Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — Q3 2007 Earnings Presentation
41 slides from Gsk's earnings presentation, Oct 24, 2007
Slide 1: 3Q Results 2007 Presentation to Analysts & Investors
PRIVILEGED & STRICTLY CONFIDENTIAL Full Year Results 2006 Presentation to Analysts & 8th February Investors2007 3Q Results 2007 Presentation to Analysts & Investors 24th October 2007
Slide 2: 2008: Pressures and Opportunities
2008: Pressures and Opportunities Growth Generic Drivers Erosion Advair Avandia Coreg IR Vaccines Wellbutrin XL Valtrex Lamictal IR Boniva Requip IR Avodart Paxil CR Veramyst Arixtra Tykerb Consumer + New products 2
Slide 3: 2008: Pressures and Opportunities
2008: Pressures and Opportunities Growth Generic Drivers Erosion Advair Avandia Coreg IR Vaccines New Wellbutrin XL Valtrex Operational Lamictal IR Boniva Excellence Requip IR Avodart Programme Paxil CR Veramyst Arixtra Tykerb Consumer + New products 3
Slide 4: Culture of Operational Excellence
Culture of Operational Excellence Persistent focus across all functions Reduce complexity – Standardise Consolidate Outsource or Off-shore Exploit Global opportunities – Procurement – Skills – Labour cost arbitrage 4
Slide 5: Operational Excellence: Examples
Operational Excellence: Examples Cumulative Savings HR business process out-sourcing Off-shoring data management Off-shoring of shared Financial Services Commercial analytics centre in India Back-office standardization Clinical trials in low cost countries Off-shoring of IT Manufacturing network rat
Slide 6: Operational Excellence: Results
Operational Excellence: Results Continuous improvement in SG&A* as a % of turnover 36% 35.0% 34.0% 33.8% 34% 32.8% 32% 31.0% 29.6% 29.4% 30% 28% 26% 24% 2001 2002 2003 2004 2005 2006 9 mths '07 * Chart represents SG&A excluding legal and restructuring 2001-2002 estimated under IFRS 6
Slide 7: Accelerating Initiatives…
Accelerating Initiatives… Improving the Selling Model Streamlining Global Manufacturing Enhancing R&D Efficiency Reducing Bureaucracy 7
Slide 8: Improving the selling model
Improving the selling model Strategy Expand specialty teams (e.g., Oncology, Vaccines) Invest in emerging markets (e.g., China) Test alternative selling models 8
Slide 9: Experimenting with Alternative Selling Models
Experimenting with Alternative Selling Models 15 pilots 13 countries Over 1000 sales representatives Over 12 months 9
Slide 10: ASMs show no difference in NRx trends
ASMs show no difference in NRx trends Pilot start 1.40 Advair NRx Index 1.30 1.20 1.10 1.00 0.90 Pilot territory 0.80 Traditional 0.70 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 1.15 1.10 Avandia NRx Index 1.05 1.00 0.95 0.90 0.85 Pilot territor
Slide 11: Streamlining global manufacturing
Streamlining global manufacturing Strategy GSK Manufacturing Sites Tailor network to evolving portfolio 108 Expand new product capability Outsource multi-sourced actives 80 Globalise procurement 2000 2006 2010 11
Slide 12: Low cost sourcing
Low cost sourcing % of Total Primary* Costs Outsourced 45% 41% 30% 23% 15% 15% 9% 0% 2001 2003 2005 2007 *Active Pharma Ingredients. 12
Slide 13: Enhancing R&D Efficiency
Enhancing R&D Efficiency Investment Strategy Deliver late-stage pipeline (e.g., oncology, neurosciences) Continue Vaccines expansion Build Biologics – ofatumumab (Genmab) – Domantis – Tolerx Globalise R&D (e.g., China) 13
Slide 14: Enhancing R&D Efficiency
Enhancing R&D Efficiency Investment Strategy Deliver late-stage pipeline (e.g., oncology, neurosciences) Continue Vaccines expansion Build Biologics – ofatumumab (Genmab) – Domantis – Tolerx Globalise R&D (e.g., China) New Operational Excellence Harness new technology (Praecis) Reduce management com
Slide 15: Regulatory progress
Regulatory progress New filings ’07 Launches Filed Approvable by year-end Avodart Arixtra ACS Promacta (CombAT study) 4Q07/early ’08 Lamictal XR Cervarix (US) Synflorix Requip 14hr (EU+Int’l) Entereg POI gepirone ER Kinrix (US) Requip 24hr (US) Advair in Japan Rotarix (US) Trexima -- in Europe -- Ty
Slide 16: Pipeline is delivering
Pipeline is delivering 33 Phase III / Filed# Up to 25 potential launches 2007-2009* 11 NCEs Phase II 9 PLEs 5 Vaccines Phase I # Key projects in Phase III/Filed (STA-4783 (Synta) and Lunivia entered Phase III/Filed in Q3) * Includes launches which have taken place during 2007 16
Slide 17: Neurosciences R&D Seminar announced
Pipeline progress in CNS diseases Alzheimer’s disease Anxiety disorders Neurosciences Bipolar disorder R&D Seminar Depression announced Drug dependence Dec 13th – New York Multiple sclerosis Neuronal repair Pain and migraine RLS Schizophrenia Sleep disorders 17
Slide 18: Consumer Healthcare – Another strong quarter
Consumer Healthcare – Another strong quarter 3Q07 £0.9 billion +16% alli 18% – 3Q = £34m; YTD £110m 16% – Filed in Europe in Sept ‘07 15% 14% Breathe Right and Fiber Choice £22m (+24% proforma) 12% New launches grow key brands 9% e.g., – Abreva +50% 6% 6% – Sensodyne +23% – Aquafresh +12% 2% 3% – Lu
Slide 19: Prepared for the future
Prepared for the future Strength in large, diversified, global portfolio Extensive pipeline with fast reloadability New 3-year operational excellence programme New CEO-designate: Andrew Witty 19
Slide 20: Julian Heslop, Chief Financial Officer
PRIVILEGED & STRICTLY CONFIDENTIAL Full Year Results 2006 Presentation to Analysts & 8th February Julian Heslop Investors2007 Chief Financial Officer 24th October 2007
Slide 21: Q3 performance summary
Q3 performance summary 3Q 07 3Q 06 % Change £m £m £ CER Turnover 5,476 5,642 (3) 1 Cost of goods (1,232) (1,222) 1 2 22.5% 21.7% SG&A (1,617) (1,617) - 3 29.5% 28.6% R&D (769) (871) (12) (9) 14.0% 15.4% Other oper. income 52 91 Operating profit 1,910 2,023 (6) (1) 34.9% 35.9% 21 % in Italics are % o
Slide 22: Q3 performance summary
Q3 performance summary 3Q 07 3Q 06 % Change £m £m £ CER Operating profit 1,910 2,023 (6) (1) Interest (42) (17) Profit before tax 1,882 2,022 (7) (2) Earnings per share 23.7p 24.7p (4) 1 Tax rate 28.5% 29.5% 22
Slide 23: Cash flow
Cash flow 3Q 07 3Q 06 £m £m Cash generated from operations 2,238 2,114 Taxation paid (396) (2,166) Capital expenditure (420) (427) Interest and other items (31) (25) Free cash flow 1,391 (504) Dividends (670) (619) Purchase of own shares (1,113) (309) Share option exercises 56 54 Other (127) (85) Ne
Slide 24: New £1.5 billion operational excellence programme costs
New £1.5 billion* operational excellence programme costs R&D 20% SG&A Manufacturing 20% 60% 24 * Approximate total cost figure, of which ~30% is for non-cash write-offs.
Slide 25: Savings of £700m annually by 2010
Savings of £700m* annually by 2010 R&D Manufacturing £700m SG&A £550m £350m 2008 2009 2010 25 * Savings figures and their respective phasing are approximate.
Slide 26: New Programme - Accounting and Guidance
New Programme - Accounting and Guidance From Q4 2007, GSK will introduce a 3-column approach to the Income Statement. ‘Business performance’ will show GSK’s underlying results excluding the one-off costs of the new ~£1.5bn restructuring programme. This will be a ‘Non-GAAP measure’. The middle column
Slide 27: Financial outlook
Financial outlook 2007 EPS growth of 8% to 10% at constant exchange, excluding one-off charges for new operational excellence programme £12 billion share buyback programme on track – £1.7 billion (August to the 23rd October) Expected 2007 dividend increased 10% to 53p (2006: 48p) 27
Slide 28: David Stout, President, Pharmaceutical Operations
PRIVILEGED & STRICTLY CONFIDENTIAL Full Year Results 2006 Presentation to Analysts & 8th February David Stout Investors2007 President, Pharmaceutical Operations 24th October 2007
Slide 29: 3Q07 Pharma sales
3Q07 Pharma sales £4.6 billion -2% Sales Growth* £m Zofran, Wellbutrin XL, Coreg (315) Avandia (145) 29 * CER Basis
Slide 30: Avandia products: US market share
Avandia products: US market share US retail oral anti-diabetic weekly volume - market share 14% meta-analysis 11.7% 12% 11.5% 10% 8% 7.4% TRx 6% 5.5% 6.2% 4% NRx 5.0% 2% 0% 07 07 07 7 7 7 7 7 7 7 7 7 07 00 00 00 00 00 00 00 00 00 0 20 20 20 /2 /2 /2 /2 /2 /2 /2 /2 /2 /2 3/ 6/ 8/ 17 31 14 28 20 22 27
Slide 31: Avandia products
Avandia products 3Q07 sales £225 million -38% Awaiting FDA label Int’l £45m -22% Europe includes £8m charge related to prior period discounts Europe US (excl. charge, growth = +4%) £50m £130m -11% -48% Note: CER % growth 31
Slide 32: 3Q07 Pharma sales
3Q07 Pharma sales £4.6 billion -2% Sales Growth* £m Zofran, Wellbutrin XL, Coreg (315) Avandia (145) (63) Key Growth Products +397 Advair, Vaccines, Lamictal, Valtrex, Requip, Avodart, Boniva, Tykerb 32 * CER Basis
Slide 33: Q3 Key growth products
Q3 Key growth products 3Q07 Sales Advair £835m +7% Vaccines £593m +49% Lamictal £275m +14% Valtrex £229m +13% Total £2.1bn Requip £87m +31% +21% Avodart £72m +33% Boniva* £41m +56% Tykerb £16m >100% Note: CER % growth *Total 3Q07 sales for Boniva in US, Europe and International were £86m. 33
Slide 34: Seretide/Advair
Seretide/Advair 3Q07 sales £835 million +7% Int’l Est. US underlying growth ~ +8% £90m +15% COPD: Key driver of current growth US Europe £452m £293m +5% Asthma: New NIH guidelines +8% (Aug. 29th) positive for Advair 34 Note: CER % growth
Slide 35: New NIH Asthma Guidelines
New NIH Asthma Guidelines Guidelines first published 1991; full update in 1997; partial update 2002 – Led to ICS becoming foundation of asthma therapy for all physician specialties Full update completed by Expert Panel August 2007 – Supports use of Advair as initial therapy in moderate or severe ast
Slide 36: Asthma professionals refer to NIH guidelines
Asthma professionals refer to NIH guidelines % of Physicians* ‘Strongly Agreeing’: I refer to the NIH Asthma Guidelines when determining appropriate treatment for patients Primary Care 56% Pulmonologists 59% Allergy specialists 61% 58% Pediatricians * Based on GSK market research (June 2007); sample
Slide 37: Vaccines – Strong growing portfolio
Vaccines – Strong growing portfolio 3Q07 sales £593 million +49% £m Growth Hepatitis 141 +29% Infanrix/Pediarix 137 +16% Influenza 141 >100% Boostrix 26 +56% Rotarix 23 >100% All Others (e.g., Priorix, Varilrix, Tritanrix, meningitis combos, Typherix) 125 +32% Total 593 +49% 9 months YTD sales £1,35
Slide 38: GSK – A leader in flu protection
GSK – A leader in flu protection + 3Q07 sales of = £120m (>100%) Reported growth in 3Q07 reflects both: – Timing of shipments in 2006 – Ongoing capacity expansion Pre-pandemic / Pandemic flu – First sales in 3Q07 £21m (primarily initial sales to HHS) – Sales to US HHS and Swiss government due in 4Q0
Slide 39: Cervarix: Significant progress
Cervarix: Significant progress EU Marketing Authorisation received on 20 Sept Now launched in 12 European countries The first cervical cancer vaccine filed in Japan Submission to WHO for prequalification New cross-protection data to be presented at ACIP 25 Oct 39
Slide 40: Regulatory progress
Regulatory progress New filings ’07 Launches Filed Approvable by year-end Avodart Arixtra ACS Promacta (CombAT study) 4Q07/early ’08 Lamictal XR Cervarix (US) Synflorix Requip 14hr (EU+Int’l) Entereg POI gepirone ER Kinrix (US) Requip 24hr (US) Advair in Japan Rotarix (US) Trexima -- in Europe -- Ty
Slide 41: GlaxoSmithKline
GlaxoSmithKline