Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — FY2006 Earnings Presentation
94 slides from Gsk's earnings presentation, Feb 8, 2007
Slide 1: Full Year Results 2006
PRIVILEGED & STRICTLY CONFIDENTIAL Full Year Results 2006 Presentation to Analysts & Investors Full Year 2007 8th February Results 2006 Presentation to Analysts & Investors 8th February 2007
Slide 2: Today's agenda
Today’s agenda The GSK Story 2006 Pharmaceutical performance JP Garnier 2006 financial performance David Stout Julian Heslop
Slide 3: Strong 2006 performance
Strong 2006 performance Turnover £23.2 billion +9% EPS 95.5p +19% 2006 dividend 48p +9% Note: Sales and EPS are CER % growth
Slide 4: Q4 performance summary
Q4 performance summary 4Q 06 4Q 05 % Change £m £m £ CER Turnover 5,959 5,907 1 9 Cost of goods (1,445) (1,298) 11 15 24.2% 22.0% SG&A (1,934) (2,040) (5) 0 32.5% 34.5% R&D (980) (968) 1 6 16.4% 16.4% Other oper. income 100 32 Operating profit 1,700 1,633 4 19 28.5% 27.6% % in Italics are % of Turnov
Slide 5: Q4 performance summary
Q4 performance summary 4Q 06 4Q 05 % Change £m £m £ CER Operating profit 1,700 1,633 4 19 Interest (3) (40) Profit before tax 1,710 1,606 6 22 Earnings per share 21.0p 19.8p 6 22 Tax rate 29.5% 28.3%
Slide 6: Legal & restructuring costs and asset sale profits
Legal & restructuring costs and asset sale profits 4Q 06 4Q 05 £m £m Legal costs (81) (132) Restructuring costs (132) (59) Asset sale profits 3 12 Theravance & Quest 46 4 Total Q4 (164) (175) + £11 million
Slide 7: Legal & restructuring costs and asset sale profits
Legal & restructuring costs and asset sale profits 4Q 06 4Q 05 £m £m Legal costs (81) (132) Restructuring costs (132) (59) Asset sale profits 3 12 Theravance & Quest 46 4 Total Q4 (164) (175) + £11 million Full year (340) (262) - £78 million
Slide 8: US dollar trends
US dollar trends 2005 2006 2.00 1.95 1.90 1.85 1.80 $/£ 1.75 1.70 1.65 1.60 1.55 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month end closing rates
Slide 9: US dollar trends
US dollar trends 2006 2007 2.00 ~ $1.96 1.95 1.90 1.85 $/£ 1.80 1.75 1.70 1.65 1.60 1.55 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Month end closing rates
Slide 10: Exchange rate impact: full year 2007
Exchange rate impact: full year 2007 £/$ Movement EPS Impact 5 Cent +/- 2% £/Euro Movement EPS Impact 5 Cent +/- 1% If these exchange rates hold at the Q4 average (e.g. $1.94/€1.50): expect around a 4% adverse impact on 2007 EPS
Slide 11: 2006 performance summary
2006 performance summary 2006 2005 % Change £m £m £ CER Turnover 23,225 21,660 7 9 Cost of goods (5,010) (4,764) 5 6 21.6% 22.0% SG&A (7,257) (7,250) 0 0 31.2% 33.5% R&D (3,457) (3,136) 10 11 14.9% 14.5% Other oper. income 307 364 Operating profit 7,808 6,874 14 17 33.6% 31.7% % in Italics are % of
Slide 12: 2006 performance summary
2006 performance summary 2006 2005 % Change £m £m £ CER Operating profit 7,808 6,874 14 17 Interest (65) (194) Profit before tax 7,799 6,732 16 19 Earnings per share 95.5p 82.6p 16 19 Tax rate 29.5% 28.5%
Slide 13: Cash flow
Cash flow 2006 £m 2005 £m Cash generated from operations 8,203 7,665 Taxation paid (3,846) (1,707) Capex, interest and other (1,734) (1,294) Free cash flow 2,623 4,664 Dividends (2,598) (2,390) Purchase of own shares (1,348) (999) Purchase of businesses (430) (1,062 ) Employee share option exercises
Slide 14: Financial outlook for 2007
Financial outlook for 2007 EPS growth rate expected to be 8% to 10% (CER)
Slide 15: Today's agenda
Today’s agenda The GSK Story 2006 Pharmaceutical performance JP Garnier 2006 financial performance David Stout Julian Heslop
Slide 16: Pharma industry environment: Medicare Part-D
Pharma industry environment Medicare Part-D
Slide 17: 90% of seniors have comprehensive drug coverage
Today for the first time ever, 90% of seniors have comprehensive drug coverage. The CBO estimates “H.R. 4 would have a negligible impact on federal spending.”
Slide 18: GSK – US sales in elderly population
GSK – US sales in elderly population 65+ population as a percent of total retail volume 60% 50% 50% 42% 40% 36% 34% Average 32% 32% 30% 30% 26% 25% 22% 22% 20% 18% 18% 10% 0% a b c d f g h i j GSK l m Source: Based on Verispan VONA Retail TRx for 65+ population, YTD September 2006. Includes Medicare
Slide 19: GSK – US sales in elderly population
GSK – US sales in elderly population 65+ population as a percent of total retail volume 60% 50% For GSK ~10% is 50% Medicare Part-D 42% 40% 36% 34% Average 32% 32% 30% 30% 26% 25% 22% 22% 20% 18% 18% 10% 0% a b c d f g h i j GSK l m Source: Based on Verispan VONA Retail TRx for 65+ population, YTD S
Slide 20: Pharma industry environment: Importation
Pharma industry environment Medicare Part-D Importation
Slide 21: Pharma industry environment: Regulatory
Pharma industry environment Medicare Part-D Importation Regulatory
Slide 22: Concluding observations
Concluding observations “…the number of drugs developed has not been commensurate with R&D investments by the pharmaceutical industry…. …Addressing this challenge will require effective collaboration between government, industry and academic institutions.”
Slide 23: Pharma industry environment: Coverage for the uninsured
Pharma industry environment Medicare Part-D Importation Regulatory Coverage for the uninsured
Slide 24: 2006 sales performance
2006 sales performance Total Pharma sales £20.1bn +9% Int’l £4.2bn +6% US £10.4bn Europe +16% £5.5bn +1% Note: CER Growth Rates
Slide 25: Strength in a diverse portfolio
Strength in a diverse portfolio Total Pharma sales £20.1bn +9% Other £1.0bn (-5%) Oncology/Emesis £1.1bn (+7%) Asthma+COPD Anti-Bacterials £4.6bn (+8%) £1.4bn (-9%) CV & Urogenital £1.6bn (+24%) Allergy £0.4bn (-47%) Vaccines £1.7bn (+23%) CNS £3.6bn (+15%) Metabolic £1.9bn (+27%) Anti Virals £2.8bn
Slide 26: Key growth drivers
Key growth drivers Three Three Rising New Franchises Franchises Stars Stars >£1.5bn >£750m Requip 2007 Avodart Launches Advair Lamictal Boniva Avandia Valtrex Vaccines Coreg
Slide 27: Key growth drivers
Key growth drivers Three Three Rising New Franchises Franchises Stars Stars >£1.5bn >£750m Requip 2007 Avodart Launches Advair Lamictal Boniva Avandia Valtrex Vaccines Coreg
Slide 28: Seretide/Advair
Seretide/Advair 2006 sales £3.3 billion +11% Int’l £310m +9% US Europe £1,870m £1,133m +13% +10% Note: CER % growth
Slide 29: US patient visit trends
US patient visit trends Asthma visits COPD visits 9,000 3,000 -0.4% -5% -3% 8,136 8,103 2,706 -9% 7,685 2,500 2,628 7,000 2,389 Thousands Thousands 2,000 5,000 1,500 3,000 1,000 1,000 500 Qtr End Qtr End Qtr End Qtr End Qtr End Qtr End Nov 2004 Nov 2005 Nov 2006 Nov 2004 Nov 2005 Nov 2006 Source: Ve
Slide 30: Advair US prescriptions trends
Advair US prescriptions trends Advair 4-week rolling average US retail TRx volume 400,000 350,000 FDA 300,000 Seasonal Advisory (Nov ‘05) upswing 250,000 200,000 Ju 4 Ju 6 Ju 5 D 4 D 5 M 5 D 6 D 3 6 3 4 06 03 05 04 -0 -0 -0 0 0 0 0 -0 -0 -0 -0 p- p- p- p- n- n- n- n- ar ar ar ec ec ec ec Se Se Se Se
Slide 31: Expanding COPD Opportunity
Expanding COPD Opportunity 17% (p=0.052) reduction in mortality* 25% (p<0.001) reduction in exacerbations* Publication expected 1H07 Filed in both US and Europe – exacerbations – mortality – higher dose in US * Compared with placebo arm
Slide 32: Comments of key opinion leaders
Comments of key opinion leaders “… this is the first time we have ever seen anything like this since the advent of COPD. This makes it a very exciting time for the COPD world.” Fernando J. Martinez, MD, MS “…Now we can add to oxygen therapy and smoking cessation another type of therapy that impacts
Slide 33: Avandia franchise
Avandia franchise 2006 sales £1.6 billion +25% Int’l £234m +19% Europe £217m +40% US £1,194m +24% Note: CER % growth
Slide 34: Doctors hearing about ADOPT now!
Doctors hearing about ADOPT now!
Slide 35: PCPs impressed by ADOPT results
PCPs impressed by ADOPT results Market Research PCPs who were aware of ADOPT: 92% thought it will have an impact on their prescribing Little/no impact 8% Moderate impact 13% >55% expect to Great impact increase prescribing of 35% Avandamet because of ADOPT Reasonably n = 45 great impact 44% n = 56 S
Slide 36: Avandia franchise US prescriptions trends
Avandia franchise US prescriptions trends 4-week rolling US retail TRx volume growth vs prior year 6% 5% 4% 3% ADOPT 2% 1% 0% 07 6 6 6 7 7 7 06 06 06 06 06 06 /0 /0 /0 /0 /0 /0 5/ 9/ 0/ 7/ 4/ 5/ 2/ /3 /1 /8 12 19 26 1/ /1 /1 /2 /2 /1 /2 11 12 12 1/ 1/ 1/ 11 11 11 12 12 12 Verispan VONA – US weekly T
Slide 37: Avandamet – a compelling profile
Avandamet – a compelling profile Outstanding efficacy – Average A1c drops of 2.3%* – In high A1c patients, average drop was 4%* Weight neutral Convenience – one pill Cost effectiveness – one co-pay… * Source: Efficacy based on initial therapy clinical trial - Rosenstock 2006. Diabetes Obesity and Me
Slide 38: Avandamet – a compelling profile
Avandamet – a compelling profile …And, more patients Outstanding efficacy get to ADA A1c Goal – Average A1c drops of 2.3%* 80% 77% – In high A1c patients, average drop was 4%* % at goal Weight neutral 57% 55% Convenience – one pill Cost effectiveness – one co-pay… 30% ADA Goal (<7%) Avandam et Metfo
Slide 39: Vaccines
Vaccines 2006 sales £1.7 billion +23% Product Sales Intern’l US – Infanrix/Pediarix £511m +29% £518m +13% £465m +40% – Hepatitis £479m +9% – Flu £170m +60% – Boostrix £60m >100% Europe £709m +20% – Rotarix £44m >100% Note: CER Growth Rates
Slide 40: Vaccines – key near-term opportunities
Vaccines – key near-term opportunities EU approval expected in ’07 US filing expected by April ’07 Head-to-head trial vs. Gardasil US filing expected 1H’07 Synflorix EU filing expected by end ’07 (previously called Streptorix) New generation ’flu Phase III data expected in ‘07 Production began Nov.
Slide 41: Key growth drivers
Key growth drivers Three Three Rising New Franchises Franchises Stars Stars >£1.5bn >£750m Requip 2007 Avodart Launches Advair Lamictal Boniva Avandia Valtrex Vaccines Coreg
Slide 42: £2.6bn+ and still growing!
£2.6bn+ and still growing! £1.0bn +19% New PGTC (‘grand mal’) seizures indication launched in Oct. ‘06 Lamictal XR (epilepsy) filed Nov ’06 New CDC Guidelines (Aug. £0.8bn +24% ‘06) state valacyclovir can reduce risk of transmission New DTC campaign Jan ‘07 £0.8bn +38% Coreg CR approved, launch expe
Slide 43: Key growth drivers
Key growth drivers Three Three Rising New Franchises Franchises Stars Stars >£1.5bn >£750m Requip 2007 Avodart Launches Advair Lamictal Boniva Avandia Valtrex Vaccines Coreg
Slide 44: Rising stars deliver
Rising stars deliver £579m +93% RLS driving growth £268m +74% Requip 14-hr (RLS) filed Oct. ’06; Requip 24-hr (Parkinson’s) filing expected 1Q07 Large untreated population £216m +69% REDUCE trial in prostate cancer ongoing £95m >100% Patients preferred the once-monthly dosing of Boniva over the once
Slide 45: Key growth drivers
Key growth drivers Three Three Rising New Franchises Franchises Stars Stars >£1.5bn >£750m Requip 2007 Avodart Launches Advair Lamictal Boniva Avandia Valtrex Vaccines Coreg
Slide 46: New stars in 2007
New stars in 2007 … - - New ACS indication - - H5N1 pandemic - - In Europe - - For POI
Slide 47: Allermist – GSK's new intranasal spray
Allermist – GSK’s new intranasal spray Allermist - High binding affinity and selectivity at the glucocorticoid receptor: – Fast onset – Long duration – Efficacy on ocular symptoms PDUFA – Safety profile proven down to age 2 April 28th Ph III data at AAAAI – Feb. ’07 5 manuscripts submitted for publi
Slide 48: Tykerb – new hope for cancer patients
Tykerb – new hope for cancer patients Extensive clinical programme Breast cancer refractory patients – PDUFA March 13th Clinical data in breast cancer – 1st line setting – Brain metastases Data Expected in ’07 – Inflammatory breast cancer Tykerb adjuvant program launched Ongoing studies in many othe
Slide 49: 2007 sales outlook
2007 sales outlook 2007 Major generic Key Growth competition: Drivers 2007 Zofran (US) Growth Wellbutrin XL (US) 300 mg ~60% of XL sales
Slide 50: Today's agenda
Today’s agenda The GSK Story 2006 Pharmaceutical performance JP Garnier 2006 financial performance David Stout Julian Heslop
Slide 51: The GSK Story
The GSK Story broad and dynamic portfolio with significant growth opportunities strong and continued commitment to delivering solid growth significant late stage pipeline with fast “reloadability”
Slide 52: 21 products with sales >£250m
Strength in size 21 products with sales >£250m Sales FY 2006
Slide 53: A diversified product line with sustained growth
A diversified product line with sustained growth 2007 Key Growth Drivers Advair Avandia Family Vaccines Lamictal Valtrex Coreg Requip Avodart Boniva Consumer
Slide 54: Strong growth from key Pharma products
Strong growth from key Pharma products +11% +25% CER Growth. Growth shown for Avandia franchise
Slide 55: Strong growth from key Pharma products
Strong growth from key Pharma products +29% +60% +11% +25% +9% CER Growth. Growth shown for Avandia franchise and hepatitis franchise
Slide 56: Vaccine sales – doubled this decade
Vaccine sales – doubled this decade 2006 vaccine sales £1.7bn +23% MMRV 1800 1600 1400 1200 Sales 1000 800 600 400 2000 2003 2006
Slide 57: Strong growth from key Pharma products
Strong growth from key Pharma products >100% +38% +29% +19% +74% +60% +11% +24% +69% +25% +9% CER Growth. Growth shown for Avandia franchise and hepatitis franchise
Slide 58: 2007 new product opportunities
2007 new product opportunities
Slide 59: 2007 new product opportunities
2007 new product opportunities H5N1 pandemic - - New ACS indication - -
Slide 60: Consumer Healthcare performing well
Consumer Healthcare performing well Sales Growth Profit Margin #5 #1 out of 10 peer companies out of 10 peer companies (based on Sept ’06 YTD data) (based on 2005 segment data) Source: Peer data based on segment data from SEC filings and GSK estimates.
Slide 61: 10 new products in 2007
New Consumer Healthcare growth drivers 10 new products in 2007
Slide 62: New Consumer Healthcare growth drivers
New Consumer Healthcare growth drivers First FDA approved OTC weight-loss medication alli - 50% more weight loss than diet alone No abuse potential
Slide 63: New Consumer Healthcare growth drivers
New Consumer Healthcare growth drivers Fastest growing US fiber brand Globalisation of CNS brands Market leader in fast growing category
Slide 64: The GSK Story
The GSK Story broad and dynamic portfolio with significant growth opportunities strong and continued commitment to delivering solid growth significant late stage pipeline with fast “reloadability”
Slide 65: Sustained cost reduction
Sustained cost reduction SG&A as a % of turnover excluding legal and restructuring 36% 35.0% 35% 34.0% 33.8% 34% 32.8% 33% 32% 31.0% 31% 30% 29.6% 29% 28% 2001 2002 2003 2004 2005 2006 2001-2002 estimated under IFRS
Slide 66: Operational excellence
With multiple initiatives ongoing... Offshoring Globalisation Operational excellence Standardisation Restructuring
Slide 67: Financial strength
Financial strength Cash generated from operations now exceeds £8bn 9 8.2 8 7 £bn 6 5.4 5 4 3 2000 2006 Reported numbers (2000 not adjusted for IFRS)
Slide 68: Financial strength
Financial strength Cash generated from operations Accelerating cash now exceeds £8bn returns to shareholders 9 8.2 8 Buy-back programme doubled to £6bn over 3 years 7 In 2006, dividend increased £bn 6 5.4 from 44p to 48p 5 4 3 2000 2006 Reported numbers (2000 not adjusted for IFRS)
Slide 69: The GSK Story
The GSK Story broad and dynamic portfolio with significant growth opportunities strong and continued commitment to delivering solid growth significant late stage pipeline with fast “reloadability”
Slide 70: Pipeline reloadability evolution
R&D Significant Fast Continue late stage pipeline R&D pipeline reloadability evolution
Slide 71: Significant opportunities in late stage pipeline
Significant opportunities in late stage pipeline Phase III Filed casopitant Tykerb pazopanib Altabax Promacta 10 Allermist NCEs belimumab Entereg ambrisentan mepolizumab Globorix Cervarix Synflorix 6 H5N1 Hib-MenCY-TT vaccines New generation flu
Slide 72: Significant opportunities in late stage pipeline
Significant opportunities in late stage pipeline casopitant Synflorix pazopanibPhase III Cervarix Filed Coreg CR+ACEiHib-MenCY-TT Promacta Lamictal XR belimumab Avandamet XR H5N1 Requip 14hr (RLS) ambrisentan New generation flu Avandia + statin Trexima mepolizumab Avodart+α blocker 12 Arixtra ACS Ty
Slide 73: Significant opportunities in late stage pipeline
Significant opportunities in late stage pipeline casopitant Synflorix Avodart PCa pazopanib Cervarix Entereg OBD Promacta Hib-MenCY-TT rosiglitazone XR (AD) Phase III belimumab H5N1 FiledLamictal XR ambrisentan New generation flu Humax-CD20 ER14hr (RLS) Requip gepirone mepolizumab 3 in- Coreg CR+ACE
Slide 74: Significant opportunities in late stage pipeline
Significant opportunities in late stage pipeline 1 4 11 Filed 2 4 2 8 20 Phase III 4 6 NCEs Vaccines PLEs In-licensed As of February 2007, does not include all Phase III and filed assets
Slide 75: Pipeline reloadability evolution
Key growth drivers Significant Fast Continue late stage pipeline R&D pipeline reloadability evolution
Slide 76: Industry ability to reload the pipeline
Industry ability to reload the pipeline Phase II starts 80 (excluding vaccines and PLEs) 70 60 number of projects 50 40 Industry 30 20 10 0 2001-03 2003-05 Source: CMR (number of development projects starting PII in the year, excluding vaccines and excluding line extensions) Industry = 7 major compa
Slide 77: Many more projects entering Phase II
Many more projects entering Phase II Phase II starts 80 (excluding vaccines and PLEs) 70 60 number of projects 50 40 Industry GSK 30 20 10 0 2001-03 2003-05 Source: CMR (number of development projects starting PII in the year, excluding vaccines and line extensions) Industry = 7 major companies: AZ,
Slide 78: Many more projects entering Phase II
Many more projects entering Phase II Phase II starts 80 (excluding vaccines and PLEs) 70 60 number of projects 50 Industry 40 GSK 30 GSK secondary indications 20 10 0 2001-03 2003-05 Source: CMR (number of development projects starting PII in the year, excluding vaccines and line extensions) Industr
Slide 79: With similar success rates
With similar success rates Phase II success rates 28% 28% 31% 31% industry Industry GSK GSK 2001-2005 Source: CMR (three year rolling average historical rates for successful completion of Phase II, excluding vaccines and line extensions) Success = number progressing to next phase / (number progressi
Slide 80: Cycle times remain relatively stable
Cycle times remain relatively stable Cycle time (combined average duration of each phase of development) 10 9 8 years Industry 7 6 5 2001-03 2002-04 2003-05 Source: CMR (three year rolling average historical cycle times for projects completing Phase I, Phase II, Phase III and Filing * Total cycle ti
Slide 81: and GSK is slightly ahead of the pack
and GSK is slightly ahead of the pack Cycle time (combined average duration of each phase of development) 10 9 8 years Industry GSK 7 6 5 2001-03 2002-04 2003-05 Source: CMR (three year rolling average historical cycle times for projects completing Phase I, Phase II, Phase III and Filing * Total cyc
Slide 82: Further progress in 2007
Further progress in 2007 >15 SGLT2 inhibitor#1 commit to full type 2 diabetes development GLP1 receptor agonist#2 type 2 diabetes decisions LAMA COPD oxytocin receptor antagonist pre-term labour/premature ejaculation orexin antagonist#3 sleep disorders Full development decision typically at the end
Slide 83: Pipeline reloadability evolution
Key growth drivers Significant Fast Continue late stage pipeline R&D pipeline reloadability evolution
Slide 84: GSK's unique CEDD structure is evolving
GSK’s unique CEDD structure is evolving oncology respiratory biopharm GSK metabolic Pipeline CV & Urol psychiatry Neuro/GI CEEDD
Slide 85: GSK's unique CEDD structure is evolving
GSK’s unique CEDD structure is evolving oncology respiratory Infec Dis biopharm GSK metabolic Pipeline CV & Urol psychiatry Neuro/GI CEEDD
Slide 86: GSK's unique CEDD structure is evolving
GSK’s unique CEDD structure is evolving oncology respiratory Infec Dis biopharm macrolide GSK metabolic Pipeline Inflamm CV & Urol psychiatry Neuro/GI CEEDD
Slide 87: GSK's unique CEDD structure is evolving
GSK’s unique CEDD structure is evolving oncology respiratory Infec Dis biopharm macrolide GSK metabolic Pipeline Inflamm CV & Urol psychiatry Neuro/GI CEEDD
Slide 88: GSK's unique CEDD structure is evolving
GSK’s unique CEDD structure is evolving oncology respiratory Infec Dis biopharm macrolide GSK metabolic Pipeline Inflamm CV & Urol psychiatry Neuro/GI CEEDD
Slide 89: CEEDD captures access to new pipelines
CEEDD captures access to 15 new pipelines CV & Urol hiatry Neuro/GI CEEDD
Slide 90: Globalisation of R&D
Globalisation of R&D
Slide 91: Globalisation of R&D
Globalisation of R&D Croatia 2006 China 2007
Slide 92: Breaking down the barriers to healthcare
Breaking down the barriers to healthcare
Slide 93: GSK – well positioned…
GSK – well positioned… …Strong and continued commitment to delivering solid financial growth 3 …Broad and dynamic portfolio with significant growth opportunities 3 …Strength and depth across the pipeline 3 ...Fast “reloadability” 3
Slide 94: GlaxoSmithKline
GlaxoSmithKline