Today's results show that we are delivering on our strategy to generate sustainable sales growth, enhance
cash generation and improve returns to shareholders.
For the quarter, we delivered underlying and reported sales growth of 6% and 3% respectively, reflecting
growth across all three areas of our business - Pharmaceuticals, Vaccines and Consumer Healthcare.
Vaccines was particularly strong in the quarter, reflecting some phasing benefits, primarily relating to sales of
Cervarix for the roll-out of Japan's national HPV programme. We have delivered average quarterly
underlying sales growth of around 4.5% over the last 7 quarters.
As evidenced this quarter, the drag from Avandia, Valtrex and pandemic products has significantly reduced
and although there is likely to be some quarterly variability, we continue to expect underlying sales growth to
translate into reported sales growth in 2012.
The breadth and mix of GSK's product and geographic portfolio is helping the Group to mitigate economic
volatility. However, the environment for pharmaceutical and consumer products remains challenging. The
impact of Healthcare Reform in the USA and price cuts in Europe this year is in line with our expectations
and we continue to expect a full year impact of around £325 million. Going forward, further measures by
these governments to reduce pharmaceutical prices cannot be ruled out. Some Emerging Markets are also
not immune to government pricing pressure. However, our combined businesses in these markets continue
to perform well and delivered underlying Group sales growth of 13% in the quarter, driven by strong volume
growth.
We remain focused on driving operational leverage and financial efficiency to deliver improving net income
margins and stronger earnings per share growth. Effective cost control offset mix and pricing pressures on
our gross Margin in the quarter and as a result operating profit grew in line with sales. Our expectations for
the 2011 operating Margin (excluding legal charges and OOI) remain unchanged and we continue to expect
the Group operating Margin on the same basis to begin to improve gradually from 2012.
The business continues to be highly cash generative and in the third quarter, we generated cash inflows of
over £2 billion before legal settlements. We continue to see significant opportunities to further improve cash
generation over time.
The performance of the business and resulting cash generation is allowing us to continue to increase returns
to shareholders. Today we have announced a further 6% increase in the dividend to 17p. In addition, our
expectations for share repurchases this year have increased from around £2 billion to up to £2.3 billion. The
process of divesting our non-core OTC brands continues and the brands are now being separated from the
ongoing business. We are continuing to target a conclusion to the bidding process by the end of the year but
we remain focused on delivering appropriate shareholder Value as we review the options for this business.
We also remain focused on improving returns on investment in R&D and by year end we will finalise
investment allocation decisions for our Discovery Performance Units for the next three year business cycle.
Our late stage pipeline continues to make good progress. Of the 15 assets with data expected by the end of
2012, six have now reported data. Of these, data have been filed for Votrient in sarcoma, data is in-house
and being reviewed for Promacta and IPX066 and programmes are ongoing for Relovair and RTS,S. One
study, with otelixizumab, failed to show efficacy. In 2012, we look forward to significant phase III data flow
across a broad range of therapy areas including our respiratory portfolio, oncology, diabetes, HIV and rare
diseases.
cash generation and improve returns to shareholders.
For the quarter, we delivered underlying and reported sales growth of 6% and 3% respectively, reflecting
growth across all three areas of our business - Pharmaceuticals, Vaccines and Consumer Healthcare.
Vaccines was particularly strong in the quarter, reflecting some phasing benefits, primarily relating to sales of
Cervarix for the roll-out of Japan's national HPV programme. We have delivered average quarterly
underlying sales growth of around 4.5% over the last 7 quarters.
As evidenced this quarter, the drag from Avandia, Valtrex and pandemic products has significantly reduced
and although there is likely to be some quarterly variability, we continue to expect underlying sales growth to
translate into reported sales growth in 2012.
The breadth and mix of GSK's product and geographic portfolio is helping the Group to mitigate economic
volatility. However, the environment for pharmaceutical and consumer products remains challenging. The
impact of Healthcare Reform in the USA and price cuts in Europe this year is in line with our expectations
and we continue to expect a full year impact of around £325 million. Going forward, further measures by
these governments to reduce pharmaceutical prices cannot be ruled out. Some Emerging Markets are also
not immune to government pricing pressure. However, our combined businesses in these markets continue
to perform well and delivered underlying Group sales growth of 13% in the quarter, driven by strong volume
growth.
We remain focused on driving operational leverage and financial efficiency to deliver improving net income
margins and stronger earnings per share growth. Effective cost control offset mix and pricing pressures on
our gross Margin in the quarter and as a result operating profit grew in line with sales. Our expectations for
the 2011 operating Margin (excluding legal charges and OOI) remain unchanged and we continue to expect
the Group operating Margin on the same basis to begin to improve gradually from 2012.
The business continues to be highly cash generative and in the third quarter, we generated cash inflows of
over £2 billion before legal settlements. We continue to see significant opportunities to further improve cash
generation over time.
The performance of the business and resulting cash generation is allowing us to continue to increase returns
to shareholders. Today we have announced a further 6% increase in the dividend to 17p. In addition, our
expectations for share repurchases this year have increased from around £2 billion to up to £2.3 billion. The
process of divesting our non-core OTC brands continues and the brands are now being separated from the
ongoing business. We are continuing to target a conclusion to the bidding process by the end of the year but
we remain focused on delivering appropriate shareholder Value as we review the options for this business.
We also remain focused on improving returns on investment in R&D and by year end we will finalise
investment allocation decisions for our Discovery Performance Units for the next three year business cycle.
Our late stage pipeline continues to make good progress. Of the 15 assets with data expected by the end of
2012, six have now reported data. Of these, data have been filed for Votrient in sarcoma, data is in-house
and being reviewed for Promacta and IPX066 and programmes are ongoing for Relovair and RTS,S. One
study, with otelixizumab, failed to show efficacy. In 2012, we look forward to significant phase III data flow
across a broad range of therapy areas including our respiratory portfolio, oncology, diabetes, HIV and rare
diseases.
