Full Year Results 2010 Presentation to Investors & Analysts 3 d F b 3 rd February 2011 2011 Andrew Witty Chief Executive Officer 1
GSK is built around portfolios that drive highest returns in the current market environment Differentiated pharmaceutical Portfolio of right price products which meet products to drive payer and patient d ti t volume in emerging l i i criteria in developed markets markets Broad vaccines portfolio which Science led, addresses the majority expert endorsed of the vaccines Consumer schedules globally brands Balanced and synergistic business with portfolio of growth engines and optionality on R&D upside 2
Change executed in 2.5 years 2007 2010 £22.3bn Turnover (ex-pandemic) £27.1bn Sales from white pill/western market 40% 40% 25% 25% (excludes pandemic) Proportion of SG&A in investment areas 36% 51% (Emerging Markets, AP/Japan, Cx, Vx, Stiefel, ViiV) 103,500 Headcount 96,500 Local Support functions Central Sales new products £272m £1.7bn (‘07 launch onwards, excludes pandemic) 59% % Ph III/filed which are NCEs/new vaccines 72% 17 54 External discovery engines £6.8bn £6.2bn Net cash generation (£8.8bn ex-legal) 53p Dividend 65p 2007 used as comparator as is the last full year prior to launch of the new strategic priorities Investment shifts are delivering significant returns Emerging Markets 16 14% 14 • Increased investment • 2010 Sales ~6% proforma 12 leads to step up in 10 • Focus on geographic expansion, innovation growth 8 8 7% 7% • >$200m savings delivered, ahead of plan • Differential returns drive 6 capital allocation 4 • Headcount reduced by >600 (incremental profit £0.50 to 2 £1.80 per £1 investment) 0 • Projected IRR>14% 02-'06 07-'10 US Pharma Consumer 7% 8 • Increased return on US selling g • Increased investment 6 6 investment post restructuring leads to step up in growth 4 3% − Sales force reduced from 9,500 to • Investment in Consumer 5,400 (2007-2010) 2 R&D drives IRR >20% − Net sales per rep increased 33% 0 Analysis of 11 projects, ~£80m (2007-2010) R&D spend; Average 3 years 02-'06 07-'10 dev’t, payback in 4 years Average CER growth, excludes pandemic 3
Accelerating growth in Consumer Healthcare “Scientifically driven, Consumer Healthcare +5% Consumer Healthcare +5% expert recommended and consumer preferred” ~15 Priority Brands • Increased focus to drive higher growth • Globalisation and innovation of priority ~90% + Emerging markets brands business • Portfolio of EM brands across multiple price points; maximise synergy with pharma • Divestment to release cash Non-core OTC brands ~10% for shareholders in US and EU 2010 sales; CER growth Remodelled business drives 2010 underlying sales growth of +4.5% 362 28,392 28,368 338 338 28,030 28,030 (-330) 233 116 (-337) 453 147 (-777) (-181) 4.5% Underlying growth 2009 turnover Flu pandemic Avandia Valtrex Other US generics Vaccines* New products Advair/Seretide Consumer All others Turnover CER Currency 2010 turnover CER growth * Vaccines excludes flu pandemic and new product vaccines (Rotarix, Cervarix & Synflorix) 4
Global underlying pharmaceutical sales growth All sales and growth are underlying (ex pandemic, Avandia, Valtrex) £7.1bn (+3%) £7.1bn (+3%) Promoted products (~80% of total) grew 8% in 2010 Promoted products (~80% of total) grew 8% in 2010 Strong early launches for Arzerra, Jalyn and Votrient Strong early launches for Arzerra, Jalyn and Votrient Strong early launches for Arzerra Jalyn and Votrient Strong early launches for Arzerra Jalyn and Votrient £5.9bn (flat); includes -2.5% price ( 50% EU austerity, 50% regular) £5.9bn (flat); includes -2.5% price ( 50% EU austerity, 50% regular) Strong portfolio of new product launches Strong portfolio of new product launches Sales force reduced from 9,350 to 6,170 (2007 to 2010) Sales force reduced from 9,350 to 6,170 (2007 to 2010) £3.3bn (+20%); growing ahead of market £3.3bn (+20%); growing ahead of market Strong growth from annualised bolt-ons BMS / UCB +28% in Q4 Strong growth from annualised bolt-ons BMS / UCB +28% in Q4 Pricing for volume; strong vaccines performance Pricing for volume; strong vaccines performance £1.4bn (+6%) £1.4bn (+6%) Launches since 2007 >£450m in 2010; inc Adoair and Cervarix Launches since 2007 >£450m in 2010; inc Adoair and Cervarix Allermist, Avolve, Lamictal, Xyzal significant market share gains Allermist, Avolve, Lamictal, Xyzal significant market share gains CER growth rates; Asia Pac, Canada, Puerto Rico, ViiV and other £3.4bn +2.5% >60% of global business is “non-white pill” 2010 sales from Vx, Cx, Resp and Derm 2010 sales from Vx, Cx, Resp and Derm Derm: 4% of GSK Vx: 12% of GSK Vx: 12% of GSK +6% in 2010 +10% in 2010 +2% in 2009 Cx: 18% of GSK Resp: 27% of GSK +5% in 2010 +3% in 2010 +7% in 2009 +5% in 2009 CER growth rates % of GSK excluding pandemic vaccine; vaccines growth excludes pandemic vaccine, derm growth rate is proforma 75% is “non-white pill/western market” 5
Pipeline potential increasing 10 new NCE / vaccine Ph III starts 2010 / early 2011 ‘212 (MEK) ‘212 (MEK) ‘273 (Telethon) ‘273 (Telethon) 273 (Telethon) 273 (Telethon) ‘436 (Braf) ‘436 (Braf) ‘786 (CCX282) ‘786 (CCX282) ~ 30 in ~ 15 assets with Phase III Phase III / ‘968 (DMD) ‘968 (DMD) data by end 2012 registration Integrase / Integrase / Integrase + Kivexa Integrase + Kivexa IPX066 IPX066 LABA / LAMA LABA / LAMA migalastat HCl migalastat HCl Zoster Zoster Committed to improving returns in R&D GSK assessment of R&D IRR, Feb 2010 GSK assessment of R&D IRR, Feb 2010 GSK current GSK Aspiration Industry historical 1 15 late-stage portfolio 2 RR (%) 10 IR 5 0 Cost Attrition Sales ~28% decrease in Pharma R&D headcount since 2006 (15,600 to 11,300) ~28% decrease in Pharma R&D headcount since 2006 (15,600 to 11,300) 29% decrease in m 2 since 2006 29% decrease in m 2 since 2006 29% decrease in m 2 since 2006 29% decrease in m 2 since 2006 Late stage development accounts for 60% of Pharma R&D spend Late stage development accounts for 60% of Pharma R&D spend 37 internal discovery groups; 54 external discovery engines 37 internal discovery groups; 54 external discovery engines Biopharm >20% of clinical projects Biopharm >20% of clinical projects 1. McKinsey, Nature Reviews, Drug Discovery (Aug 09) for small molecules. 13% for biopharms. 2. Projected rate of return based on the investment made to create late stage pipeline and expectations on future sales. Late-stage portfolio includes pharma assets and vaccines launched from 2007 onwards plus phase IIb & III pipeline. 6
Driving shareholder returns • Underlying sales momentum to continue in 2011 Sales growth Sales growth and translate to reported growth in 2012 • £1.7bn cost savings delivered; £2.2bn by end 2012 • Strong cash generation (£8.8bn excluding legal) Operating and Operating and • £1.3bn working capital reduction financial leverage financial leverage • Divestment of non-core assets • 65p (+7%) in 2010 Dividend Dividend Dividend Dividend • Commitment to grow dividend • New long term share buy back programme Share buy back Share buy back • £1 billion to £2 billion in 2011 Driving shareholder returns Sales growth Sales growth + Operating and Operating and financial leverage financial leverage Total Cash + shareholder generation return Dividend Dividend Dividend Dividend + Share buy back Share buy back 7
Julian Heslop Chief Financial Officer 2010 Performance summary Before restructuring costs 2010 2009 % Change CER £ £m £m 28,392 28,368 Turnover (1) - 53.9p 121.2p EPS (59) (56) 120.7p 131.2p EPS excluding legal charges (11) (8) 4,486 5,254 Free Cash Flow (FCF) (15) 6,533 5,508 FCF excl. legal settlements* * Expenditures for legal were £2,047m in ’10 and £254m in ’09 19 8
Diversified global business 2010 Turnover: £28.4bn (-1%) Consumer US £5.0bn (+5%) Pharma £7.6bn (-11%) ViiV £1.6bn (-3%) ROW £1.0bn (-1%) AP/Japan £3.1bn (+9%) Europe Pharma £6.5bn (-6%) Emerging Markets £3.6bn (+22%) CER growth rates 2010 Total turnover analysis 2010 2009 Change £m £m CER 28,392 28,368 Total reported -1% 1,313 1,603 Pandemic* -21% 532 1,294 Valtrex -60% 440 440 771 771 Avandia A di -44% 44% Total excl. pandemic, Valtrex 26,107 24,700 +4.5% and Avandia** * Pandemic includes Relenza and vaccines related to H5N1 pre-pandemic and H1N1 pandemic ** Acquisitions, net of divestments, contributed approximately 1% of 4.5% growth 9
2010 Pharmaceuticals key growth drivers Advair £5,139m +2% Vaccines (excl. pandemic) £3,134m +10% Dermatologicals £1,087m +6%* Flovent Flovent £804m £804m +2% +2% Avodart £629m +18% Lovaza £530m +17% Ventolin £522m +8% Arixtra £301m +19% Tykerb £227m +34% Veramyst £193m +33% Subtotal £12,566m +10% All others £8,531m -3% Total excl. pandemic, CER growth rates £21,097m +4% Valtrex and Avandia * Pro forma growth Creating a broader portfolio of potential high value assets as generic exposure declines New products contributions in 2010 • £1.73bn (+36%) • Pandemic vaccine also added £1.2bn Hiberix Hiberix Pandemrix Pandemrix US US US 2007 2008 2009 2010 CER growth rate 10
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