REG - GSK PLC - 3rd Quarter Results
02/11/2022 07:16
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RNS Number : 9931E GSK PLC 02 November 2022
Issued: Wednesday, 2 November 2022, London U.K.
GSK delivers strong Q3 2022 sales of £7.8 billion +18% AER, +9% CER and Total
EPS 255.9p +>100% AER, +>100% CER; Adjusted EPS of 46.9p +25% AER, +11%
CER
Highlights
Strong commercial execution drives continued sales growth across Specialty
Medicines, Vaccines and General Medicines
· Specialty Medicines £2.7 billion +36% AER, +24% CER; HIV +19% AER, +7% CER;
Oncology +28% AER, +19% CER; Immuno-inflammation and other specialty +29% AER
+17% CER; COVID-19 solutions (Xevudy) sales £0.4 billion
· Vaccines £2.5 billion +14% AER, +5% CER; Shingrix £760 million +51% AER,
+36% CER
· General Medicines £2.6 billion +7% AER, +1% CER
Prioritised investment in growth with cost discipline
· Total continuing operating margin 15.2%. Total EPS 255.9p >100% AER,
>100% CER primarily reflecting the gain from discontinued operations
arising on the demerger of the Consumer Healthcare business. Total continuing
EPS 18.8p -14% AER, -35% CER
· Adjusted operating margin 33.3%. Adjusted operating profit growth +18% AER,
+4% CER. This included a contribution to growth from COVID-19 solutions of
approximately +1% AER, +2% CER
· Adjusted EPS 46.9p +25% AER, +11% CER. This included a contribution to growth
from COVID-19 solutions of approximately +1% AER, +3% CER
· Q3 2022 continuing cash generated from operations £1.9 billion. Free cash
flow £0.7 billion
Continued strengthening of late-stage R&D pipeline with regulatory
approvals, positive data read-outs and further complementary business
development
· US FDA approval for Boostrix maternal and Menveo single-vial presentation.
Momelotinib for treatment of myelofibrosis submitted to US FDA
· Positive phase III data for RSV older adults candidate vaccine presented at ID
Week 2022. Priority Review granted in the US and regulatory submission
acceptance in EU and Japan
· Completed Affinivax acquisition on 15 August 2022. Announced exclusive licence
agreement with Spero Therapeutics for late-stage antibiotic tebipenem
· Phase III data readouts expected in Q4 2022: Jemperli in 1L endometrial
cancer, Blenrep in 3L multiple myeloma and gepotidacin for treatment of
uncomplicated urinary tract infection
Growing revenues and improving margin support confidence in outlooks
· 2022 Guidance raised: expect to deliver growth in sales of between 8% to 10%
CER and growth in 2022 adjusted operating profit of between 15% to 17% CER
· 2022 guidance excludes any contribution from COVID-19 solutions
· Dividend of 13.75p/share declared for Q3 2022. No change to expected dividend
from GSK of 61.25p/share for FY 2022
Emma Walmsley, Chief Executive Officer, GSK:
"GSK has delivered another quarter of excellent performance, with strong
growth in Specialty Medicines, record sales for our shingles vaccine,
Shingrix, and further improvements in adjusted operating profit. We are again
raising our full-year guidance and expect good momentum in 2023, further
strengthening our confidence in our performance outlooks, driven by Shingrix
global expansion and expected new launches including our new RSV vaccine. We
are also making good progress to strengthen our early-stage pipeline and will
continue to invest in targeted business development to build optionality and
support growth in the second half of the decade."
The Total results are presented in summary on page 2 and under 'Financial
performance' on pages 10 and 22 and Adjusted results reconciliations are
presented on pages 18, 19, 30 and 31. 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 38 and £% or AER% growth,
CER% growth, free cash flow and other non-IFRS measures are defined on page
65, COVID-19 solutions are also defined on page 66. GSK provides guidance on
an Adjusted results basis only, for the reasons set out on page 38. All
expectations, guidance and targets regarding future performance and dividend
payments should be read together with 'Guidance, assumptions and cautionary
statements' on pages 67 and 68.
Q3 2022 results
Q3 2022 Growth 9 months 2022 Growth
£m £% CER% £m £% CER%
Turnover 7,829 18 9 21,948 25 19
Total continuing operating profit* 1,191 (14) (35) 4,565 18 5
Total EPS 255.9p >100 >100 322.0p >100 >100
Total continuing EPS 18.8p (14) (35) 73.6p 2 (11)
Total discontinued EPS* 237.1p >100 >100 248.4p >100 >100
Adjusted operating profit 2,605 18 4 6,556 27 16
Adjusted EPS 46.9p 25 11 113.9p 31 20
Cash flow from operations attributable to 1,907 (12) 5,843 49
continuing operations
Free cash flow 712 (13) 2,453 >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 demerger of
the Consumer Healthcare business. The presentation of continuing and
discontinued operations under IFRS 5 are set out on page 51.
2022 guidance
Reflecting the momentum of the business performance in the year to date, GSK
now expects 2022 sales to increase between 8 to 10 per cent and Adjusted
operating profit to increase between 15 to 17 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 a
strong nine-month performance ahead of our full-year guidance. In the fourth
quarter, we anticipate continued strong sales growth and a relatively higher
rate of R&D spending, reflecting the dynamics of prior year comparisons,
in-year phasing, and continued targeted commercial investment.
Notwithstanding uncertain economic conditions across many markets in which we
operate, we continue to see evidence of healthcare systems recovering and now
expect full-year sales of Specialty Medicines to increase low double-digit
percentage at CER excluding Xevudy sales and sales of General Medicines to be
broadly flat, primarily reflecting the increased genericisation of established
Respiratory medicines. Vaccines sales, excluding COVID-19 solutions, are
expected to grow mid to high-teens percentage at CER for the full year.
Specifically, for Shingrix, we expect strong double-digit growth and record
annual sales in 2022, based on strong demand in existing markets and continued
geographical expansion.
From Q2 2022, the Group presented the Haleon plc (Haleon) business as a
discontinued operation according to IFRS 5. Adjusted results exclude 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 regarding
the expected dividend pay-out in 2022 for GSK are provided on page 36.
2022 COVID-19 solutions expectations
The majority of expected COVID-19 solutions sales for 2022 have been achieved
in the year to date. Based on known binding agreements with governments, we
anticipate that sales of COVID-19 solutions will be substantially lower going
forward. Sales of COVID-19 solutions for 2022 are at a reduced profit
contribution compared with 2021 due to the increased proportion of
lower-margin Xevudy sales; we anticipate this to reduce Adjusted Operating
profit growth (including COVID-19 solutions in both years) by around 4%. 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 pages 67 and 68. If exchange rates were to hold at
the closing rates on 30 September 2022 ($1.11/£1, €1.13/£1 and Yen
160/£1) for the rest of 2022, the estimated positive impact on 2022 Sterling
turnover growth for GSK would be 7% 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 13%.
Performance: Full year guidance
All outlooks exclude the contributions of COVID-19 solutions unless stated Current 2022 guidance at CER Previous 2022 guidance at CER
otherwise
Specialty Medicines turnover Increase low double-digit % Increase approximately 10%
Vaccines turnover Increase mid to high-teens % Increase low to mid-teens %
General Medicines turnover Broadly flat Slight decrease
Commercial operations turnover Increase between 8% to 10% Increase between 6% to 8%
Adjusted operating profit Increase between 15% to 17% Increase between 13% to 15%
Adjusted earnings per share (no change) Growth around 1% less than operating profit growth Growth around 1% less than operating profit growth
COVID-19 solutions Reduced Adjusted operating profit growth (including COVID-19 solutions in both Reduced Adjusted operating profit growth (including COVID-19 solutions in both
years) by around 4% years) by around 4% to 6%
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 was held in aggregate by GSK Shareholders, 6.0% remains held by GSK
(including shares received by GSK's consolidated ESOP trusts) and 7.5% remains
held by certain Scottish Limited Partnerships (SLPs) set up to provide
collateral for a funding mechanism pursuant to which GSK will provide
additional funding for its UK defined benefit Pension Schemes. The aggregate
ownership by GSK (including ownership by the ESOP trusts and SLPs) after the
demerger of 13.5% is measured at fair value with changes through profit and
loss.
The gain on the demerger for the distributed stake was £7.2 billion which was
recognised in Q3 2022. The asset distributed was the 54.5% ownership of the
Consumer Healthcare business. The net assets derecognised reflected Consumer
Healthcare transactions up to 18 July 2022 which included pre-separation
dividends declared and settled 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
resulted in a reduction of net debt for GSK on demerger. The gain on the
demerger arising from remeasurement of the retained stake was £2.4 billion
which was recognised in Q3 2022.
The total gain on the demerger of the Consumer Healthcare business in Q3 2022
was £9.6 billion. In addition, the Profit after taxation from discontinued
operations for the Consumer Healthcare business from 1 January to 18 July 2022
was £0.6 billion which increased the Total profit after tax of discontinued
operations in the nine month period to £10.2 billion.
Results presentation
A conference call and webcast for investors and analysts of the nine months
and Q3 2022 results will be hosted by Emma Walmsley, CEO, at 12pm GMT on 2
November 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.
Operating performance summary
The amounts below are from continuing operations unless otherwise specified.
Turnover Q3 2022 9 months 2022
£m Growth Growth £m Growth Growth
£% CER% £% CER%
Specialty Medicines 2,749 36 24 8,588 56 49
Vaccines 2,479 14 5 5,863 18 12
General Medicines 2,601 7 1 7,497 5 2
Commercial Operations 7,829 18 9 21,948 25 19
Total turnover in Q3 2022 reflected strong performance in Specialty Medicines
and Vaccines product groups and in the nine months 2022 reflected strong
performance in all three product groups. Commercial Operations turnover
excluding pandemic sales grew 15% at AER, 7% at CER in the third quarter and
15% at AER, 10% at CER in the nine months. Specialty Medicines included sales
of Xevudy of £411 million in the third quarter and £2,184 million in the
nine months. Under Speciality Medicines Nucala and Benlysta grew double digit
at AER and at CER in the third quarter, and in the nine months all therapy
areas grew double digit at AER. Vaccines growth in Q3 2022 and in the nine
months 2022 reflected strong Shingrix performance partially offset by pandemic
adjuvant sales in 2021.
Specialty Medicines
Specialty Medicines sales growth in Q3 2022 and in the nine months 2022 was
driven by consistent growth in all therapy areas. Specialty Medicines
excluding sales of Xevudy were £2,338 million, up 22% at AER, 11% at CER in
the quarter and £6,404 million, up 19% at AER, 13% at CER in the nine months
2022.
Vaccines
Vaccines sales excluding pandemic adjuvant sales grew 19% at AER, 9% at CER in
the third quarter and 27% at AER, 20% at CER in the nine months 2022. Growth
in Vaccines reflected a favourable comparator in 2021 which was impacted by
COVID-19 related disruptions in several markets as well as strong commercial
execution of Shingrix. In the third quarter, growth was partially offset by
MMR/V vaccines supply constraints and US Centers for Disease Control and
Prevention (CDC) stockpile borrows.
General Medicines
In General Medicines, growth in Q3 2022 and in the nine months 2022 was mainly
driven by Trelegy in respiratory and the post-pandemic rebound of the
antibiotic market in Other General Medicines, partially offset by the impact
of generic competition in US, Europe, and Japan. In Q3 2022, there was a 3
percentage point decrease in growth due to higher Returns and Rebates (RAR)
adjustments in the comparative quarter.
Operating profit
Q3 2022
Total operating profit was £1,191 million compared with £1,380 million in Q3
2021. The reduction primarily reflected the higher remeasurement charges for
contingent consideration liabilities and the fair value loss on the retained
stake in Haleon, partly offset by increased profits on turnover growth of 9%
at CER. Adjusted operating profit was £2,605 million, 18% higher than Q3 2021
at AER and 4% at CER on a turnover increase of 9% at CER. The Adjusted
operating margin of 33.3% was stable at AER and 1.6% percentage points lower
at CER than in Q3 2021. This primarily reflected the impact from low margin
COVID-19 solutions sales (Xevudy) as well as increased launch investment in
SG&A in Specialty Medicines and Vaccines. This was partly offset by higher
royalty income.
9 months 2022
Total operating profit was £4,565 million compared with £3,865 million in
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 19% at CER, partly offset by higher remeasurement charges
for contingent consideration liabilities and a fair value loss of £377
million on the retained stake in Haleon. Adjusted operating profit was £6,556
million, 27% higher at AER and 16% at CER than 2021 on a turnover increase of
19% at CER. The Adjusted operating margin of 29.9% was 0.5 percentage points
higher at AER and 0.7 percentage points lower at CER compared to 2021. This
reflected the impact from low margin COVID-19 solutions sales (Xevudy). This
was offset by operating leverage from strong sales growth, mix benefit and
higher royalty income.
Earnings per share
Q3 2022
Total EPS from continuing operations was 18.8p compared with 21.9p in Q3 2021.
The reduction primarily reflected increased charges for remeasurement of
contingent consideration liabilities and a fair value loss on the retained
stake in Haleon. Adjusted EPS was 46.9p compared with 37.4p in Q3 2021, up 25%
at AER, 11% at CER, on a 4% CER increase in Adjusted operating profit
primarily reflecting growth in all three product groups, lower interest
charges from reduced debt and a lower effective tax rate compared to Q3 2021,
partly offset by lower leverage as a result of higher lower margin sales of
pandemic solutions (Xevudy) as well as increased launch investment in
SG&A.
9 months 2022
Total EPS from continuing operations was 73.6p compared with 72.2p in 2021.
This primarily reflected the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 19% at CER,
partly offset by higher remeasurement charges for contingent consideration
liabilities and a £377 million fair value loss on the retained stake in
Haleon 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 113.9p compared with 86.8p in 2021, up 31% at AER, 20% at
CER, on a 19% CER turnover increase. Adjusted operating profit reflected
higher COVID-19 solutions sales at low margin. Operating leverage from growth
in sales of Specialty Medicines and Vaccines, beneficial mix, higher royalty
income and a lower effective tax rate was partly offset by increased
investment behind launches in Specialty Medicines and Vaccines plus higher
supply chain, freight and distribution costs and higher non-controlling
interests.
Cash flow
Q3 2022
Cash generated from operations attributable to continuing operations for the
quarter was £1,907 million (Q3 2021: £2,161 million). The decrease primarily
reflected increased cash contributions to the UK defined benefit pension
schemes and unfavourable timing of profit share payments for Xevudy partly
offset by an increase in operating profit, including beneficial exchange,
favourable timing of returns and rebates and favourable timing of collections.
9 months 2022
Cash generated from operations attributable to continuing operations for nine
months was £5,843 million (2021: £3,920 million). The increase primarily
reflected a significant increase in operating profit including the upfront
income from the settlement with Gilead, favourable exchange impacts and
favourable timing of collections, partly offset by unfavourable timing of
profit share payments for Xevudy sales, increased cash contribution to
pensions, increased contingent consideration payments reflecting the Gilead
settlement in February 2022 and a higher seasonal increase in inventory.
Profit and earnings per share from discontinued operations
Q3 2022
Discontinued operations include the Consumer Healthcare business and certain
directly attributable Corporate costs. Profit after taxation from discontinued
operations amounted to £9,574 million (Q3 2021: £422 million). This includes
£9,578 million for the gain arising on the demerger of Consumer Healthcare
split between the amount distributed to shareholders on demerger of £7,227
million, and profit after tax on discontinued operations for the retained
stake of £2,351 million (Q3 2021: £nil). The overall gain on the demerger of
£9,578 was partly offset by the loss after taxation from discontinued
operations including the Consumer Healthcare business of £4 million (Q3 2021:
£422 million profit) from 1 to 18 July 2022.
EPS from discontinued operations was 237.1p, compared with 7.3p in Q3 2021.
The increase primarily reflected the profit after taxation for discontinued
operations recognised for the Consumer Healthcare business demerger. For
further details see page 54.
Total earnings per share
Total EPS was 255.9p compared with 29.2p in Q3 2021. The increase primarily
reflected the profit after taxation for discontinued operations recognised on
the Consumer Healthcare business demerger.
9 months 2022
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 £10,199 million (2021:
£1,070 million). This includes £9,578 million for the gain arising on the
demerger of Consumer Healthcare split between the amount distributed to
shareholders on demerger of £7,227 million and profit after taxation on
discontinued operations for the retained stake of £2,351 million (2021:
£nil). The overall gain on the demerger of £9,578 was increased by the
profit after taxation from discontinued operations including the Consumer
Healthcare business of £621 million (2021: £1,070 million) from 1 January to
18 July 2022.
Total earnings per share
EPS from discontinued operations was 248.4p, compared with 18.6p in 2021. The
increase primarily reflected the profit after taxation for discontinued
operations recognised on the Consumer Healthcare business demerger. For
further details see page 54, discontinued operations.
Q3 2022 pipeline highlights (since 27 July 2022)
Medicine/vaccine Trial (indication, presentation) Event
Regulatory approvals or other regulatory action Juluca HIV Regulatory approval (CN)
Boostrix Tdap (maternal) Regulatory approval (US)
Menveo Invasive meningococcal disease, liquid formulation Regulatory approval (US)
Regulatory submissions or acceptances momelotinib MOMENTUM (myelofibrosis with anaemia) Regulatory acceptance (US)
cabotegravir Pre-exposure prophylaxis, long-acting injectable Regulatory acceptance (EU)
RSV older adult vaccine candidate AreSVi 006 (RSV, older adults aged 60+ years) Priority Review granted (US) Regulatory acceptance
(EU, JP)
SKYCovione COVID-19 vaccine COVID-19 Regulatory submission (EU)
Phase III data readouts or other significant events Jemperli PERLA (non-small cell lung cancer) Positive phase II data
RSV older adult vaccine candidate AreSVi 006 (RSV, older adults aged 60+ years) Positive phase III data presentation
otilimab contRAst programme (rheumatoid arthritis) Phase III data readout; concluded development
Anticipated news flow
Timing Medicine/vaccine Trial (indication, presentation) Event
Q4 2022 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)
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
Rotarix Rotavirus, liquid formulation Regulatory decision (US)
COVID-19 vaccine candidate (Sanofi) COVID-19 Regulatory decision (EU)
Timing Medicine/vaccine Trial (indication, presentation) Event
H1 2023 bepirovirsen B-Together (hepatitis B virus) Phase IIb data readout
daprodustat ASCEND (anaemia of chronic kidney disease) Regulatory decision
(US, EU)
Nucala Severe asthma Regulatory submission (CN)
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)
gepotidacin EAGLE (uncomplicated urinary tract infection) Regulatory submission
(US)
MenABCWY (gen 1) vaccine candidate Meningitis ABCWY Regulatory submission (US)
RSV older adult vaccine candidate AreSVi 006 (RSV, older adults aged 60+ years) Regulatory decision (US)
Shingrix Shingles, at-risk adults aged 18+ years Regulatory decision (JP)
SKYCovione COVID-19 vaccine COVID-19 Regulatory decision (EU)
COVID-19 vaccine candidate (Sanofi) COVID-19 Regulatory submission (US)
H2 2023 Nucala Nasal polyposis Regulatory submission
(CN, JP)
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)
Zejula FIRST (1L maintenance ovarian cancer) Phase III data readout
cabotegravir Pre-exposure prophylaxis, long-acting injectable Regulatory decision (EU)
MenABCWY (gen 2) vaccine candidate Meningitis ABCWY Phase II data readout
RSV older adult vaccine candidate AreSVi 006 (RSV, older adults aged 60+ years) Regulatory decision (EU, JP)
S. Aureus vaccine candidate S. Aureus Phase II data readout
Refer to pages 57 to 65 for further details on several key medicines and
vaccines in development by therapy area.
Contents Page
Q3 2022 R&D pipeline highlights 7
Financial performance - three months to 30 September 2022 10
Financial performance - nine months to 30 September 2022 22
Cash generation 34
Returns to shareholders 36
Total and Adjusted results 38
Income statement - three months and nine months ended 30 September 2022 40
Statement of comprehensive income - three months and nine months ended 30 41
September 2022
Balance sheet 45
Statement of changes in equity 46
Cash flow statement - nine months ended 30 September 2022 47
Segment information 48
Legal matters 50
Additional information 51
Reconciliation of cash flow to movements in net debt 56
Net debt analysis 56
Free cash flow reconciliation 56
R&D commentary 57
Reporting definitions 66
Guidance, assumptions and cautionary statements 67
Independent review report 69
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
more at www.gsk.com.
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Financial performance - Q3 2022
Total results
The Total results for the Group are set out below.
Q3 2022 Q3 2021((a)) Growth Growth
£m £m £% CER%
Continuing Operations
Turnover 7,829 6,627 18 9
Cost of sales (2,423) (2,016) 20 18
Gross profit 5,406 4,611 17 5
Selling, general and administration (2,056) (1,679) 22 13
Research and development (1,346) (1,416) (5) (12)
Royalty income 255 114 >100 >100
Other operating income/(expense) (1,068) (250)
Operating profit 1,191 1,380 (14) (35)
Finance income 22 4
Finance expense (200) (195)
Share of after tax (losses)/profits of associates and (1) 3
joint ventures
Profit before taxation 1,012 1,192 (15) (39)
Taxation (233) (246)
Tax rate % 23.0% 20.7%
Profit after taxation from continuing operations 779 946 (18) (41)
Profit after taxation from discontinued operations and 2,347 422 >100 >100
other gains/(losses) from the demerger
Remeasurement of discontinued operations distributed 7,227 -
to shareholders on demerger
Profit after taxation from discontinued operations 9,574 422 >100 >100
Profit after taxation for the period 10,353 1,368 >100 >100
Profit attributable to non-controlling interest from 20 69
continuing operations
Profit attributable to shareholders from continuing 759 877
operations
Profit attributable to non-controlling interest from 18 131
discontinued operations
Profit attributable to shareholders from discontinued 9,556 291
operations
10,353 1,368 >100 >100
Total profit attributable to non-controlling interest 38 200
Total profit attributable to shareholders 10,315 1,168
10,353 1,368
Earnings per share from continuing operations 18.8p 21.9p (14) (35)
Earnings per share from discontinued operations 237.1p 7.3p >100 >100
Total earnings per share 255.9p 29.2p >100 >100
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
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 on page 53). Reconciliations between Total results and Adjusted
results for Q3 2022 and Q3 2021 are set out on pages 18 and 19.
Q3 2022 % of Growth Growth
£m turnover £% CER%
Turnover 7,829 100 18 9
Cost of sales (2,214) (28.3) 23 21
Selling, general and administration (1,968) (25.1) 21 12
Research and development (1,297) (16.6) 17 8
Royalty income 255 3.3 >100 >100
Adjusted operating profit 2,605 33.3 18 4
Adjusted profit before tax 2,427 20 5
Adjusted profit after tax 2,025 25 10
Adjusted profit attributable to shareholders 1,890 26 11
Adjusted earnings per share 46.9p 25 11
Operating profit by segment
Q3 2022 % of Growth Growth
£m turnover £% CER%
Commercial Operations 3,950 50.5 14 2
Research and Development (1,301) 14 6
Segment profit 2,649 33.8 14 1
Corporate & other unallocated costs (44)
Adjusted operating profit 2,605 33.3 18 4
Turnover
Commercial Operations
Q3 2022
£m Growth Growth
£% CER%
HIV 1,486 19 7
Oncology 164 28 19
Immuno-inflammation, respiratory and other 688 29 17
2,338 22 11
Pandemic 411 >100 >100
Specialty Medicines 2,749 36 24
Meningitis 441 25 16
Influenza 388 1 (7)
Shingles 760 51 36
Established Vaccines 884 5 (2)
2,473 19 9
Pandemic Vaccines 6 (94) (94)
Vaccines 2,479 14 5
Respiratory 1,682 13 4
Other General Medicines 919 (2) (4)
General Medicines 2,601 7 1
Commercial Operations 7,829 18 9
US 4,015 18 2
Europe 1,484 11 11
International 2,330 22 20
Commercial Operations by region 7,829 18 9
Total turnover in the quarter was £7,829 million, up 18% at AER, 9% at CER,
reflecting strong performance in Specialty Medicines and Vaccines product
groups. Commercial Operations turnover, excluding sales of pandemic assets,
grew 15% at AER, 7% at CER. Specialty Medicines included double digit growth
of Nucala and Benlysta (at AER and at CER) and £411 million sales of Xevudy
in the quarter. Vaccines growth reflected strong Shingrix performance,
partially offset by an unfavourable comparison to pandemic adjuvant sales in
Q3 2021. General Medicines reflected strong performance of Trelegy in all
regions and recovery of the antibiotics market.
Specialty Medicines
Specialty Medicines sales in the quarter were £2,749 million, up 36% at AER,
24% at CER, driven by consistent growth in all therapy areas. Specialty
Medicines excluding sales of Xevudy were £2,338 million up 22% at AER, 11% at
CER.
HIV
HIV sales were £1,486 million with growth up 19% at AER, 7% at CER in the
quarter. The performance benefited from strong patient demand for new HIV
products (Dovato, Cabenuva, Juluca, Rukobia and Apretude). US pricing
favourability was broadly offset by timing of US customer orders and
International tender decline.
New HIV products delivered quarterly sales of £651 million up 79% at AER, 64%
at CER, representing 44% of the total HIV portfolio compared to 29% in the
same quarter last year. Sales of the oral two drug regimens Dovato and Juluca
were £360 million and £159 million respectively with combined growth of 54%
AER, 40% CER. Cabenuva, the first long acting injectable for the treatment of
human immunodeficiency virus type-1 (HIV-1) infection, recorded sales of £101
million. Apretude, the first long acting injectable for the prevention of
HIV-1, delivered sales of £10 million.
Oncology
Oncology sales in the quarter were £164 million, up 28% at AER, 19% at CER.
Zejula sales of £120 million, were up 19% at AER, 11% at CER, and Blenrep,
sales of £36 million were up 44% at AER, 32% at CER, reflecting strong growth
in Europe.
Immuno-inflammation, Respiratory and Other
Immuno-inflammation, Respiratory and Other sales were £688 million up 29% at
AER, 17% at CER. Benlysta sales were £308 million, up 29% at AER, 15% at CER
including strong underlying demand in US and worldwide. Nucala sales were
£366 million, up 28% at AER, 18% at CER on continued strong demand and launch
of additional indications in all regions.
Pandemic
Sales of Xevudy were £411 million, compared to £114 million sales in Q3
2021. The majority of sales during the period were in International, including
£241 million in Japan, with US orders filled in Q1 2022.
Vaccines
Vaccine sales were £2,479 million, up 14% at AER, 5% at CER in total and up
19% at AER, 9% at CER excluding pandemic adjuvant sales. The performance
benefited from post-pandemic rebound and strong commercial execution of
Shingrix in Europe and International. Vaccine growth was partially offset by
MMR/V vaccines supply constraints and CDC stockpile borrows.
Meningitis
Meningitis vaccines sales grew 25% at AER, 16% at CER to £441 million mainly
driven by Bexsero (23% at AER, 15% at CER to £275 million) resulting from
higher CDC purchasing and increased share in the US together with the
implementation of a Meningitis B national immunisation programme in France.
Menveo sales were also up 25% at AER, 14% at CER to £157 million, primarily
driven by post-pandemic vaccination catch-up in International. In the US,
Menveo share gain was mostly offset by the negative impact of a CDC stockpile
borrow.
Shingles
Shingrix sales grew 51% at AER, 36% at CER to £760 million mainly due to
post-pandemic rebound, new launches and strong commercial execution in Europe
and International which contributed nearly 40% of Shingrix sales during the
quarter. US sales grew 23% at AER, 5% at CER mainly driven by favourable price
volume mix and higher non-retail and retail demand, partly offset by
unfavourable wholesaler inventory movements, with growth reflecting a more
challenging comparator than in prior quarters. Shingrix is now available in 25
countries.
Influenza
Fluarix/FluLaval sales grew by 1% at AER but declined 7% at CER to £388
million, primarily driven by unfavourable phasing of supply in the US.
Established Vaccines
Established Vaccines grew by 5% at AER but decreased 2% at CER to £884
million mainly as a result of MMR/V vaccines supply constraints in
International and Europe and the negative impact of a CDC stockpile borrow for
Rotarix. This decrease was partially offset by Infanrix/Pediarix favourable
tender phasing impact and hepatitis vaccines growth in Europe.
General Medicines
General Medicines sales in the quarter were £2,601 million, up 7% at AER, 1%
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. Overall, there was
a 3 percentage point decrease in growth due to prior period Returns and
Rebates (RAR) adjustments in the quarter.
Respiratory
Respiratory sales were £1,682 million, up 13% at AER, 4% at CER. The
performance was driven by Trelegy sales of £465 million, up 43% at AER, 28%
at CER with strong growth in all regions. Advair/Seretide sales of £265
million continued to be eroded by generic competition, decreasing 18% at AER
and 23% at CER.
Other General Medicines
Other General Medicines sales were £919 million, down 2% at AER, 4% at CER.
Augmentin sales were £150 million, up 32% at AER, 32% at CER reflecting the
rebound of the antibiotic market post pandemic since Q3 2021. This was offset
by the ongoing adverse impact of generic competition and approximately 2
percentage points impact from the divestment of cephalosporin products in Q4
2021.
By Region
US
In the US, sales were £4,015 million, up 18% at AER, 2% at CER. There were no
significant sales of Xevudy in the quarter following completion of the
government contract in Q1 2022, but sales of Xevudy and vaccine adjuvant in Q3
2021 caused a drag on growth of 1 percentage point at AER and 2 percentage
points at CER in the quarter.
In Specialty Medicines, HIV sales of £1,002 million were up 28% at AER, 11%
at CER. Performance benefited from favourable pricing mix with strong patient
demand for new products, (Dovato, Cabenuva, Juluca, Apretude and Rukobia)
offsetting timing of customer orders. New HIV medicines delivered sales of
£442 million up 91% at AER, 67% at CER. Nucala and Benlysta both continued to
grow double digits reflecting ongoing strong demand. In Oncology, Zejula
continues to be impacted by lower diagnosis and treatment rates, while
Jemperli and Blenrep are seeing growth due to higher demand.
Vaccine sales were £1,466 million, up 11% at AER, down 3% at CER. Excluding
the impact of COVID-19 vaccine adjuvant sales in Q3 2021, sales grew 13% at
AER, down 1% at CER. Strong Shingrix sales and higher CDC purchasing of
Bexsero were offset by flu phasing and Rotarix CDC stockpile borrow.
General Medicines sales were £955 million up 15% at AER, down 1% at CER, with
strong Trelegy growth, up 48% at AER, 28% at CER offset by ongoing generic
impact on Advair/Seretide.
Europe
In Europe, sales were £1,484 million, up 11% at AER, 11% at CER, driven by
strong growth in Specialty and Vaccine product groups.
In Specialty Medicines, HIV sales were £331 million up 11% at AER, 11% at
CER. The performance predominantly reflected strong patient demand for Dovato
with sales of £126 million during the period. Benlysta in immunology, Nucala
in respiratory, and the Oncology therapy area all delivered strong
double-digit growth in the quarter. There were no significant sales of Xevudy
in the quarter, or the corresponding quarter last year.
Vaccine sales were £482 million, up 27% at AER, 27% at CER. Shingrix sales of
£173 million, up 92% at AER, 92% at CER, drove the growth particularly in
Germany. Additionally there was favourable tender phasing for
Infanrix/Pediarix, strong hepatitis growth, and a Meningitis B national
immunisation programme was implemented in France.
General Medicines sales were £502 million decreasing 4% at AER, 5% at CER,
including a 2 percentage point impact of the divestment of cephalosporin
products in Q4 2021. Strong demand for Trelegy was offset by ongoing generic
competitive pressures including on Seretide in respiratory.
International
International sales were £2,330 million, up 22% at AER, 20% at CER, including
Xevudy sales of £383 million. Excluding the impact of sales of Xevudy and
COVID-19 vaccine adjuvant, sales grew 12% at AER, 9% at CER.
In Specialty Medicines, HIV sales were £153 million down 11% at AER, 17% at
CER driven by Tivicay tender decline, partially offset by strong Dovato
growth. Combined Tivicay and Triumeq sales were £103 million, down 27% at AER
and 33% at CER. Nucala in respiratory and Benlysta in immunology both
continued to grow strongly reflecting growth in Japan's biological market and
inclusion on China's National Reimbursement Drug List.
Vaccine sales were £531 million, up 13% at AER, 8% at CER. Excluding the
impact of COVID-19 vaccine adjuvant sales in Q3 2021 Vaccines grew 29% at AER,
25% at CER, driven by Shingrix post-pandemic sales rebound and strong
commercial execution in several markets in the Region including China.
General Medicines sales were £1,144 million up 7% at AER, 5% at CER.
Respiratory sales of £490 million were up 15% at AER, 12% at CER including
strong growth of Trelegy, particularly in Japan, China, and Canada. Other
General Medicines sales of £654 million, up 1% at AER, 1% at CER, reflecting
growth of Augmentin on rebound of the antibiotic market post the pandemic
since Q3 2021.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 30.9% and increased 0.5
percentage points higher at AER and 2.4 percentage points higher in CER terms
than Q3 2021. Adjusted cost of sales as a percentage of turnover was 28.3%, up
1.2 percentage points AER and 3.0 at CER compared with Q3 2021. This primarily
reflected higher sales of lower margin COVID-19 solutions (Xevudy) compared to
Q3 2021, which included £95 million of pandemic adjuvant sales, increasing
cost of sales margin by 2.0 percentage points at AER and at 1.9 percentage
points at CER as well as increased supply chain costs including the impact of
increased commodity prices and freight costs.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 26.3%, 0.9 percentage
points higher at AER and 0.8 percentage points higher at CER than in Q3 2021
primarily reflected increased investment in the launch of innovative vaccines
and medicines partially offset by higher sales.
Adjusted SG&A costs as a percentage of turnover were 25.1%, 0.6 percentage
points higher at AER, 0.6 percentage points higher at CER. Adjusted SG&A
costs increased 21% at AER, 12% at CER to £1,968 million 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. This growth was
partly offset by the continuing benefit of restructuring and tight control of
ongoing costs and exchange gains on the Vir Biotechnology, Inc. collaboration
profit share.
Research and development
Adjusted R&D expenditure increased in the quarter by 17% at AER and 8% at
CER, to £1,297 million. There is continued increased investment in the
Vaccines clinical development portfolio, particularly in the mRNA technology
platforms and several early discovery programmes as well as new expenditure in
relation to our recent acquisition, Affinivax, Inc (Affinivax).
In the Specialty Medicines portfolio, investment increased in our phase III
respiratory programme for depemokimab, a potential new medicine to treat
severe asthma as well as new expenditure in momelotinib, our potential new
treatment of myelofibrosis patients with anaemia acquired as part of the
recent acquisition of Sierra Oncology, Inc (Sierra). These increases in
investment were offset by decreases related to the completion of several
late-stage clinical development programmes and reduced R&D investment in
COVID-19 pandemic solutions compared to Q3 2021.
Royalty income
Royalty income was £255 million (Q3 2021: £114 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 £1,068 million (Q3 2021: £250 million)
primarily reflecting accounting charges of £698 million (Q3 2021: £281
million) arising from the remeasurement 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 remeasurement charge of £582 million (Q3 2021:
£239 million) for the contingent consideration liability due to Shionogi,
including the unwinding of the discount for £104 million and a charge for
£478 million primarily from changes to exchange rates as well as adjustments
to sales forecasts. In addition, there was a fair value loss of £377 million
on the retained stake in Haleon reflecting a reduction in share price since
listing.
Operating profit
Total operating profit was £1,191 million compared with £1,380 million in Q3
2021. The reduction primarily reflected the higher remeasurement charges for
contingent consideration liabilities and the fair value loss on the retained
stake in Haleon, partly offset by increased profits on turnover growth of 9%
at CER.
Adjusted operating profit was £2,605 million, 18% higher than Q3 2021 at AER
and 4% at CER on a turnover increase of 9% at CER. The Adjusted operating
margin of 33.3% was stable at AER and 1.6% percentage points lower at CER than
in Q3 2021. This reflected the impact from low margin COVID-19 solutions sales
(Xevudy), which increased Adjusted Operating profit growth by approximately 1%
at AER, 2% at CER but the impact on the Adjusted operating margin was flat in
percentage points at AER but reduced 0.3 percentage points at CER, as well as
increased launch investment in SG&A in Specialty Medicines including HIV
and Vaccines including Shingrix to drive post-pandemic recovery demand and
support market expansion. This was partly offset by 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 Q3 2022 amounted to
£249 million (Q3 2021: £205 million). These included cash payments made to
Shionogi of £240 million (Q3 2021: £196 million).
Adjusted operating profit by business
Commercial Operations adjusted operating profit was £3,950 million, up 14% at
AER and 2% at CER on a turnover increase of 9% at CER. The operating margin of
50.5% was 1.7 percentage points lower at AER and 3.3 percentage points lower
at CER than in Q3 2021. This primarily reflected sales of lower margin Xevudy
in the quarter compared to Q3 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 £1,301 million, up 14% at AER and 6%
at CER, primarily reflecting increased investment in Vaccines including
priority investments for mRNA and late stage portfolio and Specialty Medicines
in early stage HIV and depemokimab. This was partly offset by the completion
of several late-stage clinical development programmes, completion of several
late-stage clinical development programmes and reduced R&D investment in
COVID-19 pandemic solutions compared to Q3 2021.
Net finance costs
Total net finance costs were £178 million compared with £191 million in Q3
2021. Adjusted net finance costs were £177 million compared with £190
million in Q3 2021. The decrease primarily reflects increased interest income
due to higher interest rates and larger cash balances as a result of the
Consumer Healthcare demerger.
Taxation
The charge of £233 million represented an effective tax rate on Total results
of 23.0% (Q3 2021: 20.7%) and reflected the different tax effects of the
various Adjusting items including the fair value loss on the retained Haleon
stake where a tax credit is not recognised. Tax on Adjusted profit amounted to
£402 million and represented an effective Adjusted tax rate of 16.6% (Q3
2021: 19.9%).
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 £20
million (Q3 2021: £69 million). The decrease was primarily due to a reduced
allocation of ViiV Healthcare profits of £24 million (Q3 2021: £69 million)
including increased credits for remeasurement of contingent consideration
liabilities.
The allocation of Adjusted earnings to non-controlling interests amounted to
£135 million (Q3 2021: £121 million). The increase in allocation primarily
reflected an increased allocation of ViiV Healthcare profits of £139 million
(Q3 2021: £122 million).
Earnings per share from continuing operations
Total EPS was 18.8p compared with 21.9p in Q3 2021. The reduction primarily
reflected increased charges for remeasurement of contingent consideration
liabilities and a fair value loss on the retained stake in Haleon.
Adjusted EPS was 46.9p compared with 37.4p in Q3 2021, up 25% at AER, 11% at
CER, on a 4% CER increase in Adjusted operating profit primarily reflecting
growth across Specialty, Vaccines and General Medicines, lower interest
charges from reduced debt and a lower effective tax rate compared to Q3 2021,
partly offset by lower leverage as a result of higher lower margin sales of
pandemic solutions (Xevudy) as well as increased launch investment in
SG&A.
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 business.
Profit after taxation from discontinued operations amounted to £9,574 million
(Q3 2021: £422 million). This includes £9,578 million for the gain arising
on the demerger of the Consumer Healthcare business split between the amount
distributed to shareholders on demerger of £7,227 million, and profit after
tax on discontinued operations for GSK's retained stake of £2,351 million.
The overall gain on the demerger of £9,578 million was partly offset by the
loss after taxation from discontinued operations for the Consumer Healthcare
business of £4 million (Q3 2021: £422 million profit) from 1 to 18 July 2022
which includes separation and transaction costs of £59 million.
EPS from discontinued operations was 237.1p, compared with 7.3p in Q3 2021.
The increase primarily reflected the gain arising on the demerger of the
Consumer Healthcare business recognised in profit after taxation for
discontinued operations. For further details see page 54, discontinued
operations.
Total earnings per share
Total EPS was 255.9p compared with 29.2p in Q3 2021. The increase primarily
reflected the gain arising on the demerger of the Consumer Healthcare business
recognised in Profit after taxation for discontinued operations.
Currency impact on Q3 2022 results
The results for Q3 2022 are based on average exchange rates, principally
£1/$1.18, £1/€1.16 and £1/Yen 161. Comparative exchange rates are given
on page 51. The period-end exchange rates were £1/$1.11, £1/€1.13 and
£1/Yen 160.
In Q3 2022, turnover was up 18% at AER and 9% at CER. Total EPS from
continuing operations was 18.8p compared with 21.9p in Q3 2021. Adjusted EPS
was 46.9p compared with 37.4p in Q3 2021, up 25% at AER and 11% 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 Japanese Yen. Exchange gains or losses on the settlement of intercompany
transactions had a negligible impact on the 14 percentage point favourable
currency impact on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for Q3 2022 and
Q3 2021 are set out below.
Three months ended 30 September 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 7,829 7,829
Cost of sales (2,423) 172 24 13 (2,214)
Gross profit 5,406 172 24 13 5,615
Selling, general and administration (2,056) 42 46 (1,968)
Research and development (1,346) 26 17 6 (1,297)
Royalty income 255 255
Other operating income/(expense) (1,068) 1 699 368 -
Operating profit 1,191 198 17 73 712 414 2,605
Net finance cost (178) 1 (177)
Share of after tax losses and joint (1) (1)
of associates ventures
Profit before taxation 1,012 198 17 73 712 415 2,427
Taxation (233) (39) (3) (15) (106) (6) (402)
Tax rate % 23.0% 16.6%
Profit after taxation from 779 159 14 58 606 409 2,025
continuing operations
Profit after taxation from 2,347 (2,347)
discontinued operations and other
gains/(losses) from the demerger
Remeasurement of discontinued 7,227 (7,227)
operations distributed to
shareholders on demerger
Profit after taxation from 9,574 (9,574) -
discontinued operations
Total profit after taxation 10,353 (9,574) 159 14 58 606 409 2,025
for the period
Profit attributable to non-controlling 20 115 135
interest from continuing operations
Profit attributable to shareholders 759 159 14 58 491 409 1,890
from continuing operations
Profit attributable to non-controlling 18 (18) -
interest from discontinued
operations
Profit attributable to shareholders 9,556 (9,556) -
from discontinued operations
10,353 (9,574) 159 14 58 606 409 2,025
Total profit attributable to 38 (18) 115 135
non-controlling interests
Total profit attributable to 10,315 (9,556) 159 14 58 491 409 1,890
shareholders
10,353 (9,574) 159 14 58 606 409 2,025
Earnings per share from continuing 18.8p 3.9p 0.4p 1.4p 12.2p 10.2p 46.9p
operations
Earnings per share from 237.1p (237.1)p -
discontinued operations
Total earnings per share 255.9p (237.1)p 3.9p 0.4p 1.4p 12.2p 10.2p 46.9p
Weighted average number 4,030 4,030
of shares (millions)
Three months ended 30 September 2021((a))
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 6,627 6,627
Cost of sales (2,016) 165 46 8 - (1,797)
Gross profit 4,611 165 46 8 - 4,830
Selling, general and administration (1,679) 39 17 (1,623)
Research and development (1,416) 26 264 12 2 (1,112)
Royalty income 114 114
Other operating income/(expense) (250) 283 (33) -
Operating profit 1,380 191 264 97 291 (14) 2,209
Net finance cost (191) 1 (190)
Share of after tax losses and joint 3 3
of associates ventures
Profit before taxation 1,192 191 264 97 291 (13) 2,022
Taxation (246) (34) (64) (20) (37) (1) (402)
Tax rate % 20.7% 19.9%
Profit after taxation from 946 157 200 77 254 (14) 1,620
continuing operations
Profit after taxation from 422 (422)
discontinued operations and other
gains/(losses) from the demerger
Remeasurement of discontinued - -
operations distributed to
shareholders on demerger
Profit after taxation from 422 (422) -
discontinued operations
Total profit after taxation 1,368 (422) 157 200 77 254 (14) 1,620
for the period
Profit attributable to non-controlling 69 52 121
interest from continuing operations
Profit attributable to shareholders 877 157 200 77 202 (14) 1,499
from continuing operations
Profit attributable to non-controlling 131 (131) -
interest from discontinued
operations
Profit attributable to shareholders 291 (291) -
from discontinued operations
1,368 (422) 157 200 77 254 (14) 1,620
Total profit attributable to 200 (131) 52 121
non-controlling interests
Total profit attributable to 1,168 (291) 157 200 77 202 (14) 1,499
shareholders
1,368 (422) 157 200 77 254 (14) 1,620
Earnings per share from continuing 21.9p 3.9p 5.0p 1.9p 5.1p (0.4)p 37.4p
operations
Earnings per share from 7.3p (7.3)p -
discontinued operations
Total earnings per share 29.2p (7.3)p 3.9p 5.0p 1.9p 5.1p (0.4)p 37.4p
Weighted average number 4,006 4,006
of shares (millions)
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
Major restructuring and integration
Total Major restructuring charges from continuing operations incurred in Q3
2022 were £73 million (Q3 2021: £97 million), analysed as follows:
Q3 2022 Q3 2021
Cash Non- Total Cash Non- Total
£m cash £m £m cash £m
£m £m
Separation Preparation restructuring 38 22 60 69 19 88
programme
Significant acquisitions 10 - 10 - - -
Legacy programmes 2 1 3 3 6 9
50 23 73 72 25 97
Cash charges of £38 million under the Separation Preparation programme
primarily arose from the restructuring of some administrative functions as
well as some global Supply Chain and R&D functions. The non-cash charges
of £22 million primarily reflected the write-down of assets in administrative
locations and manufacturing sites.
Total cash payments made in Q3 2022 were £60 million (Q3 2021: £127
million), £51 million (Q3 2021: £106 million) relating to the Separation
Preparation restructuring programme, £5 million relating to Significant
acquisitions (Q3 2021: £nil) and £4 million (Q3 2021: £21 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:
Q3 2022 Q3 2021
£m £m
Cost of sales 24 46
Selling, general and administration 42 39
Research and development 6 12
Other operating expenses 1 -
Total major restructuring costs from continuing operations 73 97
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 £712 million (Q3
2021: £290 million). This included a net £698 million accounting charge for
the remeasurement of contingent consideration liabilities and the liabilities
for the Pfizer put option and Pfizer and Shionogi preferential dividends in
ViiV Healthcare.
Charge/(credit) Q3 2022 Q3 2021
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint Venture 582 239
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 51 37
Contingent consideration on former Novartis Vaccines business 60 5
Other adjustments 19 9
Total transaction-related charges 712 290
The £582 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 £104 million and a charge of £478 million
primarily from exchange rates as well as adjustments to sales forecasts. The
£51 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 39.
Divestments, significant legal charges, and other items
Divestments, significant legal charges and other items primarily include a
fair value loss of £377 million on the retained stake in Haleon and certain
other Adjusting items. There was a charge of £45 million for Significant
Legal matters arising in the quarter, primarily reflecting provision for
increased legal fees in relation to Zantac. The Zantac litigation has now been
classified as a Significant Legal matter and all prospective costs will
therefore be included as an adjusting item. See Legal matters on page 50.
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 then 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 demerger was completed on 18 July 2022, resulting in Consumer
Healthcare being classified as a discontinued operation until that date.
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 Q3 2022 were £59 million (Q3
2021: £75 million). This includes £50 million relating to transaction costs
incurred in connection with the demerger and preparatory admission costs
related to the listing of Haleon.
Financial performance - nine months 2022
Total results
The Total results for the Group are set out below.
9 months 2022 9 months Growth Growth
£m 2021((a)) £% CER%
£m
Turnover 21,948 17,620 25 19
Cost of sales (7,316) (5,378) 36 35
Gross profit 14,632 12,242 20 12
Selling, general and administration (5,934) (4,877) 22 17
Research and development (3,691) (3,643) 1 (3)
Royalty income 552 280 97 97
Other operating income/(expense) (994) (137)
Operating profit 4,565 3,865 18 5
Finance income 50 14
Finance expense (609) (582)
Loss on disposal of interest in associates - (36)
Share of after tax profits of associates and joint ventures (4) 35
Profit before taxation 4,002 3,296 21 6
Taxation (706) (200)
Tax rate % 17.6% 6.1%
Profit after taxation from continuing operations 3,296 3,096 6 (7)
Profit after taxation from discontinued operations and 2,972 1,070 >100 >100
other gains/(losses) from the demerger
Remeasurement of discontinued operations 7,227 -
distributed to shareholders on demerger
Profit after taxation from discontinued operations 10,199 1,070 >100 >100
Total Profit after taxation for the period 13,495 4,166 >100 >100
Profit attributable to non-controlling interests 335 206
from continuing operations
Profit attributable to shareholders from 2,961 2,890
continuing operations
Profit attributable to non-controlling interests 205 324
from discontinued operations
Profit attributable to shareholders from 9,994 746
discontinued operations
13,495 4,166 >100 >100
Total Profit attributable to non-controlling interests 540 530
Total Profit attributable to shareholders 12,955 3,636
13,495 4,166
Earnings per share from continuing operations 73.6p 72.2p 2 (11)
Earnings per share from discontinued operations 248.4p 18.6p >100 >100
Total earnings per share 322.0p 90.8p >100 >100
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
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 on page 53). Reconciliations between Total results and Adjusted
results for nine months 2022 and nine months 2021 are set out on pages 30 to
31.
9 months 2022 % of Growth Growth
£m turnover £% CER%
Turnover 21,948 100 25 19
Cost of sales (6,711) (30.6) 41 40
Selling, general and administration (5,693) (25.9) 20 16
Research and development (3,540) (16.1) 9 5
Royalty income 552 2.5 97 97
Adjusted operating profit 6,556 29.9 27 16
Adjusted profit before tax 5,996 29 18
Adjusted profit after tax 5,030 32 21
Adjusted profit attributable to shareholders 4,584 32 21
Adjusted earnings per share 113.9p 31 20
Operating profit by segment
9 months 2022 % of Growth Growth
£m turnover £% CER%
Commercial Operations 10,371 47.3 18 11
Research and Development (3,548) 8 3
Segment profit 6,823 31.1 24 15
Corporate & other unallocated costs (267)
Adjusted operating profit 6,556 29.9 27 16
Turnover
Commercial Operations
9 months 2022 Growth Growth
£m £% CER%
HIV 4,071 16 9
Oncology 445 25 19
Immuno-inflammation, respiratory and other 1,888 27 20
6,404 19 13
Pandemic 2,184 >100 >100
Specialty Medicines 8,588 56 49
Meningitis 888 16 11
Influenza 438 1 (7)
Shingles 2,189 95 82
Established Vaccines 2,342 2 (2)
5,857 27 20
Pandemic Vaccines 6 (98) (98)
Vaccines 5,863 18 12
Respiratory 4,866 8 3
Other General Medicines 2,631 (1) (1)
General Medicines 7,497 5 2
Commercial Operations 21,948 25 19
US 10,918 30 18
Europe 4,693 22 24
International 6,337 18 18
Commercial Operations by region 21,948 25 19
Total turnover in the 9 months was £21,948 million, up 25% at AER, 19% at
CER, reflecting strong performance in all three product groups. Commercial
Operations turnover, excluding pandemic sales, grew 15% at AER, 10% at CER.
Specialty Medicines included £2,184 million sales of Xevudy, and double digit
AER growth of all therapy areas. Vaccines growth reflected strong Shingrix
performance assisted by demand recovery in the US, partially offset by
pandemic adjuvant sales in 2021. General Medicines reflected the recovery of
the antibiotics market as well as the strong performance of Trelegy in
respiratory across all regions.
Specialty Medicines
Specialty Medicines sales were £8,588 million, up 56% at AER, 49% at CER,
driven by consistent growth in all therapy areas. Specialty Medicines,
excluding sales of Xevudy, were £6,404 million up 19% at AER, 13% at CER.
HIV
HIV sales were £4,071 million with growth of 16% at AER and 9% at CER. The
performance benefited from strong patient demand for the new HIV medicines
(Dovato, Cabenuva, Juluca, Rukobia and Apretude). US pricing favourability
broadly offset International tender decline.
New HIV products delivered sales of over one and a half billion to £1,668
million, up 75% at AER, 65% at CER, representing 41% of the total HIV
portfolio compared to 27% year-to-date last year. Sales of the oral two drug
regimens Dovato and Juluca were £937 million and £444 million respectively
with combined growth of 52% at AER, 44% at CER. Cabenuva, the first long
acting injectable for the treatment of HIV-1 infection, recorded sales of
£211 million. Apretude, the first long acting injectable for the prevention
of HIV-1 delivered sales of £20 million.
Oncology
Oncology sales were £445 million, up 25% at AER, 19% at CER. Zejula sales of
£338 million were up 18% at AER, 13% at CER with diagnosis and treatment
rates continuing to be impacted by the pandemic especially in the US. Sales of
Blenrep of £91 million increased 36% at AER, 28% at CER, reflecting ongoing
launches and growth in launched markets.
Immuno-inflammation, Respiratory and Other
Immuno-inflammation, Respiratory and Other sales were £1,888 million up 27%
at AER, 20% at CER. Benlysta sales were £820 million, up 30% at AER, 20% at
CER, representing strong underlying demand worldwide. Nucala sales were
£1,028 million, up 24% at AER, 18% at CER, including US sales of £639
million up 28% at AER, 16% at CER. The performance reflected continued strong
patient demand and the launch of Nasal Polyps and EGPA indications.
Pandemic
Sales of Xevudy were £2,184 million, compared to £130 million sales in the
same period last year. Sales were delivered in all regions, comprising £818
million in the US, £437 million in Europe, and £929 million in
International.
Vaccines
Vaccines turnover was £5,863 million, up 18% at AER, 12% at CER, excluding
pandemic adjuvant sales, vaccine sales increased 27% at AER, 20% at CER. The
performance reflected a favourable comparator in H1 2021, which was impacted
by COVID-19 related disruptions in several markets, as well as strong
commercial execution of Shingrix, particularly in the US and Europe.
Meningitis
Meningitis vaccines sales grew 16% at AER, 11% at CER to £888 million mainly
driven by Bexsero (15% at AER, 11% at CER to £603 million) resulting from
higher CDC purchasing and increased share in the US.
Shingles
Shingrix sales grew 95% at AER, 82% at CER to £2,189 million mainly due to
post-pandemic rebound, strong commercial execution aimed at shifting the
shingles vaccination season forward, and wholesaler inventory build in the US,
and higher demand in Germany. All regions grew significantly with 51% of the
growth contributed from outside of the US. Shingrix is now available in 25
countries.
Established Vaccines
Established Vaccines grew 2% AER but declined 2% at CER to £2,342 million
mainly as a result of supply constraints in MMR/V vaccines, the negative
impact of a CDC stockpile borrow for Rotarix, and lower sales of Cervarix and
Synflorix. This decline was partially offset by higher demand for hepatitis
vaccines and Boostrix in the US and Europe.
General Medicines
General Medicines sales in the 9 months were £7,497 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 H2 2021, in Other General Medicines.
Respiratory
Respiratory sales were £4,866 million, up 8% at AER, 3% at CER. The
performance was driven by Trelegy sales of £1,272 million, up 47% at AER, 38%
at CER, including strong growth across all regions. Advair/Seretide sales of
£829 million decreased 19% at AER, 21% 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 £2,631 million, and decreased 1% at AER,
1% at CER. Augmentin sales were £409 million, up 38% at AER, 42% 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 £10,918 million, up 30% at AER, 18% at CER, including
Xevudy sales of £818 million. Sales grew 24% at AER, 13% at CER excluding
sales of pandemic assets.
In Specialty, HIV sales of £2,593 million were up 24% at AER, 12% at CER.
Growth benefited from favourable pricing mix and strong patient demand for all
new HIV products with sales of £1,104 million up 80% at AER, 64% at CER.
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, 4% at CER with diagnosis and treatment rates continuing
to be impacted by the pandemic.
Vaccine sales were £3,255 million, up 24% at AER, 13% at CER, excluding the
impact of COVID-19 vaccine adjuvant sales in 2021, sales increased 37% at AER,
24% at CER. The performance was primarily driven by Shingrix sales of £1,484
million up 66% at AER, 51% at CER, together with strong growth in Established
and Meningitis vaccines.
General Medicines sales were £2,699 million up 11% at AER, 1% at CER, driven
by strong respiratory sales of Trelegy, which increased 54% at AER, 40% at
CER, and reflected increased patient demand and growth of the single inhaler
triple therapy market.
Europe
In Europe, sales were £4,693 million, up 22% at AER, 24% at CER, including
Xevudy sales of £437 million contributing 13 percentage points of growth.
In Specialty Medicines, HIV sales were £966 million up 10% at AER, 12% at CER
primarily driven by strong patient demand from two drug regimens Dovato and
Juluca. Dovato delivered sales of £342 million and Juluca £95 million.
Benlysta in immunology, Nucala in respiratory, and Oncology medicines Zejula,
Blenrep and Jemperli all continued to show strong double-digit growth.
Vaccine sales were £1,305 million, up 33% at AER, 35% at CER. The performance
was driven by Shingrix sales of £484 million, >100% at AER, >100% at
CER, particularly in Germany.
General Medicines sales were £1,527 million and decreased 5% at AER, 4% at
CER, reflecting the ongoing impact of generic competitive pressures on
Seretide and the divestment in Q4 2021 of cephalosporins which caused 2
percentage points of drag. This was partly offset, however, by strong demand
for Trelegy and the growth of Augmentin following the post-pandemic rebound of
the antibiotic market since H2 2021.
International
International sales were £6,337 million, up 18% at AER, 18% at CER, including
Xevudy sales of £929 million. Sales grew 5% at AER, 5% at CER excluding sales
of pandemic assets.
In Specialty, HIV sales were £512 million and decreased 6% at AER, 9% at CER,
primarily driven by tender decline; strong Dovato growth partially offset the
performance. Combined Tivicay and Triumeq sales were £381 million, down 18%
at AER and 20% at CER. Nucala grew 24% at AER and 27% at CER in reflecting
biological market growth in Japan and strong uptake in Canada and Brazil.
Benlysta grew 46% at AER and 45% at CER reflecting addition to China's
National Reimbursement Drug List and market growth in Japan.
Vaccine sales were £1,303 million and decreased 4% at AER, 6% at CER.
Excluding the impact of COVID-19 vaccine adjuvant sales in the first 9 months
of 2021, sales grew 4% at AER, 2% at CER, primarily reflecting strong Shingrix
take-up in China, Canada and Japan offsetting phasing and supply constraint
impacts across the Established Vaccines portfolio.
General Medicines sales were £3,271 million up 5% at AER, 5% at CER.
Respiratory sales of £1,425 million increased 8% at AER, 8% at CER,
reflecting the strong growth of Trelegy, particularly in Japan, China, and
Canada. Sales of Advair/Seretide were stable at AER, down 1% at CER with the
adverse impact of generic competition offset by growth in certain markets due
to targeted promotion. Other General Medicines sales of £1,846 million
increased 2% at AER, 3% at CER, and reflected growth of Augmentin following
the post-pandemic rebound of the antibiotic market since Q3 2021.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 33.3%, 2.8 percentage
points higher at AER and 4.0 percentage points higher in CER terms than 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 30.6%, 3.6 percentage points higher at AER and 4.8
percentage points higher at CER compared with 2021. This primarily reflected
higher sales of lower margin Xevudy compared to 2021 which included higher
margin pandemic adjuvant sales, increasing cost of sales margin by 5.6
percentage points at AER and 5.6 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 27.0%, 0.6 percentage
points lower at AER and 0.5 percentage points lower at CER than in 2021 as the
growth in sales outweighed SG&A expenditure growth.
Adjusted SG&A costs as a percentage of turnover were 25.9%, 0.9 percentage
points lower at AER than in 2021 and 0.8 percentage points lower at CER.
Adjusted SG&A costs increased 20% 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 an unfavourable comparison to a beneficial legal settlement in
2021 and impairment provisions relating to Ukraine. This growth was partly
offset by the continuing benefit of restructuring and tight control of ongoing
costs.
Research and development
Adjusted R&D expenditure in the year-to-date increased by 9% at AER, and
5% at CER, to £3,540 million. This reflected continued increased investment
across Vaccine clinical development, including investments into the emerging
mRNA technology platform, continued investment in the late-stage portfolio and
several early discovery programmes as well as expenditure related to our
recent acquisition of Affinivax.
In addition, in Specialty Medicines, the level of R&D investment increased
to support the phase III programme for depemokimab, a potential new medicine
to treat severe asthma as well as in Oncology with new expenditure in
momelotinib, our potential new treatment of myelofibrosis patients with
anaemia, acquired as part of the recent Sierra Oncology acquisition. These
increases in investment were offset by decreases related to the completion of
several late-stage clinical development programmes and reduced R&D
investment in COVID-19 pandemic solutions versus 2021 as well as continued
efficiencies driven by the One R&D restructuring programme.
Royalty income
Royalty income was £552 million (2021: £280 million), up 97% at AER, 97% 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 expense was £994 million (2021: £137 million) reflecting
accounting charges of £1,729 million (2021: £489 million) arising from the
remeasurement of contingent consideration liabilities and the liabilities for
the Pfizer put option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare. This included a remeasurement charge of £1,423 million (2021:
£498 million) for the contingent consideration liability due to Shionogi,
including the unwinding of the discount for £300 million and a charge for
£1,123 million primarily from changes to exchange rates as well as
adjustments to sales forecasts. In addition, there was a fair value loss of
£377 million on the retained stake in Haleon reflecting a reduction in share
price since listing. This was partly offset by £0.9 billion upfront income
received from the settlement with Gilead.
Operating profit
Total operating profit was £4,565 million compared with £3,865 million in
2021. This included the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 19% at CER,
partly offset by higher remeasurement charges for contingent consideration
liabilities and a £377 million fair value loss on the retained stake in
Haleon. Adjusted operating profit was £6,556 million, 27% higher at AER and
16% at CER than 2021 on a turnover increase of 19% at CER. The Adjusted
operating margin of 29.9% was 0.5 percentage points higher at AER and 0.7
percentage points lower at CER compared to 2021. This primarily reflected the
impact from low margin COVID-19 solutions sales (Xevudy), which did not impact
on Adjusted Operating profit growth but reduced the Adjusted operating margin
by approximately 2.4 percentage points at AER and approximately 2.2 percentage
points at 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 2022 amounted to
£864 million (2021: £631 million). These included cash payments made to
Shionogi of £843 million (2021: £615 million).
Adjusted operating profit by business
Commercial Operations operating profit was £10,371 million, up 18% at AER and
11% at CER on a turnover increase of 19% at CER. The operating margin of 47.3%
was 2.6 percentage points lower at AER, 3.6 percentage points lower at CER
than in 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
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
increased Gardasil sales.
R&D segment operating expenses were £3,548 million, up 8% at AER, 3% at
CER, primarily reflecting increased investment in Vaccines including priority
investments for mRNA and late stage portfolio and Specialty Medicines in early
stage HIV and depemokimab. This was partly offset by the completion of several
late-stage clinical development programmes, a favourable comparator to 2021,
which saw increased levels of R&D investment due to COVID-19 pandemic
solutions and continued efficiencies driven by the R&D restructuring
programme.
Net finance costs
Total net finance costs were £559 million compared with £568 million in
2021. Adjusted net finance costs were £556 million compared with £566
million in 2021. The decrease is mainly driven by increased interest income
due to higher interest rates and larger cash balances as a result of the
Consumer demerger partly offset by adverse movements in foreign exchange rates
and higher interest on tax.
Share of after tax profits of associates and joint ventures
The share of after tax loss of associates and joint ventures was £4 million
(2021: £35 million share of profit). In 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 £706 million represented an effective tax rate on Total results
of 17.6% (2021: 6.1%) and reflected the different tax effects of the various
Adjusting items. Included in 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 rates from 19% to 25%. Tax on Adjusted profit
amounted to £966 million and represented an effective Adjusted tax rate of
16.1% (2021: 18.1%).
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
£335 million (2021: £206 million). The increase was primarily due to an
increased allocation of ViiV Healthcare profits of £292 million (2021: £205
million), including the Gilead upfront settlement income partly offset by
increased credits for remeasurement 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
£446 million (2021: £332 million). The increase in allocation primarily
reflected an increased allocation of ViiV Healthcare profits of £403 million
(2021: £331 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 73.6p compared with 72.2p in 2021.
This primarily reflected the £0.9 billion upfront income received from the
settlement with Gilead and increased profits on turnover growth of 19% at CER,
partly offset by higher remeasurement charges for contingent consideration
liabilities and a £377 million fair value loss on the retained stake in
Haleon 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 113.9p compared with 86.8p in 2021, up 31% at AER, 20% at
CER, on a 19% CER turnover increase. 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 increased
investment behind launches in Specialty Medicines including HIV and Vaccines
plus 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 business.
Profit after taxation from discontinued operations amounted to £10,199
million (2021: £1,070 million). This includes £9,578 million for the gain
arising on the demerger of Consumer Healthcare split between the amount
distributed to shareholders on demerger of £7,227 million and profit after
taxation on discontinued operations for the retained stake of £2,351 million.
In addition the Profit after taxation from discontinued operations for the
Consumer Healthcare business from 1 January to 18 July 2022 was £621 million
(2021: £1,070 million).
EPS from discontinued operations was 248.4p, compared with 18.6p in 2021. The
increase primarily reflected the gain arising on the demerger of the Consumer
Healthcare business recognised in Profit after taxation for discontinued
operations. For further details see page 54, discontinued operations.
Currency impact on 2022 results
The results for 2022 are based on average exchange rates, principally
£1/$1.26, £1/€1.18 and £1/Yen 160. Comparative exchange rates are given
on page 51. The period-end exchange rates were £1/$1.11, £1/€1.13 and
£1/Yen 160.
In the nine months, turnover was up 25% at AER and 19% at CER. Total EPS from
continuing operations was 73.6p compared with 72.2p in 2021. Adjusted EPS was
113.9p compared with 86.8p in 2021, up 31% at AER and 20% at CER. The
favourable currency impact primarily 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 negligible impact on the eleven percentage
point favourable currency impact on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for 2022 and
2021 are set out below.
Nine months ended 30 September 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 21,948 21,948
Cost of sales (7,316) 501 60 35 9 (6,711)
Gross profit 14,632 501 60 35 9 15,237
Selling, general and administration (5,934) 177 64 (5,693)
Research and development (3,691) 75 56 20 (3,540)
Royalty income 552 552
Other operating income/(expense) (994) 1 1,709 (716) -
Operating profit 4,565 576 56 258 1,744 (643) 6,556
Net finance cost (559) 1 2 (556)
Share of after tax losses and joint (4) (4)
of associates ventures
Profit before taxation 4,002 576 56 259 1,744 (641) 5,996
Taxation (706) (119) (10) (51) (237) 157 (966)
Tax rate % 17.6% 16.1%
Profit after taxation from 3,296 457 46 208 1,507 (484) 5,030
continuing operations
Profit after taxation from 2,972 (2,972) -
discontinued operations and other
gains/(losses) from the demerger
Remeasurement of discontinued 7,227 (7,227) -
operations distributed to
shareholders on demerger
Profit after taxation from 10,199 (10,199) -
discontinued operations
Total profit after taxation 13,495 (10,199) 457 46 208 1,507 (484) 5,030
for the period
Profit attributable to non-controlling 335 111 446
interest from continuing operations
Profit attributable to shareholders 2,961 457 46 208 1,396 (484) 4,584
from continuing operations
Profit attributable to non-controlling 205 (205) -
interest from discontinued
operations
Profit attributable to shareholders 9,994 (9,994) -
from discontinued operations
13,495 (10,199) 457 46 208 1,507 (484) 5,030
Total profit attributable to 540 (205) 111 446
non-controlling interests
Total profit attributable to 12,955 (9,994) 457 46 208 1,396 (484) 4,584
shareholders
13,495 (10,199) 457 46 208 1,507 (484) 5,030
Earnings per share from continuing 73.6p 11.4p 1.1p 5.2p 34.6p (12.0)p 113.9p
operations
Earnings per share from 248.4p (248.4)p -
discontinued operations
Total earnings per share 322.0p (248.4)p 11.4p 1.1p 5.2p 34.6p (12.0)p 113.9p
Weighted average number 4,024 4,024
of shares (millions)
Nine months ended 30 September 2021((a))
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 17,620 17,620
Cost of sales (5,378) 491 84 22 27 (4,754)
Gross profit 12,242 491 84 22 27 12,866
Selling, general and administration (4,877) 139 7 (4,731)
Research and development (3,643) 76 283 42 2 (3,240)
Royalty income 280 280
Other operating income/(expense) (137) 515 (378) -
Operating profit 3,865 567 283 265 537 (342) 5,175
Net finance cost (568) 1 1 (566)
Loss on disposal of interest (36) 36 -
in associates
Share of after tax losses and joint 35 35
of associates ventures
Profit before taxation 3,296 567 283 266 537 (305) 4,644
Taxation (200) (107) (68) (56) (101) (309) (841)
Tax rate % 6.1% 18.1%
Profit after taxation from 3,096 460 215 210 436 (614) 3,803
continuing operations
Profit after taxation from 1,070 (1,070) -
discontinued operations and other
gains/(losses) from the demerger
Remeasurement of discontinued - - -
operations distributed to
shareholders on demerger
Profit after taxation from 1,070 (1,070) -
discontinued operations
Total profit after taxation 4,166 (1,070) 460 215 210 436 (614) 3,803
for the period
Profit attributable to non-controlling 206 126 332
interest from continuing operations
Profit attributable to shareholders 2,890 460 215 210 310 (614) 3,471
from continuing operations
Profit attributable to non-controlling 324 (324) -
interest from discontinued
operations
Profit attributable to shareholders 746 (746) -
from discontinued operations
4,166 (1,070) 460 215 210 436 (614) 3,803
Total profit attributable to 530 (324) 126 332
non-controlling interests
Total profit attributable to 3,636 (746) 460 215 210 310 (614) 3,471
shareholders
4,166 (1,070) 460 215 210 436 (614) 3,803
Earnings per share from continuing 72.2p 11.5p 5.4p 5.2p 7.8p (15.3)p 86.8p
operations
Earnings per share from 18.6p (18.6)p -
discontinued operations
Total earnings per share 90.8p (18.6)p 11.5p 5.4p 5.2p 7.8p (15.3)p 86.8p
Weighted average number 4,001 4,001
of shares (millions)
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
Major restructuring and integration
Total Major restructuring charges from continuing operations incurred in 2022
were £258 million (2021: £265 million), analysed as follows:
9 months 2022 9 months 2021
Cash Non- Total Cash Non- Total
£m cash £m £m cash £m
£m £m
Separation Preparation restructuring 77 164 241 248 18 266
programme
Significant acquisitions 10 - 10 - - -
Legacy programmes 3 4 7 22 (23) (1)
90 168 258 270 (5) 265
Cash charges of £77 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
£164 million primarily reflected the write-down of assets in administrative
and manufacturing locations and impairment of IT assets.
Total cash payments made in 2022 were £273 million (2021: £417 million),
£240 million (2021: £319 million) relating to the Separation Preparation
restructuring programme, £5 million relating to Significant acquisitions
(2021: £nil) and £28 million (2021: £98 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:
9 months 2022 9 months 2021
£m £m
Cost of sales 60 84
Selling, general and administration 177 139
Research and development 20 42
Other operating expenses 1 -
Total Major restructuring costs from continuing operations 258 265
The benefit in the 9 months from restructuring programmes was £0.4 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 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 £1,744 million (2021: £537 million). This included a net £1,729
million accounting charge for the remeasurement of contingent consideration
liabilities and the liabilities for the Pfizer put option and Pfizer and
Shionogi preferential dividends in ViiV Healthcare.
Charge/(credit) 9 months 2022 9 months 2021
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint Venture 1,423 498
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 201 (53)
Contingent consideration on former Novartis Vaccines business 100 44
Other adjustments 20 48
Total transaction-related charges 1,744 537
The £1,423 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 £300 million and a charge of £1,123 million
primarily from exchange rates as well as adjustments to sales forecasts. The
£201 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 39.
Divestments, significant legal charges, and other items
Divestments, significant legal charges and other items primarily included the
£935 million upfront settlement income received from Gilead, as well as
milestone income and gains from a number of asset disposals, partly offset by
a fair value loss of £377 million on the retained stake in Haleon 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 2022 were £361 million (2021:
£184 million). This includes £102 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 £743 million including £140 million
relating to transaction costs.
Cash generation
Cash flow
Q3 2022 9 months 2022 9 months 2021
£m £m £m
Cash generated from operations attributable to 1,907 5,843 3,920
continuing operations (£m)
Cash generated from operations attributable to 10 928 1,122
discontinued operations (£m)
Total cash generated from operations (£m) 1,917 6,771 5,042
Net cash inflow from operating activities from 1,331 4,733 3,301
continuing operations
Net cash (outflow)/inflow from operating activities from (10) 765 884
discontinued operations
Total net cash generated from operating activities (£m) 1,321 5,498 4,185
Free cash inflow from continuing operations* (£m) 712 2,453 957
Free cash flow from continuing operations growth (%) (13)% >100% N/A
Free cash flow conversion from continuing operations* (%) 94% 83% 33%
Total net debt** (£m) 18,436 18,436 22,091
* Free cash flow from continuing operations and free cash flow conversion are
defined on page 65.
** Net debt is analysed on page 56.
Q3 2022
Cash generated from operations attributable to continuing operations for the
quarter was £1,907 million (Q3 2021: £2,161 million). The decrease primarily
reflected increased cash contributions to the UK defined benefit pension
schemes and unfavourable timing of profit share payments for Xevudy partly
offset by an increase in operating profit, including beneficial exchange,
favourable timing of returns and rebates and favourable timing of collections.
Cash generated from operations attributable to discontinued operations for the
quarter was £10 million (Q3 2021: £558 million).
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the quarter were £240 million (Q3 2021: £196
million), all of which was recognised in cash flows from operating activities.
These payments are deductible for tax purposes.
Free cash inflow from continued operations was £712 million for the quarter
(Q3 2021: £820 million). The reduction primarily reflected adverse timing of
profit share payments for Xevudy sales, increased cash contribution to
pensions and increased tax payments, partly offset by reduced purchases of
intangible assets, the increase in operating profit including beneficial
exchange, favourable timing of returns and rebates and favourable timing of
collections.
Nine months 2022
Cash generated from operations attributable to continuing operations for nine
months was £5,843 million (2021: £3,920 million). The increase primarily
reflected a significant increase in operating profit including the upfront
income from the settlement with Gilead, favourable exchange impact and
favourable timing of collections, partly offset by unfavourable timing of
profit share payments for Xevudy sales, increased cash contribution to
pensions, 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
2022 was £928 million (2021: £1,122 million).
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the nine months were £843 million (2021: £615
million), of which £774 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 £2,453 million for the nine
months (2021: £957 million). The increase primarily reflected a significant
increase in operating profit including the upfront income from the settlement
with Gilead, favourable exchange, reduced purchases of intangible assets and
favourable timing of collections. This was partly offset by unfavourable
timing of profit share payments for Xevudy sales, increased cash contributions
to pensions, increased contingent consideration payments reflecting the Gilead
settlement in February 2022, higher tax payments, lower proceeds from
disposals, higher capital expenditure and a higher seasonal increase in
inventory.
Total Net debt
At 30 September 2022, net debt was £18.4 billion, compared with £19.8
billion at 31 December 2021, comprising gross debt of £22.1 billion and cash
and liquid investments of £3.7 billion.
Net debt reduced by £1.4 billion due to £2.5 billion free cash flow from
continuing operations and £7.2 billion decrease from discontinued operations
as a result of the demerger primarily reflecting £7.1 billion of
pre-separation dividends attributable to GSK funded by Consumer Healthcare
debt. This was partly offset by purchases of businesses of £3.0 billion
reflecting the acquisitions of Sierra Oncology and Affinivax, dividends paid
to shareholders of £2.8 billion, £2.4 billion of net adverse exchange
impacts from the translation of non-Sterling denominated debt and exchange on
other financing items and £0.1 billion purchases of equity investments.
At 30 September 2022, GSK had short-term borrowings (including overdrafts and
lease liabilities) repayable within 12 months of £2.8 billion with loans of
£2.0 billion repayable in the subsequent year.
Returns to shareholders
Quarterly dividends
The Board has declared a third dividend for 2022 of 13.75p per share
retrospectively adjusted for the Share Consolidation (Q3 2021: 23.75p restated
pence per share).
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 (before the share consolidation)
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 third quarter of 2022 converts to 13.75p per
new ordinary share. The expected dividend for the last quarter of 2022 is
expected to be 13.75p resulting in an expected total dividend for the second
half of 2022 of 27.5p per new ordinary share and the expected dividend for
2023 converts to 56.5p per new ordinary share rounded up.
Payment of dividends
The equivalent interim dividend receivable by ADR holders will be calculated
based on the exchange rate on 10 January 2023. 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 17 November 2022, with a record date of 18 November 2022 and a
payment date of 12 January 2023.
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 16.25 655
Third interim 12 January 2023 11 13.75 555
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
The demerger of the Consumer Healthcare business was implemented by GSK
declaring an interim dividend in specie of Haleon plc shares. The fair value
of the distribution was £15.5 billion.
For details of the Share Consolidation see page 55.
Weighted average number of shares
Q3 2022 Q3 2021
millions millions((a))
Weighted average number of shares - basic 4,030 4,006
Dilutive effect of share options and share awards 58 48
Weighted average number of shares - diluted 4,088 4,054
Weighted average number of shares
9 months 2022 9 months 2021
millions millions((a))
Weighted average number of shares - basic 4,024 4,001
Dilutive effect of share options and share awards 58 48
Weighted average number of shares - diluted 4,082 4,049
(a) See page 55 for details of the Share Consolidation.
At 30 September 2022, 4,034 million shares (Q3 2021: 4,006 million) were in
free issue (excluding Treasury shares and shares held by the ESOP Trusts). GSK
made no share repurchases during the period. The company issued 0.1 million
shares under employee share schemes in the period for proceeds of £5 million
(Q3 2021: £1 million).
At 30 September 2022, the ESOP Trusts held 33.2 million GSK shares against the
future exercise of share options and share awards. The carrying value of £197
million has been deducted from other reserves. The market value of these
shares was £437 million.
At 30 September 2022, the company held 243.9 million Treasury shares 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 66.
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 21) 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 18, 19, 30 and
31.
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 remeasurements 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 the nine
months to September 2022 were £843 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 statement
Q3 2022 Q3 2021((a)) 9 months 9 months
£m £m 2022 2021((a))
£m £m
TURNOVER 7,829 6,627 21,948 17,620
Cost of sales (2,423) (2,016) (7,316) (5,378)
Gross profit 5,406 4,611 14,632 12,242
Selling, general and administration (2,056) (1,679) (5,934) (4,877)
Research and development (1,346) (1,416) (3,691) (3,643)
Royalty income 255 114 552 280
Other operating income/(expense) (1,068) (250) (994) (137)
OPERATING PROFIT 1,191 1,380 4,565 3,865
Finance income 22 4 50 14
Finance expense (200) (195) (609) (582)
Loss on disposal of interests in associates - - - (36)
Share of after tax (losses)/profits of associates (1) 3 (4) 35
and joint ventures
PROFIT BEFORE TAXATION 1,012 1,192 4,002 3,296
Taxation (233) (246) (706) (200)
Tax rate % 23.0% 20.7% 17.6% 6.1%
PROFIT AFTER TAXATION FROM CONTINUING 779 946 3,296 3,096
OPERATIONS
Profit after taxation from discontinued operations and 2,347 422 2,972 1,070
other gains/(losses) from the demerger
Remeasurement of discontinued operations distributed 7,227 - 7,227 -
to shareholders on demerger
PROFIT AFTER TAXATION FROM DISCONTINUED 9,574 422 10,199 1,070
OPERATIONS((b))
PROFIT AFTER TAXATION FROM THE PERIOD 10,353 1,368 13,495 4,166
Profit attributable to non-controlling interests 20 69 335 206
from continuing operations
Profit attributable to shareholders from 759 877 2,961 2,890
continuing operations
Profit attributable to non-controlling interests 18 131 205 324
from discontinued operations
Profit attributable to shareholders from 9,556 291 9,994 746
discontinued operations
10,353 1,368 13,495 4,166
Profit attributable to non-controlling interests 38 200 540 530
Profit attributable to shareholders 10,315 1,168 12,955 3,636
10,353 1,368 13,495 4,166
EARNINGS PER SHARE FROM CONTINUING 18.8p 21.9p 73.6p 72.2p
OPERATIONS
EARNINGS PER SHARE FROM DISCONTINUED 237.1p 7.3p 248.4p 18.6p
OPERATIONS
TOTAL EARNINGS PER SHARE 255.9p 29.2p 322.0p 90.8p
Diluted earnings per share from continuing 18.6p 21.6p 72.5p 71.4p
operations
Diluted earnings per share from discontinued 233.7p 7.2p 244.8p 18.4p
operations
Total diluted earnings per share 252.3p 28.8p 317.3p 89.8p
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
(b) See page 54 for further details on profit after tax from discontinued
operations.
Statement of comprehensive income
Q3 2022 Q3 2021((a)) 9 months 9 months
£m £m 2022 2021((a))
£m £m
Total profit for the period 10,353 1,368 13,495 4,166
Items that may be reclassified subsequently to continuing operations income
statement:
Exchange movements on overseas net assets 93 (169) (105) (209)
and net investment hedges
Reclassification of exchange movements on 1 - 10 (10)
liquidation or disposal of overseas subsidiaries
and associates
Fair value movements on cash flow hedges 11 (2) 13 (4)
Reclassification of cash flow hedges to income (1) (5) 12 11
statement
Deferred tax on fair value movements on cash 17 2 17 (1)
flow hedges
121 (174) (53) (213)
Items that will not be reclassified to continuing operations income statement:
Exchange movements on overseas net assets (5) 6 (5) (1)
of non-controlling interests
Fair value movements on equity investments (24) (453) (648) (295)
Tax on fair value movements on equity 4 60 61 98
investments
Remeasurement gains on defined benefit plans (1,195) 49 (682) 334
Tax on remeasurement losses on defined 303 (13) 177 (65)
benefit plans
(917) (351) (1,097) 71
Other comprehensive (expense)/income for the (796) (525) (1,150) (142)
period from continuing operations
Other comprehensive income/(expense) for the (595) 301 333 100
period from discontinued operations
Total comprehensive income for the period 8,962 1,144 12,678 4,124
Total comprehensive income for the period
attributable to:
Shareholders 8,904 908 12,143 3,595
Non-controlling interests 58 236 535 529
8,962 1,144 12,678 4,124
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
Specialty Medicines turnover - three months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
HIV 1,486 19 7 1,002 28 11 331 11 11 153 (11) (17)
Dolutegravir products 1,328 11 1 876 17 1 312 9 8 140 (13) (18)
Tivicay 342 (3) (13) 227 11 (3) 67 (1) (1) 48 (40) (48)
Triumeq 467 (7) (16) 325 (3) (16) 87 (20) (20) 55 (10) (13)
Juluca 159 22 8 124 25 8 32 14 11 3 - -
Dovato 360 73 60 200 82 57 126 54 54 34 >100 >100
Rukobia 21 62 54 21 75 50 1 - - (1) - -
Cabenuva 101 >100 >100 87 >100 >100 11 >100 >100 3 >100 >100
Apretude 10 - - 10 - - - - - - - -
Other 26 (19) (37) 8 (38) (54) 7 - (14) 11 (8) (33)
Oncology 164 28 19 83 14 (1) 70 37 37 11 >100 >100
Zejula 120 19 11 58 4 (9) 51 24 27 11 >100 >100
Blenrep 36 44 32 20 25 6 16 >100 >100 - - -
Jemperli 8 >100 >100 5 >100 >100 3 >100 >100 - - -
Immuno- 688 29 17 484 31 13 96 20 19 108 30 30
inflammation,
respiratory and other
Benlysta 308 29 15 257 28 11 21 24 24 30 43 38
Nucala 366 28 18 226 34 15 76 21 21 64 21 23
Other 14 56 22 1 - - (1) - - 14 56 56
Speciality Medicines 2,338 22 11 1,569 28 11 497 16 15 272 5 1
excluding pandemic
Pandemic 411 >100 >100 25 56 (87) 3 >100 >100 383 >100 >100
Xevudy 411 >100 >100 25 56 (87) 3 >100 >100 383 >100 >100
Specialty Medicines 2,749 36 24 1,594 29 10 500 17 16 655 84 83
Specialty Medicines turnover - nine months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
HIV 4,071 16 9 2,593 24 12 966 10 12 512 (6) (9)
Dolutegravir products 3,709 10 4 2,313 15 4 919 9 10 477 (7) (9)
Tivicay 1,008 (5) (10) 588 4 (5) 204 (5) (3) 216 (23) (27)
Triumeq 1,320 (6) (12) 877 (1) (10) 278 (19) (17) 165 (9) (10)
Juluca 444 19 11 339 20 9 95 17 19 10 - -
Dovato 937 76 68 509 78 62 342 64 67 86 >100 >100
Rukobia 56 87 73 54 86 69 2 >100 100 - - -
Cabenuva 211 >100 >100 182 >100 >100 25 >100 >100 4 >100 >100
Apretude 20 - - 20 - - - - - - - -
Other 75 (22) (27) 24 (35) (46) 20 (20) (24) 31 (9) (9)
Oncology 445 25 19 235 14 4 186 30 32 24 >100 >100
Zejula 338 18 13 172 7 (2) 142 20 23 24 >100 >100
Blenrep 91 36 28 55 25 14 36 64 64 - - -
Jemperli 16 >100 >100 8 >100 >100 8 >100 >100 - - -
Immuno- 1,888 27 20 1,318 29 17 272 13 15 298 35 38
inflammation,
respiratory and other
Benlysta 820 30 20 678 29 18 60 20 22 82 46 45
Nucala 1,028 24 18 639 28 16 215 13 15 174 24 27
Other 40 67 62 1 - - (3) - - 42 75 83
Speciality Medicines 6,404 19 13 4,146 25 13 1,424 13 15 834 8 6
excluding pandemic
Pandemic 2,184 >100 >100 818 >100 >100 437 >100 >100 929 >100 >100
Xevudy 2,184 >100 >100 818 >100 >100 437 >100 >100 929 >100 >100
Specialty Medicines 8,588 56 49 4,964 49 35 1,861 48 50 1,763 99 100
Vaccines turnover - three months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Meningitis 441 25 16 281 24 11 91 11 10 69 57 59
Bexsero 275 23 15 166 31 17 85 10 10 24 20 20
Menveo 157 25 14 115 16 3 4 - - 38 65 65
Other 9 >100 >100 - - - 2 >100 - 7 >100 >100
Influenza 388 1 (7) 330 1 (8) 28 22 26 30 (14) (20)
Fluarix, FluLaval 388 1 (7) 330 1 (8) 28 22 26 30 (14) (20)
Shingles 760 51 36 475 23 5 173 92 92 112 >100 >100
Shingrix 760 51 36 475 23 5 173 92 92 112 >100 >100
Established 884 5 (2) 380 7 (7) 190 3 3 314 4 1
Vaccines
Infanrix, Pediarix 188 21 10 116 13 (1) 41 71 71 31 7 (3)
Boostrix 179 7 (3) 122 15 1 36 (3) (5) 21 (12) (17)
Hepatitis 164 15 5 103 12 (2) 38 41 48 23 - (17)
Rotarix 143 (7) (8) 25 (31) (42) 29 - - 89 1 2
Synflorix 72 9 6 - - - 8 (27) (18) 64 16 11
Priorix, Priorix 51 (43) (44) 1 - - 22 (46) (41) 28 (42) (48)
Tetra, Varilrix
Cervarix 40 18 12 - - - 7 - - 33 22 15
Other 47 38 26 13 (24) (59) 9 - (33) 25 >100 >100
Vaccines excluding 2,473 19 9 1,466 13 (1) 482 27 27 525 29 25
pandemic
Pandemic vaccines 6 (94) (94) - (100) (100) - - - 6 (91) (91)
Pandemic adjuvant 6 (94) (94) - (100) (100) - - - 6 (91) (91)
Vaccines 2,479 14 5 1,466 11 (3) 482 27 27 531 13 8
Vaccines turnover - nine months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Meningitis 888 16 11 500 28 16 261 (3) (1) 127 17 19
Bexsero 603 15 11 297 36 24 245 (2) (1) 61 13 17
Menveo 268 20 12 203 18 7 12 (8) (8) 53 36 38
Other 17 (15) (15) - - - 4 - - 13 (19) (19)
Influenza 438 1 (7) 332 2 (7) 28 22 26 78 (9) (14)
Fluarix, FluLaval 438 1 (7) 332 2 (7) 28 22 26 78 (9) (14)
Shingles 2,189 95 82 1,484 66 51 484 >100 >100 221 >100 >100
Shingrix 2,189 95 82 1,484 66 51 484 >100 >100 221 >100 >100
Established 2,342 2 (2) 939 21 10 532 1 2 871 (12) (13)
Vaccines
Infanrix, Pediarix 483 13 6 279 14 4 101 11 12 103 12 7
Boostrix 463 14 7 287 33 21 107 (1) - 69 (18) (19)
Hepatitis 445 28 21 279 35 23 106 39 43 60 (6) (12)
Rotarix 380 (5) (5) 74 (12) (20) 90 5 7 216 (6) (3)
Synflorix 237 (11) (11) - - - 24 (25) (22) 213 (9) (9)
Priorix, Priorix 138 (33) (33) 1 - - 73 (25) (23) 64 (41) (44)
Tetra, Varilrix
Cervarix 91 (21) (25) - - - 15 (32) (32) 76 (18) (24)
Other 105 (13) (16) 19 (17) (35) 16 - (6) 70 (15) (12)
Vaccines excluding 5,857 27 20 3,255 37 24 1,305 33 35 1,297 4 2
pandemic
Pandemic vaccines 6 (98) (98) - (100) (100) - - - 6 (95) (95)
Pandemic adjuvant 6 (98) (98) - (100) (100) - - - 6 (95) (95)
Vaccines 5,863 18 12 3,255 24 13 1,305 33 35 1,303 (4) (6)
General Medicines turnover - three months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Respiratory 1,682 13 4 863 16 - 329 2 2 490 15 12
Arnuity Ellipta 19 6 (6) 17 13 - - - - 2 (33) (33)
Anoro Ellipta 129 (1) (8) 65 (13) (24) 41 8 8 23 35 29
Avamys/Veramyst 71 16 11 - - - 15 7 - 56 19 15
Flixotide/Flovent 141 23 10 95 17 1 16 - - 30 67 56
Incruse Ellipta 56 10 - 33 27 12 15 (12) (6) 8 - (25)
Relvar/Breo Ellipta 312 20 11 156 47 26 83 1 1 73 - -
Seretide/Advair 265 (18) (23) 58 (50) (58) 66 (6) (7) 141 3 (1)
Trelegy Ellipta 465 43 28 340 48 28 60 15 15 65 44 42
Ventolin 190 7 (2) 98 5 (10) 26 (4) (4) 66 14 10
Other Respiratory 34 21 25 1 (67) >(100) 7 17 17 26 37 47
Other General Medicines 919 (2) (4) 92 11 (4) 173 (14) (15) 654 1 1
Dermatology 94 (2) (2) - - - 24 (23) (23) 70 8 8
Augmentin 150 32 32 - - - 34 - (3) 116 45 46
Avodart 86 1 (4) - - - 27 (7) (7) 59 5 (2)
Lamictal 132 6 (2) 70 17 - 27 (7) (7) 35 - (3)
Other((a)) 457 (12) (12) 22 (4) (13) 61 (23) (23) 374 (9) (9)
General Medicines 2,601 7 1 955 15 (1) 502 (4) (5) 1,144 7 5
General Medicines turnover - nine months ended 30 September 2022
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Respiratory 4,866 8 3 2,431 11 1 1,010 1 3 1,425 8 8
Arnuity Ellipta 45 32 21 39 39 29 - - - 6 - (17)
Anoro Ellipta 345 (9) (13) 165 (23) (30) 118 7 9 62 11 11
Avamys/Veramyst 239 5 5 - - - 51 2 2 188 6 6
Flixotide/Flovent 411 22 15 278 27 16 52 11 13 81 14 13
Incruse Ellipta 157 1 (4) 88 7 (2) 48 (11) (9) 21 5 -
Relvar/Breo Ellipta 896 7 3 426 15 4 253 2 4 217 (2) -
Seretide/Advair 829 (19) (21) 203 (45) (50) 212 (13) (12) 414 - (1)
Trelegy Ellipta 1,272 47 38 932 54 40 171 17 18 169 50 51
Ventolin 565 6 1 300 2 (7) 83 8 10 182 12 10
Other Respiratory 107 6 8 - - - 22 10 10 85 6 9
Other General Medicines 2,631 (1) (1) 268 10 - 517 (15) (14) 1,846 2 3
Dermatology 277 (7) (6) - - - 79 (21) (20) 198 - 1
Augmentin 409 38 42 - - - 107 24 27 302 44 48
Avodart 248 (2) (4) - - - 81 (9) (8) 167 2 (1)
Lamictal 379 6 1 194 14 4 80 (6) (5) 105 4 2
Other((a)) 1,318 (10) (9) 74 3 (6) 170 (32) (31) 1,074 (5) (3)
General Medicines 7,497 5 2 2,699 11 1 1,527 (5) (4) 3,271 5 5
(a) Includes contract manufacturing revenue from Haleon. At H1 2022 this revenue
was not captured in the 'Other' line but was included in the total Other
General Medicines line.
Commercial Operations turnover
Total US Europe International
Growth Growth Growth Growth
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
Three months ended 7,829 18 9 4,015 18 2 1,484 11 11 2,330 22 20
30 September 2022
Nine months ended 21,948 25 19 10,918 30 18 4,693 22 24 6,337 18 18
30 September 2022
Balance sheet
30 September 2022 31 December 2021
£m £m
ASSETS
Non-current assets
Property, plant and equipment 8,901 9,932
Right of use assets 749 740
Goodwill 7,195 10,552
Other intangible assets 15,589 30,079
Investments in associates and joint ventures 71 88
Other investments 1,559 2,126
Deferred tax assets 4,818 5,218
Derivative financial instruments 12 18
Other non-current assets 1,170 1,676
Total non-current assets 40,064 60,429
Current assets
Inventories 4,659 5,783
Current tax recoverable 586 486
Trade and other receivables 7,508 7,860
Derivative financial instruments 216 188
Current equity investments 3,482 -
Liquid investments 73 61
Cash and cash equivalents 3,606 4,274
Assets held for sale 119 22
Total current assets 20,249 18,674
TOTAL ASSETS 60,313 79,103
LIABILITIES
Current liabilities
Short-term borrowings (2,793) (3,601)
Contingent consideration liabilities (967) (958)
Trade and other payables (16,115) (17,554)
Derivative financial instruments (325) (227)
Current tax payable (129) (489)
Short-term provisions (624) (841)
Total current liabilities (20,953) (23,670)
Non-current liabilities
Long-term borrowings (19,322) (20,572)
Corporation tax payable (218) (180)
Deferred tax liabilities (364) (3,556)
Pensions and other post-employment benefits (2,928) (3,113)
Other provisions (561) (630)
Derivative financial instruments (1) (1)
Contingent consideration liabilities (6,360) (5,118)
Other non-current liabilities (890) (921)
Total non-current liabilities (30,644) (34,091)
TOTAL LIABILITIES (51,597) (57,761)
NET ASSETS 8,716 21,342
EQUITY
Share capital 1,347 1,347
Share premium account 3,440 3,301
Retained earnings 2,592 7,944
Other reserves 1,773 2,463
Shareholders' equity 9,152 15,055
Non-controlling interests (436) 6,287
TOTAL EQUITY 8,716 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 12,955 12,955 540 13,495
Other comprehensive (259) (553) (812) (5) (817)
income/(expense) for the period
Total comprehensive income/(expense) 12,696 (553) 12,143 535 12,678
for the period
Distributions to non-controlling interests (1,278) (1,278)
Non-cash distribution to non-controlling (2,960) (2,960)
interest
Deconsolidation of former subsidiaries (3,028) (3,028)
Contributions from non-controlling 8 8
interests
Dividends to shareholders (2,813) (2,813) (2,813)
Non-cash dividend to shareholder (15,526) (15,526) (15,526)
Shares issued - 25 25 25
Shares acquired by ESOP Trusts 114 704 (818) - -
Share of associates and joint ventures (1) 1 - -
realised profits on disposal of equity
investments
Realised after tax losses on disposal 14 (14) - -
or liquidation of equity investments
Shares held by ESOP trust (164) 164 - -
Write-down on shares held by ESOP (530) 530 - -
Trusts
Share-based incentive plans 268 268 268
At 30 September 2022 1,347 3,440 2,592 1,773 9,152 (436) 8,716
At 1 January 2021 1,346 3,281 6,755 3,205 14,587 6,221 20,808
Profit for the period 3,636 3,636 530 4,166
Other comprehensive (expense)/ 148 (189) (41) (1) (42)
income for the period
Total comprehensive income for the 3,784 (189) 3,595 529 4,124
period
Distributions to non-controlling interests (435) (435)
Contributions from non-controlling 7 7
interests
Dividends to shareholders (3,048) (3,048) (3,048)
Shares issued 1 19 20 20
Realised after tax profits on disposal 146 (146) - -
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 (135) 135 - -
Trusts
Share-based incentive plans 272 272 272
At 30 September 2021 1,347 3,300 7,783 2,996 15,426 6,322 21,748
Cash flow statement - nine months ended 30 September 2022
(amounts presented are from continuing operations unless otherwise specified)
9 months 2022 9 months 2021((a))
£m £m
Profit after tax from continuing operations 3,296 3,096
Tax on profits 706 200
Share of after tax losses/(profits) of associates and joint ventures 4 (35)
Loss on disposal of interests in associates - 36
Net finance expense 559 567
Depreciation, amortisation and other adjusting items 2,291 1,815
Increase in working capital (667) (1,203)
Contingent consideration paid (789) (548)
Increase/(decrease) in other net liabilities (excluding contingent 443 (8)
consideration paid)
Cash generated from operations attributable to continuing operations 5,843 3,920
Taxation paid (1,110) (619)
Net cash inflow from continuing operating activities 4,733 3,301
Cash generated from operations attributable to discontinued operations 928 1,122
Taxation paid from discontinued operations (163) (238)
Net operating cash flows attributable to discontinued operations 765 884
Total net cash inflows from operating activities 5,498 4,185
Cash flow from investing activities
Purchase of property, plant and equipment (705) (576)
Proceeds from sale of property, plant and equipment 13 118
Purchase of intangible assets (802) (1,531)
Proceeds from sale of intangible assets 126 358
Purchase of equity investments (121) (146)
Purchase of business net of cash acquired (3,030) -
Proceeds from sale of equity investments 115 195
Share transaction with minority shareholders 1 1
Contingent consideration paid (75) (83)
Disposal of businesses (19) (25)
Investment in associates and joint ventures (1) (1)
Proceeds from disposal of associates and joint ventures - 277
Interest received 49 14
Decrease in liquid investments - 18
Dividends from associates and joint ventures - 9
Net cash outflow from continuing investing activities (4,449) (1,372)
Net investing cash flows attributable to discontinued operations (3,783) (44)
Total net cash outflow from investing activities (8,232) (1,416)
Cash flow from financing activities
Issue of share capital 25 20
Decrease in long-term loans (9) (1)
Net repayment of short-term loans (4,207) (578)
Repayment of lease liabilities (149) (134)
Interest paid (504) (474)
Dividends paid to shareholders (2,813) (3,048)
Distributions to non-controlling interests (390) (186)
Contributions from non-controlling interests 8 7
Other financing items 126 (106)
Net cash outflow from continuing financing activities (7,913) (4,500)
Net financing cash flows attributable to discontinued operations 10,074 (315)
Total net cash inflow/(outflow) from financing activities 2,161 (4,815)
Increase/(decrease) in cash and bank overdrafts in the period (573) (2,046)
Cash and bank overdrafts at beginning of the period 3,819 5,261
Exchange adjustments 106 (21)
Increase/(decrease) in cash and bank overdrafts (573) (2,046)
Cash and bank overdrafts at end of the period 3,352 3,194
Cash and bank overdrafts at end of the period comprise:
Cash and cash equivalents 3,606 3,453
3,606 3,453
Overdrafts (254) (259)
3,352 3,194
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21) and the impact of Share Consolidation implemented on 18 July
2022 (see page 55).
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 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
Q3 2022 Q3 2021 Growth Growth
£m £m £% CER%
Commercial Operations (total turnover) 7,829 6,627 18 9
Operating profit by segment
Q3 2022 Q3 2021((a)) Growth Growth
£m £m £% CER%
Commercial Operations 3,950 3,458 14 2
Research and Development (1,301) (1,138) 14 6
Segment profit 2,649 2,320 14 1
Corporate and other unallocated costs (44) (111)
Adjusted operating profit 2,605 2,209 18 4
Adjusting items (1,414) (829)
Total operating profit 1,191 1,380 (14) (35)
Finance income 22 4
Finance costs (200) (195)
Share of after tax (losses)/profits of (1) 3
associates and joint ventures
Profit before taxation from continuing operations 1,012 1,192 (15) (39)
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21).
Adjusting items reconciling 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
9 months 2022 9 months 2021 Growth Growth
£m £m £% CER%
Commercial Operations (total turnover) 21,948 17,620 25 19
Operating profit by segment
9 months 2022 9 months Growth Growth
£m 2021((a)) £% CER%
£m
Commercial Operations 10,371 8,770 18 11
Research and Development (3,548) (3,286) 8 3
Segment profit 6,823 5,484 24 15
Corporate and other unallocated costs (267) (309)
Adjusted operating profit 6,556 5,175 27 16
Adjusting items (1,991) (1,310)
Total operating profit 4,565 3,865 18 5
Finance income 50 14
Finance costs (609) (582)
Loss on disposal of interests in associates - (36)
Share of after tax (losses)/profits of (4) 35
associates and joint ventures
Profit before taxation from continuing operations 4,002 3,296 21 6
(a) The 2021 comparative results have been restated on a consistent basis from
those previously published to reflect the demerger of the Consumer Healthcare
business
(see page 21).
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 September
2022, the Group's aggregate provision for legal and other disputes (not
including tax matters described on page 28 was £0.3 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.
Significant legal developments since the date of the Q2 2022 results:
Zantac
The Zantac litigation continues in federal and state courts in the United
States. GSK's position on the scientific validity of these cases has not
changed since the last reporting period. GSK will continue to defend all
claims vigorously.
GSK has been named as a co-defendant in approximately 4,100 filed personal
injury cases in federal and state court. There are approximately 77,000
plaintiffs named in these cases. A significant majority of these plaintiffs
were named in a series of multi-plaintiff complaints recently filed in
Delaware state court and most of these plaintiffs were previously in the
Multidistrict Litigation (MDL) Census Registry in the Southern District of
Florida. They were removed because they allege a cancer other than the 5
cancers being pursued by the MDL plaintiffs. In the MDL, plaintiffs originally
identified 10 different types of cancers they wished to pursue. Plaintiffs
subsequently dropped 5 of the 10 cancers, and they are proceeding only as to
bladder, esophageal, gastric, liver, and pancreatic, although plaintiffs in
state courts continue to pursue claims beyond the 5 designated cancers. There
are approximately 33,000 unfiled claims relating to GSK and other
co-defendants concerning the 5 designated cancers in the MDL Census Registry.
There are also over 2,000 California state court cases subject to an agreement
between GSK and the plaintiffs which suspends the statute of limitations to
allow the plaintiffs to bring their claims at a later date. These filed and
unfiled counts are subject to change.
As planned, in September and October 2022, the MDL Court held hearings on the
admissibility of each side's general causation expert witnesses ("Daubert
hearings"). Based on the 12 epidemiological studies conducted looking at human
data regarding the use of ranitidine, the scientific consensus is that there
is no consistent or reliable evidence that ranitidine increases the risk of
any type of cancer. The 12th additional epidemiologic study (Wang et al.
(2022)) was recently released. When comparing ranitidine to an active
comparator (famotidine), Wang 2022 found a statistically significant increased
risk with regard to liver cancer (Hazard Ratio 1.22, 95% Confidence Interval
1.06-1.40) and no statistically significant increased risk for the remaining 4
cancers pursued in the MDL. Consistency across available epidemiological
evidence, particularly where reported potential associations are modest, is
critical for drawing reliable conclusions about causation. The parties await a
decision from Judge Robin L. Rosenberg.
In the California Zantac litigation Cases JCCP 5150 (JCCP), the Court will
hold a Sargon hearing on 25 January 2023 regarding the admissibility of expert
witnesses, including general causation expert witnesses, for the first
bellwether trials. The first bellwether trial is expected to start on 13
February 2023 in the California JCCP.
The Illinois Supreme Court recently consolidated all Illinois ranitidine cases
in Cook County for pretrial proceedings with trial dates to be set, including
the previously scheduled Madison County trial.
Given the complex ownership and marketing of Zantac prescription and
over-the-counter (OTC) medicine over many years, numerous claims involve
several defendants. As a result, some defendants have served one another,
including GSK, with notice of potential indemnification claims about possible
liabilities connected particularly with Zantac OTC. Given the early stage of
the proceedings, GSK cannot meaningfully assess what liability, if any, it may
have, nor can it meaningfully assess the liability of other parties under
relevant indemnification provisions.
Further information regarding the litigation can be found in GSK's 11 August
2022 and 16 August 2022 statements. These are available on www.gsk.com.
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 nine months ended 30 September 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 on an as-needed basis. GSK is encouraged by the uptake in
demand in the third 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. However, the pandemic remains a significant ongoing
risk with new variants constantly emerging. Current infections are
predominantly driven by the circulation of the BA.5 subvariant of Omicron,
while COVID-19 vaccines are being updated with Omicron variants to provide
broader immunity against circulating and emerging variants. These subvariants
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:
Q3 2022 Q3 2021 9 months 2022 9 months 2021 2021
Average rates:
US$/£ 1.18 1.37 1.26 1.38 1.38
Euro/£ 1.16 1.16 1.18 1.15 1.16
Yen/£ 161 151 160 150 151
Period-end rates:
US$/£ 1.11 1.34 1.11 1.34 1.35
Euro/£ 1.13 1.16 1.13 1.16 1.19
Yen/£ 160 151 160 151 155
Net assets
The book value of net assets decreased by £12,626 million from £21,342
million at 31 December 2021 to £8,716 million at 30 September 2022. This
primarily reflected the demerger of the Consumer Healthcare business and
adverse impact of exchange rate movement on long term borrowings partially
offset by Total profit for the period.
The retained stake in Haleon of £3,482 million is recognised as a current
equity investment.
The carrying value of investments in associates and joint ventures at 30
September 2022 was £71 million (31 December 2021: £88 million), with a
market value of £71 million (31 December 2021: £88 million).
At 30 September 2022, the net deficit on the Group's pension plans was £1,690
million compared with £1,129 million at 31 December 2021. This increase in
the net deficit is primarily related to lower asset values, increase in the UK
inflation rate (3.6% Q3 2022, 3.2% Q4 2021), the US cash balance credit rate
(3.6% Q3 2022, 2.0% Q4 2021), Eurozone inflation rates (2.2% Q3 2022; 2.1% Q4
2021) and an actuarial experience adjustment for higher inflation than
expected in pension increases of £600 million. These are partially offset by
increases in the long term UK discount rate (5.2% Q3 2022, 2.0% Q4 2021),
Eurozone discount rates (3.4% Q3 2022, 1.3% Q4 2021), the US discount rate
(5.5% Q3 2022, 2.7% Q4 2021) and cash contributions of £313 million made to
the UK pension schemes.
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 £1,209 million (31 December 2021: £1,008 million).
Contingent consideration amounted to £7,327 million at 30 September 2022 (31
December 2021: £6,076 million), of which £6,139 million (31 December 2021:
£5,559 million) represented the estimated present value of amounts payable to
Shionogi relating to ViiV Healthcare, £538 million (31 December 2021: £nil)
represented the estimated present value of contingent consideration payable to
Affinivax and £632 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 September 2022, £931 million (31 December 2021: £937 million) is expected
to be paid within one year.
Movements in contingent consideration are as follows:
9 months 2022 ViiV Group
Healthcare £m
£m
Contingent consideration at beginning of the period 5,559 6,076
Remeasurement through income statement and other movements 1,423 2,115
Cash payments: operating cash flows (774) (789)
Cash payments: investing activities (69) (75)
Contingent consideration at end of the period 6,139 7,327
9 months 2021 ViiV Group
Healthcare £m
£m
Contingent consideration at beginning of the period 5,359 5,869
Remeasurement through income statement and other movements 498 574
Cash payments: operating cash flows (537) (548)
Cash payments: investing activities (78) (83)
Contingent consideration at end of the period 5,242 5,812
Contingent liabilities
There were contingent liabilities at 30 September 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 50 and on pages 248 and 249 of the Annual Report 2021.
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 was
reflected in the third quarter of 2022, the values are provisional and subject
to change. The purchase price allocation is expected to be completed by the
end of Q4 2022.
On 15 August 2022, GSK completed the acquisition of 100% of Affinivax, Inc.
(Affinivax), a clinical-stage biopharmaceutical company based in Cambridge,
Boston, Massachusetts focused on pneumococcal vaccine candidates. The
consideration for the acquisition comprised an upfront payment of $2.2 billion
(£1.8 billion) as adjusted for working capital acquired paid upon closing and
two potential milestone payments of $0.6 billion (£0.5 billion) each to be
paid upon the achievement of certain paediatric clinical development
milestones. The estimated fair value of the contingent consideration payable
was £487 million. The initial acquisition accounting was reflected in the
third quarter of 2022 on a preliminary basis, the values below are provisional
and subject to change. The purchase price allocation is expected to be
completed by the end of Q4 2022.
The fair values of the net assets acquired, including goodwill, are as
follows:
Sierra Oncology Affinivax
£m £m
Net assets acquired:
Intangible assets 1,486 2,097
Inventory 37 -
Other net assets/(liabilities) 143 103
Deferred tax liabilities (291) (524)
1,375 1,676
Goodwill 227 636
Total consideration 1,602 2,312
Discontinued operations
Consumer Healthcare has been presented as a discontinued operation from Q2
2022. The demerger of Haleon was completed on 18 July 2022. Financial
information relating to the operations of Consumer Healthcare for the period
until demerger on 18 July 2022 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 on 10 November 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 Q3 2022 Q3 2021 9 months 9 months
£m £m 2022 2021
£m £m
Turnover 466 2,450 5,581 6,967
Expenses (454) (1,894) (4,725) (5,527)
Profit before tax 12 556 856 1,440
Taxation (16) (134) (235) (370)
Tax rate% 133.3% 24.3% 27.5% 25.8%
(Loss)/profit after taxation from discontinued operations: Consumer Healthcare (4) 422 621 1,070
until 18 July 2022
Other gains/(losses) from the demerger 2,351 - 2,351 -
Remeasurement of discontinued operations 7,227 - 7,227 -
distributed to shareholders on demerger
Profit after taxation from discontinued operations 9,574 422 10,199 1,070
Non-controlling interest in discontinued operations 18 131 205 324
Earnings attributable to shareholders from 9,556 291 9,994 746
discontinued operations
Earnings per share from discontinued operations 237.1 7.3 248.4 18.6
The loss after taxation from discontinued operations for Consumer Healthcare
of £4 million includes separation and transaction costs of £59 million.
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 was held in aggregate by GSK Shareholders, 6.0% remains held by GSK
(including shares received by GSK's consolidated ESOP trusts) and 7.5% remains
held by certain Scottish limited partnerships (SLPs) set up to provide
collateral for a funding mechanism pursuant to which GSK will provide
additional funding for GSK's UK defined benefit Pension Schemes. The aggregate
ownership by GSK (including ownership by the ESOP trusts and SLPs) after the
demerger of 13.5% is 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 on distribution was 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 in the
consolidated financial statements, 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. GSK's £6.3 billion share of the shareholder loans
made in Q1 2022 in advance of the pre-separation dividends was eliminated in
the consolidated financial statements. The assets distributed were reduced by
Consumer Healthcare transactions up to 18 July that principally 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.
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 book value of the attributable net assets
of the Consumer Healthcare business of £7.2 billion was recorded in the
Income Statement in Q3 2022. There was an additional gain of £2.4 billion 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. The gain on distribution and on remeasurement of the retained stake
upon demerger is presented as part of discontinued operations. Any future
gains or losses on the retained stake in Haleon will be recognised in
adjusting items in continuing operations. In addition, there was 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 reserves into the
Income Statement of £0.6 billion. The total gain on the demerger of Consumer
Healthcare was £9.6 billion. These transactions are presented in profit from
discontinued operations (adjusting items) in Q3 2022.
Q3 2022
£bn
Fair value of the Consumer Healthcare business distributed (54.5%) 15.5
Fair value of the retained ownership in Haleon (13.5%) 3.9
Total fair value 19.4
Carrying amount of the net assets and liabilities distributed/derecognised (13.4)
Carrying amount of the non-controlling interest de-recognised 3.0
Gain on demerger before exchange movements and transaction costs 9.0
Reclassification of exchange movements on disposal of overseas subsidiaries 0.6
Total gain on the demerger of Consumer Healthcare 9.6
Total transaction costs incurred in Q3 2022 were £50 million and £102
million in the nine months 2022. These transaction costs were incurred in
connection with the demerger and preparatory admission costs related to the
listing of Haleon and are reported as part of the profit from discontinued
operations in the Total to Adjusted presentation on page 30.
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.
Post Balance Sheet Event: Pensions and other post-employment benefits
Scottish limited partnerships ("SLPs") were established to provide a funding
mechanism for each of GSK's UK defined benefit pension schemes. The SLPs
together hold shares representing 7.5% of the total issued share capital of
Haleon.
Each pension scheme, through its SLP interest, is entitled to receive a
distribution from that SLP in an amount equal to the net proceeds of sales of
Haleon shares, and to receive dividend income on Haleon shares, until it has
received an aggregate amount equal to an agreed threshold ("Proceeds
Threshold"). The Proceeds Thresholds total £1,080 million (as increased by
notional interest on the remaining balance from time to time), and payment of
this amount would fully fund the cash funding or "technical provisions"
deficits in the three schemes shown by the 31 December 2020 valuations. Once
the Proceeds Threshold has been reached the GSK-controlled General Partner of
each SLP is entitled to sell the remaining Haleon shares held by the SLP and
distribute the proceeds to GSK.
In response to market volatility in the UK gilt markets, on 14 October 2022,
GSK made voluntary cash contributions to two of the UK defined benefit pension
schemes totalling £334 million. These cash contributions operated to reduce
the principal amount outstanding under the relevant pension scheme's Proceeds
Thresholds. This is in addition to cash contributions made previously of £32
million in Q2 2022, £281 million in Q3 2022 and £88 million in prior years.
The total payments of £735 million contribute to the Proceeds Thresholds
currently leaving a principal amount of £345 million outstanding to the UK
pension schemes.
Related party transactions
Details of GSK's related party transactions are disclosed on page 221 of our
2021 Account Report and Accounts.
Reconciliation of cash flow to movements in net debt
9 months 2022 9 months 2021
£m £m
Total Net debt at beginning of the period (19,838) (20,780)
Increase/(decrease) in cash and bank overdrafts (7,629) (2,571)
Increase/(decrease) in liquid investments - (18)
Net decrease in short-term loans 4,207 578
Net decrease in long-term loans 9 1
Repayment of lease liabilities 149 134
Debt of subsidiary undertaking acquired (20) -
Exchange adjustments (2,376) 105
Other non-cash movements (119) (72)
Decrease/(increase) in net debt from continuing operations (5,779) (1,843)
Decrease/(increase) in net debt from discontinued operations 7,181 532
Total Net debt at end of the period (18,436) (22,091)
Net debt analysis
30 September 30 September 31 December
2022 2021 2021
£m £m £m
Liquid investments 73 61 61
Cash and cash equivalents 3,606 3,453 4,274
Short-term borrowings (2,793) (4,869) (3,601)
Long-term borrowings (19,322) (20,736) (20,572)
Total Net debt at the end of the period (18,436) (22,091) (19,838)
Free cash flow reconciliation from continuing operations
Q3 2022 9 months 2022 9 months 2021
£m £m £m
Net cash inflow from continuing operating activities 1,331 4,733 3,301
Purchase of property, plant and equipment (275) (705) (576)
Proceeds from sale of property, plant and equipment 7 13 118
Purchase of intangible assets (205) (802) (1,531)
Proceeds from disposals of intangible assets 113 126 358
Net finance costs (44) (455) (460)
Dividends from joint ventures and associates - - 9
Contingent consideration paid (reported in investing (2) (75) (83)
activities)
Distributions to non-controlling interests (213) (390) (186)
Contributions from non-controlling interests - 8 7
Free cash inflow from continuing operations 712 2,453 957
R&D commentary
Pipeline overview
Medicines and vaccines in phase III development (including major lifecycle 19 Infectious Diseases (9)
innovation or under regulatory review)
· Bexsero infants vaccine (US)
· Covifenz (Medicago) COVID-19
· COVID-19 (Sanofi) vaccine candidate
· SKYCovione (SK) COVID-19
· MenABCWY (1st gen) vaccine candidate
· 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
· cobolimab (anti-TIM-3) non-small cell lung cancer
· Jemperli (anti-PD-1) 1L endometrial cancer
· Zejula (PARP inhibitor) 1L ovarian, lung and breast cancer
· momelotinib (JAK1, JAK2 and ACVR1 inhibitor) myelofibrosis with anaemia
Immunology (3)
· latozinemab (AL001, anti-sortilin) frontotemporal dementia
· depemokimab (long acting anti-IL5) severe eosinophilic asthma, eosinophilic
granulomatosis with polyangiitis, chronic rhinosinusitis with nasal polyps,
hyper-eosinophilic syndrome
· Nucala chronic obstructive pulmonary disease
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 65
Total projects in clinical development (inclusive of all phases and 85
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 presented at the American Association for
the Study of Liver Diseases (AASLD) Liver Meeting, 4-8 November 2022, and
published in a peer-reviewed journal.
A phase III trial evaluating bepirovirsen as a monotherapy for people with CHB
will 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;
efficacy and safety of treatment with bepirovirsen in participants with
chronic hepatitis B virus Q3 2020 full data anticipated
NCT04449029 H2 2022
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)
Potential first in class novel antibiotic for the treatment of uncomplicated
urinary tract infections (uUTI) and gonorrhoea.
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 prevent disease caused by meningococcal bacteria
serogroups A, B, C, W, and Y.
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 October, GSK shared positive pivotal phase III trial results for its
respiratory syncytial virus (RSV) older adult vaccine candidate. The vaccine
candidate was highly efficacious, demonstrating overall vaccine efficacy of
82.6% (96.95% CI, 57.9-94.1, 7 of 12,466 vs. 40 of 12,494) against RSV lower
respiratory tract disease (RSV-LRTD), meeting the trial's primary endpoint.
Consistent high vaccine efficacy was also observed across a range of
pre-specified secondary endpoints, highlighting the impact the vaccine could
have on populations most at risk of the severe outcomes of RSV. Efficacy
against severe RSV-LRTD was 94.1% (95% CI, 62.4-99.9, 1 of 12,466 vs. 17 of
12,494). In participants with pre-existing comorbidities, such as underlying
cardiorespiratory and endocrinometabolic conditions, vaccine efficacy was
94.6% (95% CI, 65.9-99.9, 1 of 4,937 vs. 18 of 4,861). In adults aged 70-79
years, vaccine efficacy was 93.8% (95% CI, 60.2-99.9, 1 of 4,487 vs. 16 of
4,487). The vaccine was well tolerated with a favourable safety profile. The
full data was presented as part of ID Week 2022.
Additionally, GSK's RSV older adult vaccine candidate was accepted for
regulatory review by the US Food and Drug Administration (FDA), the European
Medicines Agency (EMA) and the Japanese Ministry of Health, Labour and Welfare
(MHLW). The FDA has granted a Priority Review with a target review date of 3
May 2023.
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; primary endpoint met
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
demonstrate the efficacy of a single dose of GSK's RSVPreF3 OA investigational
(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; primary endpoint met
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-008 III A phase III, open-label, randomised, controlled, multi country study to Trial start: Recruiting
evaluate the immune response, safety and reactogenicity of RSVPreF3 OA
investigational vaccine when co-administered with FLU HD vaccine in adults Q4 2022
aged 65 years and above
(Adults ≥ 65 years old)
NCT05559476
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
RSV OA=ADJ-017 III A phase III, open-label, randomised, controlled, multi-country study to Trial start: Recruiting
evaluate the immune response, safety and reactogenicity of an RSVPreF3 OA
(Adults ≥ 65 years old) investigational vaccine when co-administered with FLU aQIV (inactivated Q4 2022
influenza vaccine - adjuvanted) in adults aged 65 years and above
NCT05568797
RSV OA=ADJ-018 III A phase III, observer-blind, randomised, placebo controlled study to evaluate Trial start: Not yet recruiting
the non inferiority of the immune response and safety of the RSVPreF3 OA
(Adults 50-59 years) investigational vaccine in adults 50 59 years of age, including adults at Q4 2022
increased risk of respiratory syncytial virus lower respiratory tract disease,
compared to older adults ≥60 years of age.
NCT05590403
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 July 2022, ViiV Healthcare presented new efficacy and safety findings from
the unblinded period of the HIV Prevention Trials Network (HPTN) 084 trial
evaluating cabotegravir long-acting (LA) for pre-exposure prophylaxis (PrEP)
in women in sub-Saharan Africa, at the 24th International AIDS Conference
(AIDS 2022) in Montreal, Canada. The findings showed that cabotegravir LA for
PrEP continued to demonstrate superior efficacy in the prevention of new HIV
infections among women when compared to daily oral emtricitabine/tenofovir
disoproxil fumarate (FTC/TDF) tablets, with an 89% lower rate of HIV
acquisition (HR 0.11, 95% CI 0.05, 0.24).
Additionally, ViiV and the Medicines Patent Pool (MPP) announced the signing
of a new voluntary licensing agreement for patents relating to cabotegravir LA
for HIV pre-exposure prophylaxis (PrEP) to help enable access in least
developed, low-income, lower middle-income and Sub-Saharan African countries.
Following on from US approval in January, Apretude was approved in Australia
and Zimbabwe, marking the first regulatory approval in Sub-Saharan Africa. In
October, the EMA validated the company's marketing authorisation application
(MAA) seeking approval of cabotegravir long-acting injectable for pre-exposure
prophylaxis (PrEP) to reduce the risk of sexually acquired HIV-1.
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)
In September 2022, SpringWorks Therapeutics announced an expanded global,
non-exclusive license and collaboration agreement with GSK for nirogacestat,
SpringWorks' investigational oral gamma secretase inhibitor, in combination
with Blenrep. This new agreement expands the original collaboration, to
include the potential for continued development and commercialization of
nirogacestat and Blenrep in earlier lines of treatment such as newly diagnosed
multiple myeloma.
GSK is on track to provide an update for DREAMM-3 before the end of the year,
and we anticipate data from DREAMM-7 and DREAMM-8 in the second line setting
in 2023.
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: Active, not 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 the European Society for Medical Oncology (ESMO) Congress 2022, which took
place 9-13 September, updated results from the GARNET trial further
demonstrated the potential of dostarlimab in the treatment of advanced solid
tumours. This includes a longer-term analysis from cohorts A1 and F of the
study, evaluating overall survival (OS) and progression-free survival (PFS) in
certain patients with mismatch repair-deficient (dMMR) recurrent or advanced
solid tumours.
GSK recently announced positive headline results of the PERLA phase II trial,
which met its primary endpoint of objective response rate (ORR) by RECIST
criteria as determined by blinded independent central review. The trial
evaluated dostarlimab in combination with chemotherapy versus pembrolizumab in
combination with chemotherapy in first-line patients with metastatic
non-squamous non-small cell lung cancer (NSCLC). The PERLA phase II trial is a
randomised, double-blind trial of 243 patients and is the largest global
head-to-head trial of PD-1 inhibitors in this population. The trial was not
designed to demonstrate superiority.
Full results from the PERLA phase II trial, including the primary endpoint of
ORR and the key secondary endpoint of progression-free survival, with results
by PD-L1 expression subgroups, will be presented at an upcoming scientific
meeting.
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: Active, not 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
GARNET I/II A multi-center, open-label, first-in-human study evaluating dostarlimab Trial start: Active, recruiting
(TSR-042) in participants with advanced solid tumors who have limited
available treatment options Q1 2016
momelotinib (JAK1/2 and ACVR1/ALK2 inhibitor)
In August 2022, GSK announced that the US FDA accepted the New Drug
Application (NDA) for momelotinib, a potential new medicine with a proposed
differentiated mechanism of action that may address the significant medical
needs of myelofibrosis patients with anaemia. The US FDA has assigned a
Prescription Drug User Fee Act action date of 16 June 2023.
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 ESMO, GSK announced long-term data from the phase III PRIMA
(ENGOT-OV26/GOG-3012) study showing Zejula (niraparib) maintained a sustained
and clinically meaningful progression-free survival (PFS) benefit as a
maintenance therapy in patients with first-line ovarian cancer following a
response to platinum-based chemotherapy. Importantly, this benefit was
sustained across all biomarker subgroups, including BRCAm, HRd and HRp.
Zejula's safety profile remained consistent with the primary analysis and no
new safety signals were identified. Long-term tolerability data on the
individualised starting dose was also presented.
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 Q3 2022, GSK began recruiting for a phase III programme in eosinophilic
granulomatosis with polyangiitis (EGPA) and progressed trial site initiations
for a programme in hyper-eosinophilic syndrome (HES). Recruitment is ongoing
across four potential indications, also including severe eosinophilic asthma
(SEA) and chronic rhinosinusitis with nasal polyps (CRSwNP).
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 start: Recruiting
relapsing or refractory EGPA
Q3 2022
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)
In October, GSK provided an update on the ContRAst phase III programme
otilimab, an investigational anti-GM-CSF, in the potential treatment of
moderate to severe rheumatoid arthritis (RA). ContRAst-1 and ContRAst-2 met
their primary endpoints of a statistically significant ACR20 response versus
placebo at week 12 in patients with inadequate response to methotrexate
(ContRAst-1) and conventional synthetic or biologic disease modifying
antirheumatic drugs (DMARDs) (ContRAst-2). Data from ContRAst-3, the third
trial in the programme, did not demonstrate statistical significance on the
primary endpoint of ACR20 response versus placebo at week 12 in patients with
inadequate response to biologic DMARDs and/or Janus Kinase inhibitors.
While the ContRAst-1 and ContRAst-2 trials met their primary endpoints, the
efficacy demonstrated is unlikely to transform patient care for this
difficult-to-treat patient population. Assessment of efficacy and safety data
from the ContRAst programme is ongoing, however the limited efficacy
demonstrated does not support a suitable benefit/risk profile for otilimab as
a potential treatment for RA. As a result, GSK has decided not to progress
with regulatory submissions. Full results from the ContRAst phase III
programme will be submitted for publication in 2023.
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: Complete; primary endpoint met
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: Trial activities concluding; primary endpoint met
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; primary endpoint not met
comparing otilimab with placebo and with sarilumab, in combination with
conventional synthetic DMARDs, in participants with moderately to severely Q4 2019
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)
On 26 October, GSK reported that the US FDA Cardiovascular and Renal Drugs
Advisory Committee (CRDAC) supported that the benefit of treatment with
daprodustat outweighs the risks for adult dialysis patients with anaemia of
chronic kidney disease (CKD) with a 13 to 3 vote. In adult non-dialysis
patients with anaemia of CKD, the CRDAC did not support that the benefit of
treatment with daprodustat outweighs the risks with a 5 to 11 vote. GSK will
continue to work with the US FDA as they complete their review of our new drug
application.
When left untreated or undertreated, anaemia of CKD is associated with poor
clinical outcomes and leads to a substantial burden on patients and healthcare
systems. There remains an unmet need for convenient treatment options with
efficacy and safety comparable to current treatments.
Key phase III trials for daprodustat:
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
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 38 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 56.
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.
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.
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.
Stockpile Borrow
The CDC stockpiles vaccines to ensure availability for the US public during
disease outbreaks. The CDC, at their discretion, may propose that a
manufacturer borrow from the stockpile to ensure supply continuity in both the
public and private market and will align on a commitment to replenish the
stockpile at a point in the future with the manufacturer. At the time of a
borrow, sales to the CDC for the stockpile are reversed and new sales are
booked at the time of stockpile replenishment.
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.
Total Earnings per share
Unless otherwise stated, Total earnings per share refers to Total basic
earnings per share.
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.
Guidance, assumptions and cautionary statements
2022 guidance
GSK now expects 2022 sales to increase between 8 to 10 per cent and Adjusted
operating profit to increase between 15 to 17 per cent. 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. Reflecting the momentum of
the business performance in the year to date, GSK now expects 2022 sales to
increase between 8 to 10 per cent and Adjusted operating profit to increase
between 15 to 17 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 a strong nine-month performance
ahead of our full-year guidance. In the fourth quarter, we anticipate
continued strong sales growth and a relatively higher rate of R&D
spending, reflecting the dynamics of prior year comparisons, in-year phasing,
and continued targeted commercial investment.
Notwithstanding uncertain economic conditions across many markets in which we
operate, we continue to observe evidence of healthcare systems recovering and
now expect full-year sales of Specialty Medicines to increase low double-digit
percentage at CER excluding Xevudy sales and sales of General Medicines to be
broadly flat, primarily reflecting the increased genericisation of established
Respiratory medicines. Vaccines sales, excluding COVID-19 solutions, are
expected to grow mid to high-teens percentage at CER for the full year.
Specifically, for Shingrix, we expect strong double-digit growth and record
annual sales in 2022, based on strong demand in existing markets and continued
geographical expansion.
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 Q3 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.
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 nine months ended 30 September 2022.
What we have reviewed
The condensed financial information comprises:
· the income statement and statement of comprehensive income for the three and
nine month periods ended 30 September 2022 on pages 40 to 41;
· the balance sheet as at 30 September 2022 on page 45;
· the statement of changes in equity for the nine month period then ended on
page 46;
· the cash flow statement for the nine month period then ended on page 47; and
· the accounting policies and basis of preparation and the explanatory notes to
the condensed financial information on pages 42 to 44 and 48 to 56 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 42 to 44 and 48 to 56, and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
information.
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 (ISRE (UK) 2410). 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.
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
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.
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 (ISRE(UK)2410). 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 nine months ended 30 September 2022 are not prepared, in all
material respects, in accordance with the accounting policies set out in the
accounting policies and basis of preparation section on page 51.
Deloitte LLP
Statutory Auditor
London, United Kingdom
2 November 2022
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