Full Year Results, 2014 4 February 2015
Cautionary statement regarding forward-looking statements Under the safe harbor provisions of the US Private Securities Litigation Reform Act of 1995, the company cautions investors that any forward-looking statements or projections made by the company, including those made in this document are subject to risks and uncertainties that may cause actual results to differ materially from those projected. Nothing in this document should be construed as a profit forecast. 2
Andrew Witty Chief Executive Officer
Sharp focus on key strategic priorities Changing environment Rebuild sales growth momentum • Product launch uptake • Supply bounce back opportunity R&D pipeline next waves • Advanced pipeline • Up to 10 Phase III Rx starts • 15 Phase II Rx NME starts Restructuring and cost reduction • ~ £5bn benefits • Global economic dynamics Novartis transaction • Financial benefits • US market dynamics • Cost synergies • • Emerging Markets volume potential Revenue synergies Innovation and access 3
2014 performance Financial efficiencies and cost reduction helped to mitigate 2014 sales reduction and supports shareholder return Core results Sales -3% Operating profit -6% EPS -1% Dividend +3% 4
Addressing challenges in US respiratory Improved formulary coverage expected to improve outlook NRx growth (LABA / ICS) 10% Medicare Part D coverage 5% Jan Jan Market 2014 2015 0% Advair + Breo 74% 2% Breo -5% -10% * Data presented for Advair removed due to restatement, please call Advair GSK Investor Relations if you have questions. -15% -20% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 55% NBRx share (LABA / ICS) 50% Advair + Breo 45% Advair 40% Symbicort 35% 30% Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2013 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 Source: IMS 6
Addressing challenges in US respiratory Improved formulary coverage expected to improve outlook Anoro share of market Medicare Part D coverage Market = LAMA containing (Anoro, Spiriva, Tudorza) April Jan 2014 2015 4% 65% 0% Anoro NRx 3% Positive head-to-head vs tiotropium in promotional materials September 2% DTC campaign began Q1 2015 TRx 1% 0% Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2014 2014 2014 2014 2014 2014 2014 2014 2014 2015 Source: IMS 7
Encouraging early uptake of Relvar in Japan Ryotan Ryotan New patients Total patients restriction restriction 70% 70% removed removed Total GSK 60% Total GSK 60% Adoair 50% 50% Adoair 40% 40% Symbicort 30% 30% Symbicort 20% 20% Relvar Relvar 10% 10% Flutiform Flutiform 0% 0% Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Source: JMIRI G5 December 2014 8
Respiratory expected to return to growth in 2016* Incruse Arnuity Relvar / Breo Key milestones and Anoro Launch Launch in 2015 Ongoing global launches Breo Relvar / Breo mepolizumab Open triple Asthma PDUFA SUMMIT COPD Severe asthma (Incruse + Breo) April mortality study decision Expect to file Future Closed triple MABA +/- ICS ICS / LAMA opportunities ICS/LABA/LAMA LABA mepolizumab VI monotherapy COPD Haemophilus Early pipeline PI3K δ inhibitor influenza vaccine COPD COPD exacerbations * Assuming no material impact from A/B rated substitutable Advair generics in the US in 2016 9
ViiV launches Sales of £339m in 2014 for Tivicay and Triumeq US TRx comparison: 70 weeks post Tivicay / DTG launch + 9000 8000 7000 TRx Volume 6000 5000 4000 Other HIV 3000 launches 2000 1000 0 Japan Germany Australia Canada Source: IMS 10
Sustainable R&D pipeline to support future sales growth Today Newly launched products Significant late-stage assets Early / mid stage pipeline (Phase II/III) • Breo/Relvar • Immuno-oncology (OX-40, • mepolizumab (asthma/COPD) ICOS, TLR-4, Adaptimmune • Anoro technology) • sirukumab (RA) • Tivicay • Epigenetics • cabotegravir (HIV) • Tafinlar (BETi, EZH2, LSD-1) • losmapimod (ACS) • Mekinist • Respiratory (PI3Kδ) • ICS/LAMA/LABA (COPD) • Tanzeum • Cardiovascular (TRPV4) • PHI (Anaemia) • QIV Flu • Immuno-inflammation • RTS,S (Malaria) • Benlysta (GM-CSF mAb, IL-7R mAb, • ‘273 ( ADA-SCID) RIP1 and RIP2 kinases) • Duodart • Respiratory syncytial virus • HZ/su (shingles) vaccine • Synflorix (RSV) vaccine • Tuberculosis vaccine £1.5bn, +84% CER, 8% of Rx + Vx R&D investor day to profile new pharma and vaccines pipelines to be held in October 2015 11
Reshaping GSK Organic Final year Programme Scope Period benefits restructuring* £2.9bn OE programme Operating model 2008-14 Major Change R&D and manufacturing 2012-16 £1.0bn Global pharmaceutical Pharma: Commercial and R&D 2015-17 £1.0bn restructuring ~£5bn Novartis transaction** *Excludes structural savings 11 ** Subject to approvals and regulatory clearances
Reshaping GSK: Proposed Novartis transaction Better balance, quality and durability of earnings Consumer Vaccines Pharma ~25%* ~14%* ~61%* Respiratory HIV 27%* 5%* #1 OTC globally #1 global position #1 global position #2 globally Total consumer ~$26bn market ~$29bn market ~$20bn market ~$73bn market growing at mid growing at ~2% p.a . growing at ~8% p.a. growing at ~4% p.a. single digit Complemented by strength in Emerging Markets and Japan * Percentage of sales based on 2013 Pro-forma of GSK post transaction with Novartis 13 Source: Internal and external data, Euromonitor, Visiongain, Evaluate Pharma
Modernising the business US sales force voted #1 Sales force HCP engagement compensation Ranked 1 st amongst Fundamental change in Leveraging medical our business model peers by HCPs in 2014 and multichannel communication opportunities 14
Innovation and access Malaria Ebola Access to Medicines Index 30 years and counting Responding to a crisis Number 1 for the fourth consecutive time Regulatory decision Phase III trials started in 2015 February 2015 15
What to expect in 2015 Regulatory Closure of Return of £4 billion Dividend of 80p decision for RTS,S Novartis to shareholders per share malaria vaccines transaction** following Novartis (same level as 2014) transaction close* File GSK’s first cell Results from the Investor Day Combi-d trial (post Novartis & gene therapy for completion) ADA-SCID (‘273) Up to10 Phase III AdCom and ViiV IPO decision AdCom and PDUFA starts and PDUFA decision decision on 15 Phase II NME on asthma mepolizumab for severe starts indication for Breo eosinophilic asthma Phase III data for Readout of Breo R&D Investor Day Confirmation of sirukumab for RA SUMMIT study of filing strategy for mortality and HZ/su shingles morbidity in COPD vaccine * 2015 returns assumes positive readout of Combi-d 16 ** Subject to approvals and regulatory clearances
Simon Dingemans Chief Financial Officer
Headline results Core EPS -1% despite top line pressure Growth % £m 2014 CER £ Turnover 23,006 (3) (10) Core operating profit 6,594 (6) (15) Core EPS 95.4p (1) (12) Adjusted net cash inflow from operations* 5,878 (20) Adjusted FCF* 3,322 (30) *Adjusted net cash inflow from operations and adjusted FCF exclude legal charges 18
Sales growth Most significant headwinds from US Advair, Lovaza and Consumer supply CER 2013 2013 Sales, ex div £25.6bn divestments US -10% Europe flat Japan +1% Emerging Markets +5% ViiV +15% EPP and other -13% Consumer -1% 2014 Sales at 2013 FX £24.7bn -3% Currency -7% 2014 Reported Sales £23.0bn -10% 2013 divestments primarily Lucozade, Ribena, Arixtra and Fraxiparine 19
Operating profit margin breakdown Reduced margin primarily reflects FX, lower sales, mix and investments 2013 OP (ex divestments) 30.4% Currency 0.9% 29.5% COGS 0.2% SG&A 0.5% R&D 0.1% Royalties 0.2% 2014 OP 28.7% 20
COGS Mix and investments largely offset by restructuring & cost savings 2013 COGS (ex divestments) 27.6% Currency 0.6% 28.2% Mix / Price 0.6% Investments 0.9% Restructuring & cost management 1.3% 2014 COGS 28.4% 21
SG&A Cost control offsetting investments and reducing impact of lower sales 2013 SG&A (ex divestments) 30.3% Currency 0.1% 30.2% Lower sales 1.0% Investments 0.6% Restructuring & cost management 1.1% 2014 SG&A 30.7% 22
Continued delivery of restructuring and structural benefits Delivered ~£400m of incremental savings in 2014 £bn 3.7 +0.4 0.2 +0.4 3.3 0.6 0.3 2.9 0.3 0.4 2.9 2.7 2.5 2012 2013 2014 OE Programme Major Change Structural savings 23
Further financial efficiency gains Reduced finance costs and a lower tax rate Operating profit Net finance costs £646m in 2014 vs. £692m in 2013 Net funding rate below 5% - down 3% since 2010 Consistent short term debt rating target: A1/P1 Effective core tax rate in 2014: 19.6% £238m share buyback in 2014 EPS 24
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