GSK delivers further progress against strategy with 2015

GSK delivers further progress against strategy with 2015 sales of £24 billion (+6%), core EPS 75.7p (-15%) and total EPS 174.3p, +>100% CER

2016 core EPS percentage growth expected to reach double digits (CER)

Summary

  • Group sales +6% CER on a reported basis and +1% CER pro-forma

- Pharmaceuticals £14.2 billion, -7% (-1% pro-forma); Vaccines £3.7 billion, +19% (+3% pro-forma); Consumer Healthcare £6 billion, +44% (+6% pro-forma)

  • £2 billion of new product sales driven by HIV (Tivicay, Triumeq), Respiratory (Relvar/Breo, Anoro, Incruse) and Meningitis vaccines (Menveo, Bexsero)

- Growing sales contribution: Q4 sales £682 million, (Q3: £591 million)
- Nucala, a new biologic treatment for severe asthma, launched at the end of 2015
- New product sales now expected to reach £6 billion target up to two years earlier (2018 vs 2020)

  • Integration and restructuring programme on schedule

- £1 billion incremental annual cost savings delivered in 2015 for costs of £1.9 billion
- On track to deliver £3 billion of annual cost savings by end 2017

  • 2015 core EPS 75.7p, -15% CER, ahead of financial guidance

- Reflects short-term dilution from transaction partly offset by integration and restructuring benefits

  • 2015 total EPS 174.3p, +>100% CER

- Reflects impact of transaction gains, partly offset by restructuring charges and revaluation of the contingent consideration relating to improved outlook for HIV business

  • 2016 core EPS percentage growth expected to reach double digits CER

- If FX rates held at January average levels estimated impact of +5% on 2016 Sterling core EPS growth

  • 2015 ordinary dividend of 80p and special dividend of 20p confirmed

- Special dividend to be paid alongside Q4 ordinary dividend in April 2016
- Continue to expect 80p full year dividend for 2016 and 2017

  • New R&D portfolio of ~40 assets to drive long-term performance; multiple development milestones expected in 2016/2017

- Up to 10 regulatory filings include Shingrix (shingles vaccine), sirukumab (RA), Benlysta SC (lupus) and ICS/LABA/LAMA (COPD)
- Up to 10 Phase lll starts include cabotegravir (HIV), daprodustat (anaemia) and Men ABCWY vaccine
- Up to 20 Phase ll starts in Immuno-inflammation, Oncology, Respiratory and Infectious diseases
- Estimated R&D rate of return maintained at 13%

Sir Andrew Witty,Chief Executive Officer, GSK said:

In 2015, we made substantial progress to accelerate new product sales growth, integrate new businesses in Vaccines and Consumer Healthcare and restructure our Global Pharmaceuticals business. This progress means the Group is well positioned to return to core earnings growth in 2016.

Group sales grew on a reported (+6% CER) and pro-forma basis (+1% CER) in 2015. New product sales were £2 billion in 2015 with Q4 sales of £682 million demonstrating continued positive momentum. We now expect sales of new products to meet our target of £6 billion in annual revenues up to two years earlier than previously stated (2018 vs 2020).

2015 core EPS was 75.7p (-15%), ahead of the financial guidance we set out at our Investor Day in May. Total EPS was 174.3p (+>100%) reflecting gains from the recent 3-part transaction, partly offset by restructuring charges and a revaluation of the contingent consideration due to Shionogi relating to the improved outlook of our HIV business.

For 2016, we continue to expect core EPS percentage growth to reach double-digits on a constant currency basis, although we are also mindful that the macro-economic and healthcare environment will continue to be challenging. As a result, we remain focused on improving commercial execution and realising the benefits of our integration and restructuring programme.

As we detailed to investors in November 2015, we see significant opportunities for the Group's new R&D portfolio of ~40 assets, of which approximately 80% have the potential to be first in class. In 2016/2017, development milestones are expected for assets such as: Shingrix, sirukumab, ICS/LABA/LAMA, cabotegravir, daprodustat and our Men ABCWY vaccine. We also expect up to 20 Phase ll starts for assets in Immuno-inflammation, Oncology, Respiratory and Infectious diseases. Today, we have also published our latest estimate for the rate of return in R&D, which has been maintained at 13%.

We have confirmed a full year ordinary dividend of 80p and, as previously announced, a special dividend of 20p. The Group continues to expect to pay an ordinary dividend of 80p for 2016 and 2017.

Information regarding today's results, including video interviews with Sir Andrew and other executives are available on: www.gsk.com/investors.