Result summary for the first quarter 2016

GSK delivers strong Q1 performance with sales of £6.2 billion (+8% CER), core EPS 19.8p (+8% CER); dividend of 19p.

2016 core EPS percentage growth now expected to be 10-12% CER.

Summary

  • Group sales £6.2 billion +8% CER on a reported basis, +6% CER pro-forma
    -      Pharmaceuticals £3.6 billion, -1% (+5% pro-forma); Vaccines £882 million, +23% (+14% pro-forma); Consumer Healthcare £1.8 billion, +26% (+4% pro-forma)

  • New product sales £821 million (Q4 2015: £682 million, Q1 2015: £269 million) driven by HIV (Tivicay,Triumeq), Respiratory (Relvar/Breo, Anoro, Incruse, Nucala) and Meningitis vaccines (Menveo, Bexsero)
    -      New Pharmaceutical product sales now represent 20% of total Pharmaceutical sales 

  • Sales momentum, cost control and restructuring/integration benefits driving improved operating leverageand margin delivery across all three businesses
    -      Restructuring and integration programme delivered incremental cost savings in Q1 2016 of £0.4 billion; remains on track for £3 billion annual cost savings by end 2017
    -      Q1 operating margins of Pharmaceuticals 32%, Vaccines 29%, Consumer Healthcare 17% 

  • Q1 core EPS 19.8p, +8% CER

  • Q1 total EPS 5.8p with year-on-year decline reflecting £9.3 billion profit from Oncology disposal and other disposal gains in Q1 2015
    -      Restructuring charges of 3.3p per share and non-cash transaction-related charges of 6.9p (principally related to HIV and Consumer Healthcare businesses) 

  • 2016 core EPS percentage growth now expected to be 10-12% CER
    -      At Q1 period-end rates estimated FX impact of +8% to FY 2016 core EPS growth 

  • 19p dividend declared for Q1.  Continue to expect 80p for FY 2016 and FY 2017

  • Development of new R&D pipeline continues with progress made in core therapy areas of Respiratory, HIV, Oncology, Immuno-inflammation and Rare diseases
    -      Nucalaapproved in Japan for severe asthma
    -      Strimvelisreceived positive CHMP opinion for rare disease, ADA-SCID
    -      Phase II data support progression of HIV asset cabotegravir into Phase III studies for prevention and maintenance in H2 2016; transactions to acquire BMS HIV R&D portfolio completed
    -      Phase II study start for anti GM-CSF antibody for inflammatory hand OA
    -      FDA breakthrough therapy designation awarded to NY-ESO in synovial sarcoma; Phase I/II data supports development of BET inhibitor in NUT midline carcinoma; 11 oncology assets currently in Phase I/II development

 

Sir Andrew Witty, Chief Executive Officer, GSK said:

This strong first quarter performance demonstrates the momentum we have across the Group driven by growth in sales of our new products, effective cost control and execution of our restructuring and integration plans. We also continue to see good progression of novel assets in our core R&D therapy areas. 

Sales of new products were £821 million, more than double the same period last year. New Pharmaceutical product sales now represent 20% of total Pharmaceutical sales, which grew 5% on a pro-forma basis. Within our Respiratory portfolio, the growth in sales of new products offset about 70% of the decline in Seretide/Advair. Elsewhere, Vaccines sales grew 14% pro-forma with some benefit this quarter arising from an accelerated phasing of sales to governments. In Consumer Healthcare, sales were £1.8 billion up 4% with a further strong performance by Flonase OTC. 

The improvement in our sales performance, together with the effective management of our cost base, also helped deliver better operating leverage and an improvement in the margins of all three businesses. This puts us on the right track to achieve the expectations we set out last year, although inevitably, we expect some quarter-to-quarter volatility in reported progress, particularly in our margins, given the dynamics of our businesses. 

Core EPS for the quarter was 19.8 pence, up 8% CER. This is an encouraging start to the year and we now expect full year core EPS percentage growth to be 10-12% CER. The Group has declared a dividend of 19 pence for the quarter. We continue to expect to pay a full year dividend of 80 pence for 2016 and for 2017. 

Overall, the quarter reflects the progress we have made in our strategy and our ability to allocate capital across our three businesses to generate the best returns. Together with the roll out of our new commercial model, we believe the Group is well placed to maximise the opportunities, and respond to the competitive pressures and challenging pricing dynamics, that we see in the global healthcare environment.