Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — FY2011 Earnings Presentation
28 slides from Gsk's earnings presentation, Feb 7, 2012
Slide 1: Full Year Results 2011
Full Year Results 2011 7th February 2012
Slide 2: Sir Andrew Witty and Simon Dingemans
Sir Andrew Witty Chief Executive Officer Simon Dingemans Chief Financial Officer
Slide 3: Delivering our strategy
Delivering our strategy Grow a diversified global business Deliver more products of value Simplify the operating model
Slide 4: Delivering our strategy: grow a diversified global business
Delivering our strategy Grow a diversified • 38% sales generated outside US global business and EU • 22% of sales “White Pill Western Market” vs 40% in 2007 Deliver more • £5.3bn of Group sales from products of value strengthened EM business • £2.1bn Japan Rx/Vx sales (+35% vs 2008) Simplify the • £
Slide 5: Delivering our strategy: deliver more products of value
Delivering our strategy Grow a diversified • 19 new product launches in global business 4 years • Pharma R&D budget broadly Deliver more unchanged since 2007 (CER) products of value • Over 200,000 patients in GSK trials (<100,000 in 2007) • Maintained ~30 assets in Simplify the PhIII/registration op
Slide 6: DPU approach to Drug Discovery is delivering
DPU approach to Drug Discovery is delivering 2008 2011 2012 TA DPUs Full review rebalancing established 38 40 Extensive review completed Q4 2011 4 DPUs created 3 DPUs closed 6 DPUs with >20% increased investment 5 DPUs with >20% decreased investment Overall Drug Discovery budget unchanged
Slide 7: DPU approach has led to significant improvements in GSK Drug Discovery
DPU approach has led to significant improvements in GSK Drug Discovery • Co-location leads to • Increased agility drives • DPU structure breaks rapid decision making faster process & lower cost traditional hierarchies
Slide 8: Visibility of multiple waves of pipeline delivery
Visibility of multiple waves of pipeline delivery Up to 30 6 complete 1 filed C2MD* Ph III 4 ready to file (2012-14) in 2012 * Commit to Medicine Development – Typically phase IIb
Slide 9: Increasing confidence that respiratory portfolio will drive expanding market share
Increasing confidence that respiratory portfolio will drive expanding market share ICS/ SABA ICS LABA LABA ~27% of £2.2bn rescue market ~67% of £7.7bn ICS/LABA market ~32% of £2.6bn steroid market GSK 33% share of the £21bn Global Asthma/COPD market Source: IMS Health MAT Sept 2011.
Slide 10: Increasing confidence that respiratory portfolio will drive expanding market share
Increasing confidence that respiratory portfolio will drive expanding market share ICS/ LAMA/ LAMA/ Anti- SABA ICS LABA LABA LAMA LABA MABA ICS p38 FLAIR IL5 GSK pipeline 9 9 9 9 9 9 9 9 9 9 £2.2bn rescue market £4.4bn maintenance bronchodilator market £7.7bn ICS/LABA market £0.5bn biological severe
Slide 11: Returns on R&D investment increased to 12%; on track to deliver 14%
Returns on R&D investment increased to 12%; on track to deliver 14% return rate GSK assessment of R&D IRR 15 Industry historical1 GSK Feb 2010 GSK Feb 2012 GSK target late-stage portfolio2 late-stage portfolio2 IRR (%) 10 5 0 Increased risk adjusted sales following positive data Some early impact of
Slide 12: Delivering in innovation-led markets
Delivering in innovation-led markets USA Japan • Turnover: £7 billion in 2011 • Turnover: £2.1 billion in 2011 • ~80% of business is promoted • Fastest growing large pharma products growing +6% company in Japan in 2011 • Customer orientated approach • First in class with Avodart, provides competitiv
Slide 13: Delivering our strategy: simplify the operating model
Delivering our strategy Grow a diversified • Reduced sales force in US and EU global business by ~8,000; added ~7,500 in RoW since 2007 • Global support functions; 23% Deliver more decrease in costs vs 2008 products of value • Exited 19 manufacturing sites since 2006 Simplify the • R&D footprint red
Slide 14: Strategy delivers stronger platforms for growth
Strategy delivers stronger platforms for growth Reshaped R&D delivers sustainable pipeline flow Businesses in innovation markets structured to launch new products Increased portfolio of affordable Pharma, Vaccines and Consumer brands in Emerging Markets Consumer Healthcare business refocused around
Slide 15: Strategy is delivering sustainable financial performance and returns to shareholders
Strategy is delivering sustainable financial performance and returns to shareholders Sales growth Reshaped R&D delivers sustainable pipeline flow Operating Businesses in innovation markets structured to leverage launch new products Increased portfolio of affordable Pharma, Vaccines Returns to and Co
Slide 16: Headline results
Headline results Before major restructuring Growth % £m FY 2011 CER £ Turnover 27,387 (3) (4) Underlying turnover 26,880 4 3 Operating profit 8,397 65 64 Operating profit (excluding legal) 8,554 (5) (6) EPS 114.1p >100 >100 EPS (excluding legal) 116.8p (3) (3) Free cash flow 4,141 Adjusted free cash
Slide 17: Group underlying turnover growth of +4% is broadly based
Group underlying turnover growth of +4% is broadly based Pharma Vaccines Consumer 68% of GSK 13% of GSK 19% of GSK £18.7bn £3.5bn £5.2bn +2% +11% +5% Asia Pacific (7%) £1.8bn + 10% 38% of GSK sales are now outside US & Europe Sales numbers are reported sales; growth rates at CER on underlying basis;
Slide 18: 2011 operating margin was impacted by loss of high margin sales and pricing pressure
2011 operating margin was impacted by loss of high margin sales and pricing pressure 2011 2010 Sales growth Margin Margin Op margin* FY'10 30.4% Operating COGS 26.5% 26.1% leverage SG&A 30.2% 29.5% Financial R&D 14.3% 14.0% efficiency Op margin* FY'11 29.0% Cash flow 20% 21% 22% 23% 24% 25% 26% 27%
Slide 19: OE programme and cost savings have partially offset mix and pricing pressures on COGS
OE programme and cost savings have partially offset the mix and pricing pressures on COGS Sales growth COGS margin FY'10 26.1% Pandemic, Avandia, Valtrex 0.6% Operating leverage US HC reform and EU austerity 0.3% pricing Regional/product mix 0.4% Financial efficiency OE savings and cost management (
Slide 20: Cost savings have enabled investment in higher growth businesses
Cost savings have enabled investment in higher growth businesses Sales growth SG&A margin FY'10 29.5% Pandemic, Avandia, Valtrex (net of underlying 0.9% sales growth) Operating leverage US HC reform levy 0.4% Investment markets 0.8% Financial efficiency OE savings and cost management (1.4%) Cash flo
Slide 21: Remain focused on driving operating leverage
Remain focused on driving operating leverage Turnover Sales growth Simplification of supply chain R&D Greater focus on £3,912m procurement capabilities 14.3% COGS Operating £7,259m leverage 26.5% IT systems roll out on track SG&A, £8,272m Consolidation of global 30.2% functions Financial efficiency
Slide 22: Making progress on delivery of financial efficiencies
Making progress on delivery of financial efficiencies Operating Profit Sales growth 2011 2012 >> Continue to target Held net debt steady at ~£9bn A-1/P-1 short-term debt rating Operating ~2% reduction in finance rate leverage Effective interest rate is ~8% by 2013; Offset by increase in net debt Gro
Slide 23: Generated ~£5.6bn free cash flow (ex legal) in 2011
Generated ~£5.6bn free cash flow (ex legal) in 2011 £ Million Sales growth 477 1,466 10,000 9,830 1,128 8,000 7,713 2,135 Operating leverage 6,000 1,228 5,607 209 4,141 4,000 Financial efficiency 2,000 0 Cash flow EBITDA Working cap Legal Other Cash from Tax & Ops Interest Capex Minorities FCF FCF (
Slide 24: Progress in reducing working capital but significant opportunity remains
Progress in reducing working capital but significant opportunity remains Sales growth Conversion cycle Working capital as % of sales Dec 09 Dec 10 Dec 11 27% Operating 23% 21% leverage DSO 70 66 61 DIO 200 190 192 Financial DPO (26) (35) (43) efficiency Total 244 221 210 2009 2010 2011 Cash flow gro
Slide 25: Net debt has remained steady at ~£9bn
Net debt has remained steady at ~£9bn Sales growth £ Million 16,000 5,898 14,901 14,000 Operating leverage 12,000 10,000 8,859 2,191 264 237 9,003 4,141 8,000 3,406 Financial efficiency 6,000 1,339 4,000 Net Debt FCF Disposals Dividends Share Bolt-Ons Other Net Debt Cash and Gross Debt 31/12/2010 bu
Slide 26: £5.6bn cash returned to shareholders in 2011
£5.6bn cash returned to shareholders in 2011 Dividends Buyback £3.4bn in 2011 £2.2bn in 2011 Full year 70p (+8%) plus Q4 Supplemental dividend of 5p
Slide 27: Strategy is delivering sustainable financial performance and returns to shareholders
Strategy is delivering sustainable financial performance and returns to shareholders Sales growth • Broadly sourced growth and sales Operating momentum leverage Returns to • Large and maturing late-stage shareholders Financial efficiency pipeline • Operating leverage & financial Cash flow growth eff
Slide 28: GlaxoSmithKline
GlaxoSmithKline