GlaxoSmithKline : GSK delivers another quarter of continued progress

Issued: London, UK

Q1 sales of £7.4 billion, +19% AER, + 5% CER
Total EPS of 21.4p >100% AER, >100% CER; Adjusted EPS of 25.0p, +31% AER, +9% CER

View full Q1 2017 results (PDF)

Summary:

Financial highlights

• Sales growth across all three businesses: Pharmaceuticals £4.2 billion, +17% AER, +4% CER; Vaccines £1.2 billion, +31% AER, +16% CER; Consumer Healthcare £2.0 billion, +16% AER, +2% CER
• Improved Group operating margin reflecting leverage from sales growth, focus on costs and benefits of restructuring. Pharmaceuticals 34.4%; Vaccines 29.6%; Consumer Healthcare 17.2%
• Net cash flow from operations of £1.1 billion (Q1 2016: £0.5 billion). Free cash flow of £0.7 billion
  (Q1 2016: £0.2 billion outflow), primarily reflecting improved operating performance and the net benefit of exchange rate movements
• 19p dividend declared for Q1 2017. Continue to expect 80p for FY 2017
• 2017 Adjusted CER earnings per share guidance maintained

Product and pipeline highlights

• New product sales of £1.4 billion +72% AER, +52% CER. On track to deliver £6 billion (CER) sales in 2018
• Results from MUSCA study demonstrate Nucala significantly improves quality of life and lung function in patients with severe asthma
• Positive SWORD study presented for two-drug regimen of dolutegravir and rilpivirine for treatment of HIV
• Positive results reported in-house from ZOSTER-048 study of Shingrix in individuals previously vaccinated with Zostavax*
• Flonase Sensimist launched in US; second Rx to OTC switch in 3 years

Outlook assumptions and cautionary statements

Assumptions related to 2017 guidance and 2016-2020 outlook

In outlining the expectations for 2017 and the five-year period 2016-2020, the Group has made certain assumptions about the healthcare sector, the different markets in which the Group operates and the delivery of revenues and financial benefits from its current portfolio, pipeline and restructuring programmes.

For the Group specifically, over the period to 2020 GSK expects further declines in sales of Seretide/Advair. The introduction of a generic alternative to Advair in the US has been factored into the Group's assessment of its future performance. The Group assumes no premature loss of exclusivity for other key products over the period. The Group's expectation of at least £6 billion of revenues per annum on a CER basis in 2018 from products launched since 2013 includes contributions from the current pipeline asset Shingrix. The Group also expects volume demand for its products
to increase, particularly in Emerging Markets.

The assumptions for the Group's revenue and earnings expectations assume no material interruptions to supply of the Group's products and no material mergers, acquisitions, disposals, litigation costs or share repurchases for the Company; and no change in the Group's shareholdings in ViiV Healthcare or Consumer Healthcare. They also assume no material changes in the macro-economic and healthcare environment.

The Group's expectations assume successful delivery of the Group's integration and restructuring plans over the period 2016-2020. Material costs for investment in new product launches and R&D have been factored into the expectations given. The expectations are given on a constant currency basis and assume no material change to the Group's effective tax rate.

Assumptions and cautionary statement regarding forward-looking statements

The Group's management believes that the assumptions outlined above are reasonable, and that the aspirational targets described in this report are achievable based on those assumptions. However, given the longer term nature of these expectations and targets, they are subject to greater uncertainty, including potential material impacts if the above assumptions are not realised, and other material impacts related to foreign exchange fluctuations, macroeconomic activity, changes in regulation, government actions or intellectual property protection, actions by our competitors, and other risks inherent to the industries in which we operate.

This document contains statements that are, or may be deemed to be, 'forward-looking statements'. Forward-looking statements give the Group's current expectations or forecasts of future events. An investor can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as 'anticipate', 'estimate', 'expect', 'intend', 'will', 'project', 'plan', 'believe', 'target' and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results. Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority), the Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The reader should, however, consult any additional disclosures that the Group may make in any documents which it publishes and/or files with the SEC. All readers, wherever located, should take note of these disclosures. Accordingly, no assurance can be given that any particular expectation will be met and investors are cautioned not to place undue reliance on the forward-looking statements.

Forward-looking statements are subject to assumptions, inherent risks and uncertainties, many of which relate to factors that are beyond the Group's control or precise estimate. The Group cautions investors that a number of important factors, including those in this document, could cause actual results to differ materially from those expressed or implied in any forward-looking statement. Such factors include, but are not limited to, those discussed under 'Principal risks and uncertainties on pages 253-262 of the GSK 2016 Annual Report. Any forward looking statements made by or on behalf of the Group speak only as of the date they are made and are based upon the knowledge and information available to the Directors on the date of this report.

About GSK

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