REG - GlaxoSmithKline PLC - Final Results
09/02/2022 07:00
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RNS Number : 0848B GlaxoSmithKline PLC 09 February 2022
Issued: Wednesday, 9 February 2022, London U.K.
GSK delivers FY 2021 reported sales of £34 billion, stable at AER, +5% CER;
Total EPS 87.6p -24% AER, -13% CER and Adjusted EPS of 113.2p -2% AER, +9% CER
Highlights
Strong commercial execution drives growth across Pharmaceuticals, Vaccines and
Consumer Healthcare (excluding brands divested/under review)
· Pharmaceuticals £17.7 billion +4% AER, +10% CER; New and Specialty medicines
£10 billion +20% AER, +26% CER; Respiratory +21% AER, +28% CER;
Immuno-inflammation +22% AER, +29% CER; Oncology +31% AER, +37% CER; total HIV
-2% AER, +3% CER
· Vaccines £6.8 billion -3% AER, +2% CER; Shingrix £1.7 billion -13% AER, -9%
CER
· COVID-19 solutions sales £1.4 billion; Xevudy £958 million; pandemic
adjuvant £447 million
· Consumer Healthcare £9.6 billion -4% AER, stable CER (+4% excluding brands
divested/under review)
Continued momentum in R&D delivery and strengthening of pipeline
· 3 major product approvals during 2021; Apretude HIV long-acting medicine for
prevention (Dec); Xevudy for COVID-19 (Dec); and Jemperli for endometrial
cancer (April)
· Strong pipeline of 21 vaccines and 43 medicines, many offering potential best
or first-in-class opportunities for patients, and of which 22 are in pivotal
trials
· Positive Phase III data on daprodustat in anaemia due to chronic kidney
disease presented at American Society of Nephrology. On track to file in EU
and US in H1 2022
· 20+ deals executed securing access to 5 novel clinical assets, including with
iTeos in immuno-oncology, Alector in immuno-neurology and Vir Biotechnology in
flu, plus technologies that expand our capabilities in human genetics and AI
· Expect to report milestones in 2022 on up to 7 of the 11 potential new
vaccines and medicines identified as key future growth drivers including Older
Adults RSV vaccine (H1 2022)
Cost discipline supports delivery of Adjusted EPS of 113.2p
· Total Group operating margin 18.2%. Total EPS 87.6p -24% AER, -13% CER
· Adjusted Group operating margin 25.8%. Adjusted EPS 113.2p -2% AER, +9% CER.
This included a contribution to growth from COVID-19 solutions of
approximately +8% AER, +9% CER (+17% AER, +20% CER for Q4 2021)
· Full year 2021 net cash flow from operations £8.0 billion. Full year free
cash flow £4.4 billion
On track to demerge a new world-leading Consumer Healthcare business mid-2022
· Progress to create new Board with appointment of Chair Designate
· Capital Markets Day on 28 February to highlight overall strategy, capabilities
and operations, including detailed financial information and superior growth
ambitions
2022 guidance for new GSK
· New GSK, the biopharma business, expected to deliver growth in 2022 sales of
between 5% to 7% at CER and growth in 2022 Adjusted operating profit of
between 12% to 14% at CER including the anticipated benefit in royalty income
from Gilead settlement
· This 2022 guidance excludes any contribution from COVID-19 solutions
· Dividend of 23p declared for Q4 2021; 80p FY 2021
Emma Walmsley, Chief Executive Officer, GSK: "We have ended the year strongly,
with another quarter of excellent performance driven by first-class commercial
execution, and we enter 2022 with good momentum. This is going to be a
landmark year for GSK, with a step-change in growth expected and multiple
R&D catalysts, including milestones on up to 7 key late-stage pipeline
assets. 2022 is also the year when we demerge our world-leading Consumer
Healthcare business. At our capital markets event later this month, we will
set out the future growth ambitions and highly attractive financial profile of
this business, and the outstanding opportunity it provides for shareholders."
The Total results are presented in summary on page 2 and under 'Financial
performance' on pages 13 and 28 and Adjusted results reconciliations are
presented on pages 23, 24, 38 and 39. Adjusted results are a non-IFRS measure
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 10 and £% or AER% growth, CER% growth, free cash flow and
other non-IFRS measures are defined on page 61. GSK provides guidance on an
Adjusted results basis only, for the reasons set out on page 10. All
expectations, guidance and targets regarding future performance and dividend
payments should be read together with 'Guidance, assumptions and cautionary
statements' on pages 62 and 63.
2021 results
2021 Growth Q4 2021 Growth
£m £% CER% £m £% CER%
Turnover 34,114 - 5 9,527 9 13
Total operating profit 6,201 (20) (9) 895 (16) 1
Total earnings per share 87.6p (24) (13) 15.0p 10 31
Adjusted operating profit 8,806 (1) 9 1,893 4 15
Adjusted earnings per share 113.2p (2) 9 25.6p 9 22
Net cash from operating activities 7,952 (6) 3,767 (2)
Free cash flow 4,437 (18) 2,901 (7)
2022 guidance
We set out below our guidance for new GSK in 2022. This guidance is provided
at CER and excludes the commercial impact of COVID-19 solutions.
In 2022 we expect to continue to deliver on our strategic priorities. We plan
to increase targeted investment in R&D, to build on and invest behind our
top line momentum for key growth drivers and to deliver the demerger of our
Consumer Healthcare business in mid-year. Assuming global economies and
healthcare systems approach normality as the year progresses, we expect sales
of Specialty Medicines to grow approximately 10% at CER and sales of General
Medicines to show a slight decrease, primarily reflecting increased
genericisation of established Respiratory products. Vaccines sales are
expected to grow at a low teens percentage at CER for the year as a whole.
However, governments' prioritisation of COVID-19 vaccination programmes and
ongoing measures to contain the pandemic are expected to result in some
continued disruption to adult immunisations, with the impact weighted to the
first half. For Shingrix, despite the potential for short-term pandemic
disruption, we continue to expect strong double-digit growth and record annual
sales based on strong demand in existing markets and geographical expansion.
Reflecting these factors, in 2022 for new GSK we expect sales to grow between
5% to 7% at CER and Adjusted operating profit to grow between 12% to 14% at
CER as compared with 2021. This includes the future benefit in royalty income
from the settlement and license agreement with Gilead Sciences, Inc. (Gilead)
announced on 1 February 2022.
Medium term outlooks will be provided for Consumer Healthcare at a Capital
Markets Day scheduled for 28 February 2022. Until such time as the formal
criteria for treating Consumer Healthcare as a 'Discontinued operation' have
been satisfied (currently expected in Q2 2022), GSK will continue to present
the Consumer Healthcare business within 'Continuing operations' and will
consolidate the business for reporting purposes until the demerger has
completed.
Dividend policies and expected pay-out ratios are unchanged for new GSK and
new Consumer Healthcare (subject to new Consumer Healthcare board approval).
The expected distribution per share for the new Consumer Healthcare Company
for the second half of 2022 has been adjusted from that highlighted at the GSK
Investor Update in June 2021 to reflect the total number of shares in the new
Consumer Healthcare company that are expected to be in issue upon demerger.
The future dividend policies and guidance in relation to the expected dividend
pay-out in 2022 across both new GSK and new Consumer Healthcare are provided
on page 43.
2022 COVID-19 solutions expectations
In 2022, based on known binding agreements from governments we expect that
COVID-19 solutions will contribute a similar sales level to 2021, but a
substantially reduced profit contribution due to the increased proportion of
lower margin Xevudy sales. We expect this to reduce new GSK Adjusted Operating
profit growth (including COVID-19 solutions in both years) by between 5% to
7%. We continue to discuss further opportunities with governments.
All expectations, guidance and targets regarding future performance and
dividend payments should be read together with 'Guidance, assumptions and
cautionary statements' on pages 62 and 63. If exchange rates were to hold at
the closing rates on 31 January 2022 ($1.34/£1, €1.20/£1 and Yen 155/£1)
for the rest of 2022, the estimated impact on 2022 Sterling turnover growth
for new GSK would be stable and if exchange gains or losses were recognised at
the same level as in 2021, the estimated impact on 2021 Sterling Adjusted
Operating Profit growth for new GSK would also be stable.
Results presentation
A webcast of the quarterly results presentation hosted by Emma Walmsley, GSK
CEO, will be held at 2pm GMT on 9 February 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 - 2021
Turnover
£m Growth Growth
£% CER%
Pharmaceuticals 17,729 4 10
Vaccines 6,778 (3) 2
Consumer Healthcare 9,607 (4) -
Group turnover 34,114 - 5
Group turnover was £34,114 million in the year, stable at AER but up 5% CER.
Sales of COVID-19 solutions contributed approximately 4 percentage points to
growth in the year.
Pharmaceutical turnover in the year was £17,729 million, up 4% AER and 10%
CER. Sales of Xevudy, the monoclonal antibody treatment for COVID-19 of £958
million contributed approximately 6 percentage points to total Pharmaceuticals
growth.
Vaccines turnover was £6,778 million in the year, down 3% AER but up 2% CER,
primarily driven by pandemic adjuvant sales, partially offset by lower demand
for routine adult vaccination due to COVID-19 vaccination programme deployment
and disease circulation across regions. Vaccines turnover excluding pandemic
vaccines decreased 9% AER, 5% CER to £6,331 million.
Consumer Healthcare turnover was £9,607 million, down 4% AER but remained
stable at CER reflecting dilution from divestments given the completion of the
portfolio rationalisation at the end of Q1 2021. Sales excluding brands
divested/under review decreased 1% AER but increased 4% CER reflecting the
underlying strength of brands across the portfolio and categories and
continuing growth in e-commerce.
Operating profit
Total operating profit was £6,201 million compared with £7,783 million in
2020. This primarily reflected an unfavourable comparison to the net profit on
disposal in Q2 2020 of Horlicks and other Consumer brands and resultant sale
of shares in Hindustan Unilever. This was partly offset by lower major
restructuring costs, lower re-measurement charges on the contingent
consideration liabilities and the unwind in 2020 of the fair market value
uplift on inventory arising on completion of the Consumer Healthcare Joint
Venture with Pfizer.
Adjusted operating profit was £8,806 million, 1% lower than 2020 at AER, but
9% higher at CER on a turnover increase of 5% CER. The Adjusted operating
margin of 25.8% was 0.3 percentage points lower at AER, 0.9 percentage points
higher on a CER basis than in 2020. The increase in Adjusted operating profit
primarily reflected the benefit from incremental pandemic sales, sales growth
in Pharmaceuticals and tight control of ongoing costs, favourable legal
settlements and benefits from continued restructuring across the business.
This was offset by lower sales in Vaccines, higher supply chain costs in
Vaccines and Consumer Healthcare, divestments in Consumer Healthcare and
increased investment in R&D across Vaccines and Pharmaceuticals.
Earnings per share
Total EPS was 87.6p, compared with 115.5p in 2020. This primarily reflected an
unfavourable comparison as 2020 benefited from the net profit on disposal of
Horlicks and related transactions, partly offset by a credit of £397 million
to Taxation in 2021 resulting from the revaluation of deferred tax assets,
lower major restructuring costs and lower re-measurement charges on the
contingent consideration liabilities. Adjusted EPS was 113.2p compared with
115.9p in 2020, down 2% AER but up 9% CER, on a 9% CER increase in Adjusted
operating profit primarily reflecting incremental pandemic sales, sales
increases in Pharmaceuticals, tight cost control and favourable legal
settlements and lower interest costs, partly offset by lower sales in
Vaccines, higher supply chain costs in Vaccines, increased R&D investment
and a higher effective tax rate.
Cash flow
The net cash inflow from operating activities for the year was £7,952 million
(2020: £8,441 million). The decrease primarily reflected adverse exchange
impacts, increased trade receivables, adverse timing of returns and rebates
(RAR) and increased separation costs, partly offset by improved adjusted
operating profit at CER and reduced tax payments including tax on disposals.
Operating performance - Q4 2021
Turnover Q4 2021
£m Growth Growth
£% CER%
Pharmaceuticals 5,221 20 25
Vaccines 1,809 (10) (7)
Consumer Healthcare 2,497 6 10
Group turnover 9,527 9 13
Group turnover was £9,527 million in the quarter, up 9% AER, 13% CER. Sales
of COVID-19 solutions contributed approximately 11 percentage points to total
growth in the quarter.
Pharmaceutical turnover in the quarter was £5,221 million, up 20% AER, 25%
CER. The increase was driven by strong growth in New and Specialty products,
partly offset by a decrease in the Established Products portfolio. Sales of
Xevudy of £828 million contributed approximately 20 percentage points to
Pharmaceuticals growth in the quarter.
Vaccines turnover decreased 10% AER, 7% CER to £1,809 million. This was
primarily driven by lower Meningitis vaccines sales associated with the return
to a normal US back-to-school season, lower DTPa-containing vaccines sales due
to unfavourable CDC purchasing patterns in the US and lower Shingrix sales
resulting from the negative impact of COVID-19 vaccination programme
deployment and disease circulation, partly offset by pandemic adjuvant sales.
Consumer Healthcare turnover in the quarter was £2,497 million, up 6% AER,
10% CER. Sales excluding brands divested/under review increased 7% AER, 11%
CER with strong growth across the whole portfolio but particularly Respiratory
health which rebounded from the historically low cold and flu season in both
Q4 2020 and Q1 2021.
Operating profit
Total operating profit was £895 million in Q4 2021 compared with £1,061
million in Q4 2020. This reflected higher re-measurement charges on the
contingent consideration liabilities including the impact of the Gilead
settlement partly offset by lower restructuring and higher profit on disposal
of assets.
Adjusted operating profit was £1,893 million, 4% higher than Q4 2020 at AER,
15% higher at CER on a turnover increase of 13% CER. The Adjusted operating
margin of 19.9% was 0.9 percentage points lower at AER, and 0.2 percentage
points higher on a CER basis than in Q4 2020. The increase in Adjusted
operating profit primarily reflected leverage from £920 million of pandemic
sales as well as strong growth in New and Specialty Products and a favourable
prior period RAR adjustment in Pharmaceuticals, continued tight control of
ongoing costs and benefits from continued restructuring across the business.
This was partly offset by increased investment in R&D, increased
investment behind launches and higher supply chain costs resulting from lower
demand and higher inventory adjustments in Vaccines.
Earnings per share
Total EPS was 15.0p, compared with 13.6p in Q4 2020. This primarily reflected
lower restructuring and higher disposal income partly offset by higher
re-measurement charges. Adjusted EPS was 25.6p compared with 23.3p in Q4 2020,
up 9% AER and 22% CER, on a 15% CER increase in Adjusted operating profit
reflecting positive leverage from Xevudy sales in the quarter and lower
interest costs partly offset by a higher non-controlling interest allocation
of Consumer Healthcare profits.
Cash flow
The net cash inflow from operating activities for the quarter was £3,767
million (Q4 2020: £3,855 million). The reduction primarily reflected adverse
exchange impacts and a lower seasonal reduction in trade receivables in the
quarter and phasing of tax payments partly offset by improved adjusted
operating profit at CER and favourable timing of RAR.
R&D pipeline
We focus on the science of the immune system, human genetics and advanced
technologies to develop Vaccines and Specialty Medicines in four core
therapeutic areas - Infectious Diseases, HIV, Oncology and
Immunology/Respiratory. We also remain open to opportunities outside these
core therapy areas where there are scale opportunities consistent with the
science of the immune system and human genetic validation.
As disclosed at the Investor Update on 23 June 2021, the company has a robust
late-stage R&D pipeline with many assets having the potential to be
first-in-class or best-in-class, as well as offering significant strategic
lifecycle opportunities. The late-stage pipeline will help deliver the sales
ambition set by the company for 2021-2026 and beyond.
Our R&D pipeline currently comprises 64 Vaccines and Specialty Medicines.
Pipeline news flow highlights since Q3 2021 are listed below in chronological
order.
Infectious diseases
Rotarix
· Submitted a supplemental Biologics License Application for Rotarix Liquid (PCV
free) in the US
Shingrix
· Received approval in Canada for the prevention of shingles in adults aged 18
years and older who are or who will be at increased risk of shingles due to
immunodeficiency or immunosuppression caused by known disease or therapy
Varicella new strain candidate vaccine
· Started a Phase II trial of a varicella candidate vaccine for use in the US
for children aged 12 to 15 months
Cervarix
· Withdrew an application to the EMA for the prevention of head and neck cancers
related to human papillomavirus (HPV)
HIV
Apretude (cabotegravir extended-release injectable suspension)
· Received approval from the FDA for Apretude, the first and only long-acting
injectable pre-exposure prophylaxis (PrEP) option to reduce the risk of
sexually acquired HIV-1
Cabenuva/Vocabria (cabotegravir) and Rekambys (rilpivirine)
· Received approval from the FDA for every-two-month dosing for virologically
suppressed adults living with HIV without prior treatment failure or
resistance to cabotegravir or rilpivirine
· Announced a decision from the European Commission to update the Summary of
Product Characteristics for Vocabria and Janssen's Rekambys injections to be
initiated with or without an oral lead-in period for the long-acting treatment
of HIV
· Presented positive interim data from the CARISEL Phase IIIb trial showing
Vocabria and Janssen's Rekambys can be implemented successfully in a variety
of European healthcare settings at the 2021 European AIDS Conference
VH4004280 (capsid protein inhibitor)
· Dosed the first patient in a Phase I trial investigating our capsid protein
inhibitor for HIV
Oncology
Blenrep (belantamab mafodotin)
· Presented new data from the DREAMM-9 Phase I trial and two collaborative
studies at the 2021 American Society of Haematology annual meeting.
Collectively, these data suggest that with an optimised dose, schedule and
combination treatment, corneal events associated with Blenrep may be reduced
in patients receiving earlier lines of therapy
· Expanded our collaboration with SpringWorks Therapeutics to include two new
sub-studies evaluating the combination of Blenrep plus nirogacestat with
standard-of-care multiple myeloma therapies in the DREAMM-5 trial
Jemperli (dostarlimab)
· Received approval in Canada for the treatment of adult patients with mismatch
repair deficient (dMMR) or microsatellite instability-high (MSI-H) recurrent
or advanced endometrial cancer, that has progressed on or following prior
treatment with a platinum containing regimen
Immuno-oncology combinations
· Dosed the first patient in a Phase I trial of GSK4428859 (EOS-448; TIGIT
antagonist) in combination with Jemperli (dostarlimab)
GSK3326595 and GSK3368715 (PRMT5 inhibitor and Type I PRMT inhibitor)
· Removed from the Phase I pipeline due to prioritisation within the synthetic
lethal portfolio (termination of in-license agreement with Epizyme will be
effective on 16 March 2022)
Next-generation cell therapy
· Lyell announced FDA clearance of an Investigational New Drug application to
initiate a Phase I trial, in collaboration with GSK, for LYL132 - an
investigational T-cell receptor therapy that incorporates next-generation
enhancements for patients with solid tumours expressing NY-ESO-1
Immunology/Respiratory
Nucala (mepolizumab)
· Received approval from the FDA for a 40 mg prefilled syringe for appropriate
patients aged 6 to 11 years old who have severe eosinophilic asthma,
administered at home or by a child's health care provider
· Received approval from the European Commission for Nucala in three additional
eosinophil-driven diseases; hypereosinophilic syndrome, eosinophilic
granulomatosis with polyangiitis, and chronic rhinosinusitis with nasal
polyps, making it the only treatment in Europe approved for use in four
eosinophil-driven diseases
· Received approval in Canada as an add-on maintenance treatment with intranasal
corticosteroids in adult patients with severe chronic rhinosinusitis with
nasal polyps inadequately controlled by intranasal corticosteroids alone
GSK4527223 (AL001; progranulin-elevating monoclonal antibody)
· Alector presented positive data from the INFRONT-2 Phase II open-label trial
of AL001 for the treatment of symptomatic frontotemporal dementia patients
with a progranulin mutation at the 2021 Clinical Trials on Alzheimer's Disease
conference
GSK4532990 (ARO-HSD; RNA interference)
· Announced a worldwide license agreement with Arrowhead Pharmaceuticals for
GSK4532990 (ARO-HSD), a genetically validated investigational RNA interference
therapeutic currently in Phase I/II trials for patients with non-alcoholic
steatohepatitis (NASH). The agreement covers the medicine's development and
commercialisation outside of greater China. The deal closed on 24 January 2022
Benlysta (belimumab)
· Received coverage in China's 2021 National Reimbursement Drug List for
paediatric systemic lupus erythematosus in children aged five years and older
· Recommended by the UK National Institute for Health and Care Excellence (NICE)
as an add-on treatment option for active autoantibody-positive systemic lupus
erythematosus in eligible people with high disease activity despite standard
treatment
GSK3888130 (IL-7 monoclonal antibody)
· Dosed the first patient in a Phase I trial investigating our monoclonal
antibody against IL-7, a genetically validated target for multiple sclerosis
Opportunity driven
Daprodustat (oral hypoxia-inducible factor prolyl hydroxylase inhibitor)
· Presented new data from five trials in the ASCEND Phase III programme at the
American Society of Nephrology's Kidney Week 2021. Presentations from the
pivotal ASCEND-ND and ASCEND-D trials confirm the potential for a new oral
treatment for patients with anaemia due to chronic kidney disease in both
non-dialysis and dialysis settings. These data were simultaneously published
in the New England Journal of Medicine
Linerixibat (IBAT inhibitor)
· Dosed the first patient in the GLISTEN Phase III trial for cholestatic
pruritus in primary biliary cholangitis
· Received Orphan Drug Designation from the European Commission
GSK3884464
· Dosed the first patient in a Phase I trial investigating GSK3884464 for heart
failure
COVID-19
Xevudy (sotrovimab, VIR-7831/GSK4182136)
· Submitted an application to the FDA requesting an amendment to the Emergency
Use Authorisation to include intramuscular administration
· Received binding agreements for the sale of approximately 1.7 million doses
worldwide, including a portion of those procured by the US Government
· Oxford University included sotrovimab in the RECOVERY trial, the world's
largest COVID-19 study, as a possible treatment for hospitalised patients
· Granted marketing authorisation from the European Commission for the early
treatment of COVID-19 in adults and adolescents (aged 12 years and over and
weighing at least 40 kg) who do not require supplemental oxygen and who are at
increased risk of progressing to severe infection
· Announced that preclinical studies demonstrated sotrovimab retains activity
against the full combination of mutations in the spike protein of the Omicron
variant
· Granted conditional marketing authorisation from the UK's Medicines and
Healthcare products Regulatory Agency (MHRA) and a supply agreement with the
UK Government for the treatment of symptomatic adults and adolescents (aged 12
years and over and weighing at least 40 kg) with acute COVID-19 infection who
do not require oxygen supplementation and who are at increased risk of
progressing to severe infection
· Announced data from the COMET-TAIL Phase III trial demonstrating that
intramuscular administration of sotrovimab was non-inferior and offered
similar efficacy to intravenous administration for high-risk populations
Vaccine collaborations
· Medicago submitted Emergency Use Authorisation for a jointly developed
plant-based COVID-19 vaccine candidate in Canada
· Announced with Medicago data from the Phase III trial of their plant-based
COVID-19 vaccine candidate, in combination with GSK's pandemic adjuvant, that
demonstrated 71% efficacy against the main variants of SARS-COV-2 circulating
at the time of the trial
· Announced with Sanofi that a single booster dose of the recombinant adjuvanted
COVID-19 vaccine candidate was well tolerated and delivered consistently
strong immune responses regardless of the primary vaccine received
Contents Page
Total and Adjusted results 10
Financial performance - 2021 13
Financial performance - three months ended 31 December 2021 28
Cash generation 42
Returns to shareholders 43
Income statements 45
Statement of comprehensive income 46
Pharmaceuticals turnover - year ended 31 December 2021 47
Pharmaceuticals turnover - three months ended 31 December 2021 48
Vaccines turnover - year ended 31 December 2021 49
Vaccines turnover - three months ended 31 December 2021 50
Balance sheet 51
Statement of changes in equity 52
Cash flow statement - year ended 31 December 2021 53
Segment information 54
Legal matters 56
Additional information 57
Reconciliation of cash flow to movements in net debt 60
Net debt analysis 60
Free cash flow reconciliation 60
Reporting definitions 61
Guidance, assumptions and cautionary statements 62
Contacts
GSK is a science-led global healthcare company. For further information please
visit www.gsk.com/aboutus
GSK enquiries:
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Kathleen Quinn +1 202 603 5003 (Washington)
Analyst/Investor enquiries: Nick Stone +44 (0) 7717 618834 (London)
James Dodwell +44 (0) 7881 269066 (London)
Mick Readey +44 (0) 7990 339653 (London)
Joshua Williams +44 (0) 7385 415719 (London)
Jeff McLaughlin +1 215 589 3774 (Philadelphia)
Frances De Franco +1 570 236 4850 (Philadelphia)
Sonya Ghobrial +44 (0) 7392 784784 (Consumer)
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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 61.
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 following items from Total results, together with
the tax effects of all of these items:
· amortisation of intangible assets (excluding computer software)
· 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 including the one-off impact of the revaluation of deferred tax assets
and liabilities following enactment of the increase in the headline rate of UK
corporation tax from 19% to 25% (effective 2023)
· separation costs include costs to establish Consumer Healthcare as an
independent business, as well as admission listing and demerger costs
Costs for all other ordinary course smaller scale restructuring and legal
charges and expenses 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. 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.
The enactment of the increase in the headline rate of UK corporation tax from
19% to 25% (effective 2023) resulted in a credit to the income statement of
£325 million in Q2 2021 revised upwards to £397 million in Q4 2021. Due to
the magnitude, GSK has reported this credit as an Adjusting item in the year
so that it does not obscure the key trends in the Group's performance for the
period.
Reconciliations between Total and Adjusted results, providing further
information on the key Adjusting items, are set out on pages 23, 24, 38 and
39.
GSK provides earnings guidance to the investor community on the basis of
Adjusted results. This is in line with peer companies and expectations of the
investor community, supporting easier comparison of the Group's performance
with its peers. GSK is not able to give guidance for Total results as it
cannot reliably forecast certain material elements of the Total results,
particularly the future fair value movements on contingent consideration and
put options that can and have given rise to significant adjustments driven by
external factors such as currency and other movements in capital markets.
ViiV Healthcare
ViiV Healthcare is a subsidiary of the Group and 100% of its operating results
(turnover, operating profit, profit after tax) are included within the Group
income statement.
Earnings are allocated to the three shareholders of ViiV Healthcare on the
basis of their respective equity shareholdings (GSK 78.3%, Pfizer 11.7% and
Shionogi 10%) and their entitlement to preferential dividends, which are
determined by the performance of certain products that each shareholder
contributed. As the relative performance of these products changes over time,
the proportion of the overall earnings allocated to each shareholder also
changes. In particular, the increasing proportion of sales of dolutegravir and
cabotegravir-containing products has a favourable impact on the proportion of
the preferential dividends that is allocated to GSK. Adjusting items are
allocated to shareholders based on their equity interests. GSK was entitled to
approximately 86% of the Total earnings and 83% of the Adjusted earnings of
ViiV Healthcare for 2021.
As consideration for the acquisition of Shionogi's interest in the former
Shionogi-ViiV Healthcare joint venture in 2012, Shionogi received the 10%
equity stake in ViiV Healthcare and ViiV Healthcare also agreed to pay
additional future cash consideration to Shionogi, contingent on the future
sales performance of the products being developed by that joint venture,
dolutegravir and cabotegravir. Under IFRS 3 'Business combinations', GSK was
required to provide for the estimated fair value of this contingent
consideration at the time of acquisition and is required to update the
liability to the latest estimate of fair value at each subsequent period end.
The liability for the contingent consideration recognised in the balance sheet
at the date of acquisition was £659 million. Subsequent re-measurements are
reflected within other operating income/(expense) and within Adjusting items
in the income statement in each period.
On 1 February 2022, ViiV Healthcare reached agreement with Gilead to settle
the global patent infringement litigation relating to the commercialisation of
Gilead's Biktarvy. Under the terms of the global settlement and licensing
agreement, Gilead will make an upfront payment of $1.25 billion to ViiV
Healthcare which is expected in the first quarter of 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. The settlement resulted in a re-measurement of the existing
liabilities for contingent consideration and the Pfizer put option at the 2021
year end. The upfront payment is a contingent asset at the balance sheet date.
The impact on the contingent consideration liability (CCL) is to increase it
by £288 million, on a post-tax basis in Q4 2021 due to the obligation ViiV
Healthcare has to pay future cash consideration to Shionogi for its share of
the upfront and of the future US sales performance of Biktarvy and products
containing bictegravir. Including the impact of the settlement at 31 December
2021, the liability which is discounted at 8% stood at £5,559 million, on a
post-tax basis.
Pfizer has the right to require GSK to acquire its shareholding in ViiV
Healthcare in certain circumstances* at any time. A put option liability is
therefore recorded on the Group's balance sheet as a current liability. It is
measured on the gross redemption basis derived from an internal valuation of
the ViiV Healthcare business.
The impact of the settlement on the Pfizer put option liability is an increase
of £114 million and is included in the re-measurement at 31 December 2021.
See page 59 for an explanation of the post balance sheet event impact.
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 2021 were
£826 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 52 and 53 of the Annual Report 2020.
* See page 53 of GSK's Annual Report 2020.
Financial performance - 2021
Total results
The Total results for the Group are set out below.
2021 2020 Growth Growth
£m £m £% CER%
Turnover 34,114 34,099 - 5
Cost of sales (11,603) (11,704) (1) 2
Gross profit 22,511 22,395 1 7
Selling, general and administration (10,975) (11,456) (4) -
Research and development (5,278) (5,098) 4 7
Royalty income 419 318 32 32
Other operating (expense)/income (476) 1,624
Operating profit 6,201 7,783 (20) (9)
Finance income 28 44
Finance expense (784) (892)
Share of after tax profits of associates 33 33
and joint ventures
Loss on disposal of interest in associates (36) -
Profit before taxation 5,442 6,968 (22) (10)
Taxation (346) (580)
Tax rate % 6.4% 8.3%
Profit after taxation 5,096 6,388 (20) (9)
Profit attributable to non-controlling 711 639
interests
Profit attributable to shareholders 4,385 5,749
5,096 6,388 (20) (9)
Earnings per share 87.6p 115.5p (24) (13)
Adjusted results
The Adjusted results for the Group are set out below. Reconciliations between
Total results and Adjusted results for 2021 and 2020 are set out on pages 23
and 24.
2021
£m % of Growth Reported
turnover £% growth
CER%
Turnover 34,114 100 - 5
Cost of sales (10,726) 31.4 5 8
Selling, general and administration (10,225) 30.0 (5) (1)
Research and development (4,776) 14.0 4 8
Royalty income 419 1.2 32 32
Adjusted operating profit 8,806 25.8 (1) 9
Adjusted profit before tax 8,086 - 11
Adjusted profit after tax 6,671 (2) 9
Adjusted profit attributable to shareholders 5,665 (2) 9
Adjusted earnings per share 113.2p (2) 9
Operating profit by business 2021
£m % of Growth Reported
turnover £% growth
CER%
Pharmaceuticals 8,170 46.1 6 15
Pharmaceuticals R&D* (3,489) (1) 3
Total Pharmaceuticals 4,681 26.4 12 24
Vaccines 2,256 33.3 (17) (11)
Consumer Healthcare 2,239 23.3 1 9
9,176 26.9 1 10
Corporate & other unallocated costs (370)
Adjusted operating profit 8,806 25.8 (1) 9
* Operating profit of Pharmaceuticals R&D segment, which is the
responsibility of the Chief Scientific Officer and President, R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported within the
Pharmaceuticals segment.
Turnover
Pharmaceuticals turnover
2021
£m Growth Growth
£% CER%
Respiratory 2,863 21 28
HIV 4,777 (2) 3
Immuno-inflammation 885 22 29
Oncology 489 31 37
Pandemic 958 - -
New and Speciality 9,972 20 26
Established Pharmaceuticals 7,757 (11) (6)
17,729 4 10
US 8,442 13 21
Europe 3,934 (4) (2)
International 5,353 (3) 4
17,729 4 10
Pharmaceuticals turnover in the year was £17,729 million, up 4% AER, 10% CER.
Sales of Xevudy, the monoclonal antibody treatment for COVID-19 of £958
million contributed approximately 6 percentage points to Pharmaceuticals
growth.
HIV sales were down 2% AER but up 3% CER, to £4,777 million, with growth in
Dovato and Juluca partly offset by Tivicay and Triumeq. Respiratory sales were
up 21% AER, 28% CER, to £2,863 million, on growth of Trelegy and Nucala.
Oncology and Immuno-Inflammation therapy areas each continued to show strong
double-digit sales growth. Sales of Established Pharmaceuticals decreased 11%
AER, 6% CER to £7,757 million.
In the US, sales grew 13% AER, 21% CER including sales of Xevudy, which
contributed approximately 9 percentage points to total growth. Continued
strong performance of Trelegy, Nucala, Benlysta and Dovato also drove growth
of New and Specialty products in the Region. Established Products were stable
at AER but grew 6% CER, reflecting strong demand for Established Respiratory
products in the COVID-19 environment and certain supply challenges faced by
generic competitor products, plus the benefit of favourable prior period RAR
adjustments.
In Europe, sales decreased 4% AER, 2% CER, with decreases in the Established
Pharmaceuticals portfolio, impacted by generic competition including Seretide,
Duodart and Volibris, lower antibiotic demand, and the divestment of
cephalosporin products at the start of the fourth quarter. The decrease was
partly offset by strong growth of Trelegy, Benlysta and Oncology products, and
of Dovato which more than doubled in the year. Sales of Xevudy totalling £69
million also contributed approximately 2 percentage points to total growth.
International sales decreased 3% AER but grew 4% CER. Decreases in Established
Pharmaceuticals reflected the impact of COVID-19 suppressed antibiotics
markets and increased generic competition in the first half of the year. This
was offset by strong growth in Respiratory, Dovato, Tivicay tenders, and sales
of Xevudy, which added approximately 6 percentage points to International
total growth.
Respiratory
Total Respiratory sales were up 21% AER, 28% CER, with sales of Trelegy and
Nucala each exceeding £1 billion per year for the first time. International
Respiratory sales grew 33% AER, 42% CER including Nucala up 23% AER, 34% CER,
and Trelegy up 81% AER, 92% CER including the impact of the Trelegy asthma
launch in Japan in Q4 2020. In Europe, Respiratory grew 11% AER, 13% CER with
double digit CER growth of Trelegy and Nucala. In the US, Respiratory grew 23%
AER, 30% CER, driven by continued strong performance of Trelegy and Nucala.
Sales of Nucala were £1,142 million in the year and grew 15% AER, 22% CER,
with consistent, strong growth across all three regions. US sales were up 15%
AER, 23% CER to £690 million and International sales of £195 million grew
23% AER, 34% CER. Europe sales of £257 million grew 8% AER, 11% CER.
Trelegy sales were up 49% AER, 57% CER to £1,217 million driven by growth in
all regions. In the US, sales continue to grow strongly including benefit of
the asthma indication approved and launched in Q3 2020, with sales up 52% AER,
62% CER. In Europe, sales grew 19% AER, 21% CER and in International, where
Trelegy asthma was approved in Japan in Q4 2020, sales grew 81% AER, 92% CER
to £163 million.
HIV
HIV sales were £4,777 million a decrease of 2% AER but growth of 3% CER for
the year. Triumeq sales were £1,882 million, down 18% AER, 14% CER and
Tivicay sales were £1,381 million, down 10% AER, 4% CER. The mature portfolio
resulted in less than 1 percentage point of CER sales decrease.
New HIV products Juluca, Dovato, Rukobia and Cabenuva delivered sales of
£1,387 million representing 29% of the total HIV portfolio (18% in 2020).
Sales of the two drug regimens Juluca and Dovato were £517 million and £787
million, respectively, with combined growth of 50% AER, 58% CER. Rukobia sales
were £45 million. Cabenuva, the first long acting injectable, recorded £38
million of sales for the full year.
In the US, total sales were £2,898 million with a decrease of 4% AER, but
growth of 3% CER. New HIV products delivered sales of £896 million,
including: Dovato £428 million with growth of 87% AER, 99% CER, Juluca £393
million with growth of 2% AER, 8% CER, Rukobia £43 million and Cabenuva £32
million. Combined Tivicay and Triumeq sales were £1,953 million declining 16%
AER, 11% CER. In Europe, total sales were £1,194 million with a decrease of
2% AER, but growth of 1% CER. New HIV products delivered sales of £420
million, including: Dovato sales of £302 million, which more than doubled at
AER and CER, and Juluca £111 million with growth of 14% AER, 18% CER.
Combined Tivicay and Triumeq sales were £738 million declining 21% AER, 19%
CER. International continued to grow strongly with total sales of £685
million, with growth of 4% AER, 11% CER, driven by the Tivicay tender business
and new HIV products.
Immuno-inflammation
Immuno-inflammation sales of £885 million grew 22% AER, 29% CER with Benlysta
sales up 22% AER, 29% CER to £874 million, benefitting from lupus nephritis
launches in US and Japan in H2 2020.
Oncology
Sales of Zejula, the PARP inhibitor treatment for ovarian cancer were £395
million, up 17% AER, 22% CER, impacted by ongoing lower diagnosis rates due to
the COVID-19 pandemic, particularly in the US. Sales included £212 million in
the US and £163 million in Europe.
Blenrep for the treatment of patients with relapsed or refractory multiple
myeloma was approved and launched in the US and Europe in Q3 2020, with
ongoing launches throughout Europe in 2021. Blenrep sales globally totalled
£89 million.
Pandemic Sales
Sales of Xevudy were £958 million in the year, reflecting the ongoing
fulfilment of contracts across the world and most significantly in the US,
which reported sales of £602 million. International recorded sales of £287
million and Europe £69 million.
Established Pharmaceuticals
Sales of Established Pharmaceuticals in the year were £7,757 million, down
11% AER, 6% CER.
Established Respiratory products decreased 7% AER, 2% CER to £4,327 million.
This includes the impact of generic competition to Xyzal in Japan, and to
Advair/Seretide globally. The decrease was partially offset by approximately 6
percentage points impact on growth of favourable prior period RAR adjustments.
The remainder of the Established Pharmaceuticals portfolio decreased by 16%
AER, 11% CER to £3,430 million on lower demand for antibiotics during the
COVID-19 pandemic period, the divestment of GSK's cephalosporin products at
the start of the fourth quarter, and the impact of government mandated changes
increasing use of generics in markets including France, Japan and China.
Vaccines turnover
2021
£m Growth Growth
£% CER%
Meningitis 961 (7) (2)
Influenza 679 (7) (2)
Shingles 1,721 (13) (9)
Established Vaccines 2,970 (8) (4)
6,331 (9) (5)
Pandemic Vaccines 447 - -
Total Vaccines 6,778 (3) 2
US 3,472 (6) -
Europe 1,436 - 2
International 1,870 1 5
6,778 (3) 2
Vaccines turnover in the year decreased 3% at AER, but grew 2% CER to £6,778
million, primarily driven by pandemic adjuvant sales, partially offset by
lower demand for routine adult vaccination due to COVID-19 vaccination
programme deployment and disease circulation across regions, resulting in
lower Shingrix and Hepatitis vaccines sales. Unfavourable US prior period RAR
adjustments reduced overall Vaccines growth by approximately 2 percentage
points, particularly in Fluarix/Flulaval and Shingrix where the impact on
product growth was a decrease of 7% and a decrease of 2% respectively.
Vaccines turnover excluding pandemic vaccines decreased 9% AER, 5% CER to
£6,331 million.
Meningitis
Meningitis sales decreased 7% AER, 2% CER to £961 million driven primarily by
unrepeated International tender volumes for other Meningitis vaccines. Bexsero
sales were stable at AER, but grew 5% CER to £650 million, reflecting
increased market share in the US.
Menveo sales were up 3% AER, 9% CER to £272 million, primarily driven by 2020
cohort catch-up vaccinations and 2021 higher demand, as well as increased
market share in the US.
Influenza
Fluarix/FluLaval sales decreased 7% AER, 2% CER, to £679 million as a result
of unfavourable prior period RAR movements in the US, partially offset by
higher volume in the US and strong southern hemisphere demand in
International.
Shingles
Shingrix decreased 13% AER, 9% CER to £1,721 million, primarily driven by
lower demand in the US and International for routine adult vaccination due to
COVID-19 vaccination programme deployment and disease circulation. In Europe,
sales growth was driven by Germany and launches in the UK, Spain and Italy.
Shingrix was sold in 17 countries, including 9 markets launched during 2021.
Established Vaccines
Hepatitis vaccines sales were down 20% AER, 16% CER to £460 million,
adversely impacted by de-prioritisation of routine US adult vaccination,
increased Hepatitis B vaccine competition and unfavourable CDC stockpile
movements in the US, and by COVID-19 related travel restrictions in Europe and
International.
Sales of DTPa-containing vaccines (Infanrix, Pediarix and Boostrix) decreased
4% AER but grew 1% CER. Infanrix/Pediarix sales decreased 14% AER, 9% CER to
£543 million, reflecting lower tender volume in Europe and International as
well as a change in recommendation for the dosing schedule in Germany, partly
offset by increased demand in the US. Boostrix sales grew 9% AER, 14% CER to
£521 million, largely driven by demand recovery and tender volumes in
International, as well as higher demand and share in the US.
Rotarix sales were down 3% AER but up 1% CER to £541 million, reflecting
demand recovery in International.
Synflorix sales decreased by 11% AER, 8% CER to £357 million, primarily due
to lower tender demand in Emerging markets.
MMRV vaccines sales were stable at AER but grew 4% CER to £260 million,
largely driven by higher demand in International.
Pandemic Vaccines
Pandemic vaccines sales of £447 million included £444 million of pandemic
adjuvant sales to the US and Canadian governments.
Consumer Healthcare turnover
2021
£m Growth Growth
£% CER%
Oral health 2,732 (1) 5
Pain relief 2,276 3 7
Vitamins, minerals and supplements 1,512 - 4
Respiratory health 1,133 (6) (1)
Digestive health and other 1,803 (1) 4
9,456 (1) 4
Brands divested/under review 151 (71) (69)
9,607 (4) -
US 3,179 (7) (1)
Europe 2,468 (6) (3)
International 3,960 (1) 4
9,607 (4) -
Consumer Healthcare turnover in the year of £9,607 million decreased 4% AER
and was stable at CER reflecting dilution from divestments given the
completion of the portfolio rationalisation at the end of Q1 2021. On a
two-year CAGR sales excluding brands divested under review grew 4% overall
despite the adverse impact of the COVID-19 pandemic.
Sales excluding brands divested/under review decreased 1% AER but increased 4%
CER reflecting the underlying strength of brands across the portfolio and
categories and continuing growth in e-commerce. Overall, sales benefited from
strong growth across all categories excluding Respiratory health which was
negatively impacted in Q1 2021 by the historically low cold and flu season.
The decrease in cold and flu sales resulted in an approximately 1% drag on
full year growth.
International sales excluding brands divested/under review grew high single
digit on a CER basis with double digit growth in emerging markets including
India, China, the Middle East and Africa. Excluding brands divested/under
review, US sales grew low single digits but European sales were stable on a
CER basis. Both regions were particularly negatively impacted by the
historically low cold and flu season during Q1 2021.
Oral health
Oral health sales decreased 1% AER, but grew 5% CER to £2,732 million.
Sensodyne delivered high single digit growth reflecting underlying brand
strength, continued innovation and strong growth across key markets including
the US, China, India and Japan. Gum health also delivered broad based high
single digit growth across key markets. Denture care grew low single digits
driven partly by a return to growth in Q4 2021.
Pain relief
Pain relief sales increased 3% AER, 7% CER to £2,276 million. Panadol, which
benefitted from seasonal demand in the last quarter, grew double digits.
Voltaren grew mid-single digits, offsetting the expected short-term decrease
in the second half of the year in the US after the introduction of private
label competition earlier in 2021. Excedrin delivered growth of over 40%
versus a prior year decrease reflecting supply improvements.
Vitamins, minerals and supplements
Vitamins, minerals and supplements sales were stable at AER but grew 4% CER to
£1,512 million building on the significant (19% CER) growth in 2020. Centrum
grew mid-teens percent driven by successful innovation, improved supply
capacity in the US and continued consumer focus on health and wellness.
Caltrate grew mid-single digits and Emergen-C decreased high-single digits
reflecting a particularly challenging 2020 comparator due to unprecedented
demand during the early stages of the pandemic.
Respiratory health
Respiratory health sales decreased 6% AER, 1% CER to £1,133 million. In Q4
2021, cold and flu sales rebounded strongly and were above 2019 levels in
Europe and slightly below 2019 levels in the US. For the full year, cold and
flu products were down mid-single digits as the H2 2021 rebound was
insufficient to offset the considerable decrease in the first quarter of 2021
which resulted from historically low demand for cold and flu products,
effectively halving the global market in the period. Allergy products grew
mid-single digits.
Digestive health and other
Digestive health and other brands sales decreased 1% AER but grew 4% CER to
£1,803 million. Digestive health brands were up high-single digits with
particularly strong growth in Tums and Eno. Skin health and Smoker's health
brands were up mid-single digits, offset partly by a decrease in small,
non-strategic brands.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 34.0%, 0.3 percentage
points lower at AER and 1.1 percentage points lower in CER terms compared with
2020. This primarily reflected lower write-downs in a number of manufacturing
sites and the unwind in 2020 of the fair market value uplift on inventory
arising on completion of the Consumer Healthcare Joint Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 31.4%, 1.6 percentage points higher at AER and 0.8
percentage points higher at CER compared with 2020. This primarily reflected
higher pandemic sales (Xevudy) as well as higher supply chain costs in
Vaccines resulting from lower demand and higher inventory adjustments and
higher commodity and freight costs in Consumer Healthcare, partly offset by
price benefits in Pharmaceuticals, including the benefit from prior period RAR
adjustments, a further contribution from restructuring savings across all
three businesses and favourable mix in Vaccines.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 32.2%, 1.4 percentage
points lower at AER and 1.8 percentage points lower at CER compared with 2020.
This included increased separation costs partly offset by lower restructuring
charges.
Excluding Adjusting items, Adjusted SG&A costs as a percentage of turnover
were 30.0%, 1.5 percentage points lower at AER than in 2020 and 1.8 percentage
points lower on a CER basis. Adjusted SG&A costs decreased 5% AER, 1% CER
which reflected the tight control of ongoing costs and reduced variable
spending across all three businesses as a result of the COVID-19 lockdowns,
and the continuing benefit of restructuring in Pharmaceuticals, Consumer
Healthcare and support functions. The decrease also reflected a favourable
legal settlement in 2021 compared to increased legal costs in 2020 as well as
one-off benefits in pensions and insurance which were partly offset by the
one-off benefit from restructuring of post-retirement benefits in 2020. This
was partly offset by increased investment behind launches in HIV and Vaccines.
Research and development
Total R&D expenditure was £5,278 million (15.5% of turnover), up 4% AER,
7% CER, including an increase in impairments partly offset by a decrease in
major restructuring charges. Adjusted R&D expenditure was £4,776 million
(14.0% of turnover), 4% higher at AER, 8% higher at CER than in 2020.
Pharmaceuticals R&D expenditure was £3,578 million (20.2% of turnover),
stable at AER, up 4% CER, primarily driven by increased investment in our
Specialty portfolios, including the early stage research projects. Efficiency
savings continued from the implementation of the One R&D programme for
Pharmaceuticals and Vaccines as part of the Separation preparation
restructuring programme.
The growth of the Specialty portfolio in 2021 was primarily driven by our two
programmes for COVID-19 treatment (Xevudy and otilimab) along with the other
otilimab programme for rheumatoid arthritis, bepirovirsen, our HBV antisense
oligonucleotide and depemokimab, our anti-IL5 for asthma. This has been partly
offset by reduced spend on daprodustat due to the completion of programmes. In
Oncology, there is continued investment reflecting our commitment to synthetic
lethality and in Blenrep, together with bintrafusp alfa, where we have
accelerated close-out costs for the programme but this has been largely offset
by a reduction in spend on feladilimab following the decision to terminate the
programme in April.
R&D expenditure in Vaccines was £887 million (13.1% of turnover), up 29%
AER, 34% CER, reflecting increased investment in clinical programmes for
meningitis and RSV and investment in our mRNA platform, partly offset by
efficiency savings from the implementation of the One Development programme
and variable spending as a result of COVID-19 lockdowns. R&D expenditure
in Consumer Healthcare was £249 million.
Royalty income
Royalty income was £419 million (2020: £318 million), up 32% AER, 32% CER,
primarily driven by higher sales of Gardasil.
Other operating income/(expense)
Net other operating expenses of £476 million (2020: £1,624 million income)
primarily reflected accounting charges of £1,101 million (2020: £1,234
million) arising from the re-measurement of the contingent consideration
liabilities related to the acquisitions of the former Shionogi-ViiV Healthcare
joint venture and the former Novartis Vaccines business and the liabilities
for the Pfizer put option and Pfizer and Shionogi preferential dividends in
ViiV Healthcare. This included a re-measurement charge of £1,026 million
(2020: £1,114 million) for the contingent consideration liability due to
Shionogi, as a result of the unwinding of the discount for £380 million and a
charge for £646 million primarily from adjustments to sales forecasts and the
settlement with Gilead (see page 11). This was partly offset by a number of
asset disposals including the disposal of royalty rights on cabozantinib, the
disposal of the cephalosporin business and disposal of a number of Consumer
Healthcare brands and fair value uplifts on investments. 2020 included the net
profit on disposal of Horlicks and other Consumer Healthcare brands of £2,815
million, partly offset by the related loss on sale of the shares in Hindustan
Unilever of £476 million.
Operating profit
Total operating profit was £6,201 million compared with £7,783 million in
2020. This primarily reflected an unfavourable comparison to the net profit on
disposal in Q2 2020 of Horlicks and other Consumer brands and resultant sale
of shares in Hindustan Unilever. This was partly offset by lower major
restructuring costs, lower re-measurement charges on the contingent
consideration liabilities and the unwind in 2020 of the fair market value
uplift on inventory arising on completion of the Consumer Healthcare Joint
Venture with Pfizer.
Excluding these and other Adjusting items, Adjusted operating profit was
£8,806 million, 1% lower than 2020 at AER, but 9% higher at CER on a turnover
increase of 5% CER. The Adjusted operating margin of 25.8% was 0.3 percentage
points lower at AER, 0.9 percentage points higher on a CER basis than in 2020.
The increase in Adjusted operating profit primarily reflected the benefit from
incremental pandemic sales (Xevudy and adjuvant) contributing approximately 6%
AER, 7% CER to Adjusted Operating profit growth. Adjusted Operating profit
also benefited from sales growth in Pharmaceuticals including the benefit from
prior period RAR adjustments and tight control of ongoing costs including
reduced promotional and variable spending across all three businesses as a
result of the COVID-19 lockdowns, favourable legal settlements compared to
increased legal costs in 2020 and benefits from continued restructuring across
the business. This was partly offset by lower sales in Vaccines, primarily
Shingrix, higher supply chain costs in Vaccines and Consumer Healthcare,
divestments in Consumer Healthcare and increased investment in R&D across
Vaccines and Pharmaceuticals.
Contingent consideration cash payments which are 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 2021
amounted to £856 million (2020: £885 million). This included cash payments
made to Shionogi of £826 million (2020: £858 million).
Adjusted operating profit by business
Pharmaceuticals operating profit was £4,681 million, up 12% AER, 24% CER on a
turnover increase of 10% CER. The operating margin of 26.4% was 1.9 percentage
points higher at AER than in 2020 and 3.3 percentage points higher on a CER
basis. This primarily reflected price benefits in Pharmaceuticals, including
the benefit from a prior period RAR adjustment, reduced supply chain costs,
the tight control of ongoing costs, short term benefits to changes in ways of
working, a favourable legal settlement in 2021 compared to increased legal
costs in 2020 and the continuing benefit of restructuring. This was partly
offset by support to launches in HIV and increased investment in R&D.
Vaccines operating profit was £2,256 million, down 17% AER, 11% CER on 2%
turnover increase at CER. The operating margin of 33.3% was 5.6 percentage
points lower at AER than in 2020 and 4.8 percentage points lower on a CER
basis. This was primarily driven by higher supply chain costs resulting from
higher inventory adjustments and lower demand, along with higher R&D spend
to support key strategic priorities and increased SG&A investment to
support business growth, partly offset by higher royalty income and pandemic
adjuvant beneficial mix.
Consumer Healthcare operating profit was £2,239 million, up 1% AER, 9% CER on
stable turnover at CER. The operating margin of 23.3% was 1.2 percentage
points higher at AER and 2.0 percentage points higher on a CER basis than in
2020. This primarily reflected sales growth of continuing brands, price
increases and favourable mix, synergy delivery from the Pfizer Joint Venture
Integration and tight cost control, partially offset by the impact of
divestments (1.2 percentage points), increased advertising and promotion
investment, increased commodity and freight costs and investment in
manufacturing sites.
Net finance costs
Total net finance costs were £756 million compared with £848 million in
2020. Adjusted net finance costs were £753 million compared with £844
million in 2020. The decrease is primarily as a result of reduced interest
expense from lower debt levels, favourable movements in foreign exchange
rates, a premium paid on the early repayment and refinancing of bond debt in
2020 and reduced interest on tax partly offset by lower interest income on
overseas cash post-closing of the divestment of Horlicks and other Consumer
Healthcare nutrition products in India and a number of other countries.
Share of after tax profits of associates and joint ventures
The share of after tax profits of associates and joint ventures was £33
million (2020: £33 million).
Loss on disposal of interests in associates
The net loss on disposal of interests in associates was £36 million,
primarily driven by a loss on disposal of our interest in the associate
Innoviva Inc.
Taxation
The charge of £346 million represented an effective tax rate on Total results
of 6.4% (2020: 8.3%) and reflected the different tax effects of the various
Adjusting items, including a credit of £397 million resulting from the
revaluation of deferred tax assets following enactment of an increase in the
headline rate of UK corporation tax (effective 1 April 2023). 2020 reflected
the disposal of Horlicks and other Consumer brands and the subsequent disposal
of shares received in Hindustan Unilever. Tax on Adjusted profit amounted to
£1,415 million and represented an effective Adjusted tax rate of 17.5% (2020:
16.0%).
Issues related to taxation are described in Note 14, 'Taxation' in the Annual
Report 2020. The Group continues to believe it has made adequate provision for
the liabilities likely to arise from periods which are open and not yet agreed
by 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
£711 million (2020: £639 million). The increase was primarily due to an
increased allocation of Consumer Healthcare Joint Venture profits of £461
million (2020: £374 million) and an increased allocation of ViiV Healthcare
profits of £197 million (2020: £223 million), including reduced credits for
re-measurement of contingent consideration liabilities.
The allocation of Adjusted earnings to non-controlling interests amounted to
£1,006 million (2020: £1,031 million). The reduction in allocation primarily
reflected a reduced allocation of ViiV Healthcare profits of £438 million
(2020: £474 million), partly offset by higher net profits in some of the
Group's other entities with non-controlling interests. The allocation of
Consumer Healthcare Joint Venture profits was £515 million (2020: £515
million).
Earnings per share
Total EPS was 87.6p compared with 115.5p in 2020. This primarily reflected an
unfavourable comparison to the net profit on disposal in Q2 2020 of Horlicks
and other Consumer brands partly offset by the related loss on sale of the
shares in Hindustan Unilever, partly offset by a credit of £397 million to
Taxation in 2021 resulting from the revaluation of deferred tax assets
following enactment of an increase in the headline rate of UK corporation tax
(effective 1 April 2023), lower major restructuring costs and lower
re-measurement charges on the contingent consideration liabilities.
Adjusted EPS was 113.2p compared with 115.9p in 2020, down 2% AER but up 9%
CER, on a 9% CER increase in Adjusted operating profit primarily reflecting
incremental pandemic sales, sales increases in Pharmaceuticals, tight cost
control and favourable legal settlements and lower interest costs, partly
offset by lower sales in Vaccines, primarily Shingrix, higher supply chain
costs in Vaccines, increased R&D investment and a higher effective tax
rate. The contribution to growth from COVID-19 solutions was approximately 8%
AER, 9% CER.
Currency impact on 2021 results
The results for 2021 are based on average exchange rates, principally
£1/$1.38, £1/€1.16 and £1/Yen 151. Comparative exchange rates are given
on page 57. The period-end exchange rates were £1/$1.35, £1/€1.19 and
£1/Yen 155.
In 2021, turnover remained stable at AER, but was up 5% CER. Total EPS was
87.6p compared with 115.5p in 2020. Adjusted EPS was 113.2p compared with
115.9p in 2020, down 2% AER but up 9% CER. The adverse currency impact
primarily reflected the strengthening in Sterling, particularly against the US
Dollar as well as the Japanese Yen and Euro. Exchange gains or losses on the
settlement of intercompany transactions had a negligible impact on the
negative currency impact of eleven percentage points on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for 2021 and
2020 are set out below.
Year ended 31 December 2021
Total Intangible Intangible Major Trans- Divest- Separation
results amort- impair- restruct- action- ments, costs
£m isation ment uring related significant £m
£m £m £m £m legal and Adjusted
other items results
£m £m
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 34,114 34,114
Cost of sales (11,603) 701 (33) 154 28 27 (10,726)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 22,511 701 (33) 154 28 27 23,388
Selling, general and (10,975) 426 25 17 282 (10,225)
administration
Research and (5,278) 101 355 46 (4,776)
development
Royalty income 419 419
Other operating (476) 1,106 (662) 32 -
income/(expense)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 6,201 802 322 626 1,159 (618) 314 8,806
Net finance costs (756) 2 1 (753)
Loss on disposal of interest in associates (36) 36 -
Share of after tax profits 33 33
of associates and joint
ventures
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before taxation 5,442 802 322 628 1,159 (581) 314 8,086
Taxation (346) (159) (81) (114) (196) (470) (49) (1,415)
Tax rate % 6.4% 17.5%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after taxation 5,096 643 241 514 963 (1,051) 265 6,671
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit attributable to 711 295 1,006
non-controlling interests
Profit attributable to 4,385 643 241 514 668 (1,051) 265 5,665
shareholders
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per share 87.6p 12.9p 4.8p 10.3p 13.3p (21.0)p 5.3p 113.2p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average 5,003 5,003
number of shares
(millions)
------------ ------------
Year ended 31 December 2020
Total Intangible Intangible Major Trans- Divest- Separation
results amort- impair- restruct- action- ments, costs
£m isation ment uring related significant £m
£m £m £m £m legal and Adjusted
other items results
£m £m
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 34,099 34,099
Cost of sales (11,704) 699 31 667 116 (10,191)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 22,395 699 31 667 116 23,908
Selling, general and (11,456) 1 18 659 (23) 16 68 (10,717)
administration
Research and (5,098) 75 214 206 (4,603)
development
Royalty income 318 318
Other operating 1,624 1,215 (2,839) -
income/(expense)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 7,783 775 263 1,532 1,308 (2,823) 68 8,906
Net finance costs (848) 2 2 (844)
Share of after tax profits 33 33
of associates and joint
ventures
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before taxation 6,968 775 263 1,534 1,308 (2,821) 68 8,095
Taxation (580) (150) (47) (292) (229) 17 (14) (1,295)
Tax rate % 8.3% 16.0%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after taxation 6,388 625 216 1,242 1,079 (2,804) 54 6,800
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit attributable to 639 392 1,031
non-controlling interests
Profit attributable to 5,749 625 216 1,242 687 (2,804) 54 5,769
shareholders
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per share 115.5p 12.6p 4.4p 25.0p 13.8p (56.5)p 1.1p 115.9p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average 4,976 4,976
number of shares
(millions)
------------ ------------
Major restructuring and integration
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.
Total Major restructuring charges incurred in 2021 were £626 million (2020:
£1,532 million), analysed as follows:
2021 2020
Cash Non-cash Total Cash Non-cash Total
£m £m £m £m £m £m
2018 major restructuring 18 9 27 105 210 315
programme (incl. Tesaro)
Consumer Healthcare Joint 173 11 184 298 28 326
Venture integration
programme
Separation Preparation 371 59 430 625 216 841
restructuring programme
Combined restructuring and 8 (23) (15) 39 11 50
integration programme
570 56 626 1,067 465 1,532
Cash charges of £371 million under the Separation Preparation programme
primarily arose from restructuring of some administrative and central
manufacturing functions as well as commercial pharmaceuticals and R&D
functions. The non-cash charges of £59 million primarily reflected write-down
of assets in administrative locations and R&D sites.
Cash charges of £173 million on the Consumer Healthcare Joint Venture
programme primarily related to severance and integration costs. The non-cash
credit in the Combined restructuring and integration programme primarily
reflected a write back on disposal of a site.
Total cash payments made in 2021 were £753 million (2020: £737 million),
£434 million (2020: £152 million) relating to the Separation Preparation
restructuring programme, a further £176 million (2020: £291 million)
relating to the Consumer Healthcare Joint Venture integration programme, £95
million (2020: £179 million) under the 2018 major restructuring programme
including the settlement of certain charges accrued in previous quarters and
£48 million (2020: £115 million) for the existing Combined restructuring and
integration programme.
2021 2020
£m £m
Pharmaceuticals 233 671
Vaccines (40) 214
Consumer Healthcare 196 374
389 1,259
Corporate & central functions 237 273
Total Major restructuring costs 626 1,532
The analysis of Major restructuring charges by Income statement line was as
follows:
2021 2020
£m £m
Cost of sales 154 667
Selling, general and administration 426 659
Research and development 46 206
Other operating income/(expense) - -
Total Major restructuring costs 626 1,532
The benefit in the year from restructuring programmes was £0.7 billion, the
benefit from the Separation Preparation restructuring programme was £0.3
billion, the benefit from the Consumer Healthcare Joint Venture integration
was £0.2 billion and the benefit from the 2018 Restructuring programme was
£0.2 billion.
The 2018 major restructuring programme, including Tesaro, has cost £1.5
billion to the end of 2021, with cash costs of £0.6 billion and non-cash
costs of £0.9 billion, and has delivered annual savings of around £0.5
billion by the end of 2021 (at 2019 rates). These savings were fully
re-invested to help fund targeted increases in R&D and commercial support
of new products. The programme is substantially complete and therefore GSK
will cease external reporting of total costs and benefits of the 2018 major
restructuring programme from 2022 onwards.
The completion of the Consumer Healthcare Joint Venture with Pfizer has
realised substantial cost synergies and has largely delivered the expected
total annual cost savings of £0.5 billion by 2021. The cash costs are
expected to be £0.7 billion and non-cash charges expected to be £0.1
billion, plus additional capital expenditure of £0.2 billion. Up to 25% of
the cost savings are intended to be reinvested in the business to support
innovation and other growth opportunities.
The Group initiated in Q1 2020 a two-year Separation Preparation programme to
prepare for the separation of GSK into two companies: new GSK, a biopharma
company with an R&D approach focused on science related to the immune
system, the use of genetics and new technologies, and a new leader in Consumer
Healthcare. The programme aims to:
· Drive a common approach to R&D with improved capital allocation
· Align and improve the capabilities and efficiency of global support functions
to support new GSK
· Further optimise the supply chain and product portfolio, including the
divestment of non-core assets. A strategic review of prescription dermatology
is underway
· 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.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of £1,159 million
(2020: £1,308 million). This included a net £1,101 million accounting charge
for the re-measurement of the contingent consideration liabilities related to
the acquisitions of the former Shionogi-ViiV Healthcare joint venture and the
former Novartis Vaccines business and the liabilities for the Pfizer put
option and Pfizer and Shionogi preferential dividends in ViiV Healthcare.
Charge/(credit) 2021 2020
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint venture 1,026 1,114
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 48 (52)
Contingent consideration on former Novartis Vaccines business 27 172
Release of fair value uplift on acquired Pfizer inventory - 91
Other adjustments 58 (17)
Total transaction-related charges 1,159 1,308
The £1,026 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 £380 million and a charge of £646 million
primarily from adjustments to sales forecasts and the settlement with Gilead
as well as updated exchange rate assumptions. The £48 million charge relating
to the ViiV Healthcare put option and Pfizer preferential dividends
represented an increase in the valuation of the put option as a result of the
settlement with Gilead, offset by lower cash and updated exchange rate
assumptions.
The ViiV Healthcare contingent consideration liability is fair valued under
IFRS. The potential impact of the COVID-19 pandemic remains uncertain and at
31 December 2021, it has been assumed that there will be no significant impact
on the long-term value of the liability. This position remains under review
and the amount of the liability will be updated in future quarters as further
information on the impact of the pandemic becomes available. An explanation of
the accounting for the non-controlling interests in ViiV Healthcare is set out
on page 11.
Divestments, significant legal charges and other items
Divestments and other items also included gains from a number of asset
disposals, including the disposal of royalty rights on cabozantinib, disposal
of the cephalosporins business and disposal of a number of Consumer Healthcare
brands, fair value gains on investments and certain other Adjusting items,
including the impact of the enactment of the increase in the headline rate of
UK Corporate tax as discussed on page 11. The Consumer Healthcare brands
disposal programme is complete and has delivered net proceeds of £1.1
billion. In 2021 the net loss on disposal of interests in associates was £36
million, primarily driven by a loss on disposal of the interest in the
associate Innoviva Inc. A charge of £26 million (2020: £7 million) was
recorded for significant legal matters arising in the period. Significant
legal cash payments were £5 million (2020: £9 million). Included within
Divestments, significant legal and other items, is a deferred tax credit of
£157 million arising on the transfer of intellectual property within the
group during the quarter. This deferred tax credit arises due to differences
between group value and the market value of the assets transferred.
Separation costs
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"). Total Separation costs incurred in 2021 were £314
million (2020: £68 million). This includes £38 million relating to
transaction costs including preparatory admission costs (costs relating to
achieve a listing).
Total separation costs are estimated to be £600-700 million, excluding
transaction costs.
Financial performance - Q4 2021
Total results
The Total results for the Group are set out below.
Q4 2021 Q4 2020 Growth Growth
£m £m £% CER%
Turnover 9,527 8,739 9 13
Cost of sales (3,680) (3,171) 16 19
Gross profit 5,847 5,568 5 10
Selling, general and administration (3,260) (3,162) 3 6
Research and development (1,448) (1,470) (2) 1
Royalty income 135 91 48 46
Other operating (expenses)/income (379) 34
Operating profit 895 1,061 (16) 1
Finance income 4 5
Finance expense (191) (239)
Share of after tax losses of (2) (6)
associates and joint ventures
Profit before taxation 706 821 (14) 8
Taxation 224 18
Tax rate % (31.7)% (2.2)%
Profit after taxation 930 839 11 30
Profit attributable to non-controlling 181 162
interests
Profit attributable to shareholders 749 677
930 839 11 30
Earnings per share 15.0p 13.6p 10 31
Adjusted results
The Adjusted results for the Group are set out below. Reconciliations between
Total results and Adjusted results for Q4 2021 and Q4 2020 are set out on
pages 38 and 39.
Q4 2021
£m % of Growth Reported
turnover £% growth
CER%
Turnover 9,527 100 9 13
Cost of sales (3,496) 36.7 25 28
Selling, general and administration (2,908) 30.5 (1) 2
Research and development (1,365) 14.3 5 7
Royalty income 135 1.4 48 46
Adjusted operating profit 1,893 19.9 4 15
Adjusted profit before tax 1,705 8 20
Adjusted profit after tax 1,528 13 25
Adjusted profit attributable to shareholders 1,280 10 23
Adjusted earnings per share 25.6p 9 22
Operating profit by business Q4 2021
£m % of Growth Reported
turnover £% growth
CER%
Pharmaceuticals 2,035 39.0 9 17
Pharmaceuticals R&D* (1,007) (2) -
Total Pharmaceuticals 1,028 19.7 21 37
Vaccines 403 22.3 (42) (43)
Consumer Healthcare 558 22.3 45 56
1,989 20.9 3 12
Corporate & other unallocated costs (96)
Adjusted operating profit 1,893 19.9 4 15
* Operating profit of Pharmaceuticals R&D segment, which is the
responsibility of the Chief Scientific Officer and President, R&D. It
excludes ViiV Healthcare R&D expenditure, which is reported within the
Pharmaceuticals segment.
Turnover
Pharmaceuticals turnover
Q4 2021
£m Growth Growth
£% CER%
Respiratory 786 15 20
HIV 1,260 (1) 3
Immuno-inflammation 247 20 23
Oncology 132 15 18
Pandemic 828 - -
New and Specialty 3,253 43 49
Established Pharmaceuticals 1,968 (6) (2)
5,221 20 25
US 2,675 36 40
Europe 1,068 1 6
International 1,478 11 17
5,221 20 25
Pharmaceuticals turnover in the quarter was £5,221 million, up 20% AER, 25%
CER, driven by strong growth in New and Specialty products, partly offset by a
decrease in the Established Products portfolio. Sales of Xevudy of £828
million contributed approximately 20 percentage points to total
Pharmaceuticals growth in the quarter.
New and Specialty sales of £3,253 million grew 43% AER, 49% CER, with ongoing
growth from Respiratory, up 15% AER, 20% CER, to £786 million. Oncology and
Immuno-Inflammation therapy areas continued to show double digit sales growth,
while HIV sales were down 1% AER but up 3% CER. Excluding the impact of Xevudy
sales, New and Specialty products grew 7% AER and 10% CER.
Sales of Established Pharmaceuticals decreased 6% AER, 2% CER to £1,968
million, including the impact of the divestment of GSK's cephalosporin
products effective from the start of the quarter, plus the benefit of a
favourable prior period RAR adjustment.
In the US, sales grew 36% AER, 40% CER including an order for Xevudy delivered
in the quarter, contributing approximately 30 percentage points to total
growth. Continued strong performance of Trelegy, Benlysta and Dovato drove
growth of New and Specialty products in the Region. Established Products grew
6% AER, 8% CER, with the impact of generic competition partly offset by strong
demand for Established Respiratory products in the COVID-19 environment, and a
favourable prior period RAR adjustment.
In Europe, sales grew 1% AER, 6% CER, with double digit growth of Trelegy,
Nucala, Benlysta and Zejula. Dovato sales grew 66% AER, 75% CER in the
quarter. Sales of Xevudy contributed approximately 6 percentage points to
total growth. The Established Pharmaceuticals portfolio decreased 14% AER, 10%
CER, impacted by generic competition including Seretide, Duodart and Volibris
and the divestment of cephalosporin products.
International sales grew 11% AER, 17% CER, including £174 million sales of
Xevudy, which contributed approximately 13 percentage points to total growth.
Continued underlying growth of New and Specialty products was driven by
Respiratory, HIV, Oncology and Benlysta. Established Pharmaceuticals decreased
8% AER, 2% CER, with Established Respiratory down 11% AER, 6% CER on Seretide
decline.
Respiratory
Total Respiratory sales of £786 million were up 15% AER, 20% CER, with growth
from Trelegy and Nucala in all regions. International Respiratory sales grew
31% AER, 42% CER including Nucala, up 22% AER, 36% CER, and Trelegy up 72%
AER, 86% CER. In Europe, Respiratory grew 7% AER, 11% CER with double digit
CER growth of Trelegy and Nucala. In the US, Respiratory grew 15% AER, 17%
CER, driven by Trelegy up 54% AER, 58% CER in the quarter.
Sales of Nucala were £311 million in the quarter and grew 7% AER, 11% CER,
with consistent, strong growth across all three regions. US sales were up 3%
AER, 5% CER to £189 million including the impact of the nasal polyps
indication launch in the previous quarter. International sales of £55 million
grew 22% AER, 36% CER including strong growth of at home application in Japan.
Europe sales of £67 million grew 6% AER, 11% CER.
Trelegy sales were up 48% AER, 53% CER to £352 million. In the US, sales
growth of 54% AER, 58% CER includes the asthma indication approved and
launched in Q3 2020. In Europe, sales grew 13% AER, 17% CER and in
International, where Trelegy asthma was approved in Japan in Q4 2020, sales
grew 72% AER, 86% CER to £50 million.
HIV
HIV sales were £1,260 million with a decrease of 1% AER but growth of 3% CER
in the quarter. CER growth was driven by new products Dovato, Cabenuva,
Rukobia and Juluca.
Triumeq sales were £476 million, down 18% AER, 15% CER and Tivicay sales were
£321 million, down 12% AER, 10% CER. New HIV products Juluca, Dovato, Rukobia
and Cabenuva delivered sales of £432 million representing 34% of the total
HIV portfolio (23% in 2020). Sales of the two drug regimens Juluca and Dovato
were £143 million and £254 million respectively with combined growth of 42%
AER, 47% CER. Rukobia sales were £15 million. Cabenuva, the first long acting
injectable, recorded quarterly sales of £20 million.
In the US, total sales of £803 million were stable at AER, but grew 2% CER.
New HIV products delivered sales of £283 million, including: Dovato £142
million with growth of 80% AER, 85% CER, Juluca £110 million with growth of
2% AER, 5% CER, Rukobia £14 million and Cabenuva £17 million. Combined
Tivicay and Triumeq sales were £508 million declining 15% AER, 13% CER. In
Europe, total sales were £318 million with 3% decrease AER, but up 2% CER.
New HIV products delivered sales of £126 million, including: Dovato £93
million with growth of 66% AER, 75% CER and Juluca £30 million with growth of
7% AER, 11% CER. Combined Tivicay and Triumeq sales were £181 million a
decrease of 22% AER, 18% CER.
Immuno-inflammation
Immuno-inflammation sales of £247 million grew 20% AER, 23% CER with Benlysta
sales up 19% AER, 22% CER to £244 million in the quarter, benefitting from
lupus nephritis launches in US and Japan in H2 2020.
Oncology
Sales of Zejula, the PARP inhibitor treatment for ovarian cancer were £108
million in the quarter, up 21% AER, 24% CER impacted by ongoing lower
diagnosis rates due to the COVID-19 pandemic, particularly in the US. Sales
included £51 million in the US and £45 million in Europe.
Blenrep for the treatment of patients with relapsed or refractory multiple
myeloma was approved and launched in the US and Europe in Q3 2020 and reported
sales of £22 million in the quarter.
Pandemic Sales
Sales of Xevudy were £828 million in the quarter, up from £114 million in
the third quarter. This reflected the ongoing fulfilment of contracts across
the world and most significantly the US, which reported sales of £586
million.
Established Pharmaceuticals
Sales of Established Pharmaceuticals in the quarter were £1,968 million, down
6% AER, 2% CER.
Established Respiratory products decreased 2% AER but grew 2% CER to £1,075
million, including the benefit of a prior period adjustment in the quarter.
This product category continues to experience generic competition to products
including Advair/Seretide and Ventolin, but with some flattening of the
generic decline including Xyzal in Japan.
The remainder of the Established Pharmaceuticals portfolio decreased by 11%
AER, 6% CER to £893 million with ongoing generic impacts on products
including Volibris in Europe and Lamictal in the US, and approximately 2
percentage points impact from the divestment of GSK's cephalosporin products
at the start of the quarter.
Vaccines turnover
Q4 2021
£m Growth Growth
£% CER%
Meningitis 194 (29) (27)
Influenza 244 (3) -
Shingles 597 (7) (4)
Established Vaccines 682 (19) (16)
1,717 (15) (12)
Pandemic Vaccines 92 - -
Total Vaccines 1,809 (10) (7)
US 849 (22) (20)
Europe 452 7 12
International 508 1 6
1,809 (10) (7)
Vaccines turnover in the quarter decreased 10% AER, 7% CER to £1,809 million,
primarily driven by lower Meningitis vaccines sales associated with the return
to a normal US back-to-school season, lower DTPa-containing vaccines sales due
to unfavourable CDC purchasing patterns in the US and lower Shingrix sales
resulting from the negative impact of COVID-19 vaccination programme
deployment and disease circulation, partly offset by pandemic adjuvant sales.
Vaccines turnover excluding pandemic vaccines decreased 15% AER, 12% CER to
£1,717 million.
Meningitis
Meningitis sales were down by 29% AER, 27% CER to £194 million. Bexsero sales
decreased 20% AER, 17% CER to £127 million and Menveo sales decreased 42%
AER, 42% CER to £48 million primarily driven by the return to a normal US
back-to-school vaccination season focused in Q3 2021 compared with an
elongated pattern in 2020 when COVID-19 related transition to virtual
schooling spread demand into Q4 2021. Menveo sales also reflect lower demand
in International.
Influenza
Fluarix/FluLaval sales were down 3% AER, stable at CER to £244 million as a
result of higher expected US returns associated with less influenza disease
circulation and vaccination resulting from COVID-19 mitigations, offset by
late season sales and increased supply in Europe.
Shingles
Shingrix decreased 7% AER, 4% CER to £597 million driven by lower demand
resulting from de-prioritisation related to COVID-19 vaccination and
containment measures in the US and International, partially offset by demand
recovery post COVID-19 mass vaccination in Germany and new launches in Europe.
Favourable US prior period RAR movements reduced the Shingrix decrease by
approximately 2 percentage points.
Established Vaccines
Established vaccines decreased 19% AER, 16% CER driven primarily by lower US
sales of Infanrix/Pediarix, Hepatitis vaccines, Boostrix and Rotarix.
Sales of DTPa-containing vaccines (Infanrix/Pediarix and Boostrix) were down
23% AER, 21% CER. Infanrix/Pediarix sales decreased 33% AER, 31% CER to £115
million, reflecting lower CDC purchasing patterns in the US, lower tender
volume and a change in recommendation for the German dosing schedule in
Europe. Boostrix sales decreased 9% AER, 6% CER to £114 million driven by
de-prioritisation of routine adult vaccination and lower CDC purchasing
patterns in the US, partially offset by higher tender volume in International.
Hepatitis vaccines sales were down 19% AER, 17% CER to £113 million, largely
driven by de-prioritisation of US routine adult vaccination together with
increased Hepatitis B vaccine competition in the US.
Rotarix sales were down 4% AER but grew 1% CER reflecting higher tender volume
in International, partially offset by unfavourable CDC purchasing patterns in
the US.
Synflorix sales decreased 1% AER but grew 4% CER to £92 million, primarily
due to higher demand in International and Europe, partially offset by lower
demand in Emerging Markets.
MMRV vaccines sales decreased 31% AER, 26% CER to £54 million, driven by
supply constraints and lower demand in International.
Pandemic Vaccines
£92 million of pandemic adjuvant sales was recorded primarily reflecting
contracted volumes to the Canadian government.
Consumer Healthcare turnover
Q4 2021
£m Growth Growth
£% CER%
Oral health 672 (1) 4
Pain relief 580 7 11
Vitamins, minerals and supplements 398 3 6
Respiratory health 352 34 40
Digestive health and other 463 8 11
2,465 7 11
Brands divested/under review 32 (48) (44)
2,497 6 10
US 902 9 12
Europe 612 (1) 4
International 983 7 12
2,497 6 10
Consumer Healthcare sales increased 6% AER,10% CER to £2,497 million in the
quarter.
Sales excluding brands divested/under review increased 7% AER, 11% CER with
strong growth across the whole portfolio but particularly Respiratory health
which rebounded from the historically low cold and flu season in both Q4 2020
and Q1 2021.
International sales grew double digits on a CER basis with double digit growth
in emerging markets such as China and the Middle East and Africa. European
growth was driven by a particularly strong rebound of cold and flu product
sales ahead of pre-pandemic levels in 2019. US growth was strong across all
categories helped by further improved capacity in Pain relief and Vitamins,
minerals and supplements allowing retailer restocking and a particularly
strong rebound of Respiratory health with cold and flu purchases slightly
behind 2019 levels.
Oral health
Oral health sales decreased 1% AER but grew 4% CER to £672 million. Sensodyne
delivered mid-single digit growth reflecting underlying brand strength, with
the US growing mid-single digits despite the advance purchasing in Q3 2021
ahead of price increases. Gum health continued to deliver high-single digit
growth. Denture care grew mid-single digits.
Pain relief
Pain relief sales increased 7% AER, 11% CER to £580 million. Advil and
Panadol delivered high-teens percent growth; Advil benefitting from improved
capacity in the US allowing retailer restocking, Panadol benefitting from
seasonal demand and both helped by a favourable Q4 2020 comparator. Excedrin
grew by mid-twenties percent reflecting supply improvements. Voltaren grew by
low single digit as growth outside of the US offset the expected short term US
decrease following the introduction of private label competition.
Vitamins, minerals and supplements
Vitamins, minerals and supplements sales increased by 3% AER, 6% CER to £398
million, building on the significant growth (17% CER) in Q4 2020 and
demonstrating that consumers are continuing to prioritise their health and
wellbeing. Centrum grew by mid-twenties percent, helped by further improved
capacity in the US that allowed retailer restocking and despite a challenging
Q4 2020 comparator. Caltrate sales were down low single digits and Emergen-C
decreased double digits.
Respiratory health
Respiratory health sales increased by 34% AER, 40% CER to £352 million driven
by a return of more typical seasonal cold and flu demand and helped by a
favourable prior year comparator. Cold and flu sales rebounded strongly,
growing over 40%, and were above 2019 levels in Europe and slightly below 2019
levels in the US.
Digestive health and other
Digestive health and other brands sales increased by 8% AER,11% CER at £463
million. Skin health and Digestive health both grew by high-single digits.
Smokers health grew by high teens percent helped by favourable stocking
patterns following the introduction of new packaging in the quarter.
Operating performance
Cost of sales
Total cost of sales as a percentage of turnover was 38.6%, 2.3 percentage
points higher at AER and 1.8 percentage points higher in CER terms compared
with Q4 2020. This included a reduction in write-downs in manufacturing sites.
Excluding these and other Adjusting items, Adjusted cost of sales as a
percentage of turnover was 36.7%, 4.7 percentage points higher at AER and 4.2
percentage points higher at CER compared with Q4 2020. This primarily
reflected higher pandemic sales from Xevudy in the quarter as well as higher
supply chain costs resulting from lower demand and higher inventory
adjustments in Vaccines, partly offset by price benefits in Pharmaceuticals,
including the benefit from a prior period RAR adjustment.
Selling, general and administration
Total SG&A costs as a percentage of turnover were 34.2%, 2.0 percentage
points lower at AER and 2.5 percentage points lower CER compared with Q4 2020.
This included an increase in separation costs and significant legal costs.
Excluding Adjusting items, Adjusted SG&A costs as a percentage of turnover
were 30.5%, 2.9 percentage points lower at AER than in Q4 2020 and 3.4
percentage points lower on a CER basis. Adjusted SG&A costs decreased 1%
AER but increased 2% CER which reflected increased investment for launches in
Pharmaceuticals and Vaccines partly offset by reduced costs for legal
settlements, one-off benefits in pensions and insurance continued tight
control of ongoing costs and the continuing benefit of restructuring in
Consumer Healthcare and support functions.
Research and development
Total R&D expenditure was £1,448 million (15.2% of turnover), down 2%
AER, and up 1% CER, including an reduction in restructuring costs. Adjusted
R&D expenditure was £1,365 million (14.3% of turnover), 5% higher at AER,
7% higher at CER than in Q4 2020.
Pharmaceuticals R&D expenditure was £1,041 million (19.9% of turnover),
stable at AER, up 2% CER, reflecting steady progression of the portfolio
offset by reduction in spend in bintrafusp alfa, feladilimab and daprodustat.
Efficiency savings continue from the implementation of our One R&D
programme for Pharmaceuticals and Vaccines as part of the Separation
preparation restructuring programme.
In the Specialty portfolio, investment has been stable, with increased
investment in the early-stage Research programmes (including IL18 and CCL17)
and in depemokimab, our anti-IL5 for asthma. This has been offset by reduced
spend on daprodustat due to completion of programmes. In Oncology, there has
been increased investment in Blenrep, NY-ESO and cobolimab however these
increases were offset by a reduction in spend on feladilimab following the
decision to terminate the programme in April and bintrafusp alfa programme
closure.
R&D expenditure in Vaccines was £230 million (12.7% of turnover), up 29%
AER, 35% CER, reflecting increased investment in clinical programmes for
meningitis, RSV and investment in our mRNA platform, partly offset by
efficiency savings from the implementation of the One Development programme.
R&D expenditure in Consumer Healthcare was £81 million.
Royalty income
Royalty income was £135 million (Q4 2020: £91 million), up 48% AER and up
46% at CER, primarily reflecting increased royalties on sales of Gardasil.
Other operating income/(expense)
Net other operating expense of £379 million (Q4 2020: £34 million) primarily
reflected accounting charges of £612 million (Q4 2020: £2 million credit)
arising from the re-measurement of the contingent consideration liabilities
related to the acquisitions of the former Shionogi-ViiV Healthcare joint
venture and the former Novartis Vaccines business and the liabilities for the
Pfizer put option and Pfizer and Shionogi preferential dividends in ViiV
Healthcare. This included a re-measurement charge of £528 million (Q4 2020:
£3 million credit) for the contingent consideration liability due to
Shionogi, as a result of the unwinding of the discount for £101 million and a
charge for £427 million primarily from the settlement with Gilead and
adjustments to sales forecasts partly offset by updated exchange rate
assumptions. This was partly offset by a number of asset disposals including
the profit on disposal of the cephalosporins business.
Operating profit
Total operating profit was £895 million in Q4 2021 compared with £1,061
million in Q4 2020. This reflected higher re-measurement charges on the
contingent consideration liabilities partly offset by lower restructuring and
higher profit on disposal of assets.
Excluding these and other Adjusting items, Adjusted operating profit was
£1,893 million, 4% higher than Q4 2020 at AER, 15% higher at CER on a
turnover increase of 13% CER. The Adjusted operating margin of 19.9% was 0.9
percentage points lower at AER, and 0.2 percentage points higher on a CER
basis than in Q4 2020.
The increase in Adjusted operating profit primarily reflected leverage from
£920 million of pandemic sales (Xevudy £828 million, Pandemic adjuvant £92
million) as well as strong growth in New and Specialty Products and a
favourable prior period RAR adjustment in Pharmaceuticals, reduced costs for
legal settlements continued tight control of ongoing costs and benefits from
continued restructuring across the business. This was partly offset by
increased investment in R&D, increased investment behind launches and
higher supply chain costs resulting from lower demand and higher inventory
adjustments in Vaccines. The contribution to growth from COVID-19 solutions
was approximately 12% AER, 15% CER.
Contingent consideration cash payments which are 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 Q4 2021
amounted to £225 million (Q4 2020: £221 million). This included cash
payments made to Shionogi of £211 million (Q4 2020: £210 million).
Adjusted operating profit by business
Pharmaceuticals operating profit was £1,028 million, up 21% AER, 37% CER on a
turnover increase of 25% CER. The operating margin of 19.7% was 0.2 percentage
points higher at AER than in Q4 2020 and 1.9 percentage points higher on a CER
basis. This primarily reflected strong growth in New and Specialty products
and a favourable prior period RAR adjustment as well as continued tight
control of ongoing costs and benefits from continued restructuring. This was
partly offset by reduced costs for legal settlements and increased investment
behind launches.
Vaccines operating profit was £403 million, 42% lower than Q4 2020 at AER,
and 43% lower at CER on a turnover decrease of 7% CER. The operating margin of
22.3% was 12.1 percentage points lower at AER than in Q4 2020 and 13.2
percentage points lower on a CER basis. This was primarily driven by negative
operating leverage from the sales decrease, higher supply chain costs
resulting from lower demand and higher inventory adjustments, higher SG&A
investment behind key brands and higher R&D spend to support key strategic
priorities. This was partly offset by higher royalty income.
Consumer Healthcare operating profit was £558 million, up 45% AER but up 56%
CER on a turnover increase of 10% CER. The operating margin of 22.3% was 6.0
percentage point higher at AER and 6.9 percentage points higher on a CER basis
than in Q4 2020. The margin increase at CER reflected leverage from volume
growth and price increases, incremental synergy benefits from the Pfizer Joint
Venture and the one-time benefit from legal settlements offset by incremental
supply chain costs, including commodities and freight.
Net finance costs
Total net finance costs were £187 million compared with £234 million in Q4
2020. Adjusted net finance costs were £186 million compared with £233
million in Q4 2020. The decrease primarily reflected a premium paid on the
early repayment and refinancing of bond debt in Q4 2020, reduced interest on
tax, increased swap interest income on foreign currency hedges and favourable
movements in foreign exchange rates.
Share of after tax profits of associates and joint ventures
The share of after tax losses of associates and joint ventures was £2 million
(Q4 2020: £6 million).
Taxation
The credit of £224 million represented an effective tax rate on Total results
of (31.7)% (Q4 2020: (2.2)%) and reflected the different tax effects of the
various Adjusting items including a further credit adjustment of £72 million
resulting from the revaluation of deferred tax assets following enactment of
the proposed change of UK corporation tax rate from 19% to 25% (effective 1
April 2023). Tax on Adjusted profit amounted to £177 million and represented
an effective Adjusted tax rate of 10.4% (Q4 2020: 13.9%).
Issues related to taxation are described in Note 14, 'Taxation' in the Annual
Report 2020. The Group continues to believe it has made adequate provision for
the liabilities likely to arise from periods which are open and not yet agreed
by 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
£181 million (Q4 2020: £162 million). The increase was primarily due to an
increased allocation of Consumer Healthcare Joint Venture profits of £180
million (Q4 2020: £64 million) offset by a reduced allocation of ViiV
Healthcare losses of £8 million (Q4 2020: £97 million profits), including
increased credits for re-measurement of contingent consideration liabilities.
The allocation of Adjusted earnings to non-controlling interests amounted to
£248 million (Q4 2020: £195 million). The increase in allocation primarily
reflected an increased allocation of Consumer Healthcare Joint Venture profits
of £132 million (Q4 2020: £91 million) and an increased allocation of ViiV
Healthcare profits of £107 million (Q4 2020: £103 million).
Earnings per share
Total EPS was 15.0p, compared with 13.6p in Q4 2020. This primarily reflected
lower restructuring and higher disposal income partly offset by higher
re-measurement charges.
Adjusted EPS was 25.6p compared with 23.3p in Q4 2020, up 9% AER and 22% CER,
on a 15% CER increase in Adjusted operating profit reflecting positive
leverage from Xevudy sales in the quarter and lower interest costs partly
offset by a higher non-controlling interest allocation of Consumer Healthcare
profits. The contribution to growth from COVID-19 solutions was approximately
17% AER, 20% CER.
Currency impact on Q4 2021 results
The results for Q4 2021 are based on average exchange rates, principally
£1/$1.36, £1/€1.18 and £1/Yen 154. Comparative exchange rates are given
on page 57. The period-end exchange rates were £1/$1.35, £1/€1.19 and
£1/Yen 155.
In the quarter, turnover increased 9% AER, 13% CER. Total EPS was 15.0p
compared with 13.6p in Q4 2020. Adjusted EPS was 25.6p compared with 23.3p in
Q4 2020, up 9% AER and 22% CER. The adverse currency impact primarily
reflected the strengthening in Sterling, particularly against the US dollar as
well as Euro and Japanese Yen. Exchange gains or losses on the settlement of
intercompany transactions had a one percentage point, negative currency impact
of 13 percentage points on Adjusted EPS.
Adjusting items
The reconciliations between Total results and Adjusted results for Q4 2021 and
Q4 2020 are set out below.
Three months ended 31 December 2021
Total Intangible Intangible Major Transaction- Divestments, Separation
results amort- impair- restruct- related significant costs
£m isation ment uring £m legal and £m
£m £m £m other items Adjusted
£m results
£m
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 9,527 9,527
Cost of sales (3,680) 179 (37) 35 7 (3,496)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 5,847 179 (37) 35 7 6,031
Selling, general and (3,260) 215 25 14 98 (2,908)
administration
Research and (1,448) 25 64 (4) (2) (1,365)
development
Royalty income 135 135
Other operating (379) 1 591 (245) 32 -
income/(expense)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 895 204 27 247 623 (233) 130 1,893
Net finance costs (187) 1 (186)
Share of after tax losses (2) (2)
of associates and joint
ventures
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before taxation 706 204 27 248 623 (233) 130 1,705
Taxation 224 (49) (11) (33) (95) (201) (12) (177)
Tax rate % (31.7)% 10.4%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after taxation 930 155 16 215 528 (434) 118 1,528
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit attributable to 181 67 248
non-controlling interests
Profit attributable to 749 155 16 215 461 (434) 118 1,280
shareholders
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per share 15.0p 3.1p 0.3p 4.3p 9.3p (8.7)p 2.3p 25.6p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average 5,008 5,008
number of shares
(millions)
------------ ------------
Three months ended 31 December 2020
Total Intangible Intangible Major Transaction- Divestments, Separation
results amort- impair- restruct- related significant costs
£m isation ment uring £m legal and £m
£m £m £m other items Adjusted
£m results
£m
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Turnover 8,739 8,739
Cost of sales (3,171) 170 3 199 7 (2,792)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Gross profit 5,568 170 3 199 7 5,947
Selling, general and (3,162) 1 1 211 2 (2) 25 (2,924)
administration
Research and (1,470) 25 38 110 (1,297)
development
Royalty income 91 91
Other operating 34 (8) (26) -
income/(expense)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Operating profit 1,061 196 42 520 1 (28) 25 1,817
Net finance costs (234) 1 (233)
Share of after tax losses (6) (6)
of associates and joint
ventures
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit before taxation 821 196 42 520 1 (27) 25 1,578
Taxation 18 (40) (8) (51) (43) (90) (6) (220)
Tax rate % (2.2)% 13.9%
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit after taxation 839 156 34 469 (42) (117) 19 1,358
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Profit attributable to 162 33 195
non-controlling interests
Profit attributable to 677 156 34 469 (75) (117) 19 1,163
shareholders
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Earnings per share 13.6p 3.2p 0.7p 9.3p (1.5)p (2.4)p 0.4p 23.3p
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Weighted average 4,981 4,981
number of shares
(millions)
------------ ------------
Major restructuring and integration
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.
Total Major restructuring charges incurred in Q4 2021 were £247 million (Q4
2020: £520 million), analysed as follows:
Q4 2021 Q4 2020
Cash Non-cash Total Cash Non-cash Total
£m £m £m £m £m £m
2018 major restructuring 10 (1) 9 30 15 45
programme (incl. Tesaro)
Consumer Healthcare Joint 67 7 74 53 4 57
Venture integration
programme
Separation Preparation 119 41 160 273 104 377
restructuring programme
Combined restructuring and 3 1 4 26 15 41
integration programme
199 48 247 382 138 520
Cash charges of £119 million under the Separation Preparation programme
primarily arose from restructuring of some administrative functions and office
locations as well as commercial pharmaceuticals and R&D functions.
Non-cash charge of £41 million primarily related to write-down of assets in
administrative locations and R&D sites.
Cash charges of £67 million on the Consumer Healthcare Joint Venture
programme primarily related to severance and integration costs.
Total cash payments made in Q4 2021 were £181 million (Q4 2020: £194
million), £112 million (Q4 2020: £71 million) relating to the Separation
Preparation restructuring programme, a further £35 million (Q4 2020: £67
million) relating to the Consumer Healthcare Joint Venture integration
programme, £25 million (Q4 2020: £34 million) under the 2018 major
restructuring programme including the settlement of certain charges accrued in
previous quarters and £9 million (Q4 2020: £22 million) for the existing
Combined restructuring and integration programme.
The analysis of Major restructuring charges by business was as follows:
Q4 2021 Q4 2020
£m £m
Pharmaceuticals 87 309
Vaccines (10) 11
Consumer Healthcare 76 71
153 391
Corporate & central functions 94 129
Total Major restructuring costs 247 520
The analysis of Major restructuring charges by Income statement line was as
follows:
Q4 2021 Q4 2020
£m £m
Cost of sales 35 199
Selling, general and administration 215 211
Research and development (4) 110
Other operating income 1 -
Total Major restructuring costs 247 520
The benefit in the quarter from restructuring programmes was £0.3 billion,
with contributions from the Separation Preparation restructuring programme
(£0.1 billion), Consumer Healthcare Joint Venture integration and the 2018
major restructuring programme.
Transaction-related adjustments
Transaction-related adjustments resulted in a net charge of £623 million (Q4
2020: £1 million). This included a net accounting charge of £612 million (Q4
2020: £2 million credit) for the re-measurement of the contingent
consideration liabilities related to the acquisitions of the former
Shionogi-ViiV Healthcare joint venture and the former Novartis Vaccines
business and the liabilities for the Pfizer put option and Pfizer and Shionogi
preferential dividends in ViiV Healthcare.
Charge/(credit) Q4 2021 Q4 2020
£m £m
Contingent consideration on former Shionogi-ViiV Healthcare joint venture 528 (3)
(including Shionogi preferential dividends)
ViiV Healthcare put options and Pfizer preferential dividends 101 (10)
Contingent consideration on former Novartis Vaccines business (17) 11
Other adjustments 11 3
Total transaction-related charges 623 1
The £528 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, primarily as a
result of the unwind of the discount for £101 million and a charge of £427
million primarily from the settlement with Gilead and updated sales forecasts
partly offset by updated exchange rate assumptions. The £101 million charge
relating to the ViiV Healthcare put option and Pfizer preferential dividends
represented an increase in the valuation of the put option following the
settlement with Gilead offset by updated exchange rate assumptions.
The ViiV Healthcare contingent consideration liability is fair valued under
IFRS. The potential impact of the COVID-19 pandemic remains uncertain and at
31 December 2021, it has been assumed that there will be no significant impact
on the long-term value of the liability. This position remains under review
and the amount of liability will be updated in future quarters as further
information on the impact of the pandemic becomes available. An explanation of
the accounting for the non-controlling interests in ViiV Healthcare is set out
on page 11.
Divestments, significant legal charges and other items
Divestments and other items included a number of asset disposals including the
profit on disposal of the cephalosporins business and certain other Adjusting
items. There was a charge of £37 million (Q4 2020: £1 million) for
significant legal matters arising in the quarter. Significant legal cash
payments were £1 million (Q4 2020: £2 million). Included within Divestments,
significant legal and other items, is a deferred tax credit of £157 million
arising on the transfer of intellectual property within the group during the
quarter. This deferred tax credit arises due to differences between group
value and the market value of the assets transferred.
Separation costs
From Q2 2020, the Group started to report additional costs to prepare for
Consumer Healthcare separation. Separation costs incurred in the quarter were
£130 million (Q4 2020: £25 million) including preparatory admission costs of
£38 million.
Cash generation
Cash flow
2021 2020 Q4 2021
Net cash inflow from operating activities (£m) 7,952 8,441 3,767
Free cash flow* (£m) 4,437 5,406 2,901
Free cash flow growth (%) (18)% 7% (7)%
Free cash flow conversion* (%) 101% 94% 387%
Net debt** (£m) 19,838 20,780 19,838
* Free cash flow and free cash flow conversion are defined on page 61.
** Net debt is analysed on page 60.
2021
The net cash inflow from operating activities for the year was £7,952 million
(2020: £8,441 million). The decrease primarily reflected adverse exchange
impacts, increased trade receivables, adverse timing of RAR and increased
separation costs, partly offset by improved adjusted operating profit at CER
and reduced tax payments including tax on disposals.
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the year were £826 million (2020: £858 million),
of which £721 million was recognised in cash flows from operating activities
and £105 million was recognised in contingent consideration paid within
investing cash flows. These payments are deductible for tax purposes.
Free cash inflow was £4,437 million for the year (2020: £5,406 million). The
decrease primarily reflected adverse exchange impacts, increased trade
receivables, adverse timing of RAR, increased purchases of intangible assets
and reduced proceeds from intangible assets. This was partly offset by
improved adjusted operating profit at CER, reduced tax payments including tax
on disposals and lower dividends to non-controlling interests.
Q4 2021
The net cash inflow from operating activities for the quarter was £3,767
million (Q4 2020: £3,855 million). The reduction primarily reflected adverse
exchange impacts and a lower seasonal reduction in trade receivables in the
quarter and phasing of tax payments partly offset by improved adjusted
operating profit at CER and favourable timing of RAR.
Total cash payments to Shionogi in relation to the ViiV Healthcare contingent
consideration liability in the quarter were £211 million (Q4 2020: £210
million), of which £184 million was recognised in cash flows from operating
activities and £27 million was recognised in contingent consideration paid
within investing cash flows. These payments are deductible for tax purposes.
Free cash inflow was £2,901 million for the quarter (Q4 2020: £3,106
million). The reduction primarily reflected adverse exchange impacts and a
lower seasonal reduction in trade receivables in the quarter, phasing of tax
payments and lower proceeds from intangible assets, partly offset by improved
adjusted operating profit at CER, favourable timing of RAR and lower purchases
of intangible assets.
Net debt
At 31 December 2021, net debt was £19.8 billion, compared with £20.8 billion
at 31 December 2020, comprising gross debt of £24.1 billion and cash and
liquid investments of £4.3 billion. Net debt reduced due to £4.4 billion
free cash flow and £0.5 billion proceeds from investments, including £0.3
billion proceeds from the Innoviva disposal and £0.3 billion of net
favourable exchange impacts from the translation of non-Sterling denominated
debt and exchange on other financing items partly offset by the dividends paid
to shareholders of £4.0 billion and additional investments of £0.2 billion.
At 31 December 2021, GSK had short-term borrowings (including overdrafts and
lease liabilities) repayable within 12 months of £3.6 billion with loans of
£4.0 billion repayable in the subsequent year.
Returns to shareholders
Quarterly dividends
The Board has declared a fourth interim dividend for 2021 of 23 pence per
share (Q4 2020: 23 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. The dividend policy, the
total expected cash distribution, and the respective dividend pay-out ratios
for new GSK and new Consumer Healthcare remain unchanged.
GSK expects to declare a 27p per share dividend payable by the current group
for the first half. This comprises 22 pence per share for new GSK and 5 pence
per share representing Consumer Healthcare during the first half whilst part
of the group. For the second half of 2022, new GSK continues to expect to
declare a 22p per share dividend. As previously communicated, new GSK would
expect to declare a dividend of 45 pence per share for 2023.
Following separation, the dividend policy for the new Consumer Healthcare
company will be the responsibility of its Board of Directors and is expected
to be guided by a 30 to 50 per cent pay-out ratio. On this basis, we now
expect a second-half dividend from the new Consumer Healthcare company
equivalent to a payout of around 3 pence per share, subject to its Board's
decisions on the intra-year phasing of dividend payments. This expected
distribution per share for the second half of the year has been adjusted from
that highlighted at the GSK Investor Update in June 2021 to reflect the total
number of shares (up to circa 9.25 billion shares) in the new Consumer
Healthcare company that are expected to be in issue upon demerger. In June
2021 the planning assumption for the Investor Update reflected only the GSK
shares in issue at that time (circa 5 billion shares).
In aggregate, this would represent on the full year 2022 basis the equivalent
of a Group dividend of around 52p per share. Dividends payable by Consumer
Healthcare will only be receivable by shareholders who remain invested in
Consumer Healthcare post-separation and at the appropriate record dates.
Payment of dividends
The equivalent interim dividend receivable by ADR holders will be calculated
based on the exchange rate on 4 April 2022. An annual fee of $0.03 per ADS (or
$0.0075 per ADS per quarter) is charged by the Depositary.
The ex-dividend date will be 24 February 2022, with a record date of 25
February 2022 and a payment date of 7 April 2022.
Paid/ Pence per £m
payable share
2021
First interim 8 July 2021 19 951
Second interim 7 October 2021 19 951
Third interim 13 January 2022 19 952
Fourth interim 7 April 2022 23 1,152
80 4,006
2020
First interim 9 July 2020 19 946
Second interim 8 October 2020 19 946
Third interim 14 January 2021 19 946
Fourth interim 8 April 2021 23 1,151
80 3,989
Weighted average number of shares
2021 2020
millions millions
Weighted average number of shares - basic 5,003 4,976
Dilutive effect of share options and share awards 62 62
Weighted average number of shares - diluted 5,065 5,038
Weighted average number of shares
Q4 2021 Q4 2020
millions millions
Weighted average number of shares - basic 5,008 4,981
Dilutive effect of share options and share awards 86 61
Weighted average number of shares - diluted 5,094 5,042
At 31 December 2021, 5,009 million shares (2020: 4,981 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 1.8 million shares
under employee share schemes in the year for proceeds of £21 million (2020:
£29 million).
At 31 December 2021, the ESOP Trust held 22.8 million GSK shares against the
future exercise of share options and share awards. The carrying value of £28
million has been deducted from other reserves. The market value of these
shares was £373 million.
At 31 December 2021, the company held 355.2 million Treasury shares at a cost
of £4,969 million, which has been deducted from retained earnings.
Financial information
Income statements
2021 2020 Q4 2021 Q4 2020
£m £m £m £m
TURNOVER 34,114 34,099 9,527 8,739
Cost of sales (11,603) (11,704) (3,680) (3,171)
Gross profit 22,511 22,395 5,847 5,568
Selling, general and administration (10,975) (11,456) (3,260) (3,162)
Research and development (5,278) (5,098) (1,448) (1,470)
Royalty income 419 318 135 91
Other operating (expense)/income (476) 1,624 (379) 34
OPERATING PROFIT 6,201 7,783 895 1,061
Finance income 28 44 4 5
Finance expense (784) (892) (191) (239)
Share of after tax profits/(losses) of 33 33 (2) (6)
associates and joint ventures
Loss on disposal of interest in associates (36) - - -
PROFIT BEFORE TAXATION 5,442 6,968 706 821
Taxation (346) (580) 224 18
Tax rate % 6.4% 8.3% (31.7)% (2.2)%
PROFIT AFTER TAXATION 5,096 6,388 930 839
Profit attributable to non-controlling 711 639 181 162
interests
Profit attributable to shareholders 4,385 5,749 749 677
5,096 6,388 930 839
EARNINGS PER SHARE 87.6p 115.5p 15.0p 13.6p
Diluted earnings per share 86.6p 114.1p 14.7p 13.4p
Statement of comprehensive income
2021 2020 Q4 2021 Q4 2020
£m £m £m £m
Profit for the year 5,096 6,388 930 839
Items that may be reclassified subsequently to
income statement:
Exchange movements on overseas net assets and (290) (59) (181) (248)
net investment hedges
Reclassification of exchange movements on liquidation 25 36 35 -
or disposal of overseas subsidiaries and associates
Fair value movements on cash flow hedges 5 (19) 9 4
Reclassification of cash flow hedges to income 12 54 1 1
statement
Deferred tax on fair value movements on cash flow (8) (18) (7) (16)
hedges
(256) (6) (143) (259)
Items that will not be reclassified to income
statement:
Exchange movements on overseas net assets of (20) (34) (19) (64)
non-controlling interests
Fair value movements on equity investments (910) 1,348 (615) 635
Tax on fair value movements on equity investments 131 (220) 33 (104)
Re-measurement losses on defined benefit plans 941 (187) 607 195
Tax on re-measurement losses on defined benefit plans (223) 69 (158) (9)
(81) 976 (152) 653
Other comprehensive (expense)/income for the year (337) 970 (295) 394
Total comprehensive income for the year 4,759 7,358 635 1,233
Total comprehensive income for the year attributable to:
Shareholders 4,068 6,753 473 1,135
Non-controlling interests 691 605 162 98
4,759 7,358 635 1,233
Pharmaceuticals turnover - year ended 31 December 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Respiratory 2,863 21 28 1,822 23 30 606 11 13 435 33 42
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Anoro Ellipta 504 (8) (3) 278 (15) (9) 149 5 8 77 (1) 3
Trelegy Ellipta 1,217 49 57 854 52 62 200 19 21 163 81 92
Nucala 1,142 15 22 690 15 23 257 8 11 195 23 34
HIV 4,777 (2) 3 2,898 (4) 3 1,194 (2) 1 685 4 11
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dolutegravir products 4,567 (3) 2 2,774 (6) - 1,151 (1) 1 642 7 14
Tivicay 1,381 (10) (4) 763 (12) (7) 286 (22) (20) 332 15 24
Triumeq 1,882 (18) (14) 1,190 (18) (13) 452 (20) (18) 240 (15) (12)
Juluca 517 4 10 393 2 8 111 14 18 13 18 27
Dovato 787 >100 >100 428 87 99 302 >100 >100 57 >100 >100
Rukobia 45 >100 >100 43 >100 >100 2 >100 >100 - - -
Cabenuva 38 >100 >100 32 - - 5 - - 1 >100 >(100)
Other 127 (22) (18) 49 (8) (4) 36 (28) (26) 42 (30) (23)
Immuno- 885 22 29 727 19 26 68 21 25 90 53 63
inflammation
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Benlysta 874 22 29 727 19 26 68 21 25 79 55 67
Oncology 489 31 37 274 19 26 195 43 46 20 >100 >100
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Zejula 395 17 22 212 3 10 163 27 30 20 >100 >100
Blenrep 89 >100 >100 61 >100 >100 28 >100 >100 - - -
Jemperli 5 >100 >100 2 - - 3 >100 >100 - - -
Pandemic 958 - - 602 - - 69 - - 287 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Xevudy 958 - - 602 - - 69 - - 287 - -
New and Specialty 9,972 20 26 6,323 19 26 2,132 9 12 1,517 45 54
Pharmaceuticals
Established 7,757 (11) (6) 2,119 - 6 1,802 (16) (14) 3,836 (14) (8)
Pharmaceuticals
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Established 4,327 (7) (2) 1,788 7 13 995 (12) (10) 1,544 (16) (10)
Respiratory
Arnuity Ellipta 47 4 11 40 8 16 - - - 7 (12) (13)
Avamys/Veramyst 298 - 7 - - - 65 (2) 2 233 1 8
Flixotide/Flovent 444 6 12 275 50 60 69 (14) (11) 100 (36) (32)
Incruse Ellipta 205 (7) (3) 109 (7) (2) 70 (5) (3) 26 (10) (7)
Relvar/Breo Ellipta 1,121 - 5 488 3 9 334 4 6 299 (9) (2)
Seretide/Advair 1,357 (12) (7) 486 12 19 322 (28) (27) 549 (16) (11)
Ventolin 718 (9) (4) 390 (9) (3) 108 (7) (5) 220 (8) (3)
Other Respiratory 137 (36) (31) - - - 27 - - 110 (41) (36)
Dermatology 399 (6) (1) (1) >(100) >(100) 131 (6) (4) 269 (5) 2
Augmentin 426 (13) (7) - - - 124 (14) (12) 302 (12) (4)
Avodart 332 (29) (25) 1 (80) (80) 118 (25) (23) 213 (30) (25)
Imigran/Imitrex 105 (11) (8) 29 (31) (31) 51 - 2 25 - 8
Lamictal 478 (11) (6) 232 (14) (9) 112 (7) (5) 134 (9) (3)
Seroxat/Paxil 128 (12) (6) - - - 35 (5) (5) 93 (15) (6)
Valtrex 92 (11) (5) 11 (27) (20) 33 3 3 48 (14) (5)
Other 1,470 (18) (13) 59 (46) (40) 203 (39) (37) 1,208 (11) (5)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Pharmaceuticals 17,729 4 10 8,442 13 21 3,934 (4) (2) 5,353 (3) 4
-------- -------- -------- -------- ---------- -------- -------- --------- -------- -------- --------- --------
Pharmaceuticals turnover - three months ended 31 December 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Respiratory 786 15 20 500 15 17 160 7 11 126 31 42
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Anoro Ellipta 123 (19) (17) 63 (30) (29) 39 - 5 21 (5) (5)
Trelegy Ellipta 352 48 53 248 54 58 54 13 17 50 72 86
Nucala 311 7 11 189 3 5 67 6 11 55 22 36
HIV 1,260 (1) 3 803 - 2 318 (3) 2 139 2 7
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dolutegravir products 1,194 (3) 1 760 (3) (1) 304 (3) 1 130 5 10
Tivicay 321 (12) (10) 200 (13) (10) 71 (19) (16) 50 4 6
Triumeq 476 (18) (15) 308 (17) (15) 110 (23) (20) 58 (13) (7)
Juluca 143 3 6 110 2 5 30 7 11 3 - 33
Dovato 254 80 87 142 80 85 93 66 75 19 >100 >100
Rukobia 15 88 87 14 75 75 1 >100 >100 - - -
Cabenuva 20 >100 >100 17 - - 2 - - 1 >100 >100
Other 31 (11) (8) 12 9 - 11 (8) - 8 (33) (24)
Immuno- 247 20 23 203 16 19 18 20 27 26 62 69
inflammation
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Benlysta 244 19 22 203 16 19 18 20 27 23 53 60
Oncology 132 15 18 68 (9) (7) 52 41 46 12 >100 >100
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Zejula 108 21 24 51 (6) (4) 45 41 47 12 >100 >100
Blenrep 22 (12) (8) 17 (15) (10) 6 20 20 (1) >(100) >(100)
Jemperli 2 >100 >100 1 - - 1 >100 >100 - - -
Pandemic 828 - - 586 - - 68 - - 174 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Xevudy 828 - - 586 - - 68 - - 174 - -
New and Specialty 3,253 43 49 2,160 45 50 616 16 21 477 90 >100
Pharmaceuticals
Established 1,968 (6) (2) 515 6 8 452 (14) (10) 1,001 (8) (2)
Pharmaceuticals
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Established 1,075 (2) 2 427 14 16 255 (8) (4) 393 (11) (6)
Respiratory
Arnuity Ellipta 13 (7) - 12 9 9 - - - 1 (67) (33)
Avamys/Veramyst 71 1 7 - - - 15 - 13 56 2 5
Flixotide/Flovent 107 23 25 56 65 65 22 10 15 29 (12) (9)
Incruse Ellipta 49 2 4 27 29 24 16 (16) (11) 6 (25) (13)
Relvar/Breo Ellipta 280 2 6 117 9 10 86 2 7 77 (7) -
Seretide/Advair 335 (5) (1) 120 64 68 78 (26) (23) 137 (21) (17)
Ventolin 184 (13) (10) 96 (23) (22) 31 7 10 57 - 4
Other Respiratory 36 (3) 8 (1) >(100) (100) 7 17 17 30 3 14
Dermatology 101 (7) (2) (1) >(100) >(100) 31 (14) (11) 71 (3) 4
Augmentin 130 13 22 - - - 38 3 8 92 18 28
Avodart 79 (18) (11) - >(100) >(100) 29 (15) (9) 50 (18) (11)
Imigran/Imitrex 26 (4) - 6 - (17) 14 - - 6 (14) 14
Lamictal 122 (13) (10) 62 (15) (14) 27 (10) (7) 33 (11) (5)
Seroxat/Paxil 32 (11) (3) - - - 9 (10) (10) 23 (12) -
Valtrex 24 (8) - 3 (25) - 8 - - 13 (7) -
Other 379 (17) (12) 18 (33) (26) 41 (49) (44) 320 (8) (3)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Pharmaceuticals 5,221 20 25 2,675 36 40 1,068 1 6 1,478 11 17
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Vaccines turnover - year ended 31 December 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Meningitis 961 (7) (2) 453 5 11 354 (1) 2 154 (36) (30)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Bexsero 650 - 5 253 (3) 3 328 1 4 69 5 20
Menveo 272 3 9 200 16 23 21 (19) (15) 51 (23) (18)
Other 39 (66) (65) - - - 5 (17) (17) 34 (69) (68)
Influenza 679 (7) (2) 456 (15) (9) 101 3 6 122 22 28
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Fluarix, FluLaval 679 (7) (2) 456 (15) (9) 101 3 6 122 22 28
Shingles 1,721 (13) (9) 1,344 (20) (15) 281 51 54 96 (25) (23)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Shingrix 1,721 (13) (9) 1,344 (20) (15) 281 51 54 96 (25) (23)
Established 2,970 (8) (4) 977 (7) (1) 700 (13) (10) 1,293 (6) (3)
Vaccines
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Infanrix, Pediarix 543 (14) (9) 303 (3) 4 116 (33) (32) 124 (14) (10)
Boostrix 521 9 14 270 5 12 140 - 2 111 41 44
Hepatitis 460 (20) (16) 269 (19) (14) 109 (22) (21) 82 (20) (17)
Rotarix 541 (3) 1 111 (10) (4) 118 (1) 2 312 (2) 3
Synflorix 357 (11) (8) - - - 45 (15) (13) 312 (11) (7)
Priorix, Priorix Tetra, 260 - 4 - - - 125 (1) 2 135 - 5
Varilrix
Cervarix 138 (1) - - - - 25 (17) (17) 113 4 5
Other 150 (21) (19) 24 (20) (13) 22 16 26 104 (26) (26)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Vaccines excluding 6,331 (9) (5) 3,230 (13) (7) 1,436 - 2 1,665 (10) (6)
pandemic vaccines
Pandemic vaccines 447 - - 242 - - - - - 205 - -
Pandemic adjuvant 444 - - 242 - - - - - 202 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Vaccines 6,778 (3) 2 3,472 (6) - 1,436 - 2 1,870 1 5
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Vaccines turnover - three months ended 31 December 2021
Total US Europe International
------------------------------------- ------------------------------------- ------------------------------------- -------------------------------------
Growth Growth Growth Growth
----------------------- ----------------------- ----------------------- -----------------------
£m £% CER% £m £% CER% £m £% CER% £m £% CER%
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Meningitis 194 (29) (27) 63 (43) (45) 86 (5) (1) 45 (38) (33)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Bexsero 127 (20) (17) 35 (42) (45) 77 (6) (1) 15 (12) 6
Menveo 48 (42) (42) 28 (44) (44) 8 - - 12 (52) (52)
Other 19 (41) (37) - - - 1 - - 18 (42) (39)
Influenza 244 (3) - 130 (16) (14) 78 20 23 36 9 15
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Fluarix, FluLaval 244 (3) - 130 (16) (14) 78 20 23 36 9 15
Shingles 597 (7) (4) 451 (13) (10) 116 68 74 30 (46) (43)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Shingrix 597 (7) (4) 451 (13) (10) 116 68 74 30 (46) (43)
Established 682 (19) (16) 203 (33) (32) 172 (13) (8) 307 (10) (6)
Vaccines
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Infanrix, Pediarix 115 (33) (31) 58 (42) (43) 25 (34) (29) 32 (6) -
Boostrix 114 (9) (6) 55 (21) (20) 32 (11) (8) 27 42 47
Hepatitis 113 (19) (17) 62 (27) (27) 33 14 17 18 (28) (20)
Rotarix 142 (4) 1 27 (31) (31) 32 3 10 83 6 14
Synflorix 92 (1) 4 - - - 13 18 18 79 (4) 2
Priorix, Priorix Tetra, 54 (31) (26) - - - 28 (10) - 26 (45) (43)
Varilrix
Cervarix 23 (48) (45) - - - 3 (81) (81) 20 (29) (25)
Other 29 (31) (33) 1 (86) (57) 6 20 40 22 (27) (40)
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Vaccines excluding 1,717 (15) (12) 847 (22) (20) 452 7 12 418 (17) (13)
pandemic vaccines
Pandemic vaccines 92 - - 2 - - - - - 90 - -
Pandemic adjuvant 92 - - 2 - - - - - 90 - -
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Vaccines 1,809 (10) (7) 849 (22) (20) 452 7 12 508 1 6
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Balance sheet
31 December 2021 31 December 2020
£m £m
ASSETS
Non-current assets
Property, plant and equipment 9,932 10,176
Right of use assets 740 830
Goodwill 10,552 10,597
Other intangible assets 30,079 29,824
Investments in associates and joint ventures 88 364
Other investments 2,126 3,060
Deferred tax assets 5,218 4,287
Derivative financial instruments 18 5
Other non-current assets 1,676 1,041
Total non-current assets 60,429 60,184
Current assets
Inventories 5,783 5,996
Current tax recoverable 486 671
Trade and other receivables 7,860 6,952
Derivative financial instruments 188 152
Liquid investments 61 78
Cash and cash equivalents 4,274 6,292
Assets held for sale 22 106
Total current assets 18,674 20,247
TOTAL ASSETS 79,103 80,431
LIABILITIES
Current liabilities
Short-term borrowings (3,601) (3,725)
Contingent consideration liabilities (958) (765)
Trade and other payables (17,554) (15,840)
Derivative financial instruments (227) (221)
Current tax payable (489) (545)
Short-term provisions (841) (1,052)
Total current liabilities (23,670) (22,148)
Non-current liabilities
Long-term borrowings (20,572) (23,425)
Corporation tax payable (180) (176)
Deferred tax liabilities (3,556) (3,600)
Pensions and other post-employment benefits (3,113) (3,650)
Other provisions (630) (707)
Derivative financial instruments (1) (10)
Contingent consideration liabilities (5,118) (5,104)
Other non-current liabilities (921) (803)
Total non-current liabilities (34,091) (37,475)
TOTAL LIABILITIES (57,761) (59,623)
NET ASSETS 21,342 20,808
EQUITY
Share capital 1,347 1,346
Share premium account 3,301 3,281
Retained earnings 7,944 6,755
Other reserves 2,463 3,205
Shareholders' equity 15,055 14,587
Non-controlling interests 6,287 6,221
TOTAL EQUITY 21,342 20,808
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 2021 1,346 3,281 6,755 3,205 14,587 6,221 20,808
Profit for the year 4,385 4,385 711 5,096
Other comprehensive (expense)/income 454 (771) (317) (20) (337)
for the year
------------ ------------ ------------ ------------ ------------
Total comprehensive income for the year 4,839 (771) 4,068 691 4,759
------------ ------------ ------------ ------------ ------------
Distributions to non-controlling interests (642) (642)
Contributions from non-controlling interests 7 7
Dividends to shareholders (3,999) (3,999) (3,999)
Shares issued 1 20 21 21
Realised after tax profits on disposal of 132 (132) -
equity investments
Share of associates and joint ventures 7 (7) -
realised profits on disposal of equity
investments
Write-down on shares held by ESOP Trusts (168) 168 -
Share-based incentive plans 367 367 367
Transactions with non-controlling interests 10 10
Tax on share-based incentive plans 11 11 11
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 December 2021 1,347 3,301 7,944 2,463 15,055 6,287 21,342
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 1 January 2020 1,346 3,174 4,530 2,355 11,405 6,952 18,357
Profit for the year 5,749 5,749 639 6,388
Other comprehensive (expense)/income (133) 1,137 1,004 (34) 970
for the year
------------ ------------ ------------ ------------ ------------
Total comprehensive income for the year 5,616 1,137 6,753 605 7,358
------------ ------------ ------------ ------------ ------------
Distributions to non-controlling interests (1,208) (1,208)
Contributions from non-controlling interests 3 3
Changes to non-controlling interests (131) (131)
Dividends to shareholders (3,977) (3,977) (3,977)
Shares issued 29 29 29
Realised after tax profits on disposal of 163 (163) -
equity investments
Share of associates and joint ventures 44 (44) -
realised profits on disposal of equity
investments
Shares acquired by ESOP Trusts 78 531 (609) -
Write-down on shares held by ESOP Trusts (529) 529 -
Share-based incentive plans 381 381 381
Tax on share-based incentive plans (4) (4) (4)
------------ ------------ ------------ ------------ ------------ ------------ ------------
At 31 December 2020 1,346 3,281 6,755 3,205 14,587 6,221 20,808
------------ ------------ ------------ ------------ ------------ ------------ ------------
Cash flow statement - year ended 31 December 2021
2021 2020
£m £m
Profit after tax 5,096 6,388
Tax on profits 346 580
Share of after tax profits of associates and joint ventures (33) (33)
Loss on disposal of interest in associates 36 -
Net finance expense 756 848
Depreciation, amortisation and other adjusting items 2,524 624
(Decrease)/increase in working capital (473) 120
Contingent consideration paid (742) (765)
Increase in other net liabilities (excluding contingent consideration paid) 1,733 2,334
Cash generated from operations 9,243 10,096
Taxation paid (1,291) (1,655)
Net cash inflow from operating activities 7,952 8,441
Cash flow from investing activities
Purchase of property, plant and equipment (1,172) (1,226)
Proceeds from sale of property, plant and equipment 143 68
Purchase of intangible assets (1,759) (1,013)
Proceeds from sale of intangible assets 772 1,255
Purchase of equity investments (162) (411)
Proceeds from sale of equity investments 202 3,269
Purchase of businesses, net of cash acquired - 15
Contingent consideration paid (114) (120)
Disposal of businesses (17) 259
Investment in associates and joint ventures (1) (4)
Interest received 27 39
(Increase)/decrease in liquid investments 18 (1)
Dividends from associates and joint ventures 9 31
Proceeds from disposal of associates and joint ventures 277 -
Net cash (outflow)/inflow from investing activities (1,777) 2,161
Cash flow from financing activities
Issue of share capital 21 29
Increase in long-term loans - 3,298
Repayment of short-term loans (1,995) (7,305)
Repayment of lease liabilities (215) (227)
Interest paid (786) (864)
Dividends paid to shareholders (3,999) (3,977)
Distributions to non-controlling interests (642) (1,208)
Contributions from non-controlling interests 7 3
Other financing items 20 119
Net cash outflow from financing activities (7,589) (10,132)
(Decrease)/increase in cash and bank overdrafts in the year (1,414) 470
Cash and bank overdrafts at beginning of the year 5,262 4,831
Exchange adjustments (29) (39)
(Decrease)/increase in cash and bank overdrafts (1,414) 470
Cash and bank overdrafts at end of the year 3,819 5,262
Cash and bank overdrafts at end of the period comprise:
Cash and cash equivalents 4,274 6,292
4,274 6,292
Overdrafts (455) (1,030)
3,819 5,262
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 reports results under four segments: Pharmaceuticals;
Pharmaceuticals R&D; Vaccines and Consumer Healthcare, and individual
members of the GLT are responsible for each segment.
The Pharmaceuticals R&D segment is the responsibility of the Chief
Scientific Officer and President, R&D and is reported as a separate
segment. The operating profit of this segment excludes the ViiV Healthcare
operating profit (including R&D expenditure) that is reported within the
Pharmaceuticals segment.
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.
Corporate and other unallocated turnover and costs include the results of
certain Consumer Healthcare products which are being held for sale in a number
of markets in order to meet anti-trust approval requirements, together with
the costs of corporate functions.
Turnover by segment
2021 2020 Growth Growth
£m £m £% CER%
Pharmaceuticals 17,729 17,056 4 10
Vaccines 6,778 6,982 (3) 2
Consumer Healthcare 9,607 10,033 (4) -
34,114 34,071 - 5
Corporate and other unallocated turnover - 28 (100) (100)
Total turnover 34,114 34,099 - 5
Operating profit by segment
2021 2020 Growth Growth
£m £m £% CER%
Pharmaceuticals 8,170 7,723 6 15
Pharmaceuticals R&D (3,489) (3,538) (1) 3
Pharmaceuticals including R&D 4,681 4,185 12 24
Vaccines 2,256 2,713 (17) (11)
Consumer Healthcare 2,239 2,213 1 9
Segment profit 9,176 9,111 1 10
Corporate and other unallocated costs (370) (205)
Adjusted operating profit 8,806 8,906 (1) 9
Adjusting items (2,605) (1,123)
Total operating profit 6,201 7,783 (20) (9)
Finance income 28 44
Finance costs (784) (892)
Share of after tax profits of associates 33 33
and joint ventures
Loss on disposal of interest in associates (36) -
Profit before taxation 5,442 6,968 (22) (10)
Turnover by segment
Q4 2021 Q4 2020 Growth Growth
£m £m £% CER%
Pharmaceuticals 5,221 4,366 20 25
Vaccines 1,809 2,012 (10) (7)
Consumer Healthcare 2,497 2,360 6 10
9,527 8,738 9 13
Corporate and other unallocated turnover - 1
Total turnover 9,527 8,739 9 13
Operating profit by segment
Q4 2021 Q4 2020 Growth Growth
£m £m £% CER%
Pharmaceuticals 2,035 1,874 9 17
Pharmaceuticals R&D (1,007) (1,023) (2) -
Pharmaceuticals including R&D 1,028 851 21 37
Vaccines 403 691 (42) (43)
Consumer Healthcare 558 385 45 56
Segment profit 1,989 1,927 3 12
Corporate and other unallocated costs (96) (110)
Adjusted operating profit 1,893 1,817 4 15
Adjusting items (998) (756)
Total operating profit 895 1,061 (16) 1
Finance income 4 5
Finance costs (191) (239)
Share of after tax (losses)/profits of associates (2) (6)
and joint ventures
Profit before taxation 706 821 (14) 8
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 2020. At 31 December
2021, the Group's aggregate provision for legal and other disputes (not
including tax matters described on page 22 was £0.2 billion (31 December
2020: £0.3 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 developments since the date of the Annual Report 2020 are as
follows:
ViiV Healthcare, the global specialist HIV company majority-owned by GSK, with
Pfizer Inc. and Shionogi & Co. Limited as shareholders, has agreed to
settle the global patent infringement litigation between GSK, Shionogi and
Gilead Sciences, Inc. (Gilead) concerning ViiV Healthcare's patents relating
to dolutegravir, an antiretroviral medication used, together with other
medicines, to treat human immunodeficiency virus (HIV).
Under the terms of the global settlement and licensing agreement, Gilead will
make an upfront payment of $1.25 billion to ViiV Healthcare which is expected
in the first quarter of 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 U.S. 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.
As a result of the settlement, patent infringement cases in the US, UK,
France, Ireland, Germany, Japan, Korea, Australia, and Canada will be
discontinued.
Additional information
Accounting policies and basis of preparation
This unaudited Results Announcement contains condensed financial information
for the year-end and three months ended 31 December 2021, and should be read
in conjunction with the Annual Report 2020, 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 2020.
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 2020.
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 2020 were published in the Annual Report 2020,
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 our principal risks has been assessed with mitigation plans put in place.
In 2021, as anticipated, the pandemic impacted Group performance primarily in
demand for Vaccines and reflected the prioritisation of COVID-19 vaccination
programmes by governments', including social distancing rules resulting from
COVID-19 that affected customers' ability and willingness to access
vaccination services across all regions. We continue to remain confident in
the underlying demand for our Vaccines and are encouraged by the rate at which
COVID-19 vaccinations and boosters are being administered in many countries,
which provides support for healthcare systems and the eventual return to
normal. This continues to be a dynamic situation, with the future severity,
duration and impact unknown at this point including potential impacts on
trading results, clinical trials, supply continuity, and our employees. The
situation could change at any time and there can be no assurance that the
COVID-19 pandemic will not have a material adverse impact on the future
results of the Group.
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:
2021 2020 Q4 2021 Q4 2020
Average rates:
US$/£ 1.38 1.29 1.36 1.33
Euro/£ 1.16 1.13 1.18 1.11
Yen/£ 151 137 154 138
Period-end rates:
US$/£ 1.35 1.36 1.35 1.36
Euro/£ 1.19 1.11 1.19 1.11
Yen/£ 155 141 155 141
During Q4 2021 average Sterling exchange rates were stronger against the US
Dollar, the Yen and the Euro compared with the same period in 2020. During the
year ended 31 December 2021, average Sterling exchange rates were stronger
against the US Dollar, the Yen and the Euro compared with the same period in
2020. Period-end Sterling exchange rates were stronger against the Euro and
the Yen and weaker against the US Dollar compared with the 2020 period-end
rates.
Net assets
The book value of net assets increased by £534 million from £20,808 million
at 31 December 2020 to £21,342 million at 31 December 2021. This primarily
reflected the Total profit for the period, the re-measurement gains on the
defined benefit plans, increases in deferred tax, other non-current assets and
trade receivables. These were partially offset by the decrease in fair value
of equity investments, increase in trade and other payables and the dividends
paid during the period.
The carrying value of investments in associates and joint ventures at 31
December 2021 was £88 million (31 December 2020: £364 million), with a
market value of £88 million (31 December 2020: £364 million). During 2021,
the Group sold all of its shares in Innoviva Inc back to Innoviva for £277
million.
At 31 December 2021, the net deficit on the Group's pension plans was £1,129
million compared with £2,104 million at 31 December 2020. The decrease in the
net deficit primarily relate to higher assets value, increase in the rates
used to discount UK pension liabilities from 1.4% to 2.0%, and US pension
liabilities from 2.3% to 2.7%, partly offset by an increase in the UK
inflation rate from 2.8% to 3.2%.
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 £1,008 million (31 December 2020: £960 million).
Contingent consideration amounted to £6,076 million at 31 December 2021 (31
December 2020: £5,869 million), of which £5,559 million (31 December 2020:
£5,359 million) represented the estimated present value of amounts payable to
Shionogi relating to ViiV Healthcare and £479 million (31 December 2020:
£477 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
31 December 2021, £937 million (31 December 2020: £745 million) is expected
to be paid within one year.
Movements in contingent consideration are as follows:
2021 ViiV Healthcare Group
£m £m
Contingent consideration at beginning of the year 5,359 5,869
Re-measurement through income statement 1,026 1,063
Cash payments: operating cash flows (721) (742)
Cash payments: investing activities (105) (114)
Contingent consideration at end of the year 5,559 6,076
2020 ViiV Healthcare Group
£m £m
Contingent consideration at beginning of the year 5,103 5,479
Re-measurement through income statement 1,114 1,275
Cash payments: operating cash flows (751) (765)
Cash payments: investing activities (107) (120)
Contingent consideration at end of the year 5,359 5,869
The liabilities for the Pfizer put option and the contingent consideration at
31 December 2021 have been calculated based on the period-end exchange rates,
primarily US$1.35/£1 and €1.19/£1. Sensitivity analyses for the Pfizer put
option and each of the largest contingent consideration liabilities are set
out below.
Increase/(decrease) in liability Shionogi- Novartis
ViiV ViiV Healthcare Vaccines
Healthcare contingent contingent
put option consideration consideration
£m £m £m
10% increase in sales forecasts* 89 506 61
10% decrease in sales forecasts* (89) (506) (57)
1% (100 basis points) increase in discount rate (30) (198) (38)
1% (100 basis points) decrease in discount rate 34 213 45
10 cent appreciation of US Dollar 55 343 1
10 cent depreciation of US Dollar (47) (299) (4)
10 cent appreciation of Euro 26 102 28
10 cent depreciation of Euro (22) (85) (27)
* The sales forecast is for ViiV Healthcare sales only in respect of the ViiV
Healthcare put option and the Shionogi-ViiV Healthcare contingent
consideration.
Contingent liabilities
There were contingent liabilities at 31 December 2021 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
56.
Post Balance Sheet Events
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 agreement and
patent license agreement, Gilead will make an upfront payment of $1.25 billion
to ViiV Healthcare. 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.
The impact of the settlement in Q1 2022 will be to record the upfront payment
of $1.25 billion received in other operating income in Total results and
Adjusting items. Royalties receivable from 1 February 2022 on sales of
Biktarvy and in respect of the bictegravir component of any other future
bictegravir-containing products sold in the US will be recorded in royalty
income in Total and Adjusted results. The upfront is a contingent asset at the
balance sheet date. This is a post balance sheet event the income from which
does not adjust the Group's financial statements at 31 December 2021 as the
receipt was not virtually certain at the balance sheet date.
Both the settlement and the future royalty income increase the fair value of
the CCL to Shionogi and the Pfizer put option. This increase in carrying value
has been reflected in GSK's 2021 full-year and fourth quarter 2021 results,
and the associated charges are recorded within Adjusting items.
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.
In the cash flow statement, cash inflows from the upfront payment and future
royalty income as well as the resultant incremental contingent consideration
liability cash outflows will be recorded in cash generated from operations.
The resulting increased dividends to Shionogi and Pfizer will be included
within financing cashflows. All values are pre-taxation.
Reconciliation of cash flow to movements in net debt
2021 2020
£m £m
Net debt at beginning of the year (20,780) (25,215)
(Decrease)/increase in cash and bank overdrafts (1,414) 470
(Decrease)/increase in liquid investments (18) 1
Net decrease in short-term loans 1,995 7,305
Increase in long-term loans - (3,298)
Repayment of lease liabilities 215 227
Exchange adjustments 314 (135)
Other non-cash movements (150) (135)
Decrease in net debt 942 4,435
Net debt at end of the year (19,838) (20,780)
Net debt analysis
2021 2020
£m £m
Liquid investments 61 78
Cash and cash equivalents 4,274 6,292
Short-term borrowings (3,601) (3,725)
Long-term borrowings (20,572) (23,425)
Net debt at end of the period (19,838) (20,780)
Free cash flow reconciliation
2021 2020 Q4 2021
£m £m £m
Net cash inflow from operating activities 7,952 8,441 3,767
Purchase of property, plant and equipment (1,172) (1,226) (453)
Proceeds from sale of property, plant and equipment 143 68 18
Purchase of intangible assets (1,759) (1,013) (179)
Proceeds from disposals of intangible assets 772 1,255 283
Net finance costs (759) (825) (297)
Dividends from joint ventures and associates 9 31 -
Contingent consideration paid (reported in investing (114) (120) (31)
activities)
Distributions to non-controlling interests (642) (1,208) (207)
Contributions from non-controlling interests 7 3 -
Free cash flow 4,437 5,406 2,901
Reporting definitions
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 on
page 10 and other non-IFRS measures are defined below.
Free cash flow
Free cash flow is defined as the net cash inflow/outflow from 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. 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 operations to free
cash flow is set out on page 60.
Free cash flow conversion
Free cash flow conversion is free cash flow as a percentage of earnings.
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.
Pro-forma growth
The acquisition of the Pfizer consumer healthcare business completed on 31
July 2019 and so GSK's reported results for 2020 included twelve months of
results of the former Pfizer consumer healthcare business from 1 January 2020.
The Group has presented in this Results Announcement reference to pro-forma
growth rates at CER in 2020 for sales excluding brands divested/under review
for Consumer Healthcare and sales for certain categories of consumer
healthcare products taking account of this transaction. Pro-forma growth rates
for the year are calculated comparing reported results for 2020, calculated
applying the exchange rates used in the comparative period, with the results
for 2019 adjusted to include the equivalent seven months of results of the
former Pfizer consumer healthcare business during 2019, as consolidated (in
US$) and included in Pfizer's US GAAP results.
2 year Compound Annual Growth Rate
CAGR is defined as the compound annual growth rate and shows the annualised
average rate of pro-forma revenue growth between two given years, assuming
growth takes place at an exponentially compounded rate. For Consumer
Healthcare, the 2 year revenue CAGR has been presented showing the annualised
average rate of pro-forma revenue growth between 2019 and 2021.
COVID-19 solutions
COVID-19 solutions include the sales of pandemic adjuvant and other COVID-19
solutions including vaccine manufacturing and Xevudy and the associated costs
but does not include reinvestment in R&D. This categorisation is used by
management and we believe is helpful to investors through providing clarity on
the results of the Group by showing the contribution to growth from COVID-19
solutions.
New GSK
New GSK refers to the current GSK group excluding the Consumer Healthcare
business that is intended to be (or will have been) demerged.
General Medicines
General medicines are usually prescribed in the primary care or community
settings by general healthcare practitioners. For GSK, this includes medicines
in inhaled respiratory, dermatology, antibiotics and other diseases.
Specialty Medicines
Specialty medicines are typically prescription medicines used to treat complex
or rare chronic conditions. For GSK, this comprises medicines in infectious
diseases, HIV, oncology, immunology and respiratory.
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
For new GSK we expect sales to grow between 5% to 7% at CER and Adjusted
operating profit to grow between 12% to 14% at CER as compared with 2021. This
guidance is provided at CER and excludes the commercial impact 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. The Group also assumes that
the demerger of our Consumer Healthcare business will be delivered in mid-2022
and this guidance relates only to new GSK.
The Group has made planning assumptions for 2022 that healthcare systems will
approach normality as the year progresses, and we expect sales of Specialty
Medicines to grow approximately 10% at CER and sales of General Medicines to
show a slight decrease, primarily reflecting increased genericisation of
established Respiratory products. Vaccines sales are expected to grow at a low
teens percentage at CER for the year as a whole. However, governments'
prioritisation of COVID-19 vaccination programmes and ongoing measures to
contain the pandemic are expected to result in some continued disruption to
adult immunisations, with the impact weighted to the first half. For Shingrix,
despite the potential for short-term pandemic disruption, we continue to
expect strong double-digit growth and record annual sales based on strong
demand in existing markets and geographical expansion. Guidance also includes
the future benefit in royalty income from the settlement and license agreement
with Gilead announced on 1 February 2022.
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. It also assumes that the separation programme to
deliver the demerger of the Consumer Healthcare business is delivered
successfully. 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', 'aim', 'ambition' 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.
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 2020 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.
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