GlaxoSmithKline : GSK delivers further progress in Q2 and sets out new priorities for the Group

Financial highlights

• Pharmaceutical sales, £4.4 billion, +12% AER, +3% CER, Vaccines sales, £1.1 billion, +16% AER, +5% CER, Consumer Healthcare sales, £1.9 billion,+10% AER, flat at CER
• Group operating margin 28.5%; Pharmaceuticals 33.6%; Vaccines 33.7%; Consumer 17.7%
• Total Q2 loss per share of 3.7p reflecting charges resulting from increases in the valuation of Consumer and HIV businesses and new portfolio choices
• Updated 2017 guidance: Adjusted EPS growth now expected to be 3% to 5% CER reflecting impact of Priority Review Voucher
• H1 Free Cash Flow £0.4 billion (H1 2016: £0.1 billion)
• 19p dividend declared for Q2; continue to expect 80p for FY 2017

Product and pipeline highlights

• New product sales of £1.7 billion, +62% AER, +47% CER
• HIV two drug regimen (dolutegravir and rilpivirine) filed for approval in US and EU
• Shingrix filed for approval in Japan
• FDA approval received for subcutaneous Benlysta for treatment of SLE

New business priorities to 2020

• New priorities to strengthen innovation, improve performance and build trust
• Pharmaceutical R&D pipeline reviewed with target over time to allocate 80% of capital to priority assets in two current (Respiratory and HIV/infectious diseases) and two potential (Oncology and Immuno-inflammation) therapy areas; more than 30 pre-clinical and clinical programmes to be stopped
• Extended cost reduction programme expected to deliver additional £1 billion annual cost savings by 2020 driven by new business priorities, improved supply chain efficiency and reduced administrative costs
• Enhanced focus on improved cash generation and strengthening credit profile
• Dividend of 80p expected for 2018 in conjunction with new dividend policy
• Group outlook for 2020: Expected 5 year percentage CAGR to 2020 on a CER basis for sales of low-to-mid-single digits and Adjusted EPS of mid-to-high single digits