved capital allocation
· Align and improve the capabilities and efficiency of global support functions
to support new GSK
· Further optimise the supply chain and product portfolio, including the
divestment of non-core assets
· Prepare Consumer Healthcare to operate as a standalone company
The programme continues to target delivery of £0.8 billion of annual savings
by 2022 and £1.0 billion by 2023, with total costs estimated at £2.4
billion, of which £1.6 billion is expected to be cash costs. The proceeds of
divestments have largely covered the cash costs of the programme.
Materially all of the Separation Preparation restructuring programme has been
included as part of continuing operations. The legacy Consumer Healthcare
Joint Venture integration programme is now included as part of discontinued
operations.
Transaction-related adjustments
Transaction-related adjustments from continuing operations resulted in a net
charge of £1,032 million (H1 2021: £246 million). This included a net
£1,031 million accounting charge for the re-measurement of contingent
consideration liabilities and the liabilities for the Pfizer put option and
Pfizer and Shionogi preferential dividends in ViiV Healthcare.
Charge/(credit) H1 2022 H1 2021
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint Venture 841 259
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 150 (90)
Contingent consideration on former Novartis Vaccines business 40 39
Other adjustments 1 38
Total transaction-related charges 1,032 246
The £841 million charge relating to the contingent consideration for the
former Shionogi-ViiV Healthcare joint venture represented an increase in the
valuation of the contingent consideration due to Shionogi, as a result of the
unwind of the discount for £196 million and a charge of £645 million
primarily from exchange rates as well as adjustments to sales forecasts. The
£150 million charge relating to the ViiV Healthcare put option and Pfizer
preferential dividends represented an increase in the valuation of the put
option primarily as a result of updated exchange rates as well as adjustments
to sales forecasts.
The ViiV Healthcare contingent consideration liability is fair valued under
IFRS. An explanation of the accounting for the non-controlling interests in
ViiV Healthcare is set out on page 38.
Divestments, significant legal charges, and other items
Divestments, significant legal charges and other items primarily included the
£929 million upfront settlement income received from Gilead, as well as
milestone income and gains from a number of asset disposals and certain other
Adjusting items.
Discontinued operations
From Q2 2020, the Group started to report additional costs to prepare for
establishment of the Consumer Healthcare business as an independent entity
("Separation costs"). These are now presented as part of discontinued
operations. Total separation costs incurred in H1 2022 were £302 million (H1
2021: £109 million). This includes £52 million relating to transaction costs
incurred in connection with the demerger and preparatory admission costs
related to the listing of Haleon.
Total separation costs to date are £684 million including £90 million
relating to transaction costs.
Cash generation
Cash flow
Q2 2022 H1 2022 H1 2021
£m £m £m
Cash generated from operations attributable to continuing 1,584 3,936 1,759
operations (£m)
Cash generated from operations attributable to discontinued 515 918 564
operations (£m)
Total cash generated from operations (£m) 2,099 4,854 2,323
Net cash inflow from operating activities from continuing 1,196 3,402 1,217
operations
Net cash inflow from operating activities from discontinued 439 775 406
operations
Total net cash generated from operating activities (£m) 1,635 4,177 1,623
Free cash inflow from continuing operations** (£m) 264 1,741 137
Free cash flow from continuing operations growth (%) >100% >100% N/A
Free cash flow conversion from continuing operations* (%) 37% 79% 7%
Total net debt (**) (£m) 21,458 21,458 21,921
* Free cash flow from continuing operations and free cash flow conversion are
defined on page 68.
** Net debt is analysed on page 58.
Q2 2022
Cash generated from operations attributable to continuing operations for the
quarter was £1,584 million Q2 2021: £1,357 million). The increase primarily
reflected the increase in operating profit including beneficial exchange and
favourable timing of collections partly offset by increased contingent
consideration payments reflecting the Gilead settlement in February 2022,
adverse timing of profit share payments for Xevudy sales, a higher seasonal
increase in inventory and adverse timing of returns and rebates.
Cash generated from operations attributable to discontinued operations for the
quarter was £515 million (Q2 2021: £482 million).
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the quarter were £395 million (Q2 2021: £203
million), of which £351 million was recognised in cash flows from operating
activities and £44 million was recognised in contingent consideration paid
within investing cash flows. These payments are deductible for tax purposes.
Free cash inflow from continued operations was £264 million for the quarter
(Q2 2021: £20 million outflow). The increase primarily reflected the increase
in operating profit including beneficial exchange and favourable timing of
collections and reduced purchases of intangible assets partly offset by
increased contingent consideration payments reflecting the Gilead settlement
in February 2022, adverse timing of profit share payments for Xevudy sales, a
higher seasonal increase in inventory, higher capital expenditure and adverse
timing of returns and rebates.
H1 2022
Cash generated from operations attributable to continuing operations for H1
was £3,936 million (H1 2021: £1,759 million). The increase primarily
reflected a significant increase in operating profit including the upfront
income from the settlement with Gilead, favourable exchange, favourable timing
of collections and profit share payments for Xevudy sales, partly offset by
increased contingent consideration payments reflecting the Gilead settlement
in February 2022 and a higher seasonal increase in inventory.
Cash generated from operations attributable to discontinued operations for H1
2022 was £918 million (H1 2021: £564 million).
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the half year were £603 million (H1 2021: £419
million), of which £534 million was recognised in cash flows from operating
activities and £69 million was recognised in contingent consideration paid
within investing cash flows. These payments are deductible for tax purposes.
Free cash inflow from continuing operations was £1,741 million for the six
months (H1 2021: £137 million). The increase primarily reflected the
significant increase in operating profit including the upfront income from the
settlement with Gilead, favourable exchange and favourable timing of
collections and profit share payments for Xevudy sales. This was partially
offset by lower proceeds from disposals, increased contingent consideration
payments reflecting the Gilead settlement in February 2022, higher capital
expenditure and a higher seasonal increase in inventory.
Total Net debt
At 30 June 2022, net debt was £21.5 billion, compared with £19.8 billion at
31 December 2021, comprising gross debt of £32.4 billion which increased
primarily due to the debt issuance for Consumer Healthcare, cash and liquid
investments of £8.0 billion and cash advances and a short-term loan to a
subsidiary of Pfizer Inc. of £2.9 billion, reflecting an on-lend of a portion
of the cash received from the proceeds of the Consumer Healthcare bond
issuance in line with Pfizer's shareholding of the Consumer Healthcare Joint
Venture.
Net debt increased by £1.6 billion due to dividends paid to shareholders of
£2.1 billion, £1.6 billion of net adverse exchange impacts from the
translation of non-Sterling denominated debt and exchange on other financing
items and £0.3 billion dividends to non-controlling interests from
discontinued operations and £0.1 billion capital expenditure for discontinued
operations partly offset by £1.7 billion free cash flow from continuing
operations and £0.8 billion net cash inflow from discontinued operating
activities.
At 30 June 2022, GSK had short-term borrowings (including overdrafts and lease
liabilities) repayable within 12 months of £3,327 billion with loans of £2.3
billion repayable in the subsequent year.
Returns to shareholders
Quarterly dividends
The Board has declared a second dividend for 2022 of 16.25p per share (Q2
2021: 23.75p per share) retrospectively adjusted for the Share Consolidation.
On 23 June 2021, at the new GSK Investor Update, GSK set out that from 2022 a
progressive dividend policy will be implemented guided by a 40 to 60 percent
pay-out ratio through the investment cycle. The dividend policy, the total
expected cash distribution, and the respective dividend pay-out ratios for GSK
remain unchanged.
GSK has previously stated that it expected to declare a 27p per share dividend
for the first half of 2022, a 22p per share dividend for the second half of
2022 and a 45p per share dividend for 2023, but that these targeted dividends
per share would increase in step with the Share Consolidation to maintain the
same aggregate dividend pay-out in absolute Pound Sterling terms. Accordingly,
using the consolidation ratio, GSK's expected dividend for the second quarter
of 2022 converts to 16.25p per new ordinary share. The expected dividend for
the second half of 2022 converts to 27.5p per new ordinary share and the
expected dividend for 2023 converts to 56.5p per new ordinary share,
rounded-up from 56.25p.
Payment of dividends
The equivalent interim dividend receivable by ADR holders will be calculated
based on the exchange rate on 4 October 2022. An annual fee of $0.03 per ADS
(or $0.0075 per ADS per quarter) is charged by the Depositary. The ex-dividend
date will be 18 August 2022, with a record date of 19 August 2022 and a
payment date of 6 October 2022.
Paid/ Pence per Pence per £m
Payable share/ share/
pre share post share
consolidation consolidation
2022
First interim 1 July 2022 14 17.50 704
Second interim 6 October 2022 13 16.25 654
Paid/ Pence per Pence per £m
Payable share/ share/
pre share post share
consolidation consolidation
2021
First interim 8 July 2021 19 23.75 951
Second interim 7 October 2021 19 23.75 951
Third interim 13 January 2022 19 23.75 952
Fourth interim 7 April 2022 23 28.75 1,157
80 100 4,011
For details of the Share Consolidation see page 53.
Weighted average number of shares
Q2 2022 Q2 2021
millions millions((a))
Weighted average number of shares - basic 4,025 4,003
Dilutive effect of share options and share awards 39 35
Weighted average number of shares - diluted 4,064 4,038
Weighted average number of shares
H1 2022 H1 2021
millions millions((a))
Weighted average number of shares - basic 4,021 3,999
Dilutive effect of share options and share awards 38 35
Weighted average number of shares - diluted 4,059 4,034
(a) See page 53 for details of the Share Consolidation.
At 30 June 2022, 4,026 million shares (Q2 2021: 4,004 million) were in free
issue (excluding Treasury shares and shares held by the ESOP Trusts), after
taking into account the Share Consolidation on 18 July 2022. GSK made no share
repurchases during the period. The company issued 0.3 million shares under
employee share schemes in the period for proceeds of £3 million (Q2 2021: £4
million).
At 30 June 2022 , the ESOP Trust held 50.0 million GSK shares (before the
Share Consolidation on 18 July 2022) against the future exercise of share
options and share awards. The carrying value of £371 million has been
deducted from other reserves. The market value of these shares was £925
million.
At 30 June 2022, the company held 243.9 million Treasury shares after taking
into account the Share Consolidation on 18 July 2022 at a cost of £4,265
million which has been deducted from retained earnings.
Total and Adjusted results
Total reported results represent the Group's overall performance.
GSK also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other non-IFRS measures may
be considered in addition to, but not as a substitute for or superior to,
information presented in accordance with IFRS. Adjusted results are defined
below and other non-IFRS measures are defined on page 68.
GSK believes that Adjusted results, when considered together with Total
results, provide investors, analysts and other stakeholders with helpful
complementary information to understand better the financial performance and
position of the Group from period to period, and allow the Group's performance
to be more easily compared against the majority of its peer companies. These
measures are also used by management for planning and reporting purposes. They
may not be directly comparable with similarly described measures used by other
companies.
GSK encourages investors and analysts not to rely on any single financial
measure but to review GSK's quarterly results announcements, including the
financial statements and notes, in their entirety.
GSK is committed to continuously improving its financial reporting, in line
with evolving regulatory requirements and best practice. In line with this
practice, GSK expects to continue to review and refine its reporting
framework.
Adjusted results exclude the profits from discontinued operations from the
Consumer Healthcare business (see details on page 20 and the following items
in relation to our continuing operations from Total results, together with the
tax effects of all of these items:
· amortisation of intangible assets (excluding computer software and capitalised
development costs)
· impairment of intangible assets (excluding computer software) and goodwill
· Major restructuring costs, which include impairments of tangible assets and
computer software, (under specific Board approved programmes that are
structural, of a significant scale and where the costs of individual or
related projects exceed £25 million), including integration costs following
material acquisitions
· transaction-related accounting or other adjustments related to significant
acquisitions
· proceeds and costs of disposal of associates, products and businesses;
significant settlement income; significant legal charges (net of insurance
recoveries) and expenses on the settlement of litigation and government
investigations; other operating income other than royalty income, and other
items
Costs for all other ordinary course smaller scale restructuring and legal
charges and expenses from continuing operations are retained within both Total
and Adjusted results.
As Adjusted results include the benefits of Major restructuring programmes but
exclude significant costs (such as significant legal, major restructuring and
transaction items) they should not be regarded as a complete picture of the
Group's financial performance, which is presented in Total results. The
exclusion of other Adjusting items may result in Adjusted earnings being
materially higher or lower than Total earnings. In particular, when
significant impairments, restructuring charges and legal costs are excluded,
Adjusted earnings will be higher than Total earnings.
GSK has undertaken a number of Major restructuring programmes in response to
significant changes in the Group's trading environment or overall strategy, or
following material acquisitions. Within the Pharmaceuticals sector, the highly
regulated manufacturing operations and supply chains and long lifecycle of the
business mean that restructuring programmes, particularly those that involve
the rationalisation or closure of manufacturing or R&D sites are likely to
take several years to complete. Costs, both cash and non-cash, of these
programmes are provided for as individual elements are approved and meet the
accounting recognition criteria. As a result, charges may be incurred over a
number of years following the initiation of a Major restructuring programme.
Significant legal charges and expenses are those arising from the settlement
of litigation or government investigations that are not in the normal course
and materially larger than more regularly occurring individual matters. They
also include certain major legacy matters.
Reconciliations between Total and Adjusted results, providing further
information on the key Adjusting items, are set out on pages 17, 18, 29 and
30.
GSK provides earnings guidance to the investor community on the basis of
Adjusted results. This is in line with peer companies and expectations of the
investor community, supporting easier comparison of the Group's performance
with its peers. GSK is not able to give guidance for Total results as it
cannot reliably forecast certain material elements of the Total results,
particularly the future fair value movements on contingent consideration and
put options that can and have given rise to significant adjustments driven by
external factors such as currency and other movements in capital markets.
ViiV Healthcare
ViiV Healthcare is a subsidiary of the Group and 100% of its operating results
(turnover, operating profit, profit after tax) are included within the Group
income statement.
Earnings are allocated to the three shareholders of ViiV Healthcare on the
basis of their respective equity shareholdings (GSK 78.3%, Pfizer 11.7% and
Shionogi 10%) and their entitlement to preferential dividends, which are
determined by the performance of certain products that each shareholder
contributed. As the relative performance of these products changes over time,
the proportion of the overall earnings allocated to each shareholder also
changes. In particular, the increasing proportion of sales of dolutegravir and
cabotegravir-containing products has a favourable impact on the proportion of
the preferential dividends that is allocated to GSK. Adjusting items are
allocated to shareholders based on their equity interests. GSK was entitled to
approximately 86% of the Total earnings and 83% of the Adjusted earnings of
ViiV Healthcare for 2021.
As consideration for the acquisition of Shionogi's interest in the former
Shionogi-ViiV Healthcare joint venture in 2012, Shionogi received the 10%
equity stake in ViiV Healthcare and ViiV Healthcare also agreed to pay
additional future cash consideration to Shionogi, contingent on the future
sales performance of the products being developed by that joint venture,
dolutegravir and cabotegravir. Under IFRS 3 'Business combinations', GSK was
required to provide for the estimated fair value of this contingent
consideration at the time of acquisition and is required to update the
liability to the latest estimate of fair value at each subsequent period end.
The liability for the contingent consideration recognised in the balance sheet
at the date of acquisition was £659 million. Subsequent re-measurements are
reflected within other operating income/(expense) and within Adjusting items
in the income statement in each period.
On 1 February 2022, ViiV Healthcare reached agreement with Gilead to settle
the global patent infringement litigation relating to the commercialisation of
Gilead's Biktarvy. Under the terms of the global settlement and licensing
agreement, Gilead made an upfront payment of $1.25 billion to ViiV Healthcare
in February 2022. In addition, Gilead will also pay a 3% royalty on all future
US sales of Biktarvy and in respect of the bictegravir component of any other
future bictegravir-containing products sold in the US. These royalties will be
payable by Gilead to ViiV Healthcare from 1 February 2022 until the expiry of
ViiV Healthcare's US Patent No. 8,129,385 on 5 October 2027. Gilead's
obligation to pay royalties does not extend into any period of regulatory
paediatric exclusivity, if awarded.
Cash payments to settle the contingent consideration are made to Shionogi by
ViiV Healthcare each quarter, based on the actual sales performance and other
income of the relevant products in the previous quarter. These payments reduce
the balance sheet liability and hence are not recorded in the income
statement. The cash payments made to Shionogi by ViiV Healthcare in H1 2022
were £603 million.
As the liability is required to be recorded at the fair value of estimated
future payments, there is a significant timing difference between the charges
that are recorded in the Total income statement to reflect movements in the
fair value of the liability and the actual cash payments made to settle the
liability.
Further explanation of the acquisition-related arrangements with ViiV
Healthcare are set out on pages 57 and 58 of the Annual Report 2021.
Financial information
Income statements
Q2 2022 Q2 2021((a)) H1 2022 H1 2021((a))
£m £m £m £m
TURNOVER 6,929 5,838 14,119 10,993
Cost of sales (2,176) (1,708) (4,893) (3,362)
Gross profit 4,753 4,130 9,226 7,631
Selling, general and administration (2,066) (1,689) (3,878) (3,198)
Research and development (1,242) (1,167) (2,345) (2,227)
Royalty income 159 77 297 166
Other operating income/(expense) (523) (76) 74 113
OPERATING PROFIT 1,081 1,275 3,374 2,485
Finance income 21 4 28 10
Finance expense (204) (189) (409) (387)
Loss on disposal of interests in associates - (36) - (36)
Share of after tax (losses)/profits of associates (2) 16 (3) 32
and joint ventures
PROFIT BEFORE TAXATION 896 1,070 2,990 2,104
Taxation (150) 201 (473) 46
Tax rate % 16.7% (18.8)% 15.8% (2.2)%
PROFIT AFTER TAXATION FROM 746 1,271 2,517 2,150
CONTINUING OPERATIONS
PROFIT AFTER TAXATION FROM 229 267 625 648
DISCONTINUED OPERATIONS
PROFIT AFTER TAXATION FROM THE PERIOD 975 1,538 3,142 2,798
Profit attributable to non-controlling interests 40 57 315 137
from continuing operations
Profit attributable to shareholders from 706 1,214 2,202 2,013
continuing operations
Profit attributable to non-controlling interests 97 86 187 193
from discontinued operations
Profit attributable to shareholders from 132 181 438 455
discontinued operations
975 1,538 3,142 2,798
Profit attributable to non-controlling interests 137 143 502 330
Profit attributable to shareholders 838 1,395 2,640 2,468
975 1,538 3,142 2,798
EARNINGS PER SHARE FROM CONTINUING OPERATIONS 17.5p 30.3p 54.8p 50.3p
EARNINGS PER SHARE FROM DISCONTINUED OPERATIONS 3.3p 4.5p 10.9p 11.4p
TOTAL EARNINGS PER SHARE 20.8p 34.8p 65.7p 61.7p
Diluted earnings per share from continuing 17.4p 30.1p 54.3p 49.9p
operations
Diluted earnings per share from discontinued 3.2p 4.4p 10.7p 11.3p
operations
Total diluted earnings per share 20.6p 34.5p 65.0p 61.2p
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the classification of the Consumer
Healthcare business as a discontinued operation (see page 20) and the impact
of Share Consolidation implemented on 18 July 2022 (see page 53).
Statement of comprehensive income
Q2 2022 Q2 2021((a)) H1 2022 H1 2021((a))
£m £m £m £m
Total profit for the period 975 1,538 3,142 2,798
Items that may be reclassified subsequently to continuing operations income
statement:
Exchange movements on overseas net assets (179) 70 (198) (40)
and net investment hedges
Reclassification of exchange movements on 9 (10) 9 (10)
liquidation or disposal of overseas subsidiaries
and associates
Fair value movements on cash flow hedges - 9 2 (2)
Reclassification of cash flow hedges to income 14 2 13 16
statement
Deferred tax on fair value movements on cash - (3) - (3)
flow hedges
(156) 68 (174) (39)
Items that will not be reclassified to continuing operations income statement:
Exchange movements on overseas net assets (3) (2) - (7)
of non-controlling interests
Fair value movements on equity investments (81) (78) (624) 158
Tax on fair value movements on equity 10 (16) 57 38
investments
Re-measurement gains on defined benefit plans 200 257 513 285
Tax on re-measurement losses on defined (53) (40) (126) (52)
benefit plans
73 121 (180) 422
Other comprehensive (expense)/income for the (83) 189 (354) 383
period from continuing operations
Other comprehensive income/(expense) for the 493 (10) 928 (201)
period from discontinued operations
Total comprehensive income for the period 1,385 1,717 3,716 2,980
Total comprehensive income for the period
attributable to:
Shareholders 1,277 1,577 3,239 2,687
Non-controlling interests 108 140 477 293
1,385 1,717 3,716 2,980
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the classification of the Consumer
Healthcare business as a discontinued operation (see page 20) and the impact
of Share Consolidation implemented on 18 July 2022 (see page 53).
Specialty Medicines turnover - three months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
HIV 1,404 14 7 894 25 13 336 15 17 174 (23) (27)
Dolutegravir products 1,279 8 1 796 15 5 320 14 16 163 (25) (30)
Tivicay 346 (15) (21) 201 3 (7) 72 - 3 73 (47) (53)
Triumeq 461 (1) (7) 307 5 (5) 97 (13) (12) 57 (8) (10)
Juluca 152 15 7 116 15 4 33 22 22 3 (25) (25)
Dovato 320 74 66 172 69 54 118 71 74 30 >100 >100
Rukobia 19 90 70 18 80 70 - - - 1 >100 >(100)
Cabenuva 72 >100 >100 63 >100 >100 8 >100 >100 1 >100 >100
Apretude 8 - - 8 - - - - - - - -
Other 26 (19) (25) 9 (25) (50) 8 (27) (36) 9 - 22
Oncology 154 29 23 83 22 10 62 27 29 9 >100 >100
Zejula 120 22 16 63 17 6 48 17 20 9 >100 >100
Blenrep 30 43 33 19 36 21 11 37 37 - - -
Jemperli 4 >100 >100 1 >100 >100 3 >100 100 - - -
Immuno- 680 32 24 487 35 23 92 12 12 101 42 46
inflammation,
respiratory and other
Benlysta 297 39 29 251 40 27 20 18 24 26 44 44
Nucala 367 26 19 236 30 18 74 14 15 57 27 29
Speciality Medicines 2,238 20 13 1,464 28 16 490 16 17 284 (5) (8)
excluding pandemic
Pandemic 466 >100 >100 23 >100 >100 123 - - 320 >100 >100
Xevudy 466 >100 >100 23 >100 >100 123 - - 320 >100 >100
Specialty Medicines 2,704 44 35 1,487 30 16 613 45 47 604 91 90
Specialty Medicines turnover - six months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
HIV 2,585 14 10 1,591 21 13 635 10 13 359 (4) (5)
Dolutegravir products 2,381 9 6 1,437 13 6 607 8 11 337 (4) (6)
Tivicay 666 (6) (9) 361 1 (6) 137 (7) (4) 168 (17) (19)
Triumeq 853 (5) (9) 552 1 (6) 191 (18) (16) 110 (9) (9)
Juluca 285 17 12 215 17 9 63 19 23 7 - -
Dovato 577 78 73 309 76 64 216 70 75 52 >100 >100
Rukobia 35 >100 88 33 94 82 1 >100 >100 1 >100 >(100)
Cabenuva 110 >100 >100 95 >100 >100 14 >100 >100 1 >100 >100
Apretude 10 - - 10 - - - - - - - -
Other 49 (23) (22) 16 (33) (42) 13 (28) (28) 20 (9) 5
Oncology 281 23 19 152 14 7 116 26 29 13 >100 >100
Zejula 218 17 14 114 9 1 91 18 21 13 >100 >100
Blenrep 55 31 26 35 25 18 20 33 33 - - -
Jemperli 8 >100 >100 3 >100 >100 5 >100 >100 - - -
Immuno- 1,200 26 21 834 27 19 176 10 13 190 39 42
inflammation,
respiratory and other
Benlysta 512 31 24 421 30 21 39 18 21 52 49 49
Nucala 662 21 18 413 24 16 139 9 13 110 26 30
Speciality Medicines 4,066 18 14 2,577 23 15 927 12 15 562 9 9
excluding pandemic
Pandemic 1,773 >100 >100 793 >100 >100 434 - - 546 >100 >100
Xevudy 1,773 >100 >100 793 >100 >100 434 - - 546 >100 >100
Specialty Medicines 5,839 69 63 3,370 60 50 1,361 64 67 1,108 >100 >100
Vaccines turnover - three months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Meningitis 235 4 - 120 10 (1) 87 (9) (6) 28 40 40
Bexsero 165 - (3) 65 8 (3) 81 (9) (7) 19 19 19
Menveo 69 17 10 55 12 2 5 - - 9 80 >100
Other 1 - - - - - 1 (50) - - - -
Influenza 32 (3) (9) 1 >100 >100 - - - 31 (6) (12)
Fluarix, FluLaval 32 (3) (9) 1 >100 >100 - - - 31 (6) (12)
Shingles 731 >100 >100 519 >100 97 151 >100 >100 61 >100 >100
Shingrix 731 >100 >100 519 >100 97 151 >100 >100 61 >100 >100
Established 717 (5) (9) 257 8 (3) 176 12 13 284 (22) (23)
Vaccines
Infanrix, Pediarix 120 (12) (19) 51 (35) (45) 31 15 15 38 23 16
Boostrix 158 8 3 95 44 30 38 9 11 25 (44) (44)
Hepatitis 159 45 35 98 53 39 39 56 56 22 5 -
Rotarix 120 (9) (8) 14 (46) (54) 29 7 11 77 (3) -
Synflorix 84 (13) (14) - - - 10 11 - 74 (16) (16)
Priorix, Priorix 40 (26) (26) - - - 23 (4) (8) 17 (43) (40)
Tetra, Varilrix
Cervarix 22 (39) (44) - - - 4 (43) (43) 18 (38) (45)
Other 14 (70) (70) (1) >(100) (60) 2 (33) 33 13 (67) (79)
Vaccines excluding 1,715 31 24 897 53 38 414 39 42 404 (6) (8)
pandemic
Pandemic vaccines - (100) (100) - (100) (100) - - - - (100) (100)
Pandemic adjuvant - (100) (100) - (100) (100) - - - - (100) (100)
Vaccines 1,715 9 3 897 13 2 414 39 42 404 (15) (18)
Vaccines turnover - six months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Meningitis 447 8 6 219 34 24 170 (9) (6) 58 (11) (8)
Bexsero 328 10 9 131 44 34 160 (8) (6) 37 9 15
Menveo 111 13 8 88 21 12 8 (11) (11) 15 (6) -
Other 8 (56) (56) - - - 2 (33) - 6 (60) (67)
Influenza 50 (2) (6) 2 >100 >100 - - - 48 (6) (10)
Fluarix, FluLaval 50 (2) (6) 2 >100 >100 - - - 48 (6) (10)
Shingles 1,429 >100 >100 1,009 99 86 311 >100 >100 109 >100 >100
Shingrix 1,429 >100 >100 1,009 99 86 311 >100 >100 109 >100 >100
Established 1,458 1 (1) 559 33 25 342 - 2 557 (19) (19)
Vaccines
Infanrix, Pediarix 295 8 4 163 15 7 60 (10) (9) 72 14 11
Boostrix 284 18 15 165 51 41 71 - 3 48 (20) (20)
Hepatitis 281 37 32 176 53 43 68 39 41 37 (10) (10)
Rotarix 237 (4) (2) 49 2 (4) 61 7 11 127 (10) (6)
Synflorix 165 (17) (17) - - - 16 (24) (24) 149 (16) (16)
Priorix, Priorix 87 (26) (26) - - - 51 (9) (9) 36 (41) (41)
Tetra, Varilrix
Cervarix 51 (37) (41) - - - 8 (47) (47) 43 (35) (39)
Other 58 (33) (32) 6 - 33 7 - 29 45 (39) (43)
Vaccines excluding 3,384 33 30 1,789 64 53 823 36 40 772 (8) (9)
pandemic
Pandemic vaccines - (100) (100) - (100) (100) - - - - (100) (100)
Pandemic adjuvant - (100) (100) - (100) (100) - - - - (100) (100)
Vaccines 3,384 21 17 1,789 38 29 823 36 40 772 (13) (14)
General Medicines turnover - three months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Respiratory 1,649 9 4 846 11 1 348 4 5 455 8 7
Arnuity Ellipta 13 30 20 11 22 22 - - - 2 100 -
Anoro Ellipta 118 (12) (16) 59 (23) (31) 39 8 11 20 (5) (5)
Avamys/Veramyst 74 17 14 - - - 20 - - 54 26 21
Flixotide/Flovent 143 36 28 98 44 31 18 20 27 27 23 18
Incruse Ellipta 51 (4) (8) 29 - (14) 17 (11) (16) 5 - 60
Relvar/Breo Ellipta 309 (1) (4) 150 (2) (11) 87 4 5 72 (4) (1)
Seretide/Advair 262 (24) (27) 61 (54) (60) 73 (8) (6) 128 (6) (7)
Trelegy Ellipta 467 60 50 354 74 58 58 18 20 55 45 47
Ventolin 174 4 (2) 85 (4) (15) 27 8 12 62 17 11
Other Respiratory 38 19 16 (1) 50 >100 9 12 - 30 11 4
Other General Medicines 861 (1) (2) 87 6 (6) 174 (15) (14) 600 4 4
Dermatology 91 (11) (11) - - - 28 (20) (20) 63 (6) (6)
Augmentin 130 43 45 - - - 37 28 31 93 50 52
Avodart 81 (5) (6) - - - 27 (10) (7) 54 (2) (5)
Lamictal 127 9 3 65 18 7 27 (4) (4) 35 6 -
Other 399 (9) (9) 22 (19) (33) 55 (34) (34) 322 - 1
General Medicines 2,510 5 2 933 11 - 522 (3) (2) 1,055 6 5
General Medicines turnover - six months ended 30 June 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Respiratory 3,184 6 3 1,568 9 2 681 1 3 935 4 5
Arnuity Ellipta 26 62 50 22 69 62 - - - 4 33 -
Anoro Ellipta 216 (14) (16) 100 (29) (34) 77 7 10 39 - 3
Avamys/Veramyst 168 1 2 - - - 36 - 3 132 2 2
Flixotide/Flovent 270 22 17 183 33 24 36 16 19 51 (4) (2)
Incruse Ellipta 101 (4) (7) 55 (2) (9) 33 (11) (11) 13 8 17
Relvar/Breo Ellipta 584 1 (1) 270 2 (5) 170 2 5 144 (3) (1)
Seretide/Advair 564 (19) (20) 145 (42) (46) 146 (16) (14) 273 (1) (1)
Trelegy Ellipta 807 50 43 592 57 47 111 18 20 104 53 57
Ventolin 375 5 2 202 - (6) 57 14 18 116 10 10
Other Respiratory 73 - 2 (1) 50 100 15 7 7 59 (5) (5)
Other General Medicines 1,712 (1) - 176 10 3 344 (16) (14) 1,192 4 5
Dermatology 183 (9) (8) - - - - (20) (19) 128 (4) (2)
Augmentin 259 42 48 - - - 73 40 46 186 43 48
Avodart 162 (4) (4) - - - 54 (10) (8) 108 1 -
Lamictal 247 6 3 124 13 5 53 (5) (4) 70 6 5
Other 785 (8) (7) 52 6 (2) 109 (36) (35) 624 (1) 1
General Medicines 4,896 3 2 1,744 9 2 1,025 (5) (3) 2,127 4 5
Commercial Operations turnover
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Three months ended 30 June 2022 6,929 19 13 3,317 19 7 1,549 23 25 2,063 15 14
Six months ended 14,119 28 25 6,903 38 29 3,209 27 30 4,007 16 17
30 June 2022
Balance sheet
30 June 2022 31 December 2021
£m £m
ASSETS
Non-current assets
Property, plant and equipment 8,503 9,932
Right of use assets 650 740
Goodwill 5,906 10,552
Other intangible assets 11,371 30,079
Investments in associates and joint ventures 77 88
Other investments 1,651 2,126
Deferred tax assets 4,952 5,218
Derivative financial instruments 11 18
Other non-current assets 1,736 1,676
Total non-current assets 34,857 60,429
Current assets
Inventories 4,664 5,783
Current tax recoverable 413 486
Trade and other receivables 6,457 7,860
Derivative financial instruments 105 188
Liquid investments 67 61
Cash and cash equivalents 6,465 4,274
Assets held for sale/distribution 36,017 22
Total current assets 54,188 18,674
TOTAL ASSETS 89,045 79,103
LIABILITIES
Current liabilities
Short-term borrowings (3,327) (3,601)
Contingent consideration liabilities (888) (958)
Trade and other payables (14,806) (17,554)
Derivative financial instruments (70) (227)
Current tax payable (295) (489)
Short-term provisions (599) (841)
Liabilities held for distribution (17,850) -
Total current liabilities (37,835) (23,670)
Non-current liabilities
Long-term borrowings (18,784) (20,572)
Corporation tax payable (200) (180)
Deferred tax liabilities (149) (3,556)
Pensions and other post-employment benefits (2,526) (3,113)
Other provisions (557) (630)
Derivative financial instruments (1) (1)
Contingent consideration liabilities (5,472) (5,118)
Other non-current liabilities (881) (921)
Total non-current liabilities (28,570) (34,091)
TOTAL LIABILITIES (66,405) (57,761)
NET ASSETS 22,640 21,342
EQUITY
Share capital 1,347 1,347
Share premium account 3,439 3,301
Retained earnings 9,824 7,944
Other reserves 1,764 2,463
Shareholders' equity 16,374 15,055
Non-controlling interests 6,266 6,287
TOTAL EQUITY 22,640 21,342
Statement of changes in equity
Share Share Retained Other Share- Non- Total
capital premium earnings reserves holder's controlling equity
£m £m £m £m equity interests £m
£m £m
At 1 January 2022 1,347 3,301 7,944 2,463 15,055 6,287 21,342
Profit for the period 2,640 2,640 502 3,142
Other comprehensive 1,010 (411) 599 (25) 574
income/(expense) for the period
Total comprehensive income/(expense) 3,650 (411) 3,239 477 3,716
for the period
Distributions to non-controlling interests (506) (506)
Contributions from non-controlling 8 8
interests
Dividends to shareholders (2,108) (2,108) (2,108)
Shares issued 20 20 20
Shares acquired by ESOP Trusts 118 704 (822) - -
Share of associates and joint ventures (1) 1 - -
realised profits on disposal of equity
investments
Realised after tax losses on disposal (23) 23 - -
or liquidation of equity investments
Write-down on shares held by ESOP (510) 510 - -
Trusts
Share-based incentive plans 168 168 168
At 30 June 2022 1,347 3,439 9,824 1,764 16,374 6,266 22,640
At 1 January 2021 1,346 3,281 6,755 3,205 14,587 6,221 20,808
Profit for the period 2,468 2,468 330 2,798
Other comprehensive (expense)/ 14 205 219 (37) 182
income for the period
Total comprehensive income for the 2,482 205 2,687 293 2,980
period
Distributions to non-controlling interests (320) (320)
Contributions from non-controlling 7 7
interests
Dividends to shareholders (2,097) (2,097) (2,097)
Shares issued 1 18 19 19
Realised after tax profits on disposal 145 (145) - -
of equity investments
Share of associates and joint ventures 9 (9) - -
realised profits on disposal of equity
investments
Write-down on shares held by ESOP (96) 96 - -
Trusts
Share-based incentive plans 181 181 181
At 30 June 2021 1,347 3,299 7,379 3,352 15,377 6,201 21,578
Cash flow statement - six months ended 30 June 2022
(amounts presented are from continuing operations unless otherwise specified)
H1 2022 H1 2021((a))
£m £m
Profit after tax from continuing operations 2,517 2,150
Tax on profits 473 (46)
Share of after tax losses/(profits) of associates and joint ventures 3 (32)
Loss on disposal of interests in associates - 36
Net finance expense 381 377
Depreciation, amortisation and other adjusting items 1,335 906
Increase in working capital (198) (809)
Contingent consideration paid (542) (371)
Decrease in other net liabilities (excluding contingent consideration paid) (33) (452)
Cash generated from operations attributable to continuing operations 3,936 1,759
Taxation paid (534) (542)
Net cash inflow from continuing operating activities 3,402 1,217
Cash generated from operations attributable to discontinued operations 918 564
Taxation paid from discontinued operations (143) (158)
Net operating cash flows attributable to discontinued operations 775 406
Total net cash inflows from operating activities 4,177 1,623
Cash flow from investing activities
Purchase of property, plant and equipment (430) (352)
Proceeds from sale of property, plant and equipment 6 95
Purchase of intangible assets (597) (556)
Proceeds from sale of intangible assets 13 314
Purchase of equity investments (59) (122)
Proceeds from sale of equity investments - 171
Share transaction with minority shareholders 1 1
Contingent consideration paid (73) (55)
Disposal of businesses (12) (19)
Investment in associates and joint ventures - (1)
Proceeds from disposal of associates and joint ventures - 277
Interest received 26 10
Decrease in liquid investments - 18
Dividends from associates and joint ventures - 9
Net cash outflow from continuing investing activities (1,125) (210)
Net investing cash flows attributable to discontinued operations (3,013) (23)
Total net cash outflow from investing activities (4,138) (233)
Cash flow from financing activities
Issue of share capital 20 19
Shares acquired by ESOP trust (3) -
Decrease in long-term loans (3) (2)
Repayment of short-term loans (3,062) (352)
Repayment of lease liabilities (99) (94)
Interest paid (437) (431)
Dividends paid to shareholders (2,108) (2,097)
Distributions to non-controlling interests (177) (121)
Contributions from non-controlling interests 8 7
Other financing items 264 (99)
Net cash outflow from continuing financing activities (5,597) (3,170)
Net financing cash flows attributable to discontinued operations 9,084 (251)
Total net cash inflow/(outflow) from financing activities 3,487 (3,421)
Increase/(decrease) in cash and bank overdrafts in the period 3,526 (2,031)
Cash and bank overdrafts at beginning of the period 3,817 5,261
Exchange adjustments 83 (34)
Increase/(decrease) in cash and bank overdrafts 3,526 (2,031)
Cash and bank overdrafts at end of the period 7,426 3,196
Cash and bank overdrafts at end of the period comprise:
Cash and cash equivalents 6,465 3,503
Cash and cash equivalents reported in assets held for sale/distribution 1,421 -
7,886 3,503
Overdrafts (460) (307)
7,426 3,196
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the classification of the Consumer
Healthcare business as a discontinued operation (see page 20) and the impact
of Share Consolidation implemented on 18 July 2022 (see page 53).
Segment information
Operating segments are reported based on the financial information provided to
the Chief Executive Officer and the responsibilities of the GSK Leadership
Team (GLT). GSK has revised its operating segments from Q1 2022 and from Q2
2022. Previously, GSK reported results under four segments: Pharmaceuticals;
Pharmaceuticals R&D; Vaccines and Consumer Healthcare. For the first
quarter 2022, GSK reported results under three segments: Commercial
Operations; Total R&D and Consumer Healthcare. From Q2 2022, GSK reports
results under two segments from continuing operations as the demerger of the
Consumer Healthcare segment was completed on 18 July 2022. Members of the GLT
are responsible for each segment. Comparative information in this announcement
has been retrospectively restated on a consistent basis. The Consumer
Healthcare segment is presented entirely as discontinued operations and
therefore no segment information is presented.
R&D investment is essential for the sustainability of the business.
However for segment reporting the Commercial operating profits exclude
allocations of globally funded R&D.
The Total R&D segment is the responsibility of the Chief Scientific
Officer and President, R&D and is reported as a separate segment. The
operating profit of this segment includes R&D activities across Specialty
Medicines, including HIV and Vaccines. It includes R&D and some SG&A
costs relating to regulatory and other functions.
The Group's management reporting process allocates intra-Group profit on a
product sale to the market in which that sale is recorded, and the profit
analyses below have been presented on that basis.
Turnover by segment
Q2 2022 Q2 2021 Growth Growth
£m £m £% CER%
Commercial Operations (total turnover) 6,929 5,838 19 13
Operating profit by segment
Q2 2022 Q2 2021 Growth Growth
£m £m £% CER%
Commercial Operations 3,304 2,869 15 6
Research and Development (1,152) (1,119) 3 (2)
Segment profit 2,152 1,750 23 10
Corporate and other unallocated costs (144) (109)
Adjusted operating profit 2,008 1,641 22 7
Adjusting items (927) (366)
Total operating profit 1,081 1,275 (15) (35)
Finance income 21 4
Finance costs (204) (189)
Loss on disposal of interests in associates - (36)
Share of after tax (losses)/profits of (2) 16
associates and joint ventures
Profit before taxation from continuing operations 896 1,070 (16) (40)
Adjusting items reconciling Q2 2022 and H1 2022 segment profit and operating
profit comprise items not specifically allocated to segment profit. These
include impairment and amortisation of intangible assets; major restructuring
costs, which include impairments of tangible assets and computer software;
transaction-related adjustments related to significant acquisitions; proceeds
and costs of disposals of associates, products and businesses, significant
legal charges and expenses on the settlement of litigation and government
investigations, other operating income other than royalty income and other
items.
Turnover by segment
H1 2022 H1 2021 Growth Growth
£m £m £% CER%
Commercial Operations (total turnover) 14,119 10,993 28 25
Operating profit by segment
H1 2022 H1 2021 Growth Growth
£m £m £% CER%
Commercial Operations 6,421 5,312 21 16
Research and Development (2,247) (2,148) 5 2
Segment profit 4,174 3,164 32 26
Corporate and other unallocated costs (223) (198)
Adjusted operating profit 3,951 2,966 33 26
Adjusting items (577) (481)
Total operating profit 3,374 2,485 36 26
Finance income 28 10
Finance costs (409) (387)
Loss on disposal of interests in associates - (36)
Share of after tax (losses)/profits of (3) 32
associates and joint ventures
Profit before taxation from continuing operations 2,990 2,104 42 32
Legal matters
The Group is involved in significant legal and administrative proceedings,
principally product liability, intellectual property, tax, anti-trust,
consumer fraud and governmental investigations, which are more fully described
in the 'Legal Proceedings' note in the Annual Report 2021. At 30 June 2022,
the Group's aggregate provision for legal and other disputes (not including
tax matters described on page 27 was £0.2 billion (31 December 2021: £ 0.2
billion).
The Group may become involved in significant legal proceedings in respect of
which it is not possible to meaningfully assess whether the outcome will
result in a probable outflow, or to quantify or reliably estimate the
liability, if any, that could result from ultimate resolution of the
proceedings. In these cases, the Group would provide appropriate disclosures
about such cases, but no provision would be made.
The ultimate liability for legal claims may vary from the amounts provided and
is dependent upon the outcome of litigation proceedings, investigations and
possible settlement negotiations. The Group's position could change over time,
and, therefore, there can be no assurance that any losses that result from the
outcome of any legal proceedings will not exceed by a material amount the
amount of the provisions reported in the Group's financial accounts.
There have been no significant legal developments this quarter.
Additional information
Disposal group and discontinued operations accounting policy
Disposal groups are classified as held for distribution if their carrying
amount will be recovered principally through a distribution to shareholders
rather than through continuing use, they are available for distribution in
their present condition and the distribution is considered highly probable.
They are measured at the lower of their carrying amount and fair value less
costs to distribute.
Non-current assets included as part of a disposal group are not depreciated or
amortised while they are classified as held for distribution. The assets and
liabilities of a disposal group classified as held for distribution are
presented separately from the other assets and liabilities in the balance
sheet.
A discontinued operation is a component of the entity that has been disposed
of or distributed or is classified as held for distribution and that
represents a separate major line of business. The results of discontinued
operations are presented separately in the statement of profit or loss and
comparatives are restated on a consistent basis.
Accounting policies and basis of preparation
This unaudited Results Announcement contains condensed financial information
for the three and six months ended 30 June 2022, and should be read in
conjunction with the Annual Report 2021, which was prepared in accordance with
United Kingdom adopted International Financial Reporting Standards. This
Results Announcement has been prepared applying consistent accounting policies
to those applied by the Group in the Annual Report 2021.
The Group has not identified any changes to its key sources of accounting
judgements or estimations of uncertainty compared with those disclosed in the
Annual Report 2021.
This Results Announcement does not constitute statutory accounts of the Group
within the meaning of sections 434(3) and 435(3) of the Companies Act 2006.
The full Group accounts for 2021 were published in the Annual Report 2021,
which has been delivered to the Registrar of Companies and on which the report
of the independent auditor was unqualified and did not contain a statement
under section 498 of the Companies Act 2006.
COVID-19 pandemic
The potential impact of the COVID-19 pandemic on GSK's trading performance and
all its principal risks is continually assessed, with appropriate mitigation
plans put in place. GSK is encouraged by the uptake in demand in the second
quarter for its medicines and vaccines, particularly Shingrix. The Company
remains confident in the underlying demand for its vaccines and medicines,
given the number of COVID-19 vaccinations and boosters administered worldwide.
The pandemic continues to be challenging to predict and remains a dynamic
situation with the worldwide rate of community infections presently increasing
due to Omicron subvariants BA.5 and BA.4; these variants of concern and future
variants of concern could potentially impact GSK's trading results, clinical
trials, supply continuity and its employees materially.
Exchange rates
GSK operates in many countries and earns revenues and incurs costs in many
currencies. The results of the Group, as reported in Sterling, are affected by
movements in exchange rates between Sterling and other currencies. Average
exchange rates, as modified by specific transaction rates for large
transactions, prevailing during the period, are used to translate the results
and cash flows of overseas subsidiaries, associates and joint ventures into
Sterling. Period-end rates are used to translate the net assets of those
entities. The currencies which most influenced these translations and the
relevant exchange rates were:
Q2 2022 Q2 2021 H1 2022 H1 2021 2021
Average rates:
US$/£ 1.26 1.40 1.30 1.39 1.38
Euro/£ 1.18 1.16 1.19 1.15 1.16
Yen/£ 162 152 159 149 151
Period-end rates:
US$/£ 1.21 1.39 1.21 1.39 1.35
Euro/£ 1.16 1.17 1.16 1.17 1.19
Yen/£ 165 153 165 153 155
During Q2 2022 average Sterling exchange rates were stronger against the Yen
and the Euro but weaker against the US Dollar compared with the same period in
2021. Period-end Sterling exchange rates were stronger against the Yen but
weaker against the US Dollar and the Euro compared with the 2021 period-end
rates.
Net assets
The book value of net assets increased by £1,298 million from £21,342
million at 31 December 2021 to £22,640 million at 30 June 2022. This
primarily reflected the Total profit for the period and the re-measurement
gains on the defined benefit plans. These increases were partially offset by a
decrease in fair value of Other investments and by dividends paid during the
period.
The carrying value of investments in associates and joint ventures at 30 June
2022 was £77 million (31 December 2021: £88 million), with a market value of
£77 million (31 December 2021: £88 million).
At 30 June 2022, the net deficit on the Group's pension plans was £651
million compared with £1,129 million at 31 December 2021. This decrease in
the net deficit is primarily related to increases in the long term UK discount
rate (3.9% Q2 2022, 2.0% Q4 2021), the US discount rate (4.7% Q2 2022, 2.7% Q4
2021) and Euro-zone discount rates (3.4% Q2 2022, 1.3% Q4 2021), partially
offset by increases in the US cash balance credit rate (3.0% Q2 2022; 2.0% Q4
2021), Euro-zone inflation rates (2.2% Q2 2022; 2.1% Q4 2021) and, lower UK
and Euro-zone asset values. The net deficit balance at 30 June 2022 excludes
£25 million relating to the discontinued Consumer Healthcare business.
The estimated present value of the potential redemption amount of the Pfizer
put option related to ViiV Healthcare, recorded in Other payables in Current
liabilities, was £1,158 million (31 December 2021: £1,008 million).
Contingent consideration amounted to £6,360 million at 30 June 2022 (31
December 2021: £6,076 million), of which £5,797 million (31 December 2021:
£5,559 million) represented the estimated present value of amounts payable to
Shionogi relating to ViiV Healthcare and £546 million (31 December 2021:
£479 million) represented the estimated present value of contingent
consideration payable to Novartis related to the Vaccines acquisition.
Of the contingent consideration payable (on a post-tax basis) to Shionogi at
30 June 2022, £857 million (31 December 2021: £937 million) is expected to
be paid within one year.
Movements in contingent consideration are as follows:
H1 2022 ViiV Group
Healthcare £m
£m
Contingent consideration at beginning of the period 5,559 6,076
Re-measurement through income statement 841 899
Cash payments: operating cash flows (534) (542)
Cash payments: investing activities (69) (73)
Contingent consideration at end of the period 5,797 6,360
H1 2021 ViiV Group
Healthcare £m
£m
Contingent consideration at beginning of the period 5,359 5,869
Re-measurement through income statement 259 317
Cash payments: operating cash flows (366) (371)
Cash payments: investing activities (53) (55)
Contingent consideration at end of the period 5,199 5,760
Contingent liabilities
There were contingent liabilities at 30 June 2022 in respect of guarantees and
indemnities entered into as part of the ordinary course of the Group's
business. No material losses are expected to arise from such contingent
liabilities. Provision is made for the outcome of legal and tax disputes where
it is both probable that the Group will suffer an outflow of funds and it is
possible to make a reliable estimate of that outflow. Descriptions of the
significant legal disputes to which the Group is a party are set out on page
49.
Discontinued operations
Consumer Healthcare has been presented as a discontinued operation at the end
of Q2 2022. The demerger of Haleon was completed on 18 July. Financial
information relating to the operations of Consumer Healthcare for the period
is set out below. The Group Income Statement and Group Cash Flow Statement
distinguish discontinued operations from continuing operations. Comparative
figures have been restated on a consistent basis.
This financial information differs both in purpose and basis of preparation
from the Historical Financial Information and the Interim Financial
Information included in the Haleon prospectus and from that which will be
published by Haleon plc on 19 September 2022. As a result, whilst the two sets
of financial information are similar, they are not the same because of certain
differences in accounting and disclosure under IFRS.
Total Results H1 2022 H1 2021
£m £m
Turnover 5,115 4,517
Expenses (4,271) (3,633)
Profit before tax 844 884
Taxation (219) (236)
Tax rate% 25.9% 26.7%
Profit after Tax from discontinued operations 625 648
Non-controlling interest in discontinued operations 187 193
Earnings attributable to shareholders from discontinued operations 438 455
Earnings per share from discontinued operations 10.9p 11.4p
Q2 2022 Q2 2021
£m £m
Turnover 2,525 2,254
Expenses (2,185) (1,854)
Profit before tax 340 400
Taxation (111) (133)
Tax rate% 32.6% 33.4%
Profit after Tax from discontinued operations 229 267
Non-controlling interest in discontinued operations 97 86
Earnings attributable to shareholders from discontinued operations 132 181
Earnings per share from discontinued operations 3.3p 4.5p
Assets and liabilities held for sale/distribution
Haleon has been presented as a disposal group at the end of Q2 2022.
Non-current assets and disposal groups are transferred to Assets held for
sale/distribution when it is expected that their carrying amounts will be
recovered principally through disposal or a distribution, they are available
for sale/distribution in their present condition and sale/distribution is
considered highly probable. They are held at the lower of carrying amount and
fair value less costs to sell/distribute. No impairment was recorded as fair
value was in excess of carrying value.
Assets held for sale/distribution 30 June 2022 30 June 2022 30 June 2022 31 December 2021
Haleon Other Total Total
£m £m £m £m
Property, plant and equipment 1,649 104 1,753 22
Goodwill 5,207 - 5,207 -
Other intangibles 19,951 6 19,957 -
Inventories 1,775 - 1,775 -
Trade and other receivables 1,955 - 1,955 -
Short term loans to third parties 2,948 - 2,948 -
Cash and cash equivalents 1,421 - 1,421 -
Other 987 14 1,001 -
Total assets held for sale/distribution 35,893 124 36,017 22
Liabilities held for distribution 30 June 2022 31 December 2021
Haleon Total
£m £m
Borrowings (10,248) -
Trade payables and other liabilities (3,880) -
Deferred tax liability (3,722) -
Total liabilities held for distribution (17,850) -
Post balance sheet events:
Business acquisitions
On 1 July 2022, GSK completed the acquisition of 100% of Sierra Oncology, Inc.
a California-based, late-stage biopharmaceutical company focused on targeted
therapies for the treatment of rare forms of cancer, for $1.9 billion (£1.6
billion). The main asset is momelotinib which targets the medical needs of
myelofibrosis patients with anaemia. The initial acquisition accounting will
be reflected in the third quarter of 2022, and it is not completed at this
date.
On 31 May 2022, GSK announced that it has entered into a definitive agreement
to acquire 100% of Affinivax, Inc. (Affinivax), a clinical-stage
biopharmaceutical company based in Cambridge, Boston, Massachusetts focused on
pneumococcal vaccine candidates. Under the terms of the agreement, GSK will
acquire 100% of the outstanding shares of Affinivax. The consideration for the
acquisition comprises an upfront payment of $2.1 billion (£1.7 billion) to be
paid upon closing and two potential milestone payments of $0.6 billion (£0.5
billion) to be paid upon the achievement of certain paediatric clinical
development milestones. The transaction is subject to customary closing
conditions, including the expiration or early termination of the waiting
period under the Hart-Scott-Rodino Anti-Trust Improvements Act of 1976. The
transaction is expected to close in the third quarter of 2022.
Divestments
On 18 July 2022, GSK plc separated its Consumer Healthcare business from the
GSK Group to form Haleon, an independent listed company. The separation was
effected by way of a demerger of 80.1% of GSK's 68% holding in the Consumer
Healthcare business to GSK shareholders. Following the demerger, 54.5% of
Haleon is held in aggregate by GSK Shareholders, 6.0% is held by GSK
(including shares received by GSK's consolidated ESOT trusts) and 7.5% is held
by certain Scottish limited partnerships (SLPs) set up to provide a funding
mechanism pursuant to which GSK will provide additional funding for GSK's UK
Pension Schemes. The aggregate ownership by GSK (including ownership by the
ESOT trusts and SLPs) after the demerger of 13.5% will be initially measured
at fair value with changes through profit or loss. Pfizer continues to hold
32% of Haleon after the demerger.
Under IFRIC 17 'Distributions of Non-cash Assets to Owners' a liability and an
equity distribution are measured at the fair value of the assets to be
distributed when the dividend is appropriately authorised and it is no longer
at the entity's discretion. The liability and equity movement, and associated
gain, will be recognised in Q3 2022 when the demerger distribution was
authorised and occurred.
The asset distributed was the 54.5% ownership of the Consumer Healthcare
business. The net carrying value of the Consumer Healthcare business,
including the retained 13.5% and net of the amount attributable to the
non-controlling interest, was approximately £11.5 billion at the end of June.
The assets distributed were reduced by Consumer Healthcare transactions up to
18 July that included pre-separation dividends declared and settled after the
end of Q2 2022 and before 18 July 2022. Those dividends included: £10.4
billion (£7.1 billion attributable to GSK) of dividends funded by Consumer
Healthcare debt that was partially on-lent during Q1 2022 and dividends of
£0.6 billion (£0.4 billion attributable to GSK) from available cash
balances. GSK's share of the pre-separation dividends and loans are eliminated
in the consolidated financial statements.
The fair value of the 54.5% ownership of the Consumer Healthcare business
distributed was £15.5 billion. This was measured by reference to the quoted
average Haleon share price over the first five days of trading, this being a
fair value measured with observable inputs which is considered to be
representative of the fair value at the distribution date. A gain on
distribution of this fair value less 54.5% of the book value of the net assets
of the Consumer Healthcare business will be recorded in the Income Statement
in Q3 2022. There will be an additional gain to remeasure the retained 13.5%
from its book value to fair value of £3.9 billion using the same fair value
methodology as used for the distributed shares. In addition, there will be a
reclassification of the Group's share of cumulative exchange differences
arising on translation of the foreign currency net assets of the divested
subsidiaries and offsetting net investment hedges from Retained Earnings into
the Income Statement. All these transactions will be presented in profit from
discontinued operations (adjusting results) in Q3 2022.
Share Consolidation
Following completion of the Consumer Healthcare business demerger on 18 July
2022, GSK plc Ordinary shares were consolidated to maintain share price
comparability before and after demerger. The consolidation was approved by GSK
shareholders at a General Meeting held on 6 July 2022. Shareholders received 4
new Ordinary shares with a nominal value of 31¼ pence each for every 5
existing Ordinary share which had a nominal value of 25 pence each. Earnings
per share, diluted earnings per share, adjusted earnings per share and
dividends per share were retrospectively adjusted to reflect the Share
Consolidation in all the periods presented.
Related party transactions
Details of GSK's related party transactions are disclosed on page 221 of our
2021 Annual Report and Accounts.
Financial instruments fair value disclosures
The following tables categorise the Group's financial assets and liabilities
held at fair value by the valuation methodology applied in determining their
fair value. Where possible, quoted prices in active markets are used (Level
1). Where such prices are not available, the asset or liability is classified
as Level 2, provided all significant inputs to the valuation model used are
based on observable market data. If one or more of the significant inputs to
the valuation model is not based on observable market data, the instrument is
classified as Level 3. Other investments classified as Level 3 in the tables
below comprise equity investments in unlisted entities with which the Group
has entered into research collaborations and also investments in emerging life
science companies.
At 30 June 2022 Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets at fair value
Financial assets at fair value through other comprehensive income (FVTOCI):
Other investments designated at FVTOCI 1,183 - 208 1,391
Trade and other receivables - 2,119 - 2,119
Financial assets mandatorily at fair value through profit or loss (FVTPL):
Other investments - - 260 260
Other non-current assets - - 25 25
Trade and other receivables - 55 - 55
Held for trading derivatives that are not in a - 102 11 113
designated and effective hedging relationship
Cash and cash equivalents 5,230 - - 5,230
Derivatives designated and effective as hedging - 3 - 3
instruments (FVTOCI)
Financial assets classified as assets held 424 160 - 584
for distribution
6,837 2,439 504 9,780
Financial liabilities at fair value
Financial liabilities mandatorily at fair value through profit or loss
(FVTPL):
Contingent consideration liabilities - - (6,360) (6,360)
Held for trading derivatives that are not in a - (41) (1) (42)
designated and effective hedging relationship
Derivatives designated and effective as hedging - (29) - (29)
instruments (FVTOCI)
Financial liabilities classified as liabilities held - (57) - (57)
for distribution
- (127) (6,361) (6,488)
At 31 December 2021 Level 1 Level 2 Level 3 Total
£m £m £m £m
Financial assets at fair value
Financial assets at fair value through other comprehensive income (FVTOCI):
Other investments designated at FVTOCI 1,736 - 191 1,927
Trade and other receivables - 1,943 - 1,943
Financial assets mandatorily at fair value through profit or loss (FVTPL):
Other investments - - 199 199
Other non-current assets - - 23 23
Trade and other receivables - 59 - 59
Held for trading derivatives that are not in a - 77 6 83
designated and effective hedging relationship
Cash and cash equivalents 1,449 - - 1,449
Derivatives designated and effective as hedging - 123 - 123
instruments (FVTOCI)
3,185 2,202 419 5,806
Financial liabilities at fair value
Financial liabilities mandatorily at fair value through profit or loss
(FVTPL):
Contingent consideration liabilities - - (6,076) (6,076)
Held for trading derivatives that are not in a - (171) - (171)
designated and effective hedging relationship
Derivatives designated and effective as hedging - (57) - (57)
instruments (FVTOCI)
- (228) (6,076) (6,304)
Movements in the six months to 30 June 2022 and the six months to 30 June 2021
for financial instruments measured using Level 3 valuation methods are
presented below:
Financial Financial
assets liabilities
£m £m
At 1 January 2022 419 (6,076)
Gains/(losses) recognised in the income statement (7) (900)
Gains recognised in other comprehensive income 32 -
Additions 60 -
Disposals - -
Transfer from Level 3 - -
Payments in the period - 615
At 30 June 2022 504 (6,361)
At 1 January 2021 814 (5,878)
Gains/(losses) recognised in the income statement 47 (313)
Gains recognised in other comprehensive income 90 -
Additions 51 -
Disposals (10) -
Transfer from Level 3 (595) -
Payments in the period - 426
At 30 June 2021 397 (5,765)
Net losses of £907 million (H1 2021: net losses of £267 million) reported in
other operating income were attributable to Level 3 financial instruments held
at the end of the period. There were no transfers from Level 3 as a result of
listing of equity investments on a recognised stock exchange during the
period. In H1 2021, net gains of £99m arose prior to transfer from Level 3 on
equity investments which transferred to a Level 1 valuation methodology as a
result of such listings. Net gains and losses include the impact of exchange
movements.
Financial liabilities measured using Level 3 valuation methods at 30 June
included £5,797 million (H1 2021: £5,199 million) of contingent
consideration for the acquisition in 2012 of the former Shionogi-ViiV
Healthcare joint venture and £546 million (H1 2021: £504 million) of
contingent consideration for the acquisition of the Novartis Vaccines business
in 2015. Contingent consideration is expected to be paid over a number of
years and will vary in line with the future performance of specified products,
the achievement of certain milestone targets and movements in certain foreign
currencies. The financial liabilities are measured at the present value of
expected future cash flows, the most significant inputs to the valuation
models being future sales forecasts, the discount rate, the Sterling/US Dollar
exchange rate and the Sterling/Euro exchange rate.
The table below shows, on an indicative basis, the income statement and
balance sheet sensitivity to reasonably possible changes in key inputs to the
valuation of the largest contingent consideration liabilities.
Shionogi- Novartis
ViiV Healthcare Vaccines
£m £m
Increase/(decrease) in financial liability
10% increase in sales forecasts 571 64
10% decrease in sales forecasts (571) (62)
1% (100 basis points) increase in discount rate (211) (40)
1% (100 basis points) decrease in discount rate 227 47
10 cent appreciation of US Dollar 397 7
10 cent depreciation of US Dollar (338) (5)
10 cent appreciation of Euro 103 20
10 cent depreciation of Euro (86) (17)
The Group transfers financial instruments between different levels in the fair
value hierarchy when, as a result of an event or change in circumstances, the
valuation methodology applied in determining their fair values alters in such
a way that it meets the definition of a different level. There were no
transfers between the Level 1 and Level 2 fair value measurement categories.
Transfers from Level 3 during H1 2021 relate to equity investments in
companies which were listed on stock exchanges during the period.
The following methods and assumptions were used to measure the fair value of
the significant financial instruments carried at fair value on the balance
sheet:
· Other investments - equity investments traded in an active market determined
by reference to the relevant stock exchange quoted bid price; other equity
investments determined by reference to the current market value of similar
instruments, recent financing rounds or the discounted cash flows of the
underlying net assets
· Trade receivables carried at fair value - based on invoiced amount
· Interest rate swaps, foreign exchange forward contracts, swaps and options -
based on the present value of contractual cash flows or option valuation
models using market-sourced data (exchange rates or interest rates) at the
balance sheet date
· Cash and cash equivalents carried at fair value - based on net asset value of
the funds
· Contingent consideration for business acquisitions and divestments - based on
present values of expected future cash flows
There are no material differences between the carrying value of the Group's
other financial assets and liabilities and their estimated fair values, with
the exception of bonds, for which the carrying values and fair values are set
out in the table below:
30 June 2022 31 December 2021
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Bonds in a designated hedging relationship (5,096) (5,008) (4,982) (5,311)
Other bonds (15,830) (16,688) (17,373) (20,746)
Bonds classified as liabilities held for distribution (9,823) (9,341) - -
(30,749) (31,037) (22,355) (26,057)
The following methods and assumptions are used to estimate the fair values of
financial assets and liabilities which are not measured at fair value on the
balance sheet:
· Receivables and payables, including put options, carried at amortised cost -
approximates to the carrying amount
· Liquid investments - approximates to the carrying amount
· Cash and cash equivalents carried at amortised cost - approximates to the
carrying amount
· Short-term loans, overdrafts and commercial paper - approximates to the
carrying amount because of the short maturity of these instruments
· Long-term loans - based on quoted market prices (a Level 1 fair value
measurement) in the case of European and US Medium Term Notes; approximates to
the carrying amount in the case of other fixed rate borrowings and floating
rate bank loans
Put option
Other payables in Current liabilities includes the present value of the
expected redemption amount of the Pfizer put option over its non-controlling
interest in ViiV Healthcare of £1,158 million. This reflects a number of
assumptions around future sales, profit forecasts and forecast exchange rates.
The forecast exchange rates used are consistent with market rates at 30 June
2022.
The table below shows on an indicative basis the income statement and balance
sheet sensitivity to reasonably possible changes in the key inputs to the
measurement of this liability.
Increase/(decrease) in financial liability ViiV
Healthcare
put option
£m
10% increase in sales forecasts 107
10% decrease in sales forecasts (107)
1% (100 basis points) increase in discount rate (38)
1% (100 basis points) decrease in discount rate 42
10 cent appreciation of US Dollar 73
10 cent depreciation of US Dollar (61)
10 cent appreciation of Euro 32
10 cent depreciation of Euro (27)
Reconciliation of cash flow to movements in net debt
H1 2022 H1 2021
£m £m
Total Net debt at beginning of the period (19,838) (20,780)
Increase/(decrease) in cash and bank overdrafts 3,526 (2,031)
Increase/(decrease) in liquid investments and short-term loans to third 2,948 (18)
parties
Net decrease in short-term loans 3,073 352
Net increase in long-term loans (9,232) -
Repayment of lease liabilities 116 108
Exchange adjustments (1,999) 525
Other non-cash movements (52) (77)
Increase in net debt (1,620) (1,141)
Total Net debt at end of the period (21,458) (21,921)
Net debt analysis
30 June 2022 30 June 2021 31 December
£m £m 2021
£m
Liquid investments 67 59 61
Cash and cash equivalents 6,465 3,503 4,274
Short-term borrowings (3,327) (5,041) (3,601)
Long-term borrowings (18,784) (20,442) (20,572)
Short-term loans to third parties held for distribution 2,948 - -
Cash and cash equivalents held for distribution 1,421 - -
Borrowings held for distribution (10,248) - -
Total Net debt at the end of the period (21,458) (21,921) (19,838)
Free cash flow reconciliation from continuing operations
Q2 2022 H1 2022 H1 2021
£m £m £m
Net cash inflow from continuing operating activities 1,196 3,402 1,217
Purchase of property, plant and equipment (237) (430) (352)
Proceeds from sale of property, plant and equipment - 6 95
Purchase of intangible assets (220) (597) (556)
Proceeds from disposals of intangible assets 8 13 314
Net finance costs (337) (411) (421)
Dividends from joint ventures and associates - - 9
Contingent consideration paid (reported in investing activities) (47) (73) (55)
Distributions to non-controlling interests (99) (177) (121)
Contributions from non-controlling interests - 8 7
Free cash inflow from continuing operations 264 1,741 137
R&D commentary
Pipeline overview
Medicines and vaccines in phase III development (including major lifecycle 21 Infectious Diseases (10)
innovation or under regulatory review)
· Bexsero infants vaccine (US)
· COVID-19 (Medicago) vaccine candidate
· COVID-19 (Sanofi) vaccine candidate
· COVID-19 (SK Bioscience) vaccine candidate
· MenABCWY (1st gen) vaccine candidate
· Menveo liquid vaccine
· Rotarix liquid (US) vaccine
· RSV older adult vaccine candidate
· gepotidacin (bacterial topoisomerase inhibitor) uUTI and GC
· Xevudy (sotrovimab/VIR-7831) COVID-19
Oncology (5)
· Blenrep (anti-BCMA ADC) multiple myeloma
· Jemperli (anti-PD-1) 1L endometrial cancer
· Zejula (PARP inhibitor) 1L ovarian, lung and breast cancer
· letetresgene-autoleucel (NY-ESO-1 TCR) synovial
sarcoma/myxoid/round cell liposarcoma
· momelotinib (JAK1/2 and ACVR1/ALK2 inhibitor) myelofibrosis with anaemia
Immunology (4)
· latozinemab (AL001, anti-sortilin) frontotemporal dementia
· depemokimab (long acting anti-IL5) asthma, eosinophilic granulomatosis with
polyangiitis, chronic rhinosinusitis with nasal polyps
· Nucala chronic obstructive pulmonary disease
· otilimab (anti-GM-CSF) rheumatoid arthritis
Opportunity driven (2)
· daprodustat (HIF-PHI) anaemia of chronic kidney disease
· linerixibat (IBATi) cholestatic pruritus in primary biliary cholangitis
Total vaccines and medicines in all phases of clinical development 68
Total projects in clinical development (inclusive of all phases and 86
indications)
Our key growth assets by therapy area
The following outlines several key vaccines and medicines by therapy area that
will help drive growth for GSK to meet its outlooks and ambition for 2021-2026
and beyond.
Infectious Diseases
bepirovirsen (HBV ASO)
Bepirovirsen is a potential new treatment option for people with chronic
hepatitis B as either a monotherapy (B-Clear) or combination therapy with both
existing (B-Together) and novel treatments to explore additional combinations
in the future. In June 2022, GSK announced promising interim results from the
B-Clear phase IIb trial showing that bepirovirsen reduced levels of hepatitis
B surface antigen (HBsAg) and hepatitis B virus (HBV) DNA after 24 weeks'
treatment in people with chronic hepatitis B (CHB). These data were presented
in an oral late-breaker session at the European Association for the Study of
the Liver's International Liver Congress (ILC) in June 2022 in London, UK. The
final results from the trial will be submitted for presentation at a
scientific congress later this year and published in a peer-reviewed journal.
GSK also presented an abstract at ILC showing preclinical evidence that
bepirovirsen harbours intrinsic immunostimulatory activity via Toll-like
receptor 8 (TLR8), correlating with clinical efficacy from the phase IIa
trial.
GSK announced that a phase III trial evaluating bepirovirsen as a monotherapy
treating people with CHB is anticipated to start in the first half of 2023.
Key trials for bepirovirsen:
Trial name (population) Phase Design Timeline Status
B-Clear bepirovirsen monotherapy (chronic hepatitis B) IIb A multi-centre, randomised, partial-blind parallel cohort trial to assess the Trial start: Complete; interim results presented; full data anticipated H2 2022
efficacy and safety of treatment with bepirovirsen in participants with
chronic hepatitis B virus Q3 2020
NCT04449029
B-Together bepirovirsen sequential combination therapy with Peg-interferon II A multi-centre, randomised, open label trial to assess the efficacy and safety Trial start: Active, not recruiting
phase II (chronic hepatitis B) of sequential treatment with bepirovirsen followed by Pegylated Interferon
Alpha 2a in participants with chronic hepatitis B virus Q1 2021
NCT04676724
bepirovirsen sequential combination therapy with targeted immunotherapy II A trial on the safety, efficacy and immune response following sequential Trial start: Recruiting
treatment with an anti-sense oligonucleotide against chronic hepatitis B (CHB)
(chronic hepatitis B) and chronic hepatitis B targeted immunotherapy (CHB-TI) in CHB patients Q2 2022
receiving nucleos(t)ide analogue (NA) therapy
NCT05276297
gepotidacin (bacterial topoisomerase inhibitor)
First in class novel antibiotic for the treatment of uncomplicated urinary
tract infections (uUTI) and gonorrhoea. Interim analysis for EAGLE-2 and 3 are
scheduled for the second half of 2022.
Key phase III trials for gepotidacin:
Trial name (population) Phase Design Timeline Status
EAGLE-1 (uncomplicated urogenital gonorrhoea) III A randomised, multi-centre, open-label trial in adolescent and adult Trial start: Recruiting
participants comparing the efficacy and safety of gepotidacin to ceftriaxone
plus azithromycin in the treatment of uncomplicated urogenital gonorrhoea Q4 2019
caused by Neisseria gonorrhoeae
NCT04010539
EAGLE-2 (females with uUTI / acute cystitis) III A randomised, multi-centre, parallel-group, double-blind, double-dummy trial Trial start: Recruiting
in adolescent and adult female participants comparing the efficacy and safety
of gepotidacin to nitrofurantoin in the treatment of uncomplicated urinary Q4 2019
tract infection (acute cystitis)
NCT04020341
EAGLE-3 (females with uUTI / acute cystitis) III A randomised, multi-centre, parallel-group, double-blind, double-dummy trial Trial start: Recruiting
in adolescent and adult female participants comparing the efficacy and safety
of gepotidacin to nitrofurantoin in the treatment of uncomplicated urinary Q2 2020
tract infection (acute cystitis)
NCT04187144
MenABCWY vaccine candidate
GSK is developing two MenABCWY pentavalent (5-in-1) vaccines. The first
generation is in late-stage development and the second generation is in an
earlier stage. The goal is to help protect against all five major
disease-causing serogroups. Phase III pivotal results from the
first-generation MenABCWY vaccine are anticipated in the second half of this
year.
Key trials for MenABCWY vaccine candidate:
Trial name (population) Phase Design Timeline Status
MenABCWY - 019 IIIb A randomised, controlled, observer-blind trial to evaluate safety and Trial start: Active, not recruiting
immunogenicity of GSK's meningococcal ABCWY vaccine when administered in
healthy adolescents and adults, previously primed with meningococcal ACWY Q1 2021
vaccine
NCT04707391
MenABCWY - V72 72 III A randomised, controlled, observer-blind trial to demonstrate effectiveness, Trial start: Active, not recruiting
immunogenicity, and safety of GSK's meningococcal Group B and combined ABCWY
vaccines when administered to healthy adolescents and young adults Q3 2020
NCT04502693
RSV vaccine candidates
In June 2022, GSK announced positive headline results from a pre-specified
efficacy interim analysis of the AReSVi 006 phase III trial for its RSV older
adult (OA) vaccine candidate. An Independent Data Monitoring Committee
reviewed the interim analysis, and the primary endpoint was exceeded with no
unexpected safety concerns observed. Results from this phase III trial will be
presented in a peer-reviewed publication and at an upcoming scientific
meeting. The AReSVi 006 trial will continue to evaluate an annual
revaccination schedule and longer-term protection over multiple seasons
following one dose of the RSV OA vaccine candidate.
Key phase III trials for RSV older adult and maternal vaccine candidates:
Trial name (population) Phase Design Timeline Status
RSV OA=ADJ-004 III A randomised, open-label, multi-country trial to evaluate the immunogenicity, Trial start: Active, not recruiting; results anticipated to be shared in H2 2022
safety, reactogenicity and persistence of a single dose of the RSVPreF3 OA
(Adults ≥ 60 years old) investigational vaccine and different revaccination schedules in adults aged Q1 2021
60 years and above
NCT04732871
RSV OA=ADJ-006 III A randomised, placebo-controlled, observer-blind, multi-country trial to Trial start: Active, not recruiting; primary endpoint met; results anticipated to be shared
demonstrate the efficacy of a single dose of GSK's RSVPreF3 OA investigational
in H2 2022
(ARESVI-006; Adults ≥ 60 years old) vaccine in adults aged 60 years and above Q2 2021
NCT04886596
RSV OA=ADJ-007 III An open-label, randomised, controlled, multi-country trial to evaluate the Trial start: Complete; results anticipated to be shared in H2 2022
immune response, safety and reactogenicity of RSVPreF3 OA investigational
(Adults ≥ 60 years old) vaccine when co-administered with FLU-QIV vaccine in adults aged 60 years and Q2 2021
above
NCT04841577
RSV OA=ADJ-009 III A randomised, double-blind, multi-country trial to evaluate consistency, Trial start: Active, not recruiting; primary endpoint met
safety, and reactogenicity of 3 lots of RSVPreF3 OA investigational vaccine
(Adults ≥ 60 years old) administrated as a single dose in adults aged 60 years and above Q4 2021
NCT05059301
GRACE (pregnant women aged 18-49 years old) III A randomised, double-blind, placebo-controlled multi-country trial to Trial start: Stopped enrolment and vaccination
demonstrate efficacy of a single dose of unadjuvanted RSV maternal vaccine,
administered IM to pregnant women 18 to 49 years of age, for prevention of RSV Q4 2020
associated LRTIs in their infants up to 6 months of age
NCT04605159
Trial stopped enrolment and vaccination:
Q1 2022
HIV
cabotegravir
In June 2022, the Ministry of Health, Labour and Welfare (MHLW) in Japan
approved Vocabria (cabotegravir injection and tablets) used in combination
with Janssen Pharmaceutical Companies of Johnson & Johnson's Rekambys
(rilpivirine long-acting injectable suspension) and Edurant (rilpivirine
tablets taken as an oral lead-in before initiating injections), the first and
only complete long-acting treatment for HIV.
Key phase III trials for cabotegravir:
Trial name (population) Phase Design Timeline Status
HPTN 083 IIb/III A double-blind safety and efficacy trial of injectable cabotegravir compared Trial start: Active; not recruiting; primary endpoint met (superiority)
to daily oral tenofovir disoproxil fumarate/emtricitabine (TDF/FTC), for
(HIV uninfected cisgender men and transgender women who have sex with men) Pre-Exposure Prophylaxis in HIV-uninfected cisgender men and transgender women Q4 2016
who have sex with men
NCT02720094
HPTN 084 III A double-blind safety and efficacy trial of long-acting injectable Trial start: Active; not recruiting; primary endpoint met (superiority)
cabotegravir compared to daily oral TDF/FTC for Pre-Exposure Prophylaxis in
(HIV uninfected women who are at high risk of acquiring HIV) HIV-Uninfected women Q4 2017
NCT03164564
ATLAS III A randomised, multi-centre, parallel-group, non-inferiority, open-label trial Trial start: Active; not recruiting; primary endpoint met (non-inferiority)
evaluating the efficacy, safety, and tolerability of switching to long-acting
cabotegravir plus long-acting rilpivirine from current INI- NNRTI-, or Q4 2016
PI-based antiretroviral regimen in HIV-1-infected adults who are virologically
NCT02951052 suppressed
ATLAS-2M IIIb A randomised, multi-centre, parallel-group, non-inferiority, open-label trial Trial start: Active; not recruiting; primary endpoint met (non-inferiority)
evaluating the efficacy, safety, and tolerability of long-acting cabotegravir
plus long-acting rilpivirine administered every 8 weeks or every 4 weeks in Q4 2017
HIV-1-infected adults who are virologically suppressed
NCT03299049
FLAIR III A randomised, multi-centre, parallel-group, open-label trial evaluating the Trial start: Active; not recruiting; primary endpoint met (non-inferiority)
efficacy, safety, and tolerability of long-acting intramuscular cabotegravir
and rilpivirine for maintenance of virologic suppression following switch from Q4 2016
an integrase inhibitor single tablet regimen in HIV-1 infected antiretroviral
NCT02938520 therapy naïve adult participants
Oncology
Blenrep (belantamab mafodotin)
Updated data from the DREAMM (DRiving Excellence in Approaches to Multiple
Myeloma) clinical trial programme evaluating Blenrep were presented at the
2022 American Society of Clinical Oncology (ASCO) Annual Meeting, held 3-7
June in Chicago, and the European Haematology Association (EHA) 2022 Hybrid
Congress, held 9-12 June in Vienna, Austria.
At ASCO, preliminary data from DREAMM-5 sub-study 3 of low-dose Blenrep in
combination with nirogacestat in patients with relapsed/refractory multiple
myeloma were presented. Nirogacestat, an investigational gamma-secretase
inhibitor, has been shown to increase target density and reduce levels of
soluble BCMA. As such, the potential to enhance the activity of BCMA-targeted
therapies like Blenrep is under investigation. Additionally, the DREAMM-6 data
showcased outcomes from several dose cohorts of Blenrep in combination with
lenalidomide and dexamethasone in patients with relapsed/refractory multiple
myeloma who have received one or more prior lines of treatment.
At EHA, data from DREAMM-9 evaluating a quadruplet combination treatment
regimen of Blenrep with the standard of care (bortezomib, lenalidomide and
dexamethasone) in patients with newly diagnosed multiple myeloma who are
transplant ineligible was presented. Additionally, an oral presentation on
updated results from a supported collaborative trial evaluated the safety and
efficacy of Blenrep plus lenalidomide and dexamethasone in
transplant-ineligible patients with newly diagnosed multiple myeloma.
Collectively, the data from these trials will be used to help inform
additional studies evaluating the potential of Blenrep in multiple myeloma,
including the earlier line setting.
DREAMM-3 phase III pivotal results are anticipated in the second half of this
year.
Key phase III trials for Blenrep:
Trial name (population) Phase Design Timeline Status
DREAMM-3 (3L/4L+ MM pts who have failed Len + PI) III An open-label, randomised trial to evaluate the efficacy and safety of Trial start: Recruiting
single-agent belantamab mafodotin compared to pomalidomide plus low dose
dexamethasone (pom/dex) in participants with relapsed/refractory multiple Q2 2020
myeloma
NCT04162210
DREAMM-7 (2L+ MM pts) III A multi-centre, open-label, randomised trial to evaluate the efficacy and Trial start: Active, not recruiting
safety of the combination of belantamab mafodotin, bortezomib, and
dexamethasone (B-Vd) compared with the combination of daratumumab, bortezomib Q2 2020
and dexamethasone (D-Vd) in participants with relapsed/refractory multiple
NCT04246047 myeloma
DREAMM-8 (2L+ MM pts) III A multi-centre, open-label, randomised trial to evaluate the efficacy and Trial start: Recruiting
safety of belantamab mafodotin in combination with pomalidomide and
dexamethasone (B-Pd) versus pomalidomide plus bortezomib and dexamethasone Q4 2020
(P-Vd) in participants with relapsed/refractory multiple myeloma
NCT04484623
Jemperli (dostarlimab)
At ASCO, updated data from an investigator-sponsored trial from Memorial Sloan
Kettering Cancer Center (MSKCC) was presented in a late-breaking oral
presentation. The data showed 14 consecutive clinical complete responses in
patients who received Jemperli as a first-line treatment for mismatch
repair-deficient (dMMR) locally advanced rectal cancer. The research was also
published in The New England Journal of Medicine, and initial data were
presented earlier this year at the ASCO Gastrointestinal Cancers Symposium.
GSK continues to closely collaborate with MSKCC to advance this research and
expand the trial for patients with rectal cancer.
Also, at ASCO, results from the GARNET trial Cohorts A1 and A2 in
advanced/recurrent dMMR/microsatellite instability-high or proficient/stable
endometrial cancer was presented, which will inform long-term use of Jemperli
in this patient population. In addition, long-term outcomes from the GARNET
trial Cohorts A1 and F were shared, covering the efficacy and safety profile
of Jemperli in certain patients with dMMR recurrent or advanced solid tumours,
including endometrial cancer.
RUBY phase III pivotal results are anticipated in the second half of this
year.
Key trials for Jemperli:
Trial name (population) Phase Design Timeline Status
RUBY III A randomised, double-blind, multi-centre trial of dostarlimab (TSR-042) plus Trial start: Recruiting
carboplatin-paclitaxel with and without niraparib maintenance versus placebo
ENGOT-EN6 plus carboplatin-paclitaxel in patients with recurrent or primary advanced Q3 2019
endometrial cancer
GOG-3031 (1L Stage III or IV endometrial cancer)
NCT03981796
PERLA (1L metastatic non-small cell lung cancer) II A randomised, double-blind study to evaluate the efficacy of dostarlimab plus Trial start: Active, not recruiting
chemotherapy versus pembrolizumab plus chemotherapy in metastatic non-squamous
non-small cell lung cancer Q4 2020
NCT04581824
momelotinib (JAK1/2 and ACVR1/ALK2 inhibitor)
On July 1, GSK announced that it had completed the acquisition of Sierra
Oncology, Inc. (Sierra Oncology), a California-based biopharmaceutical company
focused on targeted therapies for the treatment of rare forms of cancer. The
acquisition includes momelotinib, a potential new medicine with a unique dual
mechanism of action that may address the critical unmet medical needs of
myelofibrosis patients with anaemia.
The full MOMENTUM phase III data were presented in an oral presentation at
ASCO, in addition to a poster presentation of a subset analysis from the trial
evaluating safety and efficacy for patients with low platelet counts, which
was presented as a poster. Together, these data demonstrate the potential use
of momelotinib in symptomatic and anaemic myelofibrosis patients.
In June 2022, Sierra Oncology announced the regulatory submission of a New
Drug Application (NDA) for momelotinib with the US Food and Drug
Administration (FDA). A filing with the European Medicines Agency (EMA) is
expected in H2 2022.
Key phase III trials for momelotinib:
Trial name (population) Phase Design Timeline Status
MOMENTUM (myelofibrosis) III A randomised, double-blind, active control phase III trial intended to confirm Trial start: Active, not recruiting; primary endpoint met
the differentiated clinical benefits of the investigational drug momelotinib
(MMB) versus danazol (DAN) in symptomatic and anaemic subjects who have Q1 2020
previously received an approved Janus kinase inhibitor (JAKi) therapy for
NCT04173494 myelofibrosis (MF)
Zejula (niraparib)
At ASCO, GSK presented real-world analyses from four studies in patients with
advanced ovarian cancer, including real-world data evaluating outcomes in
patients with advanced ovarian cancer who receive poly (ADP-ribose) polymerase
(PARP) inhibitor monotherapy as maintenance compared to those who receive
active surveillance. Insights from the presentations will deepen the
understanding of the use of PARP inhibitors for maintenance therapy in
advanced ovarian cancer and shed light on differences in treatment practice
across geographic locations.
Key phase III trials for Zejula:
Trial name (population) Phase Design Timeline Status
ZEAL-1L (maintenance for 1L advanced NSCLC) III A randomised, double-blind, placebo-controlled, multi-centre trial comparing Trial start: Recruiting
niraparib plus pembrolizumab versus placebo plus pembrolizumab as maintenance
therapy in participants whose disease has remained stable or responded to Q4 2020
first-line platinum-based chemotherapy with pembrolizumab for Stage IIIB/IIIC
NCT04475939 or IV non-small cell lung cancer
ZEST (Her2- with BRCA-mutation, or TNBC) III A randomised double-blinded trial comparing the efficacy and safety of Trial start: Recruiting
niraparib to placebo in participants with either HER2-negative BRCA-mutated or
triple-negative breast cancer with molecular disease based on presence of Q2 2021
circulating tumour DNA after definitive therapy
NCT04915755
FIRST (1L ovarian cancer maintenance) III A randomised, double-blind, comparison of platinum-based therapy with Trial start: Active, not recruiting
dostarlimab (TSR-042) and niraparib versus standard of care platinum-based
therapy as first-line treatment of stage III or IV non-mucinous epithelial Q4 2018
ovarian cancer
NCT03602859
Immunology
depemokimab (long-acting anti-IL5)
In Q2 2022, GSK began recruiting for three additional phase III programmes.
This includes a screening of patients in two trials for chronic rhinosinusitis
with nasal polyps (CRSwNP) and site initiation activities for trials in
eosinophilic granulomatosis with polyangiitis (EGPA) and hyper-eosinophilic
syndrome (HES). Recruitment of patients into all three programmes is ongoing.
Key phase III trials for depemokimab:
Trial name (population) Phase Design Timeline Status
SWIFT-1 (severe eosinophilic asthma; SEA) III A 52-week, randomised, double-blind, placebo-controlled, parallel-group, Trial start: Recruiting
multi-centre trial of the efficacy and safety of depemokimab adjunctive
therapy in adult and adolescent participants with severe uncontrolled asthma Q1 2021
with an eosinophilic phenotype
NCT04719832
SWIFT-2 (SEA) III A 52-week, randomised, double-blind, placebo-controlled, parallel-group, Trial start: Recruiting
multi-centre trial of the efficacy and safety of depemokimab adjunctive
therapy in adult and adolescent participants with severe uncontrolled asthma Q1 2021
with an eosinophilic phenotype
NCT04718103
NIMBLE (SEA) III A 52-week, randomised, double-blind, double-dummy, parallel group, Trial start: Recruiting
multi-centre, non-inferiority trial assessing exacerbation rate, additional
measures of asthma control and safety in adult and adolescent severe asthmatic Q1 2021
participants with an eosinophilic phenotype treated with depemokimab compared
NCT04718389 with mepolizumab or benralizumab
ANCHOR-1 (CRSwNP) III Efficacy and safety of depemokimab in participants with CRSwNP Trial start: Recruiting
Q2 2022
NCT05274750
ANCHOR-2 (CRSwNP) III Efficacy and safety of depemokimab in participants with CRSwNP Trial start: Recruiting
Q2 2022
NCT05281523
OCEAN (EGPA) III Efficacy and safety of depemokimab compared with mepolizumab in adults with Trial site initiations underway Recruiting
relapsing or refractory EGPA
NCT05263934
DESTINY (HES) III A 52-week, randomised, placebo-controlled, double-blind, parallel group, Trial site initiations underway Recruiting
multicentre trial of depemokimab in adults with uncontrolled HES receiving
standard of care (SoC) therapy
NCT05334368
otilimab (anti-GM-CSF)
GSK is investigating otilimab, an anti-GM-CSF monoclonal antibody, as a
potential new treatment for rheumatoid arthritis (RA). We expect to report
results from three phase III studies by the end of 2022.
Key phase III trials for otilimab:
Trial name (population) Phase Design Timeline Status
contRAst-1 III A 52-week, multi-centre, randomised, double blind, efficacy, and safety trial Trial start: Active, not recruiting
comparing otilimab with placebo and with tofacitinib, in combination with
(Moderate to severe RA MTX-IR patients) methotrexate in participants with moderately to severely active rheumatoid Q2 2019
arthritis who have an inadequate response to methotrexate
NCT03980483
contRAst-2 (Moderate to severe RA DMARD-IR patients) III A 52-week, multi-centre, randomised, double blind, efficacy, and safety trial, Trial start: Active, not recruiting
comparing otilimab with placebo and with tofacitinib in combination with
conventional synthetic DMARDs, in participants with moderately to severely Q2 2019
active rheumatoid arthritis who have an inadequate response to conventional
NCT03970837 synthetic DMARDs or biologic
contRAst-3 (Moderate to severe RA patients IR to biologic DMARD and/or JAKs) III A 24-week, multi-centre, randomised, double-blind, efficacy and safety trial, Trial start: Complete; results anticipated to be shared
comparing otilimab with placebo and with sarilumab, in combination with
conventional synthetic DMARDs, in participants with moderately to severely Q4 2019 H2 2022
active rheumatoid arthritis who have an inadequate response to biological
NCT04134728 DMARDs and/or Janus Kinase inhibitors
Opportunity driven
daprodustat (oral hypoxia-inducible factor prolyl hydroxylase inhibitor)
Earlier this year, the EMA validated the marketing authorisation application
(MAA), and the US FDA accepted the NDA for daprodustat based on the positive
data from the ASCEND phase III clinical trial programme. The programme
included five pivotal trials assessing the efficacy and safety of daprodustat
for the treatment of anaemia of chronic kidney disease (CKD) in both
non-dialysis and dialysis settings. GSK has also submitted MAAs in both
Australia and Switzerland.
Trial name (population) Phase Design Timeline Status
ASCEND-D (Dialysis subjects with anaemia of CKD) III A randomised, open-label (sponsor-blind), active-controlled, parallel-group, Reported Complete; primary endpoint met
multi-centre, event driven trial in dialysis subjects with anaemia associated
with chronic kidney disease to evaluate the safety and efficacy of daprodustat
compared to recombinant human erythropoietin, following a switch from
NCT02879305 erythropoietin-stimulating agents
ASCEND-ID (Incident Dialysis subjects with anaemia of CKD) III A 52-week open-label (sponsor-blind), randomised, active-controlled, Reported Complete; primary endpoint met
parallel-group, multi-centre trial to evaluate the efficacy and safety of
daprodustat compared to recombinant human erythropoietin in subjects with
anaemia of chronic kidney disease who are initiating dialysis
NCT03029208
ASCEND-TD (Dialysis subjects with anaemia of CKD) III A randomised, double-blind, active-controlled, parallel-group, multi-centre Reported Complete; primary endpoint met
trial in haemodialysis participants with anaemia of chronic kidney disease to
evaluate the efficacy, safety, and pharmacokinetics of three-times weekly
dosing of daprodustat compared to recombinant human erythropoietin, following
NCT03400033 a switch from recombinant human erythropoietin or its analogues
ASCEND-ND (Non-dialysis subjects with anaemia of CKD) III A randomised, open-label (sponsor-blind), active-controlled, parallel-group, Reported Complete; primary endpoint met
multi-centre, event driven trial in non-dialysis subjects with anaemia of
chronic kidney disease to evaluate the safety and efficacy of daprodustat
compared to darbepoetin alfa
NCT02876835
ASCEND-NHQ (Non-dialysis subjects with anaemia of CKD) III A 28-week, randomised, double-blind, placebo-controlled, parallel-group, Reported Complete; primary endpoint met
multi-centre, trial in recombinant human erythropoietin (rhEPO) naïve
non-dialysis participants with anaemia of chronic kidney disease to evaluate
the efficacy, safety, and effects on quality of life of daprodustat compared
NCT03409107 to placebo
Principal risks and uncertainties
The principal risks and uncertainties affecting the Group for 2022 are those
described under the headings below. In our November 2021 annual risk review,
the Board agreed our principal risks for 2022, which remain largely unchanged,
with the evolution of Privacy to Data Ethics and Privacy, Non-Promotional
Engagement to Scientific and Patient Engagement and Transformation and
Separation to Separation. Additionally, we agreed that Environmental
Sustainability, the risks relating to which are described on pages 284 to 285
of our Annual Report, will be managed under our ESG areas of focus.
We describe our risk management process on page 46 of our 2021 Annual Report,
along with more detailed information on our risks, including definitions,
trends, potential impact, context and mitigation activities as set out on
pages 47 to 48 and pages 275 to 287 of our 2021 Annual Report. Additionally,
we include risks and uncertainties relating to the COVID-19 pandemic in our
Annual Report (see page 54).
2022 Principal Risks
Risk Title Risk Definition
Patient safety Failure to appropriately collect, review, follow up, or report human safety
information (HSI), including adverse events from all potential sources, and to
act on any relevant findings in a timely manner.
Product quality Failure by GSK, its contractors or suppliers to ensure:
· Appropriate controls and governance of quality in product development;
· Compliance with good manufacturing practice or good distribution practice
regulations in commercial or clinical trials manufacture and distribution
activities;
· Compliance with the terms of GSK product licences and supporting regulatory
activities.
Financial controls and reporting Failure to comply with current tax laws or incurring significant losses due to
treasury activities; failure to report accurate financial information in
compliance with accounting standards and applicable legislation.
Anti-bribery and anti-corruption (ABAC) Failure of GSK employees and third parties to comply with our anti-bribery
& anti-corruption (ABAC) principles, standards and controls, as well as
all applicable legislation.
Commercial practices Failure to engage in commercial activities that are consistent with the letter
and spirit of the law, industry regulations, or the Group's requirements
relating to sales and promotion of our medicines and vaccines; appropriate
interactions with healthcare professionals/ organizations and patients;
legitimate and transparent transfers of value; and competition (or antitrust)
regulations in commercial practices, including trade channel activities and
tendering business.
Scientific and patient engagement We engage externally with HCPs, HCOs, payers, governments, patients/general
public and others, to gain insights, educate and communicate the science of
our medicines and/or associated disease areas to inform patient care
decisions. These interactions must be legitimate, conducted appropriately and
transparently in compliance with local laws, regulations, Industry Codes, GSK
business and ethics standards.
Data ethics and privacy With increasing ease and opportunities for use and re-use of data through
artificial intelligence, data analytics and automation in business decisions
and processes, complex ethical dilemmas emerge irrespective of legal
compliance, particularly around its application to personal data. Unethical
use of data or the failure to collect, secure, use, share and destroy Personal
Information in accordance with data privacy laws can lead to harm to
individuals and GSK.
Research practices Potential failure to adequately conduct ethical and credible pre-clinical and
clinical research. In addition, it is the failure to engage in scientific
activities that are consistent with relevant laws, industry practices, and GSK
values and expectations. It comprises the following sub-risks: Data
Governance; Laboratory Research; and Human Subject Research.
Environment, health and safety (EHS) Failure in management of:
· Execution of hazardous activities;
· GSK's physical assets and infrastructure;
· Handling and processing of hazardous chemicals and biological agents;
· Control of releases of substances harmful to the environment in both the short
and long term;
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Information security Information Security risk is characterized as the unauthorised disclosure,
theft, unavailability or corruption of GSK's Information or key information
systems that may lead to harm to our patients, partners, workforce and/or
customers, disruption to our business and/or loss of commercial or strategic
advantage, regulatory sanction, or damage to our reputation.
Supply continuity Failure to deliver a continuous supply of compliant finished product;
inability to respond effectively to a crisis incident in a timely manner to
recover and sustain critical operations.
Separation Failure to deliver the plan for successful separation of GSK into two new,
leading companies: new GSK and Haleon.
Reporting definitions
Total, Continuing and Adjusted results
Total reported results represent the Group's overall performance including
discontinued operations. Continuing results represents performance excluding
discontinued operations.
GSK also uses a number of adjusted, non-IFRS, measures to report the
performance of its business. Adjusted results and other non-IFRS measures may
be considered in addition to, but not as a substitute for or superior to,
information presented in accordance with IFRS. Adjusted results are defined on
page 37 and other non-IFRS measures are defined below and are based on
continuing operations.
Free cash flow from continuing operations
Free cash flow is defined as the net cash inflow/outflow from continuing
operating activities less capital expenditure on property, plant and equipment
and intangible assets, contingent consideration payments, net finance costs,
and dividends paid to non-controlling interests plus proceeds from the sale of
property, plant and equipment and intangible assets, and dividends received
from joint ventures and associates (all attributable to continuing
operations). It is used by management for planning and reporting purposes and
in discussions with and presentations to investment analysts and rating
agencies. Free cash flow growth is calculated on a reported basis. A
reconciliation of net cash inflow from continuing operations to free cash flow
from continuing operations is set out on page 58.
Free cash flow conversion
Free cash flow conversion is free cash flow from continuing operations as a
percentage of earnings attributable to shareholders from continuing
operations.
Working capital
Working capital represents inventory and trade receivables less trade
payables.
CER and AER growth
In order to illustrate underlying performance, it is the Group's practice to
discuss its results in terms of constant exchange rate (CER) growth. This
represents growth calculated as if the exchange rates used to determine the
results of overseas companies in Sterling had remained unchanged from those
used in the comparative period. CER% represents growth at constant exchange
rates. £% or AER% represents growth at actual exchange rates.
Total Net debt
Net debt is defined as total borrowings less cash, cash equivalents, liquid
investments, and short-term loans to third parties that are subject to an
insignificant risk of change in value (including those classified as assets
and liabilities held for distribution).
COVID-19 solutions
COVID-19 solutions include the sales of pandemic adjuvant and other COVID-19
solutions including vaccine manufacturing and Xevudy and the associated costs
but does not include reinvestment in R&D. This categorisation is used by
management and we believe is helpful to investors through providing clarity on
the results of the Group by showing the contribution to growth from COVID-19
solutions.
New GSK
New GSK refers to the current GSK group excluding the Haleon business that has
been demerged.
General Medicines
General Medicines are usually prescribed in the primary care or community
settings by general healthcare practitioners. For GSK, this includes medicines
in inhaled respiratory, dermatology, antibiotics and other diseases.
Specialty Medicines
Specialty Medicines are typically prescription medicines used to treat complex
or rare chronic conditions. For GSK, this comprises medicines in infectious
diseases, HIV, oncology, immunology and respiratory.
Biopharma
Biopharma refers to sales in Commercial Operations.
Share Consolidation
Shareholders received 4 new Ordinary shares with a nominal value of 31¼ pence
each for every 5 existing Ordinary share which had a nominal value of 25 pence
each. Earnings per share, diluted earnings per share, adjusted earnings per
share and dividends per share were retrospectively adjusted to reflect the
Share Consolidation in all the periods presented.
Earnings per share
Earnings per share has been retrospectively adjusted for the Share
Consolidation on 18 July 2022, applying a ratio of 4 new Ordinary shares for
every 5 existing Ordinary shares.
Brand names and partner acknowledgements
Brand names appearing in italics throughout this document are trademarks of
GSK or associated companies or used under licence by the Group.
The MAPS trademark is a registered Trademark of Affinivax, Inc.
Guidance, assumptions and cautionary statements
2022 guidance
GSK now expects 2022 sales to increase between 6 to 8 per cent and Adjusted
operating profit to increase between 13 to 15 per cent. Adjusted Earnings per
share is expected to grow around 1 per cent lower than Operating Profit. This
guidance is provided at CER and excludes the commercial benefit of COVID-19
solutions.
Assumptions related to 2022 guidance
In outlining the guidance for 2022, the Group has made certain assumptions
about the healthcare sector, the different markets in which the Group operates
and the delivery of revenues and financial benefits from its current
portfolio, pipeline and restructuring programmes. This guidance relates only
to GSK. With the momentum from the business performance to date, GSK now
expects 2022 sales to increase between 6 to 8 per cent and Adjusted operating
profit to increase between 13 to 15 per cent, excluding any contributions from
COVID-19 solutions. Adjusted Earnings per share is expected to grow around 1
per cent lower than Operating Profit. We have delivered first half performance
ahead of our full year guidance, slightly better than expected, informed by
strong business delivery and the dynamics of prior year comparators.
Predominantly reflecting a more challenging H2 2021 sales comparator as well
as the expected increase in R&D spend, we expect lower reported growth in
the second half. Key external factors that will influence the second half of
2022 include the continued risk from COVID-19 dynamics and possible
developments in the current uncertain global economic environment.
Notwithstanding uncertain economic conditions across many markets in which we
operate, we observe evidence of healthcare systems recovering and continue to
expect full year sales of Specialty Medicines to grow approximately 10% CER
and sales of General Medicines to show a slight decrease, primarily reflecting
increased genericisation of established Respiratory medicines. Vaccines sales
are now expected to grow at a low to mid-teens percentage at CER for the year.
Specifically for Shingrix, we continue to expect strong double-digit growth
and record annual sales in 2022, based on strong demand in existing markets
and continued geographical expansion. However, we do expect sales in the
second half to be slightly lower than in the first half of 2022 due to some
channel stocking in the first half in the US.
These planning assumptions as well as operating profit guidance and dividend
expectations assume no material interruptions to supply of the Group's
products, no material mergers, acquisitions or disposals, no material
litigation or investigation costs for the Company (save for those that are
already recognised or for which provisions have been made) and no change in
the Group's shareholdings in ViiV Healthcare. The assumptions also assume no
material changes in the healthcare environment or unexpected significant
changes in pricing as a result of government or competitor action. The 2022
guidance factors in all divestments and product exits announced to date.
The Group's guidance assumes successful delivery of the Group's integration
and restructuring plans. Material costs for investment in new product launches
and R&D have been factored into the expectations given. Given the
potential development options in the Group's pipeline, the outlook may be
affected by additional data-driven R&D investment decisions. The guidance
is given on a constant currency basis.
Assumptions and cautionary statement regarding forward-looking statements
The Group's management believes that the assumptions outlined above are
reasonable, and that the guidance, outlooks, ambitions and expectations
described in this report are achievable based on those assumptions. However,
given the forward-looking nature of these guidance, outlooks, ambitions and
expectations, they are subject to greater uncertainty, including potential
material impacts if the above assumptions are not realised, and other material
impacts related to foreign exchange fluctuations, macro-economic activity, the
impact of outbreaks, epidemics or pandemics, such as the COVID-19 pandemic and
ongoing challenges and uncertainties posed by the COVID-19 pandemic for
businesses and governments around the world, changes in legislation,
regulation, government actions or intellectual property protection, product
development and approvals, actions by our competitors, and other risks
inherent to the industries in which we operate.
This document contains statements that are, or may be deemed to be,
"forward-looking statements". Forward-looking statements give the Group's
current expectations or forecasts of future events. An investor can identify
these statements by the fact that they do not relate strictly to historical or
current facts. They use words such as 'anticipate', 'estimate', 'expect',
'intend', 'will', 'project', 'plan', 'believe', 'target' and other words and
terms of similar meaning in connection with any discussion of future operating
or financial performance. In particular, these include statements relating to
future actions, prospective products or product approvals, future performance
or results of current and anticipated products, sales efforts, expenses, the
outcome of contingencies such as legal proceedings, dividend payments and
financial results. Other than in accordance with its legal or regulatory
obligations (including under the Market Abuse Regulation, the UK Listing Rules
and the Disclosure and Transparency Rules of the Financial Conduct Authority),
the Group undertakes no obligation to update any forward-looking statements,
whether as a result of new information, future events or otherwise. The reader
should, however, consult any additional disclosures that the Group may make in
any documents which it publishes and/or files with the SEC. All readers,
wherever located, should take note of these disclosures. Accordingly, no
assurance can be given that any particular expectation will be met and
investors are cautioned not to place undue reliance on the forward-looking
statements.
All outlooks, ambitions and expectations should be read together with pages
5-7 of the Stock Exchange announcement relating to an update to investors
dated 23 June 2021, paragraph 19 of Part 7 of the Circular to shareholders
relating to the demerger of Haleon dated 1 June 2022 and the Guidance,
assumptions and cautionary statements in this Q2 2022 earnings release.
Forward-looking statements are subject to assumptions, inherent risks and
uncertainties, many of which relate to factors that are beyond the Group's
control or precise estimate. The Group cautions investors that a number of
important factors, including those in this document, could cause actual
results to differ materially from those expressed or implied in any
forward-looking statement. Such factors include, but are not limited to, those
discussed under Item 3.D 'Risk Factors' in the Group's Annual Report on Form
20-F for 2021 and any impacts of the COVID-19 pandemic. Any forward looking
statements made by or on behalf of the Group speak only as of the date they
are made and are based upon the knowledge and information available to the
Directors on the date of this report.
Directors' responsibility statement
The Board of Directors approved this Half-yearly Financial Report on 27 July
2022.
The Directors confirm that to the best of their knowledge the unaudited
condensed financial information has been prepared in accordance with IAS 34 as
contained in UK-adopted International Financial Reporting Standards (IFRS) and
that the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
After making enquiries, the Directors considered it appropriate to adopt the
going concern basis in preparing this Half-yearly Financial Report.
The Directors of GSK plc are as follows:
Sir Jonathan Symonds Non-Executive Chair, Nominations & Corporate Governance Committee Chair
Dame Emma Walmsley Chief Executive Officer (Executive Director)
Iain Mackay Chief Financial Officer (Executive Director)
Dr Hal Barron Chief Scientific Officer and President, R&D (Executive Director)
Charles Bancroft Senior Independent Non-Executive Director, Audit & Risk Committee Chair
Dr Anne Beal Independent Non-Executive Director, Corporate Responsibility Committee Chair
Dr Harry (Hal) Dietz Independent Non-Executive Director
Dr Laurie Glimcher Independent Non-Executive Director
Dr Jesse Goodman Independent Non-Executive Director, Science Committee Chair
Urs Rohner Independent Non-Executive Director, Remuneration Committee Chair
Dr Vishal Sikha Independent Non-Executive Director
By order of the Board
Emma Walmsley Iain Mackay
Chief Executive Officer Chief Financial Officer
27 July 2022
Independent review report to GSK plc
We have been engaged by GSK plc ("the Company") to review the condensed
financial information in the Results Announcement of the Company for the three
and six months ended 30 June 2022.
What we have reviewed
The condensed financial information comprises:
· the income statement and statement of comprehensive income for the three month
period ended 30 June 2022 on pages 39 to 40;
· the balance sheet as at 30 June 2022 on page 44;
· the statement of changes in equity for the six month period then ended on page
45;
· the cash flow statement for the six month period then ended on page 46 and;
· the accounting policies and basis of preparation and the explanatory notes to
the condensed financial information on pages 41 to 43 and 47 to 58 that have
been prepared applying consistent accounting policies to those applied by the
Group in the Annual Report 2021, which was prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by the United
Kingdom.
We have read the other information contained in the Results Announcement,
including the non-IFRS measures contained on pages 41 to 43 and 47 to 58, and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council. Our work has been undertaken so
that we might state to the Company those matters we are required to state to
it in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company, for our review work, for this report, or for the
conclusions we have formed.
Directors' responsibilities
The Results Announcement of the Company, including the condensed interim
financial information, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the Results
Announcement of the Company in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in Note 1, the annual financial statements of the Company are
prepared in accordance with United Kingdom adopted International Financial
Reporting Standards. The condensed financial information included in this
Results Announcement have been prepared in accordance with United Kingdom
adopted International Accounting Standard 34, "Interim Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
financial information in the Results Announcement based on our review. Our
conclusion, including our Conclusions Relating to Going Concern, are based on
procedures that are less extensive than audit procedures, as described in the
Scope of Review paragraph of this report.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE (UK), however future events or conditions may cause the entity to
cease to continue as a going concern.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed financial information in the Results Announcement
for the three and six months ended 30 June 2022 are not prepared, in all
material respects, in accordance with United Kingdom adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
27 July 2022
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