GSK Annual Report 2019 01 Our Business Model Continued
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Annual Report 2019 Contents We are a science-led Strategic report Our business model 01 global healthcare company Chairman’s statement 03 CEO’s statement 04 Financial performance 06 Our long-term priorities 09 Our purpose Our culture 10 To improve the quality of human life by helping people do more, feel better, Key performance indicators 11 live longer. Industry trends 12 Stakeholder engagement 15 Our goal Pharmaceuticals 17 To become one of the world’s most innovative, best-performing and trusted Vaccines 23 healthcare companies. Consumer Healthcare 27 Trust 30 Our strategy Risk management 43 To bring differentiated, high-quality and needed healthcare products Group financial review 49 to as many people as possible, with our three global businesses, scientific Corporate Governance and technical know-how and talented people. Chairman’s Governance statement 76 Our long-term priorities Our Board 78 Our Corporate Executive Team 82 Our priorities are underpinned by our ambition to build a more performance- Responsible leadership 84 focused culture, aligned to our values and expectations. Division of responsibilities 90 Innovation Composition, succession We invest in scientific and technical excellence to develop and launch and evaluation 92 a pipeline of new products that meet the needs of patients, payers Nominations Committee report 92 and consumers. Audit, risk and internal control 96 Audit & Risk Committee report 96 Performance Science Committee report 107 We deliver growth-based performance by investing effectively in our Corporate Responsibility business, developing our people and executing competitively. Committee report 109 Trust Section 172 statement 111 We are a responsible company and commit to use our science and Directors' report 113 technology to address health needs, make our products affordable Remuneration report and available and to be a modern employer. Chairman’s annual statement 116 Our values and expectations Annual report on remuneration 119 Our values – patient focus, transparency, respect and integrity. 2020 Remuneration policy summary 140 2020 Remuneration policy report 141 Our expectations – courage, accountability, development and teamwork. Financial statements Directors’ statement of responsibilities 152 Independent Auditor’s report 154 Financial statements 166 Notes to the financial statements 170 Financial statements of GlaxoSmithKline plc prepared under UK GAAP 252 Investor information Cautionary statement Quarterly trend 258 See the inside back cover of this document for the cautionary statement regarding Five-year record 263 forward-looking statements. Product development pipeline 269 Products, competition and Non-IFRS measures intellectual property 272 We use a number of adjusted, non-IFRS, measures to report the performance of our business. Principal risks and uncertainties 275 Total reported results represent the Group's overall performance under IFRS. Adjusted results, Share capital and share price 288 pro-forma growth rates and other non-IFRS measures may be considered in addition to, but not as a substitute for or superior to, information presented in accordance with IFRS. Adjusted results Dividends 290 and other non-IFRS measures are defined on pages 50 to 52 and reconciliations to the nearest Financial calendar 291 IFRS measures are on pages 62 and 65. Annual General Meeting 2020 291 We believe that Adjusted results, when considered together with Total results, provide investors, Tax information for shareholders 292 analysts and other stakeholders with helpful complementary information to understand better Shareholder services and contacts 294 the financial performance and position of the Group from period to period, and allow the Group's US law and regulation 296 performance to be more easily compared against the majority of its peer companies. These Group companies 299 measures are also used by management for planning and reporting purposes. They may not Glossary of terms 311 be directly comparable with similarly described measures used by other companies. Strategic report Governance and remuneration Financial statements Investor information Our business model We have three global businesses that discover, develop and manufacture innovative medicines, vaccines and consumer healthcare products. Every day, we help improve the health of millions of people around the world. Our operations span the value chain from identifying, Our ability to launch new products successfully and researching, developing and testing ground-breaking grow sales from our existing portfolio is key to our discoveries, to regulatory approval, manufacturing and commercial success. For patients and consumers commercialisation. we deliver transformational medicines, vaccines and We have over 99,000 employees across 95 countries consumer healthcare products. In 2019 that included with outstanding scientific and technical know-how and 2.3 billion packs of medicines, 701 million vaccine deep expertise in regulation, intellectual property and doses and 4.2 billion consumer healthcare products. commercialisation. We also work with world-leading As part of our capital allocation framework we invest experts and form strategic partnerships to complement in our three businesses and provide returns to our existing capabilities. shareholders in the form of dividends and share value Innovation is critical to how we improve health and create growth. In 2019 we paid a dividend of 80p per share financial value. As a research-based healthcare company and delivered £5.1 billion of free cash flow. we rely on intellectual property protection to help ensure We make a positive contribution to the communities a reasonable return on our investments so we can in which we operate by creating employment, working continue to research and develop new and innovative with suppliers and paying tax. We offer a broad range medicines. In 2019 we invested £4.6 billion in R&D. of employee benefits, including preventative healthcare In Pharmaceuticals and Vaccines we focus on science services, so that we are able to attract and retain the related to the immune system, human genetics and best people. By delivering on our purpose, the greatest advanced technology. In Consumer Healthcare we contribution we make is to improve the health of people leverage our scientific expertise and deep consumer around the world with our medicines, vaccines and insights to create healthcare products that meet consumer healthcare products. consumer demands. Pharmaceuticals Vaccines Consumer Healthcare Our Pharmaceuticals business has We are the world’s largest vaccines Our world-leading Consumer Healthcare a broad portfolio of innovative and company by revenue, delivering vaccines business combines science and established medicines in respiratory, that protect people at all stages of life. consumer insights to create innovative HIV, immuno-inflammation and oncology. Our R&D focuses on developing everyday healthcare brands that We are strengthening our R&D pipeline vaccines against infectious diseases consumers trust and experts recommend. through a focus on immunology, human that combine high medical need and In 2019, we finalised an agreement with genetics and advanced technologies strong market potential. Pfizer to combine our two consumer to help us identify transformational healthcare businesses. new medicines for patients. Read more on page 17 Read more on page 23 Read more on page 27 Turnover £m Turnover £m Turnover £m Respiratory 3,081 HIV 4,854 Meningitis 1,018 Wellness 4,526 Immuno-inflammation 613 Shingles 1,810 Oral health 2,673 Oncology 230 Influenza 541 Nutrition 1,176 Established Pharmaceuticals 8,776 Established Vaccines 3,788 Skin health 620 Total 17,554 Total 7, 157 Total 8,995 GSK Annual Report 2019 01 Our business model continued Preparing for the future Investing in R&D and new products The new programme will use the unique catalyst of separation In order to be successful, we are increasing investment in R&D to reset the capabilities and cost base for both companies, and new products to deliver future growth. Since announcing and help support delivery of the significant value creation our new approach to R&D in 2018, we have made significant opportunities we see in both New GSK and new Consumer progress to strengthen our pipeline, particularly in oncology. Healthcare. We now have 39 medicines and 15 vaccines in the pipeline, For New GSK, we see a clear opportunity to drive a common and in 2019 we had three major approvals, eight regulatory approach to R&D as science related to the immune system submissions, six positive read-outs from pivotal studies and converges across both pharmaceuticals and vaccines. This we progressed four new assets into pivotal studies. will enable us to be even more effective in how we allocate During 2019 we also completed transactions with Tesaro our budget, share technical and scientific expertise and deliver and with Merck KGaA, further strengthening our position our pipeline, regardless of modality. in oncology, and initiated alliances to build out our platform Under the programme, we will also seek to improve our technologies, in genomics with the University of California, capabilities and create efficiencies in our global support and in cell therapy with Lyell Immunopharma. functions; continue to simplify and focus our manufacturing The positive clinical data we are generating and the progress network, ensuring our supply chain is ready to launch our we have made to strengthen the pipeline underpins our decision new