So what is the big challenge?

An interview with JP Garnier, Chief Executive Officer

"Ultimately, it is the crisis of healthcare financing and pricing pressures largely due to ageing populations in the developed world"

What is the main challenge facing the pharmaceutical industry and how is GSK responding to it?
JPG. Ultimately, it is the crisis of healthcare financing and pricing pressures largely due to ageing populations in the developed world. An increasing ageing population means that there is an increasing demand for new medicines to treat chronic and degenerative diseases.

While this presents an opportunity for GSK and other pharmaceutical companies, it is also placing a financial burden on governments and healthcare purchasers that is growing faster than their ability to support it. In the developing world, where infectious diseases present an enormous burden, there is an urgent need for medicines but a lack of resources to pay for them.

Therefore, GSK's challenge is to deliver affordable medicines that meet the needs of people burdened by disease. To do this, we must continue to build partnerships with governments and healthcare purchasers, and other external stakeholders. They need to understand the scale, complexity and cost of research and development, and we need to work with them to find new solutions to funding.

How healthy is GSK's pipeline of potential new medicines?
JPG. We currently have 54 New Chemical Entities (NCEs) in Phases II and III (late stage) clinical trials, and have achieved good results over the last few months from studies of some of our key compounds, including lapatinib for cancer and Cervarix, a vaccine against cervical cancer. A lot remains to be done, of course, and there will always be some pipeline attrition, but we are making good progress. We believe we have one of the largest and most promising pipelines in the industry - in fact, the number of NCEs in the pipeline has increased by nearly 80% since the merger.

In 2005, data are expected on at least 15 products and vaccines in Phase II clinical trials, including compounds to treat HIV, diabetes, blood disorders and multiple sclerosis.

In the meantime, can GSK continue to deliver strong performance?
JPG. We have been able to stay on track financially because of the performance of our key pharmaceutical products, such as Seretide/Advair and Avandia. We have also done very well with products such as Coreg for heart failure and Lamictal for epilepsy and bipolar disorder, Valtrex for genital herpes and our vaccines business. These products grew 22% in 2004.

In September 2004, GSK was ranked first (in terms of market share) in 10 of the 21 therapy areas in which GSK has launched products.

In 2004, our turnover grew 1% despite the significant loss of more than £1.5 billion of our business to generics during the year. We also continued to focus on managing our costs through our operational excellence programmes (see Sharpening our operations). In 2005, we expect to see faster growth. Continued scrutiny of costs and new initiatives to streamline our operations remains a key strategic focus for us.

Many patients in both the developed and developing worlds do not have access to the medicines they need. What is GSK doing to improve this situation?
JPG. Our pipeline is targeted at developing medicines that address real and unmet medical needs, both in the developed and developing world.

We have learnt valuable lessons from being proactive and innovative, and we aren't afraid to be 'first'. For example, GSK started the first savings card for prescription medicines (the Orange Card, for US senior citizens) and we were the first company to sell our HIV drugs on a non-profit basis in Africa, where we also now have six voluntary licensing agreements.

I am proud of our commitment to increasing access to medicines and our generosity in a wide variety of philanthropic undertakings.

In 2004, we invested £328 million in community programmes, product donations and charitable contributions.

We believe that we have a key role to play in improving access to medicines, and we are committed to continuing our efforts.

"We have learnt valuable lessons from being proactive and innovative, and we aren't afraid to be 'first' "

The pharmaceutical industry generally receives a negative press. How can GSK's reputation be improved?
JPG. GSK has a very high standing among the majority of key stakeholders. The innovation and quality associated with many of our initiatives is widely recognised, often through prestigious awards. However, this is not always visible to the general public.

By continuing to be more open and transparent in the way we run our business, we will be able to increase our external stakeholders' understanding of the industry. Good examples include making our clinical trial results available to the public by putting them on the internet (see Clinical Trial Register) and the extension of our Patient Advocacy initiative throughout the world.

Our Corporate Responsibility Principles articulate the standards we are committed to meeting in our work and interaction with communities. These are embedded in the way we do business, and we report annually on our progress against each of these Principles (see Corporate Responsibility Report at www.gsk.com).

How does GSK keep its employees motivated in this challenging environment?
JPG. We are open with our people about the challenges we face, the actions we are taking and the progress being made. I'm pleased to say that employees are highly engaged. GSK people continue to be enthusiastic and show enormous passion for their company.

We undertook a management survey last year. The results showed that people feel better about working at GSK today than they did two years ago, despite the challenging environment. This is very reassuring.

Employees take our company's quest to bring medicines of value to patients very seriously indeed. GSK will continue to engage and support our employees in driving changes through the organisation, and to recognise and reward exceptional and innovative work.

How do you expect GSK to look in five years' time?
JPG. Our goal is to develop innovative medicines of value faster than our competitors, and to sell and market our products in new and innovative ways. We will continue to collaborate with key stakeholders to find new ways to help people receive the medicines they need.

As now, we will aim to meet the demands of our patients, our customers and our employees with integrity. And we will continue to be a company that highly talented people want to join in order to make their contribution, and to enjoy a challenging and meaningful career.