Annual Report 2013
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Annual Report 2013 “ Being active and having a positive outlook on life is what keeps me going every day.” Overview of 2013 “ Our performance in 2013 was defined by remarkable &R D output and further delivery of sustained financial performance for our shareholders.” Please go to page 4 for more More at gsk.com Performance highlights £26.5bn £8.0bn £7.0bn £5.2bn Group turnover Core* operating profit Total operating profit Returned to shareholders 6 112.2p 112.5p 13% Major medicines approved Core* earnings per share Total earnings per share Estimated return on R&D investment 10 6 1st 1st Potential phase III study starts in 2014/15 Potential medicines with phase III data in Access to Medicines Index Pharmaceutical company to sign AllTrials expected 2014/15 campaign for research transparency Front cover story Betty, aged 65, (pictured) has Chronic “ Health is important to me, Obstructive Pulmonary Disease (COPD). She only has 25% lung capacity. This means I try to take care of my she finds even everyday tasks difficult, but medicines and inhaled oxygen allow her to health with all the tools live as normal a life as she can. Betty’s mindset I have and do the best is to stay busy and active, so every week she goes to rehab exercise classes. that I can with it.” COPD is a disease of the lungs that leads to Betty, COPD patient, damaged airways, causing them to become North Carolina, USA narrower and making it harder for air to get in and out. 210 million people around the world are estimated to have COPD. Patients like Betty are the reason GSK has been investing more in respiratory research than any other healthcare company over the past 40 years. For more on our research into new medicines see page 34. Cautionary statement regarding forward-looking statements The Group’s reports filed with or furnished to the US Securities and Exchange Commission (SEC), including this document and written information released, or oral statements made, to the public in the future by or on behalf of the Group, may contain 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’ 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. The Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements involve inherent risks and uncertainties. The Group cautions investors that a number of important factors, including those in this document, could cause actual results to differ materially from those contained in any forward-looking statement. Such factors include, but are not limited to, those discussed under ‘Risk factors’ on pages 232 to 241 of this Annual Report. * A number of adjusted measures are used to report the performance of our business. These measures are defined on page 58 and a reconciliation of core results to total results is set out on page 65. Our mission At GSK our mission is Contents Strategic report to improve the quality Chairman’s statement 2 CEO’s review 4 Business overview 6 of human life by enabling The global context 8 Our business model 12 Our strategic priorities 14 people to do more, feel How we performed 16 Risk management 18 Grow 20 better, live longer. Deliver 32 Simplify 44 Our financial architecture 48 Responsible business 50 Financial review 58 Governance & remuneration Our Board 76 Our Corporate Executive Team 80 Chairman’s letter 82 Board report to shareholders 83 Committee reports 89 Remuneration Committee Chairman’s Annual Statement 96 Annual report on remuneration 97 Guide to use this report Remuneration policy report 117 Financial statements This interactive PDF is designed to help you easily navigate the report and find the information you are looking for. Directors’ statement of responsibilities 128 Independent Auditors’ report 129 Guide to the navigation buttons Financial statements 132 Go to main contents page Notes to the financial statements 136 Financial statements of Search this pdf GlaxoSmithKline plc prepared under UK GAAP 211 Print Go to preceding page Investor information Go to next page Quarterly trend 218 Five-year record 222 Return to last page visited Product development pipeline 225 Products, competition and intellectual property 229 Dynamic links Risk factors 232 Click on the dynamic links (highlighted in bold) to access further relevant Share capital and share price 242 Dividends 244 information within the report or online, and use the tabs at the top of the page Tax information for shareholders 244 to navigate between sections. Annual General Meeting 2014 245 Full screen mode US law and regulation 247 The PDF is set up to view in full screen mode. 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GSK Annual Report 2013 1 Chairman’s statement To shareholders The value of the significant changes that have been made in recent years is evidenced in our performance this year “ Since Sir Andrew became It is clear from the following pages that Through the Audit & Risk Committee, we the Group made good progress against oversee the issues and challenges faced by CEO, the company has its strategy in 2013. management, and encourage the creation of an environment in which GSK can achieve The Board believes the business is seeing returned £30 billion its strategic ambitions in a responsible and the benefits of the significant changes the sustainable manner. to shareholders.” management team has driven over recent years to deliver sustainable growth, reduce I have no doubt that commercial success is risk and enhance returns to shareholders. directly linked to operating in a responsible way and which meets the changing expectations of The notably strong performance from the society. In this respect, the company continues R&D organisation in 2013 – with six major to adopt industry-leading positions on a range new product approvals in areas including of issues. respiratory disease, HIV and cancer – is critical to the longer-term prospects of the The announcement of plans during 2013 Group. That this has been achieved at the to evolve the way the business interacts with same time as R&D is effectively managing its healthcare professionals and pays sales staff cost base to deliver an improved estimated rate are developments I was particularly pleased of return of 13% is particularly encouraging. to see. It is worth noting that since Sir Andrew In the same way the Board strongly supports became CEO, GSK’s market capitalisation the commitments the company has made to has grown from approximately £55 billion advance transparency around clinical trial to around £80 billion and the company has data, and welcomes the subsequent actions returned some £30 billion to shareholders of other companies in this field. Over time, via £20 billion of dividends and £10 billion it is to be hoped these steps will advance of share buy-backs. medical science and improve patient care. The allegations of fraudulent behaviour by Risk management and commitment certain employees within our business in to ethical behaviour China are wholly contrary to the company’s The Board aims to assure the integrity of values. In addition to the Chinese Government GSK’s business operations through rigorous investigation, we have commissioned an processes and systems and during the year, independent review of our Chinese operations risk management was once again a key part by the law firm Ropes and Gray, and we will of the Board’s discussions. implement all appropriate actions as necessary on conclusion of these investigations. 2 GSK Annual Report 2013 Board gender diversity Governance and remuneration Regarding composition of the Board, our We have been mindful of the changes outlined priority is to have diversity in terms of gender, 12 length of tenure and business experience 12 in the new UK Narrative and Remuneration across developed and emerging markets. 10 Reporting regulations and this Annual Report 10 10 adheres to the new reporting standards. During the year, GSK had 33% female 8 representation on the Board, a level that In particular, this year’s Remuneration exceeds the original aspiration to have 25% 6 Report comprises two parts that will each by the start of 2013. The Board firmly believes 4 5 5 require shareholder approval at the Group’s that a diverse balance of experience, insight, forthcoming AGM. Further details are set 3 perspectives and background among its 2 out in Tom de Swann’s letter to shareholders Board members is in the best long-term 0 on page 96 of this Report. interests of the Group and its shareholders. 2011 2012 2013 Board changes and composition Prospects Female There were a number of changes to the Board Male In closing, the Board would like to thank during the year. I would like to thank Sir Crispin Sir Andrew and his executive team for their Davis, who stood down in May, for his valuable commitment during a year in which the contributions over nearly ten years of service. Group once again demonstrated its ability In April, we were pleased to have Hans Wijers to deliver innovation while constantly striving join the Board as a Non-Executive Director.