Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — FY2008 Earnings Presentation
71 slides from Gsk's earnings presentation, Feb 5, 2009
Slide 1: Year End Results 2008
Year End Results 2008 Presentation to Investors & Analysts 5th February 2009 1
Slide 2: Julian Heslop, Chief Financial Officer
Julian Heslop Chief Financial Officer 2
Slide 3: 2008 Performance summary
Before 2008 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Turnover 24,352 22,716 (3) 7 EPS 104.7p 99.1p (9) 6 Free Cash Flow 4,785 3,857 24 Excluding previously announced Q4 legal charge of £278m, 2008 EPS would have been 109.3p (-6% CER). 3
Slide 4: 2008 Turnover summary
Before 2008 Turnover summary restructuring costs 2008 2007 % Change £m £m CER £ Pharmaceuticals 20,381 19,163 (3) 6 Consumer 3,971 3,553 3 12 Total 24,352 22,716 (3) 7 4
Slide 5: 2008 Pharmaceutical turnover by geography
2008 Pharmaceutical turnover by geography Emerging Markets £2.3bn (+12%) ROW £2.7bn (-1%) US Pharma Europe £8.9bn (-11%) Pharma £6.5bn (+3%) £20.4bn -3% CER growth rates US pharma excluding Avandia and products subject to generic competition +10% 5
Slide 6: Pharmaceutical turnover analysis
Pharmaceutical turnover analysis 2008 2007 % Change £m £m CER “Core” 16,405 13,543 +10% Products impacted by generics* 3,048 3,993 -31% Avandia 805 1,219 -40% Pandemic preparations** 123 408 -71% Total 20,381 19,163 -3% *Products impacted by generics comprises Coreg, Imitrex, Lamictal, Paxil, Requip
Slide 7: Pharmaceutical turnover – analysis of 'Core'
Pharmaceutical turnover – analysis of ‘Core’ 2008 Pharma key growth £6,621m products (-1%) £9,784m (+19%) £16.4bn +10% CER growth rates 7
Slide 8: 2008 Pharmaceutical key growth products
2008 Pharmaceutical key growth products Advair £4,137m +8% Vaccines* £2,473m +20% Valtrex £1,195m +16% Epzicom £442m +23% Avodart £399m +27% Ventolin £339m +9% Lovaza £290m +71%** Boniva £237m +34% Arixtra £170m +53% Tykerb £102m +80% CER growth rates Total £9,784m +19% *Excludes Flu Pre-Pandemic **
Slide 9: New Products ('07 & '08)
New Products (’07 & ‘08) 2008 sales £784m +74% CER growth rates 9
Slide 10: 2008 Consumer Healthcare turnover
2008 Consumer Healthcare turnover Nutritional Healthcare £796m (+8%) OTC Medicines Oral £1,935m (-2%) Healthcare £1,240m (+6%) alli £75m (-53%) (consumption ~£94m) £3,971m +3% CER growth rates 10
Slide 11: 2008 Performance summary
Before 2008 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Turnover 24,352 22,716 (3) 7 Cost of goods (5,776) (5,206) 4 11 23.7% 22.9% % in italics are % of turnover 11
Slide 12: 2008 Cost of goods analysis
Before 2008 Cost of goods analysis restructuring costs Cost of Goods Sold as % of Turnover -0.4% +0.4% -0.7% +1.5% 23.7% 22.9% 2007 Regional / Restructuring All other Currency 2008 product mix benefit 12
Slide 13: 2008 Performance summary
Before 2008 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Turnover 24,352 22,716 (3) 7 Cost of goods (5,776) (5,206) 4 11 23.7% 22.9% SG&A: Core (6,741) (6,562) (4) 3 27.7% 28.9% Legal costs (611) (255) Total SG&A (7,352) (6,817) (-) 8 30.2% 30.0% % in italics are % of turno
Slide 14: 2008 SG&A analysis excl. legal
Before 2008 SG&A analysis excl. legal restructuring costs SG&A excluding Legal as % of Turnover -0.9% +0.5% -0.8% 28.9% 27.7% 2007 Restructuring Other costs Currency 2008 benefit 14
Slide 15: SG&A savings continued in 2008…
SG&A savings continued in 2008… SG&A* as a % of turnover 36% 35.0% 34.0% 33.8% 34% 32.8% 32% 31.0% 30% 29.6% 28.9% 27.7% 28% 26% 24% 2001 2002 2003 2004 2005 2006 2007 2008 * Chart represents SG&A excluding legal and restructuring (only major restructuring excluded in ’07 & ’08) 2001-2002 estimated
Slide 16: 2008 Performance summary
Before 2008 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Turnover 24,352 22,716 (3) 7 Cost of goods (5,776) (5,206) 4 11 23.7% 22.9% SG&A (7,352) (6,817) (-) 8 30.2% 30.0% (3,506) (3,237) 2 8 R&D 14.4% 14.3% Other oper. income 541 475 Operating profit 8,259 7,931 (10) 4 33.
Slide 17: 2008 Performance summary
Before 2008 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Operating profit 8,259 7,931 (10) 4 Interest 525 191 Profit before tax 7,782 7,790 (14) - Tax rate 28.7% 28.5% EPS 104.7p 99.1p (9) 6 17
Slide 18: Strong currency benefits in 2008
Strong currency benefits in 2008 EURO / £ Month-end exchange rates $ / £ Month-end exchange rates 1.60 2.20 2007 2007 2.00 1.40 1.80 1.60 2008 1.20 2008 1.40 2009 2009 1.00 1.20 l l r r v v t t g c p g c n p n r r b n b n y y Ju Ju Oc Ap Oc Ap Ma Ma No No De De Au Se Au Ja Se Ja Fe Ju Fe Ju Ma Ma 18
Slide 19: Exchange rate impact: full year 2009
Before Exchange rate impact: full year 2009 restructuring costs £/$ Movement EPS Impact 10 Cent +/- 3.5% £/Euro Movement EPS Impact 10 Cent +/- 2.5% £/Yen Movement EPS Impact 20 Yen +/- 1% If exchange rates held at YE ’08 rates (e.g., $1.44/€1.04/¥131) for ‘09: the estimated positive impact on 2009
Slide 20: Q4 Performance summary
Before Q4 Performance summary restructuring costs 2008 2007 % Change £m £m CER £ Turnover 6,910 5,974 (3) 16 EPS 26.7p 24.4p (23) 9 Excluding previously announced Q4 legal charge of £278m, Q4 ‘08 EPS would have been 31.4p (-9% CER). 20
Slide 21: Full year results after restructuring
Full year results after restructuring 2008 2007 Results before Total Total restructuring Restructuring results results £m £m £m £m Turnover 24,352 - 24,352 22,716 Operating 8,259 (1,118) 7,141 7,593 profit EPS 104.7p (16.1)p 88.6p 94.4p 21
Slide 22: Free cash flow
Free cash flow 2008 2007 £m £m Total operating profit 7,141 7,593 Depreciation & other non-cash items 1,543 1,333 Decrease / (incr.) in working capital 69 (538) Increase / (decr.) in other net liabilities 408 (308) Cash generated from operations 9,161 8,080 Taxation paid (1,850) (1,919) Capital expe
Slide 23: Free cash flow to net debt reconciliation
Free cash flow to net debt reconciliation 2008 2007 £m £m Free cash flow 4,785 3,857 Dividends (2,929) (2,793) Share repurchases (3,706) (3,751) Purchase of businesses / equities (541) (1,213) Sale of intangibles / equities 195 54 Employee share option exercises 52 507 Exchange and other movements (
Slide 24: Major restructuring costs
Major restructuring costs Previously Current announced plan R&D R&D 16% 20% Mfg Mfg 60% 48% SG&A SG&A 20% 36% Total cost £1.5bn Total cost £3.6bn* (£1.5bn already charged through YE ‘08) * Approximate total cost figure, of which ~25% is for non-cash write-offs. 24
Slide 25: Major restructuring costs – expected phasing
Major restructuring costs – expected phasing £1,200m £1,118m £700m £338m £200m 2007 2008 2009 2010 2011 Actual Actual 25
Slide 26: Savings expected from major restructuring
Savings expected from major restructuring Incremental savings from expanding programme R&D Manufacturing SG&A £1.0bn £700m £450m £40m 2008 2009 2010 2011 * Savings figures and their respective phasing are approximate. 26
Slide 27: Savings expected from major restructuring
Savings expected from major restructuring Incremental savings Total savings from expanding programme £1.7bn annually by 2011 R&D Manufacturing SG&A £1.7bn £1.4bn £1.0bn £1.0bn £700m £450m £390m £40m 2008 2009 2010 2011 2008 2009 2010 2011 * Savings figures and their respective phasing are approximat
Slide 28: Conclusion
Conclusion • 2008 was a challenging year with impact of generics, Avandia and legal costs leading to an EPS decline • Restructuring resulted in significant cost savings (£390m) • Strong cash generation continued in ‘08 Cash flow from operations of £9.2bn (+13%) Free cash flow of £4.8bn (+24%) • Stro
Slide 29: Andrew Witty, Chief Executive Officer
Andrew Witty Chief Executive Officer 29
Slide 30: GSK's strategic priorities
GSK’s strategic priorities 1. Grow a diversified global business 2. Deliver more products of value 3. Simplify the operating model 30
Slide 31: Grow a diversified global business
Grow a diversified global business Prophylactic vaccines Therapeutic vaccines Biopharm Pharma • Driving the base business Emerging market OTC brands Oral care/ nutritionals 31
Slide 32: Driving the base pharma business
Driving the base pharma business Advair US TRx Mkt Share #1 in Japan Respiratory Mkt Share by Value 25.2 20.5 24.7 17.7 Dec '07 Dec '08 Dec '07 Dec '08 Source: SDI VONA retail mkt: Source: IMS Asthma and COPD controllers Lovaza US TRx Mkt Share Avodart US TRx Mkt Share 13 16.7 9.8 15.7 Dec '07 Dec '
Slide 33: Grow a diversified global business
Grow a diversified global business Prophylactic vaccines Therapeutic vaccines Biopharm • Reshaping US Pharma • New Vaccines launches Pharma • Consumer investments • Emerging markets expansion Emerging market OTC brands Oral care/ nutritionals 33
Slide 34: Reshaping US Pharma
Reshaping US Pharma • Rescaled and redeployed salesforce – Dedicated therapy area aligned teams – 1800 reductions in primary care – 350 increase in vaccines and specialty pharma • Back office simplification • Rethinking marketing mix – Targeted use of DTC – 20% reduction in 2009 • Improved value pro
Slide 35: Innovative approach to drive volume
Innovative approach to drive volume Walmart Partnership with GSK • ReliOn® Ventolin® HFA launched Dec. ’08 • Provides accessible, affordable medications to those who need Available at Walmart for $9. it most New business for GSK • Shipped 750,000 units • Mkt share at Walmart increased from 10% to 30
Slide 36: Launching new vaccines portfolio
Launching new vaccines portfolio Reimbursed/ Phase III File tender wins HibMenCY US Paediatric US MenACWY EU/US EU US US Japan EU Adolescent/ Adult Pre/pandemic US/Japan EU adult US New gen flu Tx MAGE-A3 36
Slide 37: Market share growth in Emerging Markets
Market share growth in Emerging Markets Emerging markets Emerging markets Egypt / Pakistan A&P investment Egypt / Pakistan Neptunus Salesforce expansion New pricing strategies Portfolio diversity Broader access Brand leverage 37
Slide 38: Market share growth in Emerging Markets
Market share growth in Emerging Markets Portfolio Expansion (MENA) Geographic Expansion • Acquisitions increase market • Increased salesforce in China share by estimated 1 share (+25%) and Russia (+12%) in point in 2009 (from 8.3%) 2008 • Increases presence to 9 of top • Increases planned in Brazil
Slide 39: Investing in Consumer Healthcare
Investing in Consumer Healthcare Marketing Geographic Innovation Acquisition Switch Excellence expansion Alvedon acquisition is subject to Regulatory approval of GSK’s acquisition of AZ Nordic OTC business 39
Slide 40: Innovative, scientific claims drive appeal
Innovative, scientific claims drive appeal Releases 29% hip 8 hour action 5 times fracture preferred vs faster than reduction paracetamol generics Releases 50% more 25% 4 times weight stronger faster than loss enamel gum Doesn’t Boosts Drug-free scratch like mental better regular energy breathing to
Slide 41: Investing in Consumer Healthcare
Investing in Consumer Healthcare OTC; £1.9bn -2% +12%; #1 int’l analgesic, 2008 growth twice global average +17%; now marketed in 57 countries Oral Care; £1.2bn +6% +12%; 35% of world toothpaste growth1 in 2008 +3%; driven by new claims and marketing campaign Nutritionals; £0.8bn +8% +13%; India bui
Slide 42: GSK's strategic priorities
GSK’s strategic priorities 1. Grow a diversified global business 2. Simplify the operating model 3. Deliver more products of value 42
Slide 43: Releasing resources to invest in growth
Releasing resources to invest in growth Simplifying manufacturing network; > £500m cash flow benefit from announced closure of 12 sites since working capital programme in 2008 2006 Innovative partnership with 50% reduction in COGS for Syncria via Microsoft Online: 30% decrease in new, internal manuf
Slide 44: Releasing resources to invest in growth: A good start
Releasing resources to invest in growth A good start 44
Slide 45: GSK's strategic priorities
GSK’s strategic priorities 1. Grow a diversified global business 2. Simplify the operating model 3. Deliver more products of value 45
Slide 46: Re-personalisation of drug discovery
Re-personalisation of drug discovery Cancer Metabolic Infectious Pathways Diseases Respiratory Neurosciences Biopharm Immuno- R&D China Inflamm 46
Slide 47: Re-personalisation of drug discovery
Re-personalisation of drug discovery ceedd Virtual PoC Cancer Metabolic Infectious Pathways Diseases Academic Incubator Sirtris Respiratory Neurosciences Biopharm Macrolides ophthiris Immuno- R&D China Inflamm CEDD 35 DPUs All Business Plans Now DPU Approved by DIB 47
Slide 48: Diversify and de-risk through externalisation
Diversify and de-risk through externalisation New/expanded in 2008/2009 YTD 35 external engines 35 internal engines Corporate Venture Fund 48
Slide 49: ~30 assets in Phase III / registration
Focussed and cost-effective development ~30 assets in Phase III / registration 49
Slide 50: Leading partnering capability
Leading partnering capability Highest average score against all attributes 70% Best-in-class score 60% Median score 50% 40% 30% 20% 10% 0% Retain control in Retain Alliance Pay BD / Easy to Creative / Leadership Allows Responsive / commercialization control in management highest licensing access fle
Slide 51: Pipeline is delivering
Pipeline is delivering GSK % FDA approvals NCEs/new vaccines 10% in 2007 17% in 20081 1 includes Entereg in partnership with Adolor 51
Slide 52: Pipeline is delivering
Pipeline is delivering £784m 800 700 600 500 400 300 200 100 0 2007 2008 Sales from products launched since 2007 (£m) 52
Slide 53: Moncef Slaoui, Chairman, R&D
Moncef Slaoui Chairman, R&D 53
Slide 54: Focus on continuously improving quality, novelty and cost-efficiency
Focus on continuously improving quality, novelty and cost-efficiency Focus on the best Re-personalise science R&D Diversify through Focus on return externalisation on investment 54
Slide 55: Focus on the best science
Focus on the best science Overall reduction of 36% Rebuilding portfolios internal discovery projects internally and externally Exited • Urology Entered • GI • Hypertension • Ophthalmology • Sirtuins Re-focussed • Metabolic Pathways Grew • Neurosciences • Infectious Disease • Biopharmaceuticals • Can
Slide 56: Re-personalise R&D
Re-personalise R&D ceedd Virtual PoC Cancer Metabolic Infectious Pathways Diseases Academic Incubator Sirtris Respiratory Neurosciences Biopharm Macrolides ophthiris Immuno- R&D China Inflamm CEDD DPU 56
Slide 57: Diversify through externalisation
Diversify through externalisation Platform technology Scientific field Assets Academic approach 57
Slide 58: Focus on return on investment
Focus on return on investment Infrastructure Drug Projects 58
Slide 59: Focus on return on investment
Focus on return on investment Differential investment across therapy areas over time 2006-08 2009-11 CEEDD Neuro- Bio- MP Cancer Resp I-I R&D ID Sirtris Ophth Macro- Uro- GI & other sciences pharm Research China lides logy innovative approaches Discovery spend allocated over 2006-08 and 2009-11. CEE
Slide 60: Focus on return on investment
Focus on return on investment solabegron, Factor Xa Seeking out-license due to low priority for GSK 5HT1 Early focus on differentiation Integrase inhibitor Parallel molecule development to accelerate programme 60
Slide 61: Focus on the best science, Re-personalise R&D
Focus on the best Re-personalise science R&D Diversify through Focus on return externalisation on investment 61
Slide 62: Deliver consistent flow of reimbursable products to market
Deliver consistent flow of reimbursable products to market fuelled by ~30 assets in Phase III/registration Launches Terminations Note: during 2008 Entereg OBD was returned to Adolor and Coreg CR +ACEi was terminated 62
Slide 63: Deliver consistent flow of reimbursable products to market
Deliver consistent flow of reimbursable products to market fuelled by ~30 assets in Phase III/registration otelixizumab almorexant Launches retigabine darapladib Terminations Syncria Note: during 2008 Entereg OBD was returned to Adolor and Coreg CR +ACEi was terminated 63
Slide 64: Deliver consistent flow of reimbursable products to market
Deliver consistent flow of reimbursable products to market fuelled by ~30 assets in Phase III/registration darapladib pazopanib Promacta Syncria ofatumumab Synflorix 64
Slide 65: Promacta
Promacta FDA Approved First oral TPO agent for the treatment of ITP Nov ‘08 Patients prefer oral treatment Chronic ITP indication Reduced bleeding symptoms • Positive RAISE (6m) results presented at ASH • Filed in Europe and Reduction in rescue medications International in Dec 2008 • Ph III studies
Slide 66: Synflorix
Synflorix CHMP positive A potential paediatric vaccine against invasive pneumococcal disease and middle ear infections opinion Jan ‘09 3 additional serotypes (1, 5 & 7F) are associated with severe disease and high potential to cause infectious epidemics Potential to prevent up to 90 % of paediatric
Slide 67: pazopanib
pazopanib Filed in US Oral angiogenesis inhibitor targeting VEGFR-1, -2, 3, Dec ‘08 PDGFR-α and β, c-Kit Clinical activity in several solid tumors1 General safety profile similar to other VEGFR inhibitors with common AEs: • NDA for advanced RCC Dec 08 diarrhoea, hypertension, hepatotoxicity • Europe
Slide 68: ofatumumab
ofatumumab Filed in US A fully human anti-CD20 mAb with potential in haematological Jan ‘09 and autoimmune diseases Rituximab Ofatumumab Novel small loop epitope – binds closer to the cell Good activity in low-CD20 expressing cells (CLL) CD20 CD20 Unprecedented single agent response • Ph III active
Slide 69: darapladib
darapladib Phase III start A novel, selective and orally active inhibitor of LpPLA2 and potential Dec ‘08 anti-atherosclerosis agent for reduction of major CV events in patients with CHD Novel and unique mechanism Strong imaging data demonstrated dramatic impact on plaque in arteries • STABILITY Ph
Slide 70: Syncria (albiglutide)
Syncria (albiglutide) Phase III start A human GLP-1 with a unique molecular structure planned Q1 ‘09 H G E G T F T S D V S S Y L E G Q A A K E F I A W L V K G R DPPIV resistance and H G E G T F T S D V S S Y L E G Q A A K E F I A W L V K G R fusion to human albumin Proteolytic cleavage blocked rH-Al
Slide 71: sk Kline
© sk Kline