Results announcement for the fourth quarter 2015
Issued: London, UK
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)
- 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%
The full results are presented under ‘Income Statement’ on page 37 and core results reconciliations are presented on pages 10 and 53 to 56. All commentaries are presented in terms of CER growth as defined on page 34, unless otherwise stated. All expectations and targets regarding future performance should be read together with “Assumptions related to 2016-2020 outlook” and “Assumptions and cautionary statement regarding forward-looking statements” on page 35.
Full details with CEO and CFO interviews available in the quarterly results section of this website.
GSK cautionary statement regarding forward-looking statements
Assumptions related to 2016-2020 outlook
In outlining the expectations for 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 by 2020 from products launched in the last three years includes contributions from the current pipeline asset Shingrix. This target is now expected to be met up to two years earlier. 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 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 Item 3.D ‘Risk factors’ in the Group’s Annual Report on Form 20-F for 2014 and those discussed in Part 2 of the Circular to Shareholders and Notice of General Meeting furnished to the SEC on Form 6-K on 24 November 2014. 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.
Cautionary statement regarding unaudited pro-forma financial information
The unaudited pro-forma financial information in this release has been prepared to illustrate the effect of (i) the disposal of the Oncology assets, (ii) the Consumer Healthcare Joint Venture (i.e. the acquisition of the Novartis OTC Business), and (iii) the acquisition of the Vaccines business (which excludes the Novartis influenza vaccines business) on the results of the Group as if they had taken place as at 1 January 2014.
The unaudited pro-forma financial information has been prepared for illustrative purposes only and, by its nature, addresses a hypothetical situation and, therefore, does not represent the Group’s actual financial position or results. The unaudited pro-forma financial information does not purport to represent what the Group’s financial position actually would have been if the disposal of the Oncology assets, the Consumer Healthcare Joint Venture and the Vaccines acquisition had been completed on the dates indicated; nor does it purport to represent the financial condition at any future date. In addition to the matters noted above, the unaudited
pro-forma financial information does not reflect the effect of anticipated synergies and efficiencies associated with the Oncology disposal, the Consumer Healthcare Joint Venture and the Vaccines acquisition.
The unaudited pro-forma financial information does not constitute financial statements within the meaning of Section 434 of the Companies Act 2006. The unaudited pro-forma financial information in this release should be read in conjunction with the financial statements included in (i) the Group’s Q4 2015 results announcement dated 3 February 2016 and furnished to the SEC on Form 6-K, (ii) the Group’s Annual Report on Form 20-F for 2014 and (iii) the Circular to Shareholders and Notice of General Meeting furnished to the SEC on Form 6-K on 24 November 2014.