GSK plc American Depositary Shares (Each representing two Ordinary Shares)

Good afternoon ladies and gentlemen and welcome to the analyst call on the GSK third quarter 2020 results. I will now hand over to Sarah Elton-Farr, head of investor relations who will introduce today's session. Please go ahead Sarah.

Thank you. Good morning and good afternoon. Thank you for joining us for our Q3 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 website. Before we begin, please refer to slide 2 of our presentation for our cautionary statements. Our speakers today are Emma Warmsley, Ian McKay, Luke Miles, David Redfern and Brian McNamara. Hal Barron and Roger Connor will join us 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.

Thank you Seth and welcome everybody to today's call. I hope that you are all keeping well. 2020 continues to be an extraordinary year. GSK has shown resilience and agility in tackling the challenges while maintaining focus on our strategic goals which remain firmly on track. We continue to strengthen and advance the pipeline. In July, as mentioned at Q2, we received approval for Recovia and HIV. And this quarter we've also had first approval and launches for Blenret in multiple myeloma, for trilogy in asthma and new indications for new cholera. We've delivered positive data on our RSV candidate vaccines and GSK 836 in HEP B. Plans to progress these programs are underway. Both represent major opportunities for healthcare impact and have the potential to be significant for future growth drivers. We also initiated three major pivotal studies in meningitis vaccines, second line multiple myeloma and with our VIA antibody in COVID-19, a very exciting program you're going to hear more on later. So there have been some short term pressures as a result of the pandemic, especially in vaccines early in the quarter. Our performance fundamentals continue to strengthen. And we're very confident our vaccine portfolio and pipeline will drive growth for years to come. Brian will update you in more detail, but the momentum we're building in our commercial execution is driving encouraging growth across our new products, setting the course for strong future performance. And this has also been a quarter of disciplined cost control, as we've made substantial progress on both our consumer integration and company separation programs. We continue to deliver efficiency in our support functions, further simplify our site network and have achieved an important milestone on building one development organization in R&D for pharma and vaccines that will improve agility, decision making and scientific collaboration as well as our cost base. Our pipeline includes several COVID solutions and we remain committed to building stakeholder trust as we deliver them. We have in place supply agreements with multiple governments for our partners, adjuvanted COVID with 19 vaccines and a pledge to maintain our focus on safety and global access. Turning to the quarter, strong performance from our future growth drivers combined with a focus on cost has offset the ongoing pandemic impact. We've delivered margin and earnings growth this quarter and expect to deliver within our earnings guidance range in 2020. All numbers referenced are on a constant currency basis. In pharma, we're very encouraged by the strong performance of our new and specialty products with sales up to 12%. This was offset by a decrease in established pharma of 18% and we'll go into that in more detail in a minute. The greatest impact of the pandemic has been in our vaccines business where sales were down 9% in the quarter. However, we're encouraged by the accelerated recovery towards pre-COVID level of immunization as the quarter progressed and a strong performance in flu, up 21% year to date. Sorry, up 21% in the quarter. Year to date, Shingrix sales are up 6%. In consumer, we continue to reshape the portfolios and pro-former growth in our ongoing business was 3% driven by vitamins and oral health. Overall, we're gaining share and our power brands are performing strongly. Group adjusted operating margin for the quarter was .8% with the impact of vaccines more than offset by tight cost control and the realization of restructuring benefits with SG&A down 10% pro-former while we continue to invest in our pipeline and our new product launches. On a total basis, earnings per share were 25 pence and adjusted earnings per share were up 1% for 35.6 pence. Before I hand over to Ian, I'd just like to remind you of the great progress we're making on our portfolio of COVID solutions. Our aim is to develop multiple adjuvanted COVID-19 vaccines and we now have three different vaccine collaborations in the clinic that could move to pivotal studies by the end of the year. We also have two exciting therapeutic approaches in clinical studies through our collaboration with Veer, which Luke will speak to later, and our AGM-CFS antibody, Atilumab. And so now to Ian with more detail on the quarter.

Thanks, Emma. All the comments I'll make today will be on a constant currency basis except for I specify otherwise and I'll cover both total and adjusted results. On slide nine is a summary of the group's results for Q3 in the year to date. In Q3, turnover was down 3% CER, adjusted operating profit was 2.7 billion sterling, up 4% CER. Total EPS was 25 pence, down 9% CER, and adjusted EPS was 35.6 pence, up 1%. In the year to date, turnover was 25.4 billion sterling, up 4% reported, down 2% pro forma. Adjusted operating profit was 7.1 billion sterling, up 3%. Total EPS was 102 pence, up 55%, and adjusted EPS was 92.6 pence, down 4%. We delivered 2.3 billion sterling pre-cash flow in the year to date, and in the quarter there was a 5% headwind on sales and 9% in adjusted EPS from currency movements. Slide 10 summarizes the reconciliation of our total to adjusted results. The main adjusting items in the quarter I'd highlight are major restructuring, which continued on-track progress on the consumer healthcare integration and transformation and separation activities, and in transaction related, within which the main contributor was a charge relating to the remeasurement of the contingent consideration relating to beef healthcare. The main component within this was an increase in our forecast for cabotectomy or PrEP, following the very strong clinical data that we shared earlier in the year. Comments from here onwards are an adjusted results on a constant currency basis unless stated otherwise. Slide 11 summarizes the pharmaceuticals business, where overall revenues were in line with expectations, down 3% in Q3 and down 1% in the year to date. Excluding established pharma, revenue grew 12% in the quarter and was up 12% in the year to date, reflecting our strong commercial delivery. Respiratory was up 26%, with continued strong growth from Prelegy, Relbarbrio and Ucama. Finlista was up 13%, extending its double-digit growth after more than 9 years on the market. In Oncology, Sejula sales were 92 million sterling in the quarter, up 47%, reflecting excellent commercial execution. We remain very excited by the prospects of both Sejula and Lenrep, which launched in the quarter. Our new products continued to perform strongly, and Luke will comment on these momentarily. HIV revenues were flat, with the Dollar Tag of our franchise up 1%, with very strong performance from Devato. The established pharma portfolio declined 18%. Within this, respiratory was down 18%, reflecting generic competition for adverse seratides and Ventolin, plus accelerated brand erosion of Flowvent in the US. The rest of the established pharma portfolio was down 19%, with COVID-19 impacting performance, particularly in antibiotics. Additionally, we've seen increased government-mandated unerics in certain markets. For the current year, we expect the total established portfolio to be down mid-teens. Next year, we would expect the established portfolio to revert to its historical norm of -to-high single-digit decline, and we continue to review opportunities for divestment in this portfolio. Pharma operating margin was 28% in Q3. 470 basis points increase reflected a favorable product mix, a benefit in the quarter from the recognition of pre-launch inventory and approval of Glen Rep within R&D, a favorable comparison to 2019 pertaining to non-recurring manufacturing write-down and legal settlements, and tight control of costs and benefits of restructuring actions. These were offset by increased investment in new product support in target priority markets, and in R&D focused mainly on oncology and COVID-19 programs. The -to-date margin was 26.3%. Slide 12 gives you an overview of vaccine's performance in Q3, with sales down 9% driven by adverse impact of the pandemic. Shindrick's sales were down 25%, reflecting lower adult wellness visits in the U.S., particularly through July and August. However, by the end of Q3, Shindrick's weekly U.S. prescriptions reached similar levels to the same time last year. Shindrick's revenue has grown 6% here to date, and we've put measures in place to support further growth through Q4 and beyond. Recent trends are encouraging and demonstrate the strong underlying demand for this vaccine, and we continue to make progress on expanding supply capacity. Flu vaccines performed well, with revenue of 21%, primarily reflecting strong execution on supply and sales. We expect the increase in flu immunizations, particularly amongst older adults, to support further recovery in Shindrick's performance. The meningitis portfolio grew 1%, with the disrupted -to-school season in the U.S. affecting Xero performance. And in established vaccines, it declined 15%, reflecting lower demand due to the pandemic environment, particularly in hepatitis, as expected. The operating margin of .2% was 500 basis points lower, primarily reflecting the negative operating leverage from -19-related sales decline and investment behind key brands such as Shindrick's. In the year to date, vaccines revenues were down 7%, and adjusted operating margin was 40.7%. Turning to slide 13, Q3 revenues in consumer health care on a pro forma basis were up 3%, excluding brands either divested or under review. Including those brands, such as Horlicks, turnover declined 6% pro forma. Reversal of the Q2 system's cutover stocking benefit impacted overall growth by around 2 percentage points. Oral health grew 5% at CER, with Sensodyne up 7% driven by strong global commercial execution. The pandemic has had a sustained positive impact on vitamins, minerals, and supplements, which grew 18% driven by increased consumer focus and personal health. However, this growth was partially offset by weaker performance in respiratory health with a lower cough and cold season so far, and an in-pain relief informed principally by Advil MarketShare. The Rx to OTC switch of Altern in the US is performing very strongly. Operating margin for the quarter was down 90 basis points year on year, mainly reflecting the impact of divested brands and increased brand investment, partially offset by synergy benefits from the Pfizer integration and tight control of costs. There is no change to our previous guidance for consumer margins. In the year to date, consumer revenues were flat pro forma and up 6%, excluding the impact of divested or under review brands. Pro forma adjusted operating margin was 23.8%. Brian will provide more detail on the consumer healthcare performance and an update on the business shortly. On slide 14, we summarize the sales and adjusted operating margin for Q3. Our group operating margin was up 240 basis points pro forma basis. Lower costs across the group offset reduced sales operating leverage, which was mainly in vaccines. Across the company, we are beginning to realize restructuring benefits from programs announced earlier this year. We continue to manage operating costs very tightly and have realized significant savings in categories such as T&E. During Q3 and SG&A, we realized a one-time benefit from restructuring of post-retirement benefits and the non-occurrence of high legal costs from Q3-19. We continue to invest in new product launches and our pipeline progress remains firmly on track, with pharma R&D -to-date spend up 6%. The lower R&D spend in the quarter was the result of a benefit from the recognition of pre-launch inventory upon approval of Blenrep. Comparatively lower spend related to Neraferib and to Starlinana following their filings at the end of 2019. Plus the realization of transformation savings, synergies and efficiency. This was partly offset by increased investments in the progression of key assets such as Blenrep, ICOFS, etiolimab for rheumatoid arthritis and two key COVID programs being etiolimab COVID and Avir antibody. R&D in vaccines and consumers is slightly down in the year to date and with the realization of noted transformation, synergies and savings, we now expect R&D for the group to increase mid to high single digits for the year. All our pivotal programs are on track. Any COVID-19 related delays initially experienced are now recovered, with the exception of GIF titizine. We've included the analysis covering the year to date information in the appendix. Moving to bottom half of the P&L, I'd highlight that interest expense was 197 million Starlin, mainly affecting lower debt. The effective tax rate of .8% was in line with expectations and we still expect a full year effective tax rate of around 16%. And finally, non-controlling interest reflected Pfizer's share of profits of the consumer healthcare JV. We've delivered a cash flow of 2.3 billion in the year to September. The reduction primarily reflected higher dividends to non-controlling interest and adverse exchange impacts, partly offset by lower seasonal increase in trade receivables, beneficial timing of payments for returns and rebates, higher proceeds from disposal of spent antigen and improved operating profits. As we indicated at Q2, we expect free cash flow to be lower in the second half of 2020 than the first half and we still expect cash flow for the year to be a step down from 2019. We close the quarter with strong cash balances, have an effective approach to working capital management and maintain access to extensive undrawn committed facilities. We set a guidance range of minus 1% to minus 4% CER adjusted EPS in early February this year. I think it would be fair to say that quite a lot has happened since then, but I'm pleased that the group has responded with agility and we're still in track to deliver within this guidance range, albeit at the lower end. The performance for pharma and consumers so far this year is in line with where we expect it to be, with good commercial delivery in our new and specialty products in pharma, and our power brands in consumer health. We're encouraged by the vaccine's business recovery through the quarter, with a stronger performance in September, which has continued so far in October compared to a year ago. In vaccines across the age categories, this recovery is mostly complete in pediatrics, while slightly slower in adolescence, informed by the return to schools disruption. In older adults, the increasing immunization rates and uptake of Shinrix is encouraging and demonstrates strong underlying demand. Achieving our guidance does depend on sustaining this recovery of adult immunization rates, particularly in Shinrix. We continue to make good progress in improving supply capacity for Shinrix ahead of our new facility coming online, and we'll update you on the details behind this in Q1 next year. There are no changes to our capital allocation priorities. We continue to advance the pipeline as noted by Emma earlier. We're making great progress with the integration of the Pfizer consumer business, and advancing the transformation across all aspects of GSK, and are confident in our preparations for the separation. As noted in our earnings release, we've declared a 19-pence quarterly dividend in line with expectations set out earlier this year. And with that, I'll hand over to Luke.

Thanks, Ian. Hi, everyone. As you know, we've been working hard on our commercial institution to ensure that we're competitively resourced with a particular focus on new product launches in our key markets. And the changes we've been made are now starting to pay off. Sales and our growth areas of respiratory, HIV, immunoinflammation, and oncology were up 12% this quarter to 2.5 billion. Changes we've made include updated HCC engagement policies and Salesforce incentives, who are now asked to compete more effectively and responsibly in the key markets where we're driving growth. And we're also winning share of voice with strong acceleration of our digital capabilities, as well as increased -to-face engagement, if possible. And though the lockdown restrictions have, as expected, impacted on some of our portfolio, especially established pharma, we've taken the opportunity presented by the new way of working to amplify our digital presence, complementing more traditional approaches very successfully. And with these measures and the right investment, we are seeing great momentum across our new product portfolio, which we expect to build further in the coming quarters as we bring our pipeline assets to market. Starting now with New Carla, we had another great quarter, delivering a strong competitive performance and maintaining our leadership in the IL-5 class. This remains a market with significant growth opportunities, with unfortunately only 27% of eligible patients in the US receiving a biologic. And we're leading share of both new and total IL-5 patients in the US and remain the leader in other key markets around the world, as you see on this chart. New Carla's leading position is built on its proven efficacy, derived from its precision targeting of IL-5 to reduce eosinophils to normal levels, differentiating it from other biologics. And we're using that benefit to rapidly expand into other eosinophil-related conditions. In the US, we now have approval in EGPA and HES, and have recently submitted our application to nasal polyps. We've also had a first for GSK when we submitted three indications in parallel to the EMA earlier this month, and our studies in COPD are ongoing. And we continue to see a great growth outlook for New Carla. Staying with respiratory and moving to trilogy, we continue to not only lead the way in once a day, but grow the market as well. We are growing our share in the US, where we are the market leader, as well as in other major markets around the world. This is an increasingly competitive area, but we've maintained a leading share of voice in the US, Europe and Japan, and continue to see strong growth. The opportunity in COPD is significant, with less than 25% of patients in the US who need a triple being on it today. So there remains substantial scope for growth. Additionally, we received US approval for asthma. About 30% of adult patients in the US with asthma on an ICS lab remain uncontrolled. So they could benefit from triple therapy. It is early days, but in the first three weeks of the market, we've seen a doubling of NBRx for allergist describers, showing that there is an unmet need that is recognized. Switching to Benlister, it continues to be a great product for us and for lupus patients around the world. In Q3, we again saw double-digit growth after more than nine years on the market, supported by the uptake of the subcut formulation and the success of our IV launch in China. Lupus is a market with considerable upside potential, and we're driving through this with a focus on the We've targeted life cycle management, building data and working on new indications. This quarter, we're very pleased to say we've published positive data from the BLITZ-LN trial in the New England and received priority review for submission to the FDA. We expect to have approval by the end of the year and are on track to become the first to receive the most effective drug-only drug, indicated for both SLE and lupus nephritis. We will also have our combo study with rituxan in-house by the end of the year, and we're hopeful that this combination, if successful, could potentially lead to clinical remission. With our ongoing investment in generating important data, we are well positioned versus potential competition with established efficacy in a broad base of lupus patients, long-term real-world outcomes data, and a recognized long-term safety profile. What is interesting is more than 80% of eligible patients remain untreated with Danlister in the U.S., and of course even more around the world. The number treated will increase further with the lupus nephritis indication, and so there's plenty of opportunity for growth remaining to help these patients. Now to oncology. Although the ovarian cancer market has been impacted by the pandemic, with fewer patients undergoing first-line treatment in the first half of the year, we have been able to execute our work commercially with Zajula and drive our share of the market. Our -in-class label, the only PARP inhibitor for all comers in the first-line maintenance setting, has been key to driving market penetration, not only in the BRCA mutant population, but across all patient types. And that is now supported by both the NTCN and ASTO guidelines for patients who respond to chemo. As of August, almost half of all patients starting on a PARP inhibitor are now getting the Zajula, and by now, one in three with a new or repeat patient are on Zajula in the front line. In Q3, we saw a 50% increase in the average weekly new riders in the U.S., and we've doubled our overall market share from 14% in April to over 30% in August. We also know there's significant opportunity to continue to penetrate the market with watch and wait, still unfortunately being used in more than 70% of women in the first-line We're also investigating opportunities beyond a variant, working to improve outcomes for a broader set of patients. In Q3, we initiated the ZEAL study in combination with PEMBRO to investigate the impact of Zajula on both squamous and non-squamous non-small cell lung cancer patients in a maintenance setting. So, with this differentiated properties in a superior tumor penetration and the ability to cross the blood-brain barrier, we believe Zajula has the opportunity to improve outcomes Next slide, please. We launched LENREP for heavily pretreated multiple myeloma patients at the end of August in the U.S., and though it's early days, we are seeing a positive response across the board from physicians, patients, and advocacy groups. There's a high need in multiple myeloma, and over 500 HCPs and over 200 patients have already enrolled in our fully operationalized REMS program. We've had a highly experienced health force, we have a highly experienced health force, and our in-person access to HCP is highest amongst our competitors there. We're also focused on the continued development of this important medicine and have a robust program in place to improve the safety profile by studying alternative doses and scheduling. Importantly, we also have studies investigating LENREP in novel combinations with other drugs like PEMBRO, which can have potential synergistic effects, and a combination with Springworks gamma-scretase inhibitor, which appropriately inhibits the cleaving of ECMA, potentially enabling a clearer target, driving superior efficacy, and an improved side effect profile. And we anticipate sharing data on some of these combinations in 2021. Shifting to vaccines, on the next slide, we saw continued impact from the pandemic in the quarter with lower adult wellness visits and vaccination rates in the U.S., although momentum improved substantially in September. For Shingrix, we saw a steady increase in U.S. description volumes through the quarter, and by quarter in, they'd reached a similar level to that last seen before the pandemic and comparable to the same time last year. We've been very successful in driving this recovery throughout DTC campaign in conjunction with the flu season, and wholesaler inventory levels are now considered normal with about 1.2 million doses in the channel. Outside of the U.S., we saw strong demand from Germany and great progress in our phase launch in China, which is going well. Next slide, please. But before I hand over to David, I'd like to take you through, or before David takes us through the TDR momentum and HIV, I just wanted to highlight the upcoming readout that we're anticipating for our COVID antibody that we're developing in collaboration with VIA. Although there are many vaccines in development for COVID, including our own collaboration on adjuvant approaches for Sanofi and others, we believe a therapeutic option will still be necessary. There's a lot of uncertainty about how the pandemic might develop, but it seems likely that we'll continue to see a high level of infections in 2021 and beyond. And even if a vaccine is successful, it will take time to distribute and is unlikely to be 100% effective for everyone. So on that basis, I think it's fair to say that there will be a clear need for therapeutics. The VIA antibody has been developed from an antibody taken from a patient affected with -CoV-1. The S309 antibody was found to have extremely high affinity with the -CoV-2 spike protein. It's highly potent in neutralizing -CoV-2 in live viral cellular assays. It has three features which lead us to believe that we have a potentially -in-class asset. The first is that it has a unique receptor binding site, which is highly conserved and is required for viral entry into the host. The In silico test of over 80,000 sequences show that this epitope is highly conserved across circulating viral strains, and therefore we expect a high barrier to resistance. Furthermore, escape mutants identified for similar antibodies against other viruses have attenuated or no infectivity. Secondly, the antibody has high potent effector function in vitro, allowing the recruitment of immune cells to kill off infected cells. This potency potentially allows us to have a lower single dose, which will be important as we scale up manufacturing, given the large number of potential patients and the fact that global demand therapeutics is likely to outweigh supply for some time. And finally, the antibody has been engineered to extend half-life and will potentially enhance the viability in the lung. Pivotal common eye study in the early treatment of patients at high risk of hospitalization is ongoing, and we anticipate having initial data available by the end of the year. On top of this, we're planning to expand studies to include hospitalized patients and for use in prophylaxis. This collaboration has significant potential and is very exciting to us. Let me now hand over to Dave to take you through HIV.

Thank you, Luke. Hello, everyone. As in the rest of our business, HIV is also benefiting from strong competitive execution. We have the leading share of voice in both the US and Europe, and the benefit is clear in the momentum we are delivering in the two drug regimens and across our HIV business. We are now seeing US dollar tegravir NBRX share outstrip our TRX share, a key point of inflection which demonstrates the traction that we have achieved with the two drug regimens, which now have over a 9% share of NBRX in the US. Tivato in particular is performing very strongly. We saw the inclusion of the TangoSwitch data on the US label. This has helped Tivato accelerate its share of the US switch market. We now see about a third of Tivato's sprits come from new patients, a third from competitor regimens, and therefore only a third from other dollar tegravir continuous regimens. As such, overall we are seeing a positive net switch to dollar tegravir regimens, helping to increase our overall market share in the US. In Europe we are growing ahead of the market, and dollar tegravir is gaining market share as we continue to roll out Tivato. We have been able to launch early in all markets across Europe despite the pandemic, and Tivato now has the leading share of voice in all measures in all countries. We have also seen a positive start for Recovia, which has US insurance coverage of over 70% for 250 patients already on therapy. And we are making good progress in our discussions with the FDA on CAD in the PREP setting. We are on track to file for US approval for PREP in the first half of next year, and anticipate a 2022 approval. We still expect HIV revenue growth overall to be broadly flat in 2020, but anticipate a return to growth in 2021, building on the momentum we have established with Jaluca and DeVato, and with the expected US launch of Cabinuvra in the first quarter of 2021. I will now hand over to Brian to talk about consumer.

Thanks David. Thank you, Brian. I would like to provide a quick update on our progress with integration, which is progressing well and is firmly on track. Our positive momentum has continued despite the challenges related to the pandemic. Importantly, we have delivered significant milestones to date. 96% of the Pfizer consumer healthcare revenue are now in our system, with 71 markets having made this transition since the start of the pandemic. 87% of co-locations are complete, and 39 of the 41 warehouses identified for closure are now closed. Furthermore, all future market cutovers, employee transfers, and production site integrations remain on track. At the time of the transaction, we provided synergy and financial guidance for 2022, and this remains unchanged. We continue to expect annual synergies of 500 million pounds by 2022, with up to 25% reinvested back into the business to drive growth. We have also delivered on our divestment commitment, with transactions meeting our target of 1 billion pounds in proceeds already signed. Through this process, we have divested more than 50 growth dilutive brands, strengthening our existing portfolio. Our separation program is also on track, with work around the future organizational structure and system separation well underway. Now, it's important to remember that the end goal of all this integration work is to bring together a fantastic portfolio of category-leading brands with a strong geographic footprint, positioned in a sector which is now more relevant than ever. I continue to be excited about the potential of what we have created, a 100% focused global leader in consumer healthcare, addressing consumer needs and driving better everyday health. I look forward to sharing more with you on this great business over the coming years, and in the run-up to separation. Coming back to performance, I'd like to share some detail on the growth drivers behind today's results. I will focus on -to-day results to take out the volatility behind the pantry loading and the systems cut-over. Pro-forma revenue, excluding brands divested and under review, grew 6% -to-date, supported by healthy brand growth and overall share growth. Vitamins, minerals, and supplements continue to benefit from increased consumer focus on health and wellness, and as a result, we saw a strong performance by Centrum, Emergen-C, and CalTrade. On a pro-forma basis, category sales grew in the high teens across all three quarters this year, and with growth at one and a half times the market. E-commerce was strong across all categories, growing at about 80% -to-date, and now representing over 6% of sales, up a few percentage points over last year. Key markets such as U.S., China, U.K., and Germany are ahead of this level. Importantly, we grew significantly ahead of the market and are gaining share. Turning to our priority brands, across our nine power brands, we saw five of them deliver high single-digit or double-digit sales growth, with eight of the nine gaining or holding share. On innovation, we've had a number of exciting launches so far this year. Let me share some details on just a couple to give you some color on what we're doing. We launched the Volterra and RXOTC switch in May, our fourth RXOTC switch over the last six years, and the first in the pain category in the U.S. in over 20 years. Volterra is the number one topical pain reliever globally, despite having not been in the U.S., or just pain market in the world. The brand is off to a great start, growing the overall U.S. topical category, delivering 100% of category growth, and since launch is the number one HDP recommended topical pain brand. In the quarter, we also launched Advil Dual Action, which is the first ever combination of ibuprofen and acetaminophen, and early results are encouraging. With that, I'll hand it back over to Emma.

So, in summary, we've delivered a resilient performance this quarter, with strong commercial execution of our growth drivers, underpinned by disciplined control of costs. This, together with an improvement in vaccine immunization rates, we remain on track to deliver adjusted EPS for the year within our guided range. We're also pleased to have maintained progress in delivery against our long-term priorities of innovation, performance, and trust. In R&D, we've had four new approvals in the quarter, and generated data to support development of major pipeline assets, including our portfolio of RSV vaccines. And very importantly, we've also been able to advance the most possible COVID-19 solutions into clinical development, two very promising antibody therapies, and three collaborations for adjuvanted vaccines. Beyond R&D, integration in consumer health continues at pace, and we have achieved some important milestones in our programs to prepare the group for separation into two new companies. A biopharma company focused on the science of the immune system and genetics, and a new world-leading consumer health company dedicated to everyday health. We believe the creation of these two new companies will deliver significant new options for sustainable growth and returns to shareholders. We're now joined for Q&A by Hal and Roger with the rest of the team, and so with that, operator, we're ready to take your questions.

Thank you, Emma. Your first question comes from Kaya Parekh. You're live in the call, Kaya. Please go ahead.

Thank you for taking my question. Thank you, Emma. First of all, congratulations on your recognition of your achievement. So very much, thank you very much on that. Just linked with that, who among the senior management team has the best courtesy technique so far? A

lot

of hands going up on that. It's a recognition for the company, I can assure you, Kaya. Nobody in my house takes their towels off on the floor anymore. But anyway, going to your technical question.

Well, usually I will answer the question, but the two questions are, one, Hal, there is some amount of confusion on the update that your partner, that Mark and you put out about Interfuse Alpha. So I was just wondering if you could share your perspectives on what kind of you made out of the update. Clearly, the trial continues, but kind of the proposed expansion of the enrollment kind of isn't happening. So I was just wondering if you could share some perspectives on that. And then secondly, as it relates to kind of the reiteration of the guidance kind of for the full year, how much of that relies on Shingrix coming back into the fourth quarter, and what level of Shingrix revenues might be required to get there, or do you feel comfortable enough to get to the bottom end of the range, irrespective of what Shingrix does during the fourth quarter?

Thanks, Karen. So let's come to Hal first, and then over to Ian for a bit more specifics on the guidance and Shingrix contribution.

Oh, okay. Well, thank you very much for the question, Karen. You know, maybe backing up, I think it's important to note that when we initiated the collaboration with Merck KGA, we did it on a very large and robust Phase I data set of over 400 patients, which is really demonstrating activity and a very well tolerated safety profile, and some encouraging response data along. As we've said many times, we think it's important to do randomized control trials to see whether these observed effects are real when compared to appropriate controls. And that is really what initiated the so-called O3-7 study to obtain this randomized data. As you say, we updated you last week that the study is not expanding and will be continuing with 300 patient samples. And while I know I can't really answer any of your questions more specifically, I will say that we need to await the final data to ensure the integrity of the trial, and it's important to wait to discuss any results of the study until we have the full data set, including data on PFS and OS. So I realize that leaves you with some questions, but that's really the extent to which I can comment at this point.

Thanks, Hal. Dan?

Yeah. So, Keir, just to be absolutely clear, it's my opinion that I do the best courtesy by a long, long way in this group, being the only guy that wears a scarf in this place anyway. Anyway, moving on from that, the more important point in Shinric, I think, is really encouraged by the progress that we've seen through September, and happily that's continued into October. That recovery in older adult immunization rates has been extremely important in terms of how we formed the guidance for the full year. We don't necessarily need to grow immensely beyond where we are, but we do need to sustain the recovery that we've seen. Now, September was a great month. I think it was probably the best single month that we'd had in Shinric. Overall growth year to date, 6%, obviously below the number that we had guided to for Shinric. But provided that we can sustain the recovery that we've seen through September, we're also very encouraged by the weekly prescription date and immunization dates that we see so far through the month of October, then that certainly should take us to the lower end of our guidance range.

Thanks. And just to compliment that, I think fundamentally we're absolutely convinced that Shinric will be a great growth driver for the company for years to come. And if ever we want to be reminded of the opportunities and growth prospects in the vaccines segment, this is definitely the year to reinforce that. So, to the next question please.

Thank you. Your next question comes from Graham Paroo from Bank of America. You're live in the call, Graham. Please go ahead.

Thanks for taking my questions. So, firstly, would it be possible to quantify the Blen Rep inventory and pension restructuring benefits on adjusted operating income and margins in the quarter? So, would you still be coming in around the consensus level without those in there? And then secondly, your guide now seems R&D, it's a high single digit increase. I think at the start of the year, you were flagging similar growth 2019 for both 2020 and 2021. That would have been about a 13% increase in R&D. And it's obviously benefited from some of this Blen Rep inventory right back. So, could you just help us understand, should we be expecting a sharp upward inflection in R&D in 2021? Does the one-off benefits go away and you continue to invest in the pipeline? Thank you.

Thanks. So, I think both of those to Ian. But just to reiterate, our number one priority is still to keep strengthening the pipeline. So, we do expect to see a strong increase next year, but perhaps Ian you could put some shape around that.

Yeah, absolutely. So, Graham, thanks for your question. Blen Rep, the capitalisation of a pre-approval inventory was just north of 60 million in that factor. When you turn more broadly to R&D expense, the main point to I think rate rating here and Hal can go into more detail is that we've kept all our programmes very much on track to the extent that we'd experienced any slight delays earlier in the year on the bank. And in the back of the pandemic, those have been largely recovered. We've still got a little bit to do on jeopardism, but those are very much back on track again. And what Hal and the team have continued to do is, you know, realise fully the efficiencies and synergies to be expected from the Tesaro acquisition and continue to deliver benefits and savings through the R&D just in terms of how we prioritise and manage spend within that. Reflecting on next year, our guidance would remain absolutely consistent. We'd expect to see double-digit growth in R&D expenditure next year as we continue to invest in those priority programmes across the R&D pipeline and make progress in that regard. Hal,

I wonder whether you would like to add anything in terms of the sort of overall governance and sort of progress of the pipeline, because the other thing to note, Graham, would be that we're slightly down in both vaccines and consumer healthcare R&D through integration and cost control. Hal, perhaps you could add some more colour around the governance aspect of spend.

Yeah, well, thanks, Graham. We're making a lot of great progress, I think, as Emma highlighted in her last comments on the last slide. And in particular, highlighting that, you know, BlendRat started three pivotal studies, making very nice progress on ICOs, adding a second phase two sort of head and neck study. The two COVID trials that we're doing in the pharmicide have been highlighted and they're going well. Three vaccine trials, including moving the RSV to phase three. We've added 10 new molecules, vaccines or pharma assets, into the pipeline. But importantly, we're also using a very high bar to advance things. We're using a high bar for interpreting data. And based on that, we actually removed eight assets as well. We're tightening up our focus and research in areas that we think are most promising, making a lot of great progress on the human genetics, functional genomics side of research, but really have reduced a little bit of spend in the research area. But overall, I'm very encouraged by the progress we're making on the pipeline and we'll be continuing to move aggressively to even strengthen it further.

Thanks, Tom. Next question, please. Thank you. Your next question comes from Tim Anderson from Wolf Research. You're live in the call, Tim. Please go ahead.

Thank you. I want to go back to the intrafuss, if I can, for how would you agree that there's two very different but equal interpretations to the recent update? One is that you saw enough of a signal on the interim that you didn't feel the need to upsize the trial to hit survival. And the other would be the opposite, which is that it's not worth upsizing the trial because that interim only showed a weak signal. Just to clarify, will there be a milestone paid to your partner? And then second question is another pipeline question, and it's on the ICOS agonist data coming up in first half 2021. You have a second line lung trial, randomized ICOS plus dosataxel versus dosataxel alone. Just your updated thinking on the odds of success with that trial.

Okay, so just to confirm that there's been no milestone paid to date on the basis of the data to date. That doesn't mean there couldn't be one in the future. But Hal, do you want to make any further comments on the intrafuss and also on ICOS,

please? Yeah, Tim, thanks for your question. You know, our goal is to really be the partner of choice and be an outstanding partner when we work with another company. And we've committed to Merck AGA to have them be the lead on discussing how to interpret all this. So I sense the frustration and I would typically comment more to be honest with you, but I think it's best said that we should await the data from trial before making any comments. So sorry for not being more transparent about that. In terms of your question about the Entrez Lung study, the ICOS study, from memory that's about 105 patients study, the design that you described. And it is a phase two where we'll be looking at all the classic sort of endpoints you might expect. I think it'll be important because that'll be the first randomized data that really gives us a sense of the incremental activity that I can engender there. And so I am cautiously optimistic that that micro activity, and if it did, it would certainly be a huge boost to the program and drive subsequent study designs and probably thinking about where the molecule fits in medicine.

Next question please. Thank you. Your next question comes from the line of James Gordon from J.T. Morgan. You're live in the call, James. Please

go ahead. Hello, James Gordon, J.T. Morgan. Thanks for taking the question. Two questions please. I'm just coming back to the same point. One more on TGF beta, which would be, I noted the comment on not giving specifics about what you saw at the interim and that there hasn't been a milestone page. But can you just say more generally, how is GSK thinking about investing in this mechanism in other frontline cancer trials? So could this be an area where we're going to see much more investment over the next few years and you're going to go broader? Or do you still see this as just as much as a bet when you first entered into this partnership? So any increased confidence to go broader would be the first question. And then the second question, we've talked about Newsflow and specifically Dostalimab. So based on the slides, Dostalimab and the MDAP program, they're like -COVID-19 NCEs. We're going to have phase three data in 2021. And I know you recently renegotiated the deal on Dostalimab. So it allows you to partner with other PDX agents other than DOSTA. So just how much attention does DOSTA have? Is this something that is a big focus? Should we think this will be one of the key readouts for 2021? Or is there other aspects you're much more excited about than DOSTA now?

How about you?

Okay. Okay. Let me, so let me go with the DOPA first. You know, we're excited about having Dostalimab. It obviously is a part of the P1-1 class, which of course has transformed oncology and probably as a class will be the greatest, biggest medicine maybe ever. So we're excited to have one. We think that it's -six-week dosing. It's actually dosed at a higher level than other PD-1s. Could be an attractive attribute. I think the greatest opportunity for us with Dostalimab is to be able to combine it, particularly with our pipeline reasons. And, you know, we have the DREAM4 study with Bellimab with PD-1 inhibitor. We have, of course, the opportunity to combine PD-1 inhibition with Aparib, whether that be in lung or in ovarian with the first trial. We certainly have opportunities to combine Dostalimab with pipeline reagents that are earlier on, like C96 and Sting and Icos and other agents. So it is a nice complement to our pipeline and we're very excited about its activity. Of course, it's also active in endometrial cancer, both in the second line and we've got the front-line study going. We are hoping that we can have a tumor agnostic approval at some point with the data beyond endometrial, with colon, et cetera. So we think it has a lot of potential and that's in part why we renegotiated it, as you described, and give us a lot of flexibility on the wrapper as well. Sorry, the other question was, I didn't write it down. Benjafuz

in broader studies. Yeah,

so for Benjafuz, you know, we were very excited about the preclinical rationale for inhibiting TGF-beta. The bifunctional nature of the protein to hit PD-L1 and target the protein to the tumor is attractive. The phase one data, as I commented on, was very large and robust and seemed to have signals of activity and a well tolerated profile. As we get more data, we'll make data-driven decisions about where to invest. I can't really say more than that, but since we've got incremental data, we will be sharing that and sharing where that leads us to invest in subsequently.

Thank you. Next question, please. Thank you. Your next question comes from the line of Steve Scarlett from Cohen. You're live in the call, Steve. Please go ahead.

Thank you. First, do you think the inflection in the two drug regimens that you speak to is already reflected in Davado numbers or is that yet to come? So that's the first question. Second question is, I would like to ask about the recent thinking on the dividend. I know it's a board decision, but 25% of the board is on this call and another 25% are former CFOs of drug companies. So I would think that half the board can't find appealing paying out the majority of free cash flow to cover the dividend. Emma, would you disagree that a good portion of the board likely thinks that a change in dividend policy would be in the best interest of building the company? Thank you.

Thank you. So we'll come to David in a moment on 2DRs and the growth prospects for our HIV business, also including the upcoming pipeline. On the dividend, Steve, I'm afraid I'm going to reconfirm there's absolutely no change to the board's position on capital allocation or our dividend policy. Obviously, we're working towards separation of the group. We've been clear on what the dividend is going to be for the consumer health care business in contract with Pfizer. And as we get closer to the separation and the confirming on that, we'll update with the full board's views in terms of distribution for that, but no further comment on that at this stage. Across

the world and particularly to Davato, very strong in Europe where it's now rolled out everywhere and we're seeing rapid pick up. And as I said in my remarks, in the US, we've seen a very clear included in the label in the summer. So 2DR, MBRX is running at about just over 9%. TRX is, of course, there's always obviously a reasonable gap, time gap between MBRX coming through into the TRX. But the trends are there. I think it is just symptomatic of all the data, whether more and more strongly in TRX and the numbers.

Thanks, David. No question, please. Thank you. Your next question comes from Andrew Bon from City. You're live in the call. Andrew, please go ahead.

Priority. GSK doesn't have the strongest balance sheet prepared to its peers and their dividend policy doesn't help. But you still have firepower to do meaningful bolt on as you find with GEMMAD, Astra, Daiichi, before that Lilliloxo. I'm surprised that we haven't seen any activity from GSK, particularly in hematology, given the investment that you're making. What am I missing? There still are late stage hematology assets right for VD, some of which could be accretive immediately. Is this the valuation? Does it make sense to you? What am I missing here?

Well, it's an important topic and I'm not sure that you're missing anything because we are absolutely clear in recognizing your observations. Business development, we keep, whether it's for internal assets or external ones, as Hal's alluded to, we keep the bar high. We want to make sure they're obviously have the right kind of discipline around returns. But we certainly see it as a priority for you and that's exactly why last quarter we built out the deal with Veer, with data later this year, could be in market next year for something with really significant sales global demand. But we also continue to look at technology platforms as evidenced by the deal we struck with. So continue to watch this space and we continue to be prioritizing this as an area for team focus and energy. So I think the call, Kerry, please go ahead.

Thank you. Two questions, please. Firstly, on the COVID antibody, you spoke about extension for extended half-life. I wonder if you can provide us with any more, if you haven't seen full data, but any feeling around your comments, that would be helpful. And then on Zidula, you talked about the progress being made in the first line of variant slow. And I guess, when can we expect, when do you think we should expect and what seems to come around in sales in that setting? Thank you. Thanks,

Kerry.

So we'll come

to Luke on Zidula, but then I'd like to come back to Hal.

Sure. Thanks, Emma. And thanks, Kerry. I just, one thing I put in context, it's really interesting when you look at the bulking surgery in the U.S. I mean, it's not interesting. I think it's sad. There's still around 10 percent below the levels of February. So that's obviously having an effect on patient flow. If we look, and it's really in the U.S., because in the U.S., for Zidula, about a third of them are in first line now. I split between treatment and maintenance about a third. Hopefully, as we now move through, at some point, see some stabilization in the COVID environment, we can begin to see the overall class grow in first line and the number of people on watch or wait beyond

the variant. So Hal, back to the VIA antibodies.

Yeah. Thanks, Kerry. You know, the VIA antibodies is actually very, very special, very unique for a number of reasons. As Luke mentioned in the presentation, I think it's important to highlight that this was found through exploration of antibodies from patients with -CoV-1. And the argument and the rationale for choosing such an approach was that if, over this period of time, the SARS virus that resulted in COVID-19 has a neutralizing antibody to both, that the epitope the antibody is binding to is likely very important for its infectivity and therefore significantly reduced chances of mutating around that. So the CDR regions we think are incredibly important and why we think there's going to be very limited resistance to a single monoclonal. And that's particularly important given some of the Lilly data where I think it was somewhere between 6 and 8 percent of the patients had resistant clones and the many, many clones that are emerging as through the genetic drift and even the D614G mutation that's becoming more prevalent probably due to a fitness advantage. In addition to that, it being highly neutralizing, it actually has a modified SC receptor that not only gives it an extended half-life, which we think, we're not exactly sure how long that will be, but it will be most likely, dancefully longer, somewhere probably between 2, 3, maybe even 4 months of duration, considerably more than what you'd expect from a typical antibody because of this modification, which has been done on other antibodies that have been in the clinic, so we're reasonably confident it will extend half-life. But in addition, there's a modification of the effector function so that in addition to being neutralizing, the antibody through this increased effector function should be able to bind and destroy cells that are infected with the virus. And that's very unique. That's not something you would see with the other antibodies, we don't think. And so this could give us a greater efficacy, maybe allowing us to even use lower doses, et cetera. So we think the SC modification not only extends half-life, but the effector function may be very important. So combined with that, the lower dose that's being explored compared to other monoclonal antibodies, the single monoclonal nature and the ability most likely to effectively neutralize the resistant strains is unique. And lastly, I'll just mention that we do see lung accumulation of the antibody, whether that's due to some of these modifications in the FC or other attributes isn't clear, but the antibody also does seem to preferentially go bio-distribution wise into the lung, which we think will give it yet another advantage. So we're very excited about this program and think it could really offer a significant solution for COVID. And hopefully we'll have data soon to support that.

So a concluding reason for optimism, which I'd add to the resilient performance that we've delivered and the fact that we're on track to be within our guidance range, particularly challenging circumstances, we're encouraged by commercial execution across multiple growth drivers and optimistic for both the near-term recovery and long-term prospects of vaccines. We're seeing strong progress on our strategic imperative, whether that be in pipeline, particularly including COVID solutions, or indeed in terms of the separation preparation, which is very much firmly on track and we think gives exciting options for returns to shareholders in the coming year. So with that, thank you all very much for joining us and we look forward to speaking and seeing you soon.

Thank you, Emma. And thank you to all your speakers. Thank you, everyone. That concludes your conference call for today. You may now disconnect. Thank you for joining and enjoy the rest of your day.