Gsk Plc · LSE:GSK
Gsk — GlaxoSmithKline — Q2 2011 Earnings Presentation
32 slides from Gsk's earnings presentation, Jul 26, 2011
Slide 1: Q2 2011 Presentation to Investors & Analysts
Q 2011 Q2 Presentation to Investors & Analysts 26th July 2011
Slide 2: Andrew Witty, Chief Executive Officer
Andrew Witty y Chief Executive Officer
Slide 3: Sustained underlying growth with contribution from Pharma, Consumer and Vaccines
Sustained underlying growth with contribution from Pharma, Consumer and Vaccines FY 2010 1Q 2011 2Q 2011 4.5% 4% 5% Consumer Consumer C +5% +6% Pharma Pharma +3% +3% Vaccines Vaccines +10% +12% Average quarterly growth of 4.5% over past 6 quarters Pie charts show contribution to CER growth in FY 201
Slide 4: 37% of GSK's overall business outside the US & Europe
37% of GSK’s overall business outside the US & Europe across Pharma, Consumer and Vaccines Group underlying sales US: 31% of GSK Japan: 7% of GSK -1% in 1H 2011 +28% in 1H 2011 +2% in 2Q 2011 +12% in 2Q 2011 Europe: 32% of GSK EMAP: 26% of GSK -3% in 1H 2011 +17% in 1H 2011 -2% in 2Q 2011 +17% in 2Q
Slide 5: Reduced exposure to "white pills" and increased innovation drive long term growth
Reduced exposure to “white pills” and increased innovation are key drivers of sustainable long term growth 23% off Q2 sales l “white-pill western market” New Rx / Vx products £581m (+53%) decrease from ~40% in 2007 New consumer launches ~£175m CER growth rates Rx and Vx new products defined as launc
Slide 6: Consumer – strong performance from global brands and Emerging Markets
Consumer – strong performance from global brands and Emerging Markets Sensodyne £311m +15% 15% • Nine quarters of double digit growth • Repair and Protect now available in 29 markets; 50 by end 2011 Panadol £267m +12% • Panadol Extra Advance now in 28 markets; 40 by end 2012 Lucozade £192m +1% • YES
Slide 7: Reshaped US business focused on delivering customer value to accelerate growth
Reshaped US business focused on delivering customer value to accelerate growth Increased sales force productivity….. ~25% increase 2007 to 20111 Sales force incentive scheme………. Teamwork and customer access g New account management………….. #1 on “Corporate p Attitude”2 Launch excellence………………....... V
Slide 8: Absolute R&D spend is broadly flat 2007 to 2010
Absolute R&D spend is broadly flat 2007 to 2010 Increases in Vaccines and Consumer offset declines in Pharma 32% 31% 23% 11% 3% Overall spend increased ~£60m at CER Rx spend decreased ~£80m at CER 25% 32% 4% 22% 14% 4% Excludes intangible impairments and write-offs; central costs include facilities,
Slide 9: Restructuring and investment drives reshaped R&D organisation
Restructuring and investment drives reshaped R&D organisation 38 7 DPUs Key therapy areas 54 45% decrease in External R&D footprint discovery since 2006 engines
Slide 10: Pipeline delivery and visibility continues
Pipeline delivery and visibility continues Phase III studies for 15 assets in 2011 and 2012; data in house for 5 assets >30 studies from 14 of these assets still to report by end 2012 Data in house Data to come 1120212 (MEK inhibitor) 2118436 (BRAF inhibitor) 2402968 (DMD) ‘444+’719 (LABA+LAMA) albi
Slide 11: GSK Respiratory development portfolio spans multiple mechanisms and delivery methods
GSK Respiratory development portfolio spans multiple mechanisms and delivery methods ICS LAMA LABA LAMA/ ICS/ MABA p38 p FLAIR Anti- LABA LABA IL5 9 9 9 9 9 9 9 9 9 Company 2 9 9 9 9 Company 3 9 9 9 9 C Company 4 9 9 9 9 9 Company 5 9 9 9 9 Company 6 9 9 9 9 Company 7 9 9 9
Slide 12: Delivering the next generation respiratory portfolio
Delivering the next generation respiratory portfolio DPUs - Allergic Inflammation, Fibrosis, Neuronal Targets, 6 Refractory Respiratory Inflammation Inflammation, Stress & Repair Repair, Therapeutic siRNA Late stage development programmes 7 Relovair, LABA/LAMA, 5698 ICS, FLAIR, MABA, p38, anti-IL5 P
Slide 13: Simon Dingemans, Chief Financial Officer
Simon Dingemans g Chief Financial Officer
Slide 14: Headline results
Headline results Before major restructuring Growth % Growth% £m Q2 2011 CER £ H1 2011 CER £ Turnover 6,720 -2 -4 13,305 -6 -7 Underlying turnover 6,592 5 3 13,037 4 3 O Operating i profit fi 2 030 2,030 -9 9 -8 8 4 200 4,200 -11 11 -13 13 (excluding legal) EPS 25.0 >100% >100% 57.3 75 72 EPS 26.0 -1
Slide 15: Consistent underlying turnover growth
Consistent underlying turnover growth Ongoing washout of pandemic, Avandia and Valtrex 2010 2011 £m H1 Growth % H2 Growth % H1 Growth % CER CER CER Reported turnover 14,382 7 14,010 -8 13,305 -6 Underlying turnover 12,655 5 13,452 4 13,037 4 Pandemic, Avandia 1,727 558 268 & Valtrex sales
Slide 16: Operating margin reconciliation Q2 2010 to Q2 2011
Operating margin reconciliation Q2 2010 to Q2 2011 (excluding legal & OOI) Q2’11 Q2’10 Margin Margin 24.2% 23.1% 32.5% 32.4% 14.0% 14.1%
Slide 17: ~£2bn free cash flow (ex legal) in H1 2011
~£2bn free cash flow (ex legal) in H1 2011 EBITDA is reported (includes major restructuring) Other primarily includes accounting gains on Quest and Zovirax disposals
Slide 18: Change in net debt H1 2011
Change in net debt £m 30 June 2011 H1 2011 Gross debt: Short term (1,039) Long & medium term (14,229) Liquid investments 166 Cash / cash equivalents 5,846 Closing net debt (9,256)
Slide 19: £2.6bn cash returned to shareholders in H1 2011
£2.6bn cash returned to shareholders in H1 2011 Di id d Dividends B b k Buyback £1,783m in H1 £892m in H1 Q1 +7% Top end of Q2 +7% £1-2bn in 2011
Slide 20: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating EPS le erage leverage Focus Focus Returns to on on shareholders returns returns Financial Free Cash Flow efficiency Cash flow growth
Slide 21: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating le erage leverage Financial efficiency Cash flow growth
Slide 22: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating le erage leverage Financial efficiency Cash flow growth
Slide 23: Savings from OE programme helped mitigate impact of high margin products
Savings from OE programme helped mitigate impact of significant high margin products 2007 2011 expectations t ti R&D R&D 14.2% ~14% CoGS Generics CoGS Expect margin 22.9% Avandia ~26% to begin to Pricing improve from Mix 2012 SG&A SG&A (ex legal) (ex legal) 28 9% 28.9% ~30 5% ~30.5% OPM 34% OPM ~29.
Slide 24: OE programme now expected to deliver ~£300m of additional savings
OE programme now expected to deliver ~£300m of additional savings for the same cost £2.2bn of savings delivered 18 months ahead of schedule Original Total Revised Total Annual benefits £2.2bn + £300m savings g £2.5bn Total costs £4.5bn Cost unchanged £4.5bn Additional savings to be delivered by end
Slide 25: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating Profit Credit rating Operating le erage leverage Interest charges Tax efficiency Financial efficiency Share count Cash flow growth EPS
Slide 26: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth EBITDA Operating Working capital le erage leverage Capex Financial Restructuring charges efficiency Cash flow Free cash flow growth
Slide 27: Some progress in reducing working capital but significant opportunity remains
Some progress in reducing working capital but significant opportunity remains Working capital as % sales Conversion cycle 27% % 25% 25% 23% Dec-10 Mar-11 Jun-11 DSO 66 71 64 DIO 190 204 206 DPO (35) (34) (34) Total 221 241 236 Dec 2009 Dec 2010 Mar 2011 June 2011
Slide 28: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating EPS le erage leverage Focus on returns Financial Free Cash Flow efficiency Cash flow growth
Slide 29: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Rigorous Capital Allocation Focus F on CFROI Capital investment R&D Dividends Share buybacks Bolt-ons Divestments
Slide 30: Measurement and reporting aligned with Financial architecture
Measurement and reporting aligned with Financial architecture • Simplified turnover disclosure – Regional – Business • Greater G visibility i ibili on R&D spend d • Focus on Core EPS • Core operating profit margin and free cash flow • Endd oof middle dd e cocolumn u • CFROI and IRR • Enhanced workin
Slide 31: GSK Financial architecture to drive returns
GSK Financial architecture to drive returns Sales growth Operating EPS le erage leverage Focus Focus on on Returns to returns returns shareholders Financial Free Cash Flow efficiency Cash flow growth
Slide 32: GlaxoSmithKline
GlaxoSmithKline