Results announcement for the fourth quarter 2016

Issued: London, UK

GSK delivers continued momentum in 2016 through broadly-based sales growth, improved cash flow and further pipeline progression

View full Q4 2016 Results (PDF)


  • Group sales £27.9 billion, +6% CER on a reported basis , +5% CER pro-forma
    Pharmaceuticals £16.1 billion, +3% (+4 % pro-forma); Vaccines £4.6 billion, +14% (+12% pro-forma); Consumer Healthcare £7.2 billion, +9% (+5% pro-forma)
  • New product sales more than doubled to £4.5 billion; Q4 £1.4 billion, +71% CER. Driven by HIV (Tivicay, Triumeq), Respiratory (Relvar/Breo, Anoro, Incruse, Nucala) and Meningitis vaccines (Bexsero, Menveo)
    New Pharmaceutical products sales represented 24% of 2016 Pharmaceuticals sales; 27% of Q4 sales
  • Improved core operating leverage across all three businesses
    Group core operating profit margin 27.9%; Pharmaceuticals 34.1%; Vaccines 31.7%; Consumer 15.5%
    Incremental annual cost savings of £1.4 billion delivered in 2016, with total annual cost savings now at £3.0 billion including currency benefit of £0.2 billion
  • 2016 core EPS 102.4p, +12% CER
  • 2016 total EPS 18.8p, -99% CER, primarily reflecting comparison with £9.2 billion profit in 2015 from disposal of marketed Oncology assets
  • 2016 net cash flow from operations of £6.5 billion (2015: £2.6 billion), reflecting improved operating performance and the net benefit of exchange rate movements
  • GSK and Shionogi have agreed to remove the Shionogi put option and first two exercise windows of GSK’s call option in relation to ViiV Healthcare. Liability for put option of £1.2 billion de-recognised to equity
  • 23p dividend declared for Q4 delivering total dividend for 2016 of 80p. Continue to expect 80p dividend for 2017
  • Continued progress by the Group expected in 2017 although core EPS growth subject to uncertainty of timing and impact of possible generic competition to Advair in the US
    In the event of no generic competition to Advair in the US, expect 2017 core EPS growth to be 5-7% CER
    In the event of a mid-year introduction of a substitutable generic competitor to Advair in the US, expect full year 2017 US Advair sales of ~£1 billion at CER (US$1.36/£1) with core EPS flat to a slight decline in percentage terms at CER 
    January 2017 average exchange rates, if applied to whole of 2017, would benefit Sterling turnover by around 6% and core EPS by around 9%
  • Sustained pipeline progress with multiple milestones expected in 2017/18:
    Filed 4 assets with regulators in H2 2016 (Shingrix; Closed Triple; Benlysta SC; sirukumab), with regulatory decisions expected by end 2017
    4 key phase III starts in Q4 for assets in HIV, respiratory and anaemia
    Continue to expect key data on between 20-30 assets by end 2018 in areas including HIV, respiratory, immuno-inflammation, oncology and vaccines

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 by 2020 from the New Pharmaceutical and Vaccine products listed on page 31 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 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 or the tax regulatory environment in which it operates.

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, macro-economic 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 US Securities and Exchange Commission (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 2015 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 business, (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 2015.

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 business, 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 2016 results announcement dated 8 February 2017 and furnished to the SEC on Form 6-K, (ii) the Group’s Annual Report on Form 20-F for 2015 and (iii) the Circular to Shareholders and Notice of General Meeting furnished to the SEC on Form 6-K on 24 November 2014.

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