GSK plc

Good afternoon, ladies and gentlemen, and welcome to the analyst call on the GSK first quarter 2020 results. I will now hand you over to Sarah Elton-Farr, Head of Investment Relations, who will introduce today's session.

Thank you. Good morning and good afternoon. Thank you for joining us for our Q1 2020 results, which were issued earlier today. You should have received our press release and can view the presentation on GSK's website. For those not able to view the webcast, slides that accompany today's call are located on the investor section of the GFK website. Before we begin, please refer to slide two of our presentation for our cautionary statements. Our speakers today are Chief Executive Officer Emma Wormsley, Luke Miles, President, Global Pharmaceuticals, and Ian Mackay, Chief Financial Officer. We have a broader team available for Q&A. We request that you ask only a maximum of two questions so that everyone has a chance to participate. And with that, I will hand the call over to Emma.

Thanks, Beth, and welcome everybody to today's call. First and most importantly, I very much hope that all of you and the people around you are safe and well, and we appreciate you joining us today. We are facing an extraordinary global health threat with enormous direct and indirect consequences. And alongside updating you on our Q1 performance today, I want to start by sharing how we're responding to this. Supporting the global response to COVID-19 is at the heart of GSK's purpose as a company, and our businesses and portfolio are highly relevant and much needed. We've mobilized across the company to respond to the pandemic, and I'm pleased to report that our company is performing well and has demonstrated resilience in the face of significant pressures and uncertainty. Our people have been outstanding, showing courage and deep commitment to ensure that our products continue to be made available to patients and the people that need them. Today, we've got over 20,000 essential workers going every day into our manufacturing and R&D sites. We're working hard to make sure employees stay protected and supported and are investing in high-frequency communications, as well as providing teams with the technology, resources, and adjusted policies to support them, whatever their role. We've implemented business continuity plans across all our essential operations. In our supply chains, we're closely monitoring all parts of our manufacturing network, and our teams have shown tremendous agility to respond quickly to fluctuations in demand. For clinical trials, we've implemented proactive measures to protect study participants, staff at clinical trial sites, and our employees, while ensuring regulatory compliance and the scientific integrity of our studies are maintained. While recruitment for clinical trials has slowed due to disruption of the pandemic and diversion of resources to other clinical priorities, for the vast majority of our studies, we estimate we've incurred a one- to three-month delay. Where necessary and based on our own assessments, we've also proactively paused recruitment, including the pivotal programs related to erythilumab in rheumatoid arthritis and mucala in COPD. In the meantime, we're continuing to support enrollment of new patients into ongoing clinical studies, provided that investigators are confident they'll be able to ensure the safety of the study participants and appropriately conduct the study per the protocol. The ultimate impact course across our pipeline will depend on the duration and severity of the pandemic. From a regulatory standpoint, we have a number of products undergoing review, and at this point, we don't anticipate any significant delays to approvals as a result of the pandemic. However, the situation is dynamic and we will continue to watch it carefully and provide updates as and when appropriate. As I've mentioned, GSK's businesses and portfolio are highly relevant to helping tackle the COVID-19 virus, whether that be respiratory products in pharma, pandemic adjuvant technology in vaccines, or needed everyday products in consumer health. We are determined to help by offering solutions using our portfolio, science, technology and resources to support the global response. We're using four principles to guide our pursuit of these solutions. Working in partnerships, taking a global approach, while of course providing strong focus and practical support to our base in the UK, maintaining a deep commitment to access, and investing in long-term pandemic preparedness. Our number one focus is the development of a vaccine. This is core to the exit plan the world needs, and we're working with companies and institutions globally, including in North America, Europe, and China, to help find the best and most effective vaccine. Our aim is to develop multiple adjuvanted COVID-19 vaccines. GSK has long been the leader in vaccine adjuvant technology and our expertise in this area is proven. As many of you know, the use of an adjuvant can be of particular importance in a pandemic situation, since it may reduce the amount of vaccine protein required per dose, allowing more vaccine doses to be produced and therefore contributing to protect more people sooner. One of the most recent collaborations to be announced was with Sanofi. Together, we bring proven technologies and considerable scale. We're planning to start trials in the next few months, and if successful and subject to regulatory considerations, aim to complete development and make the vaccine available by the second half of 2021. Of course, there is a lot of work to do and no guarantees, given this is an early stage of development. But we believe if we are successful, we'll be able to make hundreds of millions of doses annually by the end of next year. Data from our other collaborations will be available in the coming months. We remain, as we always have been, committed to global access, and across this portfolio of vaccine collaborations, we'll reinvest short-term profits generated in coronavirus-related research and long-term pandemic preparedness, either through GSK internal investments or with external partners. Alongside vaccines, we're also exploring therapeutic options, and earlier this month, we entered into a new collaboration with Zia Biotechnology. Together, we'll use VIA's proprietary monoclonal antibody platform technology to identify and accelerate new antiviral antibodies that could be used for therapeutic or preventative options for COVID-19 or future coronavirus outbreaks. Our first priority is to accelerate two very promising antibody candidates that target COVID-19 directly into phase two clinical trials within the next three to five months. The VEAR platform is highly complementary with our R&D approach to focus on the science of immunology. Additionally, and more broadly, we're screening GSK marketed and pipeline assets for antiviral activity or potential use in prevention or treatment of symptoms related to COVID-19. So all in all, you can see we're pursuing a broad set of initiatives as part of our response and commitment to being part of the solution. But let me now move to our Q1 performance. We've seen a very strong start to the year, with our performance reflecting good underlying execution, the addition of the Pfizer consumer healthcare portfolio, and towards the end of the quarter, a significant step up in demand, including patient and consumer stock building for many of our products as a result of the pandemic. Proforma group sales, growth of 10% in CER terms, reflected an increase in sales in all three of our global businesses. with a particularly strong performance again in vaccines, driven by Stringwix, and consumer, where we saw double-digit pro forma increases in four of our five main categories. Group-adjusted operating margin this quarter was 29.4%, reflecting the strong sales growth across all three businesses, a more favourable mix in vaccines, and the continued benefit of restructuring. On a total basis, earnings per share were up 89% to 31.5 pence, and adjusted earnings per share increased 26% to 37.7 pence. Earnings growth benefited from a reduction in our effective tax rate in the quarter, reflecting a number of one-off items, including the revaluation of tax assets. Our free cash flow this quarter was £531 million, benefiting from our strong operating performance across the business. We've also continued to make progress on our long-term priorities of innovation, performance, and trust. Sustained focus on commercial execution delivered good growth of our new products, Nucala and Trilogy and Respiratory, and our two drug regimens, Devato and Jaluka, in HIV. Meanwhile, Shingrix also continued to perform strongly with some RAL benefits as we further accelerate supply. although short-term demand is now being impacted by slowing vaccination rates in the U.S. under containment measures. We've also made progress on our pipeline. We've regulatory submissions accepted on three oncology assets. We're anticipating FDA approval of Zedula in the first-line maintenance setting for ovarian cancer shortly, and Luke will talk to the opportunity here in just a moment. We've also had regulatory submissions accepted for two other oncology assets, bilansumab macadotin in refractory multiple myeloma, and for Pistarlimab in the second-line treatment of recurrent oral fracture endometrial cancer. We expect the Belantamab review to complete close to the producer date in August. And as we've said previously, the ARCA events associated with Belantamab are a unique adverse event that we take very seriously, and we're working with the agency to ensure its safe and effective use in the target population. We were pleased to see our long-acting two-drug regimen in HIV, Cabinuva, receive approval in Canada, and we've been engaging with the FDA on the path forward for Cabinuva in the U.S. and expect to make a resubmission around mid-year. Also in HIV, we filed the European approval for Spenzivir for heavily pre-freetip patients. We look forward to making these important resubmit options available to patients. In performance, we've continued to drive growth in sales and have seen an improvement in our profitability this quarter with continued good cost control. We've built up capabilities in oncology, ready to support our expected launches. In consumer, integration of the joint venture with Pfizer is progressing very well. We're on track to deliver our cost energy targets and 90% of leadership roles are now in place. We've also, as planned, completed the divestment of our Indian nutrition business to Hindustan Unilever. We're progressing a number of other consumer-tailed brand divestments, and alongside streamlining our portfolio, proceeds from these divestments will also help fund cash costs of the integration. In February, we announced our program to prepare the group for separation into two new companies. We've now started this important project to get us future-ready, with no change to our medium-term targets and timelines. And finally, on trust, as I've already described, we've focused our efforts on solutions to the pandemic, and on supporting our people. So I'll now hand you over to Luke, who's going to give you more details on our commercial performance in pharma and vaccines this quarter.