e20vf
As filed with the Securities and Exchange Commission on March 4, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
|
|
|
o |
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
OR
|
|
|
þ |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the fiscal year ended December 31, 2008
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
|
|
|
o |
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
Commission file number 1-15170
GlaxoSmithKline plc
(Exact name of Registrant as specified in its charter)
England
(Jurisdiction of incorporation or organization)
980 Great West Road, Brentford, Middlesex TW8 9GS England
(Address of principal executive offices)
Simon Bicknell
Company Secretary
GlaxoSmithKline plc
980 Great West Road
Brentford
England
+44 20 8047 5000
company.secretary@gsk.com
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
|
|
|
Title of Each Class
|
|
Name of Each Exchange On Which Registered |
|
|
|
American Depositary Shares, each representing 2
|
|
New York Stock Exchange |
Ordinary Shares, Par value 25 pence |
|
|
4.850% Notes due 2013
|
|
New York Stock Exchange |
5.650% Notes due 2018
|
|
New York Stock Exchange |
6.375% Notes due 2038
|
|
New York Stock Exchange |
Floating Rate Notes due 2010
|
|
New York Stock Exchange |
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of class)
Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report.
Ordinary Shares of Par value 25 pence each 5,187,122,079
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
þ Yes o No
If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
o Yes þ No
Note Checking the box above will not relieve any registrant required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those
Sections.
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See the definitions of
accelerated filer and large accelerated filer in Rule 12b-2 of the
Exchange Act. (Check one):
|
|
|
|
|
Large accelerated filer þ
|
|
Accelerated filer o
|
|
Non-accelerated filer o
|
Indicate by check mark which basis of accounting the registrant has used to prepare the financial
statements included in this filing:
|
|
|
|
|
U.S. GAAP o
|
|
International Financial Reporting Standards as issued þ
|
|
Other o |
|
|
by the International Accounting Standards Board |
|
|
If Other has been checked in response to the previous question, indicate by check mark which
financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
o Yes þ No
Find out more about GSK online...
www.gsk.com
Website
GlaxoSmithKlines website www.gsk.com gives additional information on the Group. Information made
available on the website does not constitute part of this Annual Report.
Notice regarding limitations on Director liability under English Law
Under the UK Companies Act 2006, a safe harbour limits the liability of Directors in respect of
statements in and omissions from the Report of the Directors contained on pages 12 to 98. Under
English law the Directors would be liable to the company (but not to any third party) if the Report
of the Directors contains errors as a result of recklessness or knowing misstatement or dishonest
concealment of a material fact, but would not otherwise be liable.
Report of the Directors
Pages 12 to 98 inclusive consist of a Report of the Directors that has been drawn up and presented
in accordance with and in reliance upon English company law and the liabilities of the Directors in
connection with that report shall be subject to the limitations and restrictions provided by such
law.
Cautionary statement regarding forward-looking statements
The Groups 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 Groups current expectations or forecasts of future events. A shareholder 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 50 to 53 of this Annual Report.
GSK Annual Report 2008 1
Grow
a diversified global business
Deliver
more products of value
Simplify
the operating model
In
2008 we set out three new strategic priorities that aim to improve our long-term financial performance.
We believe these priorities will enable us to navigate the coming
years successfully and retain our leading-edge as a company able to
meet patients and payers needs into the future.
Find out more about our priorities on the following pages.
Contents
|
|
|
|
|
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
12 |
|
|
|
|
60 |
|
|
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
100 |
|
|
|
|
101 |
|
|
|
|
102 |
|
|
|
|
103 |
|
|
|
|
104 |
|
|
|
|
105 |
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
182 |
|
|
|
|
193 |
|
|
|
|
197 |
|
|
|
|
200 |
|
|
|
|
201 |
|
|
2 GSK Annual Report 2008
Our mission
We have a challenging and inspiring mission to improve the quality of human life by
enabling people to do more, feel better and live longer.
By focusing our business around our strategic priorities, were confident that we can
fulfil this promise.
GSK Annual Report 2008 3
Chairman and CEO summary
2008 marked a turning point for GSK and we are now in a
pivotal period of change as we redefine our business
model to increase sales growth, reduce risk and deliver
long-term sustainable financial performance to
shareholders.
Financial performance*
We are pleased with the response of the business to what
we always knew would be a challenging 12 months, due to
the adverse impact of significant US patent expiries and
further decline in Avandia sales. As anticipated, these
factors led to a decline in earnings per share (EPS) for
the year, which was compounded by an unexpected legal
charge in the fourth quarter.
Total sales for the year were £24.4 billion, down 3% in
constant exchange rate (CER) terms, and EPS excluding
major restructuring was 104.7p, a decrease of 9% over
2007 in CER terms. Cash generation remains strong, with
net cash inflow from operating activities of £7.2
billion, up 17% in sterling terms.
The Board declared a dividend for the year of 57p, up from
53p for 2007. During the year we completed share
repurchases of £3.7 billion. We do not expect to make any
significant repurchases in 2009. Our financial strategy
remains to maintain an efficient balance sheet, while
using cash resources to invest in our strategic priorities
and increase returns to shareholders through our
progressive dividend policy.
The performance of our core pharmaceuticals business and
the increasing diversification of its sales base are
important indicators of GSKs progress. Our pharmaceutical
turnover declined 3% in CER terms, reflecting the adverse
impact of generic competition to our patented products and
lower Avandia and pandemic product sales. Excluding
genericised products, Avandia and pandemic products, which
have significant sales volatility, the remaining
pharmaceuticals business delivered £16.4 billion in sales
and grew by 10% in CER terms. Within this, vaccines sales
rose by 20% to £2.47 billion.
Our sales in emerging markets grew by 12% to £2.3 billion.
Sales in Asia Pacific and Japan totalled £1.9 billion; we
are now moving into a phase of converting our extensive
pipeline in Japan into approved medicines.
In 2008, we continued the good work of the previous year
and launched 12 pharmaceutical products including
vaccines. We are now also starting to see good traction
with our new pharmaceutical products launched in the last
two years, which contributed sales of almost £0.8 billion
during the year.
Improved productivity and disciplined allocation of
capital are key elements of our R&D strategy. We currently
have around 30 assets in our late-stage pipeline, a level
we aim to sustain. The augmentation of our pipeline, over
the past few years, has been accomplished without
substantial increases in total R&D expenditure.
*Constant
exchange rates (CER) are explained on page 16.
Sales in Consumer Healthcare were just under £4 billion
and we are making good progress with our strategy of
investment in innovation, acquisitions and marketing
excellence in this area of our business.
Strategic priorities
In 2008 we established our three strategic priorities
to: grow a diversified global business; deliver more
products of value; and simplify the operating model.
These
priorities are designed to radically transform our business by
reducing our relative dependence on small molecule pharmaceuticals
in developed Western markets. We expect to see an increase in the
relative importance of our emerging markets and Japanese businesses
and an increasingly greater contribution to our business from
vaccines and consumer products. We also anticipate a growing
capability to deliver more products of value from R&D which will
not only deliver benefits to patients but will also more readily meet
payers needs and therefore enable us to achieve more rapid,
reimbursed product approvals. Our expanded restructuring programme,
which is expected to deliver annual savings of £1.7
billion by 2011, is a vital catalyst of this change.
These priorities and the progress we made to implement
them during 2008 are explained on the following pages.
You can find more information, including regular
updates on progress as we move through 2009, by
visiting our website at www.gsk.com
Changes to the Board
Sir Ian Prosser and Dr Ronaldo Schmitz will retire from
the Board after the Annual General Meeting. We thank them
for their dedicated service to the Boards of GSK and our
heritage companies and for the valuable contributions
they have made to our business.
In May 2009, we welcome James Murdoch to the Board, as a
Non-Executive Director. As the Chairman and Chief
Executive of News Corporation Europe and Asia, James
brings great experience and expertise to our boardroom,
which will be particularly evident in his role as a
member of GSKs Corporate Responsibility Committee.
Outlook
We enter 2009 with confidence and expect to make further
good progress in implementing our strategic priorities
that will enable us to meet our long-term objective of
reducing risk and delivering sustainable growth to
shareholders.
Finally, we would especially like to recognise the
enormous contribution of our employees and our wide
network of partners. Their willingness, energy and
enthusiasm for change are strong foundations on which to
build our new business model.
|
|
|
|
|
|
Sir Christopher Gent
|
|
Andrew Witty |
Chairman
|
|
Chief Executive Officer |
|
|
|
|
|
To find out more visit us at
www.gsk.com |
4 GSK Annual Report 2008
Our
strategy
The pharmaceutical industry is experiencing a time of
unprecedented challenge. Patent expiries, regulatory issues
and increased pressures from healthcare providers have
combined to create an environment where our sector is
associated with lower growth and higher risk.
We are addressing these challenges through three key
strategic priorities which we believe will transform GSK
into a company that delivers more growth, less risk and an
improved financial performance.
Key challenges
The patents on many medicines that have driven sales growth
in our industry over the last decade are coming to an end.
These medicines may not be replaced by products of
equivalent financial size.
In addition, there are increasing pressures on
pharmaceutical companies to deliver products with
demonstrable benefits over current treatments. No longer
do we merely have to discover and develop products that
help people do more, feel better and live longer. We now
have to justify that our products represent the greatest
value for healthcare providers.
At the same time, the pharmaceutical sector has been
exposed to controversy regarding ethical and patient
safety issues. As an industry, we are in danger of
eroding what trust we already have when we actually need
to be building stronger relationships with governments,
regulators and the general public.
These factors have combined to move the industry from one
which was expected to deliver high growth at low risk, to
the very opposite.
Three strategic priorities
In 2008 we established the following three strategic priorities:
|
|
|
Grow a diversified global
business |
|
|
|
Deliver more
products of value |
|
|
|
Simplify
the operating model |
We believe these priorities will enable us to navigate
the coming years successfully and retain our
leading-edge as a company able to meet patients and
healthcare providers needs into the future.
Updates on our progress will be published on our
website at www.gsk.com and also feature in our
regular financial results.
Corporate responsibility
Running our business in a responsible way is
fundamental to our success and inseparable from our
strategic priorities.
We operate in a way that reflects our values, seeks to
understand and respond to stakeholder views and connects
our business decisions to ethical, social and environmental
concerns. In this way we aim to minimise the negative impacts and
maximise the positive benefits of our business.
Responsibility is vital in all parts of our business and we
understand the need to be open about how we are operating.
We also understand that transparency is a key factor in
building trust with our stakeholders and have implemented a
number of initiatives to improve the transparency of our
activities.
Comprehensive information on our approach to
responsibility issues can be found in our annual
Corporate Responsibility Report at
www.gsk.com/responsibility.
GSK Annual Rerport 2008 5
Grow a diversified global business
We are reducing risk by broadening and balancing our
portfolio, diversifying into new product areas that
show potential, while also fully capturing
opportunities for our products across all geographic
boundaries.
The plans which underpin this strategic priority:
|
|
Drive growth in the pharmaceutical business in
our core markets |
|
|
|
Deliver our ambitious vaccines forecast |
|
|
|
Fulfil the potential of emerging
markets |
|
|
|
Expand our business in Japan |
|
|
|
Grow the Consumer Healthcare business |
To find out more go to page 6
Deliver more products of value
We are striving to build one of the strongest pipelines in the industry.
We are transforming R&D to ensure that we not only deliver the
current pipeline but are also able to sustain a flow of new products
for years to come.
The plans which underpin this strategic priority:
|
|
Focus on the best science |
|
|
|
Diversify through externalisation |
|
|
|
Re-personalise R&D |
|
|
|
Focus on return on investment |
To find out more go to page 8
Simplify the operating model
GSK is a complex organisation. We recognise that we need to
simplify our operating model further, changing the way we
work, removing unnecessary processes and structures which
slow us down and distract us from our mission.
The plans which underpin this strategic
priority:
|
|
Evolve our commercial model |
|
|
|
Re-shape manufacturing |
|
|
|
Streamline our
processes |
|
|
|
Reduce working capital |
To find out more go to page 10
6 GSK Annual Report 2008
We are reducing risk by broadening and balancing our
portfolio, diversifying into new product areas that show
potential, while also fully capturing opportunities for
our products across all geographic boundaries.
Specifically, we expect to generate future sales
growth by strengthening our core pharmaceuticals
business and supplementing it with increased
investment in growth areas such as vaccines,
biopharmaceuticals and consumer healthcare.
We are also seeking to unlock the geographic potential of
our businesses, particularly in emerging markets and
Japan.
We have made good progress on this priority during
2008, and we believe there remain many opportunities
for GSK to diversify further.
Grow a diversified global business
Our plans
Drive growth in the pharmaceutical business in
our core markets
Our established strengths in the small molecule
pharmaceutical sectors of larger markets such as the USA,
UK,
France, Germany, Italy and Spain remain central to our
business. During 2008, we received European approval for
Tyverb for advanced breast cancer, Volibris for the
treatment of pulmonary arterial hypertension, Avamys a
new allergic rhinitis treatment and US approval for
Promacta for the treatment of thrombocytopenia and
Entereg for postoperative ileus. In our US
pharmaceuticals business we have initiated a major change
programme, refocusing marketing to demonstrate value and
introducing new product offerings which focus on volume
opportunities.
Deliver our ambitious vaccines forecast
Increasingly, healthcare providers recognise the important
role that vaccines play in preventative healthcare. Our
proven capability and strong pipeline, plus the high
barriers to entry faced by our competitors, mean that this
is expected to be a source of future growth for GSK.
We are targeting sustained growth in our vaccines
portfolio, by launching new vaccines and working to
expand our franchise in Japan and emerging markets.
During 2008, Cervarix our new cervical cancer vaccine, was
successful in approximately 60% of all tenders, achieving
several notable successes including Europes largest
vaccination programme against cervical cancer, which is
taking place in the UK. The year also saw Rotarix, Boostrix
(adult indication) and Kinrix receive approval from the
FDA.
Fulfil the potential of emerging markets
Emerging markets feature a less-defined distinction
between pharmaceutical, over-the-counter and retail
market structure and our ability to operate across this
spectrum is a clear competitive advantage. We have an
opportunity to improve this capability and further
energise our business in fast-growing emerging markets.
GSK Annual Rerport 2008 7
In 2008, we entered into an alliance with Aspen
Holdings of South Africa. This new relationship
gives us priority access to commercialised products
from a portfolio of over 1,000 potential products.
As the year
ended we acquired a BMS portfolio in
Egypt and reached agreement to acquire a BMS
portfolio in Pakistan. In early 2009 we also agreed
with UCB to acquire its current marketed product
portfolio in a range of territories.
Expand our business in Japan
Japan is a key market for GSK investment and growth. We
have an extensive product pipeline and expect to launch
more than 40 products in this market over the next five
years.
Major approvals in this market recently were Lamictal
for epilepsy and Adoair for COPD.
Grow the Consumer Healthcare business
Our Consumer Healthcare business continues to
drive growth through a portfolio of powerful
brands in three key segments: over-the-counter
(OTC)
medicines, Oral healthcare and Nutritional
healthcare.
The brand portfolio, which includes alli for weight loss,
Panadol a range of analgesics, Sensodyne toothpaste and
Lucozade is supported by a strategy focused on innovation,
marketing excellence, geographic expansion and
acquisitions.
In September 2008 we launched Sensodyne into the Chinese
market, our first major consumer launch in the country for
a decade. We are now preparing to launch alli, the first
OTC weight loss product approved by the European
Commission, across Europe.
|
|
|
|
|
To find out more visit us at
www.gsk.com |
8 GSK Annual Report 2008
We are striving to build one of the strongest pipelines
in the industry. We are transforming R&D to ensure that
we not only deliver our current pipeline of new
pharmaceuticals, vaccines and Consumer Healthcare
products, but are also able to sustain this flow of new
products for years to come.
As we move towards a more diversified business we will
concentrate on developing a higher volume of mid-size
products for more clearly-defined patient populations.
This will help develop a lower risk portfolio which is
not dependent on the performance of one or two large
products.
Positive steps have already been taken, with 30
late-stage assets currently in our pharmaceuticals and
vaccines pipeline. Our objective is to sustain this
throughput of products over the long-term.
Our plans
Focus on the best science
Around 75% of assets in our pipeline are entirely
new compounds or vaccines, demonstrating our
strong drive towards innovation.
During the year we rebalanced our Drug Discovery
organisation to improve efficiency and focus on the
areas of new science that we believe are most likely to
lead to new medicines. Together with vaccines, GSKs
R&D is now focused on eight therapy areas:
Biopharmaceuticals, Immuno-inflammation, Infectious
diseases, Metabolic pathways, Neuroscience, Oncology,
Ophthalmology and Respiratory.
Diversify through externalisation
We recognise that we do not have a monopoly on the best
science. Therefore we have proactively expanded
collaborations with external partners as well as with
academia to access innovation and strengthen our early
pipeline.
Recent alliances with organisations such as Cellzome and the
Harvard Stem Cell Institute and acquisitions such as that
of Sirtris and Genelabs are providing us with competitive
advantage in important areas of research.
In the last year, we completed or expanded 21 new drug
discovery alliances adding significant breadth and scale
to our
R&D activities. There are currently 70 discovery units
working either inside the company or externally.
Biopharmaceuticals will play an increasingly important
role in our future portfolio. Offering a worldwide market
of approximately £40 billion with projected compound
annual growth of 18% over the next five years,
biopharmaceuticals are compounds capable of being
manufactured by living organisms, usually cultured cells.
Currently only 6% of our pipeline comprises
biopharmaceuticals, which is below the industry average. We
have significantly expanded our biopharmaceutical pipeline
through in-house discovery, the acquisition of Domantis and
by in-licensing late-stage products. There are currently 10
clinical research programmes underway including five assets
in late-stage development.
Deliver more products of value
GSK Annual Rerport 2008 9
Re-personalise R&D
We want to create an environment where there is no
impediment to our best scientists making the kind of
discoveries which will transform the companys future by
delivering value to patients, healthcare providers and
shareholders.
2008 saw the creation of Discovery Performance Units
(DPUs) within our Centres of Excellence for Drug Discovery
(CEDDs). Each DPU is a compact, fully-empowered, focused
and integrated team which has responsibility for a small
part of the pipeline.
We have also created new, integrated R&D Units for
Biopharmaceuticals and Oncology. The R&D centre we
established in China in 2007 is now 200 people strong and
has recruited experienced scientists who are dedicated
solely to GSKs neurodegenerative research.
Focus on return on investment
We have adopted a more disciplined approach to how and
where we allocate resources within R&D. More than 35% of
discovery projects have been terminated following our
therapy area rebalancing exercise and reviews by the new
Drug Discovery Investment Board.
As part of the same process, all our 35 Discovery
Performance Units now have three year funding in place to
develop their projects.
We realise that reimbursement is the key to long-term
financial performance and we are working hard to bring a
health outcome focus to R&D which will in turn deliver
greater value to healthcare providers. For example, in
Europe direct dialogue now exists between payer
organisations and our R&D teams to improve our
understanding of the perceived benefit and value of new
products.
|
|
|
|
|
To find out more visit us
at www.gsk.com |
10 GSK Annual Report 2008
GSK is a complex organisation. We recognise that we need
to simplify our operating model further, changing the way
we work, removing unnecessary processes and structures
which slow us down and distract us from our mission.
Our global restructuring programme is a vital catalyst of
our strategy. We believe it will radically change our
business model giving us the capability to support a more
diverse, growing business that is also expected to be more
profitable in the long-term.
Simplify the operating model
Our plans
Evolve our commercial model
We have reorganised so that we now have one single
commercial support structure for Europe, Emerging Markets
and
Asia Pacific/Japan. In the USA, we have radically
restructured our pharmaceuticals business. This includes
the transformation of the US sales force as well as the
decision to designate a single headquarters for US
Pharmaceuticals, located at Research Triangle Park, North
Carolina to reduce complexity and streamline our US
operations.
Re-shape manufacturing
Manufacturing is a key capability at GSK and we are taking
an ambitious approach to re-shaping our operations. We are
moving to match network capacity more closely to volume
and are leveraging our network of sites and contractors to
ensure the flexibility to sustain growth and adapt to
changing business models.
We continue to improve the efficiency of our sites, by
applying benchmarked studies and seizing opportunities to
do more with less. In addition, we are simplifying our
operating model to clarify roles and responsibilities, to
improve prioritisation and decision making and to introduce
simpler, more efficient ways of working.
Streamline our processes
We are simplifying our organisation to speed up
decision-making and improve alignment to our business
priorities. There are many different programmes and
initiatives across GSK including a comprehensive
programme to simplify and reduce costs in IT. Through an
innovative partnership with Microsoft Online we will
produce financial savings, improve productivity and
enhance collaboration internally and with our external
partners.
GSK Annual Report 2008 11
We are striving to ensure that cross-business processes and structures are simpler and more
efficient. For example, a number of reviews are currently underway to simplify our support
functions infrastructure and create a leaner corporate centre.
Reduce working capital
Our current working capital requirement is around £8 billion. In September 2008, we started a
programme which has successfully delivered cash flow benefits of more than £500 million, which we
are using to invest in our strategic priorities.
|
|
|
|
|
To find out more visit us at
www.gsk.com |
|
|
|
|
|
|
|
|
|
|
|
|
12 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial
trends and ratios
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
Growth* |
|
|
2007 |
|
|
|
|
|
Growth* |
|
|
2006 |
|
Total results |
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
|
Turnover |
|
|
24,352 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
22,716 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
23,225 |
|
|
Cost of sales |
|
|
(6,415 |
) |
|
|
13 |
|
|
|
21 |
|
|
|
(5,317 |
) |
|
|
8 |
|
|
|
6 |
|
|
|
(5,010 |
) |
Selling, general and administration |
|
|
(7,656 |
) |
|
|
2 |
|
|
|
10 |
|
|
|
(6,954 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
(7,257 |
) |
Research and development |
|
|
(3,681 |
) |
|
|
4 |
|
|
|
11 |
|
|
|
(3,327 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
|
|
(3,457 |
) |
Other operating income |
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
307 |
|
|
Operating profit |
|
|
7,141 |
|
|
|
(20 |
) |
|
|
(6 |
) |
|
|
7,593 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
7,808 |
|
|
Profit before taxation |
|
|
6,659 |
|
|
|
(24 |
) |
|
|
(11 |
) |
|
|
7,452 |
|
|
|
2 |
|
|
|
(4 |
) |
|
|
7,799 |
|
Profit after taxation for the year |
|
|
4,712 |
|
|
|
(25 |
) |
|
|
(11 |
) |
|
|
5,310 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
5,498 |
|
|
Profit attributable to minority interests |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
109 |
|
Profit attributable to shareholders |
|
|
4,602 |
|
|
|
|
|
|
|
|
|
|
|
5,214 |
|
|
|
|
|
|
|
|
|
|
|
5,389 |
|
|
Basic earnings per share (pence) |
|
|
88.6 |
p |
|
|
(21 |
) |
|
|
(6 |
) |
|
|
94.4 |
p |
|
|
5 |
|
|
|
(1 |
) |
|
|
95.5 |
p |
Diluted earnings per share (pence) |
|
|
88.1 |
p |
|
|
|
|
|
|
|
|
|
|
93.7 |
p |
|
|
|
|
|
|
|
|
|
|
94.5 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results before major restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
|
|
24,352 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
22,716 |
|
|
|
2 |
|
|
|
(2 |
) |
|
|
23,225 |
|
|
Cost of sales |
|
|
(5,776 |
) |
|
|
4 |
|
|
|
11 |
|
|
|
(5,206 |
) |
|
|
6 |
|
|
|
4 |
|
|
|
(5,010 |
) |
Selling, general and administration |
|
|
(7,352 |
) |
|
|
|
|
|
|
8 |
|
|
|
(6,817 |
) |
|
|
(2 |
) |
|
|
(6 |
) |
|
|
(7,257 |
) |
Research and development |
|
|
(3,506 |
) |
|
|
2 |
|
|
|
8 |
|
|
|
(3,237 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
|
|
(3,457 |
) |
Other operating income |
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
475 |
|
|
|
|
|
|
|
|
|
|
|
307 |
|
|
Operating profit |
|
|
8,259 |
|
|
|
(10 |
) |
|
|
4 |
|
|
|
7,931 |
|
|
|
8 |
|
|
|
2 |
|
|
|
7,808 |
|
|
Profit before taxation |
|
|
7,782 |
|
|
|
(14 |
) |
|
|
|
|
|
|
7,790 |
|
|
|
6 |
|
|
|
|
|
|
|
7,799 |
|
Profit after taxation for the year |
|
|
5,551 |
|
|
|
(14 |
) |
|
|
|
|
|
|
5,571 |
|
|
|
8 |
|
|
|
1 |
|
|
|
5,498 |
|
|
Profit attributable to minority interests |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
109 |
|
Profit attributable to shareholders |
|
|
5,441 |
|
|
|
|
|
|
|
|
|
|
|
5,475 |
|
|
|
|
|
|
|
|
|
|
|
5,389 |
|
|
Basic earnings per share (pence) |
|
|
104.7 |
p |
|
|
(9 |
) |
|
|
6 |
|
|
|
99.1 |
p |
|
|
10 |
|
|
|
4 |
|
|
|
95.5 |
p |
Diluted earnings per share (pence) |
|
|
104.1 |
p |
|
|
|
|
|
|
|
|
|
|
98.3 |
p |
|
|
|
|
|
|
|
|
|
|
94.5 |
p |
|
|
Research and development total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
3,557 |
|
|
|
|
|
|
|
|
|
|
|
3,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Healthcare |
|
|
124 |
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
3,681 |
|
|
|
|
|
|
|
|
|
|
|
3,327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost cover total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net finance costs |
|
|
530 |
|
|
|
|
|
|
|
|
|
|
|
191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cover |
|
14 times |
|
|
|
|
|
|
|
|
| |
40 times |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Net finance cost cover is profit before
tax plus net finance costs, divided by net finance costs. |
Tax rate total |
|
|
29.2 |
% |
|
|
|
|
|
|
|
|
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Tax rate before major restructuring |
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
28.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net debt |
|
|
10,173 |
|
|
|
|
|
|
|
|
|
|
|
6,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gearing |
|
|
122 |
% |
|
|
|
|
|
|
|
|
|
|
61 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
The gearing ratio is calculated as net debt as a percentage of total equity.
|
|
|
* |
|
CER% represents growth at constant exchange rates. Sterling% or £% represents growth at
actual exchange rates. See page 13. |
|
|
The calculation of results before major restructuring, is described in Note 1 to the financial
statements, Presentation of the financial statements. |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 13
|
|
|
|
|
Report of the Directors |
|
|
|
|
Report
of the Directors
|
|
|
|
|
|
|
|
The Report of the Directors provides users of the
financial statements with a more complete picture of
GSK. It supplements the information in the financial
statements with a
discussion of other aspects of our activities, our
future and the environment in which we operate.
The report is divided into a number of sections. These are:
Business review
This discusses our financial and non-financial
activities, resources development and performance
during 2008 and outlines the factors including the
trends and the principal risks and uncertainties which
are likely to affect future development. This is sub
divided into:
|
|
|
|
|
|
|
|
12 |
|
|
|
|
14 |
|
|
|
|
17 |
|
|
|
|
20 |
|
|
|
|
21 |
|
|
|
|
26 |
|
|
|
|
27 |
|
|
|
|
32 |
|
|
|
|
33 |
|
|
|
|
34 |
|
|
|
|
43 |
|
|
|
|
50 |
|
|
|
|
54 |
|
Corporate governance
This discusses our management structures and governance
procedures. It includes disclosures on compliance with
the Combined Code on Corporate Governance of the
Financial Reporting Council (Combined Code) and with US
laws and regulation.
|
|
|
|
|
|
|
|
60 |
|
|
|
|
62 |
|
|
|
|
64 |
|
|
|
|
68 |
|
|
|
|
68 |
|
|
|
|
70 |
|
|
|
|
71 |
|
|
|
|
71 |
|
|
|
|
73 |
|
|
|
|
76 |
|
|
|
|
76 |
|
Directors remuneration
This sets out the remuneration policies operated for our
Directors and the Corporate Executive Team (CET)
members. There are disclosures on Directors
remuneration including those required by The Directors
Remuneration Report Regulations 2002 (the Regulations).
The sections cover:
|
|
|
|
|
|
|
|
78 |
|
|
|
|
80-87 |
|
|
|
|
87 |
|
|
|
|
88 |
|
|
|
|
89 |
|
|
|
|
90 |
|
|
|
|
91 |
|
|
|
|
92 |
|
|
|
|
92 |
|
|
|
|
94 |
|
|
|
|
97 |
|
|
|
|
98 |
|
|
|
|
98 |
|
Accounting presentation
This report is prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the
European Union and also with IFRS as issued by the
International Accounting Standards Board.
Data for market share and market growth rates are GSK
estimates based on the most recent data from independent
external sources, and where appropriate, are valued in
Sterling at relevant exchange rates. Figures quoted for
product market share reflect sales by GSK and licensees.
Exchange rates
The Group operates in many countries and earns revenues
and incurs costs in many currencies. The results of the
Group, as reported in Sterling, are affected by movements
in exchange rates between Sterling and other currencies.
Average exchange rates prevailing during the period are
used to translate the results and cash flows of overseas
subsidiaries, associates and joint ventures into
Sterling. Period end rates are used to translate the net
assets of those entities.
Currencies
The currencies that most influence the Groups
results remain the US dollar, the euro, the yen and
the pound.
In 2008 the pound weakened by 28% against the dollar, to
$1.44/£1 at year-end. In addition, the pound weakened by
24% against the euro and by 40% against the yen. A new
£/ record low of 1.02 was set in December.
|
|
|
|
|
|
|
|
|
|
|
|
14 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
2008
Performance overview
|
|
|
|
|
|
|
|
Key performance indicators
|
|
|
* |
|
The calculation of results before major
restructuring is described in Note 1 to the
financial statements, Presentation of the
financial statements. |
|
+ |
|
Free cash flow is described on page 46. |
Our strategies
During 2008 we set out three new strategic priorities.
Full details are given on pages 4 to 11.
Grow a diversified global business
Broadening and balancing our portfolio, diversifying
into new product areas while also fully capturing opportunities
for our products across all geographic boundaries.
Deliver more products of value
Transforming R&D to ensure we not only deliver the
current pipeline but are also able to sustain the flow
of products for years to come.
Simplify the operating model
Simplifying our operating model to ensure that it is
fit for purpose and able to support our business in the
most efficient and effective way.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 15
|
|
|
|
|
Report of the Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our measures
|
|
Progress in 2008 |
|
|
|
|
|
|
|
|
|
We are developing a number of measures to
track our progress against the strategic priorities over
the medium to long term. These include the
following: |
|
We made good progress during the year, with
a number of notable successes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance of core pharmaceuticals business,
including growth in vaccines
|
|
|
|
Excluding genericised products, Avandia and pre-pandemic
preparations, our core pharmaceuticals business had turnover of £16.4
billion and grew by 10%. |
|
|
|
|
|
|
|
Growth of Consumer Healthcare market share
|
|
|
|
Consumer Healthcare sales grew 3%
to nearly £4 billion. Continued
market share growth in Oral healthcare and Nutritional
healthcare but sales fell in OTC due to lower sales of smoking
cessation products. |
|
|
|
|
|
|
|
Contribution of Emerging Markets to our
overall sales and growth
|
|
|
|
Sales in Emerging Markets grew 12% to £2.3 billion.
Transactions with Aspen and BMS executed to build broader
and more geographically diverse portfolio. |
|
|
|
|
|
|
|
Expansion of Japanese business
|
|
|
|
Major recent approvals in Japan for Lamictal for epilepsy and
Adoair for COPD. Around 40 new product opportunities in
development. Sales in Japan fell by 3% as a result of price cuts
mandated by government. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to sales of new products
|
|
|
|
New product launches in the last two years contributed
sales of almost £0.8 billion in 2008. |
|
|
|
|
|
|
|
Number of reimbursable product approvals
and filings
|
|
|
|
12 key product launches, including Tyverb, Volibris and
Avamys in Europe and Treximet, Entereg, Promacta, Kinrix
and Rotarix in the USA. Secured 17% of all FDA approvals
for new chemical entities and vaccines. |
|
|
|
|
|
|
|
Sustaining late-stage pipeline of
around 30 assets
|
|
|
|
Late stage pipeline maintained at around 30 assets. Five
new assets moved into phase III development during 2008,
including darapladib for atherosclerosis and Syncria for type
2 diabetes. |
|
|
|
|
|
|
|
Enhanced productivity and increased
externalisation for Drug Discovery
|
|
|
|
Created 35 Discovery Performance Units, small teams each
with three-year funding in place. Entered or expanded 21
new drug discovery alliances. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delivery of major restructuring programme
|
|
|
|
Annual cost savings of £390 million already achieved.
Programme expanded to deliver annual savings of
£1.7 billion by 2011. |
|
|
|
|
|
|
|
Evolution of our commercial model
|
|
|
|
Rescaled and redeployed US pharmaceuticals sales force.
Sales forces expanded in Emerging Markets. |
|
|
|
|
|
|
|
Reshaping of Global Manufacturing and Supply
|
|
|
|
Manufacturing network rationalisation continuing with
multiple site exits ongoing. |
|
|
|
|
|
|
|
Reduction in working capital
|
|
|
|
Delivered more than £500 million of cash flow benefits
from the working capital reduction programme which
started in September 2008. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
History and development of the company
GlaxoSmithKline plc is a public limited company
incorporated on 6th December 1999 under English law. Its
shares are listed on the London Stock Exchange and the New
York Stock Exchange. On 27th December 2000 the company
acquired Glaxo Wellcome plc and SmithKline Beecham plc,
both English public limited companies, by way of a scheme
of arrangement for the merger of the two companies. GSK
and its subsidiary and associated undertakings constitute
a major global healthcare group engaged in the creation,
discovery, development, manufacture and marketing of
pharmaceutical and consumer health-related products.
GSK has its corporate head office in London and
has its US headquarters in Research Triangle Park,
with operations in some 114 countries, and
products sold in over 150 countries.
Annual Report and Summary
This report is the Annual Report of GlaxoSmithKline plc
for the year ended 31st December 2008, prepared in
accordance with United Kingdom requirements. It was
approved by the Board of Directors on 3rd March 2009 and
published on 4th March 2009.
A summary of the year,
intended for the shareholder not needing the full detail
of the Annual Report, is produced as a separate document
and issued to all shareholders. The summary does not
constitute a set of summary financial statements as
defined by section 251 of the Companies Act 1985. The
Annual Report is issued to shareholders who have elected
to receive it. Both documents are available on GSKs
website.
In this Report GlaxoSmithKline, the Group or GSK means
GlaxoSmithKline plc and its subsidiary undertakings; the
company means GlaxoSmithKline plc; GlaxoSmithKline
share means an Ordinary Share of GlaxoSmithKline plc of
25p; American Depositary Shares (ADS) each represents two
GlaxoSmithKline shares.
Brand names
Brand names
appearing in italics throughout this report
are trademarks either owned by and/or licensed to
GlaxoSmithKline or associated companies, with the
exception of Baycol and Levitra, trademarks of Bayer,
Boniva/Bonviva, a trademark of Roche, Citrucel, a
trademark of Merrell Pharmaceuticals, Entereg, a trademark
of Adolor Corporation in the USA, Volibris, a trademark of
Gilead, NicoDerm, a trademark of
Sanofi-Aventis, Pfizer Canada, Elan, Novartis, Merrell or
GlaxoSmithKline, and Vesicare, a trademark of Astellas
Pharmaceuticals in many countries and of Yamanouchi
Pharmaceuticals in certain countries, all of which are
used in certain countries under licence by the Group.
Business segments
GSK operates in two industry segments:
|
|
Pharmaceuticals (prescription pharmaceuticals and
vaccines) |
|
|
Consumer Healthcare (OTC medicines, Oral healthcare and Nutritional healthcare). |
Results before major restructuring
In October 2007, the Board approved the implementation of
a detailed formal plan for, and GSK announced, a
significant new Operational Excellence restructuring
programme. A second formal plan, representing a
significant expansion of the Operational Excellence
programme, was approved by the Board and announced in
February 2009. With an estimated total cost of
approximately £3.6 billion, the expanded programme is
expected to deliver annual pre-tax savings of
approximately £1.7 billion by the time it is substantially
complete in 2011. GSK presents the restructuring costs
incurred solely as a direct result of the Operational
Excellence programme in a separate column in the income
statement titled Major restructuring. In addition to the
restructuring costs of the Operational Excellence
programme, the major restructuring column in the income
statement includes restructuring costs incurred solely as
a direct result of any restructuring programmes that
follow, and relate to, material acquisitions where the
operations of the acquired business overlap extensively
with GSKs existing operations. The $1.65 billion (£814
million) acquisition of Reliant Pharmaceuticals in
December 2007 is the only acquisition since
October 2007 that meets these criteria.
The Groups
results before the costs of the Operational Excellence
programme and acquisition-related restructuring programmes
meeting the criteria described above are described as
Results before major restructuring. This presentation,
which GSK intends to apply consistently to future major
restructuring programmes that have a material impact on
GSKs operating results and on the manner in which GSKs
business is conducted, has been adopted to show clearly
the Groups results both before and after the costs of
these restructuring programmes. Management believes that
this presentation assists shareholders in gaining a
clearer understanding of the Groups financial performance
and in making projections of future financial performance,
as results that include such costs, by virtue of their
size and nature, have limited comparative value. This
presentation is also consistent with the way management
assesses the Groups financial performance.
CER growth
In order to illustrate underlying performance, it is the
Groups practice to discuss its results in terms of
constant exchange rate (CER) growth. This represents
growth calculated as if the exchange rates used to
determine the results of overseas companies in Sterling
had remained unchanged from those used in the previous
year. CER% represents growth at constant exchange rates.
£% represents growth at actual exchange rates.
All commentaries in this Report are presented in terms
of CER unless otherwise stated.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 17
|
|
|
|
|
Report of the Directors |
|
|
|
|
Products,
intellectual property and
competition
|
|
|
|
|
|
|
|
Pharmaceutical products
GSKs principal pharmaceutical products are currently
directed to eight main therapeutic areas. A description of
the products is on pages 18 to 19 and an analysis of sales
by therapeutic area, is on page 35.
Competition
Our principal pharmaceutical competitors range from small
to large pharmaceutical companies often with substantial
resources. Some of these companies are:
|
|
Abbott Laboratories |
|
|
|
Amgen |
|
|
|
AstraZeneca |
|
|
|
Bristol-Myers Squibb |
|
|
|
Eli Lilly |
|
|
|
Johnson & Johnson |
|
|
|
Merck |
|
|
|
Novartis |
|
|
|
Pfizer |
|
|
|
Roche Holdings |
|
|
|
Sanofi-Aventis |
|
|
|
Schering-Plough |
|
|
|
Wyeth |
Pharmaceuticals may be subject to competition from other
products during the period of patent protection and, once
off patent, from generic versions. The manufacturers of
generic products typically do not bear significant
research and development or education and marketing
development costs and consequently are able to offer their
products at considerably lower prices than the branded
competitors. As a research and development based company
we will normally seek to achieve a sufficiently high
profit margin and sales volume during the period of patent
protection to repay the original investment, which is
generally substantial, and to generate profits and fund
research for the future. Competition from generic products
generally occurs as patents in major markets expire.
Increasingly patent challenges are made prior to patent
expiry, claiming that the innovator patent is not valid
and/or that it is not infringed by the generic product.
For details of some of the challenges to our products see
legal proceedings on pages 172 to 180. Following the loss
of patent protection, generic products rapidly capture a
large share of the market, particularly in the USA.
We believe that remaining competitive is dependent
upon the discovery and development of new products,
together with effective marketing of existing
products.
Within the pharmaceutical industry, the introduction of
new products and processes by our competitors may affect
pricing or result in changing patterns of product use.
There is no assurance that products will not become
outmoded, notwithstanding patent or trademark protection.
In addition, increased government and other pressures for
physicians and patients to use generic pharmaceuticals,
rather than brand-name medicines, may increase competition
for products that are no longer protected by patent.
Intellectual property
Intellectual property is a key business asset for our
company, and the effective legal protection of our
intellectual property (via patents, trademarks,
registered designs, copyrights and domain name
registrations) is critical in ensuring a reasonable
return on investment in R&D.
Patents
It is our policy to try to obtain patents on commercially
important, protectable inventions discovered or developed
through our R&D activities. Patent protection for new
active ingredients is available in most major markets and
patents can also be obtained for new drug formulations,
manufacturing
processes, medical uses and devices for administering
products. Although we may obtain patents for our products,
this does not prevent them from being challenged before
they expire. Further, the grant of a patent does not
provide assurance that the issued patent will be held
valid and enforceable by a court. Significant litigation
concerning such challenges is summarised in Note 44 to the
financial statements, Legal proceedings. If a court
determines that a patent we hold is invalid, non infringed
or unenforceable, it will not protect the market from
third party entry prior to patent expiry.
The life of a patent in most countries is 20 years from
the filing date. Patents protecting new active ingredients
are generally applied for early in the development
process. The long development time for pharmaceutical
products may result in a substantial amount of this patent
life being used up before launch. In some markets
(including the USA and in Europe) it is possible to have
some of this lost time restored and this leads to
variations in the amount of patent life actually available
for each product we market. Further, certain countries
provide a period of data or market exclusivity that
prevents a third party company from relying on our
clinical trial data to enter the market with its copy for
the period of exclusivity.
The patent expiry dates for our significant products are
in the following table. Dates provided are for expiry of
patents in the USA and major European markets on the
active ingredient, unless otherwise indicated, and include
extensions of patent term (including for paediatric use in
the USA) where available.
|
|
|
|
|
|
|
|
|
|
|
|
18 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Products,
intellectual property and competition
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
Compounds |
|
Indication |
|
Major |
|
Patent expiry dates |
|
|
|
|
|
|
|
competitor brands |
|
USA |
|
EU |
|
Respiratory |
|
|
|
|
|
|
|
|
|
|
Seretide/Advair
|
|
salmeterol xinafoate/
fluticasone propionate
|
|
asthma/COPD
|
|
Singulair, Symbicort,
Spiriva, Asmanex, Pulmicort
|
|
2010
(combination)
|
|
2013 2
(combination) |
|
Flixotide/Flovent
|
|
fluticasone propionate
|
|
asthma/COPD
|
|
Qvar, Singulair
|
|
expired
|
|
expired |
|
Serevent
|
|
salmeterol xinafoate
|
|
asthma/COPD
|
|
Foradil, Spiriva
|
|
expired
|
|
expired |
|
Veramyst
|
|
fluticasone furoate
|
|
rhinitis
|
|
Nasacort
|
|
2021
|
|
2023 |
|
Flixonase/Flonase
|
|
fluticasone propionate
|
|
rhinitis
|
|
Nasonex, Rhinocort
|
|
expired
|
|
expired |
|
Anti-virals
|
|
|
|
|
|
|
|
2016
|
|
2019 |
Epzicom/Kivexa
|
|
lamivudine and abacavir
|
|
HIV/AIDS
|
|
Truvada, Atripla
|
|
(combination)
|
|
(combination) |
|
Combivir
|
|
lamivudine and zidovudine
|
|
HIV/AIDS
|
|
Truvada, Atripla
|
|
2012
(combination)
|
|
2013
(combination) |
|
Trizivir
|
|
lamivudine, zidovudine and
abacavir
|
|
HIV/AIDS
|
|
Truvada, Atripla
|
|
2016
(combination)
|
|
2016
(combination) |
|
Agenerase |
|
amprenavir |
|
HIV/AIDS |
|
Prezista, Kaletra, Reyataz |
|
2013 |
|
2014 |
|
Lexiva
|
|
fosamprenavir
|
|
HIV/AIDS
|
|
Prezista, Kaletra, Reyataz
|
|
2017
|
|
2019 |
|
Epivir
|
|
lamivudine
|
|
HIV/AIDS
|
|
Truvada, Atripla
|
|
2010
|
|
2011 |
|
Ziagen
|
|
abacavir
|
|
HIV/AIDS
|
|
Truvada, Atripla
|
|
2012
|
|
2014 |
|
Valtrex
|
|
valaciclovir
|
|
genital herpes, coldsores,
shingles
|
|
Famvir
|
|
2009
|
|
2009 |
|
Zeffix
|
|
lamivudine
|
|
chronic hepatitis B
|
|
Hepsera
|
|
2010
|
|
2011 |
|
Relenza
|
|
zanamivir
|
|
influenza
|
|
Tamiflu
|
|
2013
|
|
2014 |
|
Central nervous system
|
|
|
|
|
|
|
|
Lamictal
|
|
lamotrigine |
|
epilepsy, bipolar disorder
|
|
Keppra, Dilantin
|
|
expired
|
|
expired |
|
Imigran/lmitrex
|
|
sumatriptan
|
|
migraine
|
|
Zomig, Maxalt, Relpax
|
|
expired
|
|
expired |
|
Seroxat/Paxil
|
|
paroxetine
|
|
depression, various
anxiety disorders
|
|
Effexor, Cymbalta,
Lexapro
|
|
expired
|
|
expired |
|
Wellbutrin SR
|
|
bupropion
|
|
depression
|
|
Effexor, Cymbalta,
|
|
expired
|
|
2009 |
|
|
|
|
|
|
Lexapro |
|
|
|
|
|
Requip
|
|
ropinirole
|
|
Parkinsons disease,
|
|
Mirapex
|
|
expired
|
|
2011 |
|
|
|
|
restless legs syndrome
|
|
|
|
|
|
(use in treating
Parkinsons
disease) |
|
Treximet
|
|
sumatriptan and naproxen
|
|
migraine
|
|
Zomig, Maxalt, Relpax
|
|
2017 (combination
and use)
|
|
NA |
|
Cardiovascular
and urogenital
|
|
|
|
|
|
|
|
Avodart
|
|
dutasteride |
|
benign prostatic hyperplasia
|
|
Proscar, Flomax, finasteride
|
|
2015
|
|
2017 |
|
Lovaza
|
|
formulation of omega-4 acid
ethyl esters
|
|
very high triglycerides
|
|
Tricor
|
|
2017
(Formulation) |
|
|
|
Coreg CR
|
|
carvedilol phosphate
|
|
mild-to-severe heart failure,
hypertension, left ventricular
dysfunction post MI
|
|
Toprol XL
|
|
20231
|
|
NA |
|
Fraxiparine
|
|
nadroparin
|
|
deep vein thrombosis,
pulmonary embolism |
|
Lovenox |
|
expired
|
|
expired |
|
Arixtra
|
|
fondaparinux
|
|
deep vein thrombosis,
pulmonary embolism
|
|
Lovenox, Fragmin
Innohep
|
|
expired
|
|
expired |
|
Vesicare
|
|
solifenacin
|
|
overactive bladder
|
|
Detrol, Detrol LA, Enablex, Sanctura
|
|
2018
|
|
NA |
|
|
|
|
|
|
1 Generic competition possible in 2010 as a result of patent settlement |
|
|
|
|
|
2 The UK patent has been revoked by the UK courts |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 19
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Products,
intellectual property and competition
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product |
|
Compounds |
|
Indication |
|
Major |
|
Patent expiry dates |
|
|
|
|
|
|
competitor brands |
|
USA |
|
EU |
|
Metabolic |
|
|
|
|
|
|
|
|
|
|
Avandia |
|
rosiglitazone maleate |
|
type 2 diabetes |
|
Actos, Januvia |
|
2012 |
|
2013 |
|
Avandamet |
|
rosiglitazone maleate and metformin HCI |
|
type 2 diabetes |
|
Competact, Janumet Actoplus met |
|
2012 |
|
2013 |
|
Bonviva/Boniva |
|
ibandronate |
|
osteoporosis |
|
Actonel, Fosamax |
|
2012 |
|
2011 |
|
Anti-bacterials |
|
|
|
|
|
|
|
|
|
|
Augmentin |
|
amoxicillin/clavulanate potassium |
|
common infections |
|
|
|
expired |
|
expired |
|
Altabax |
|
retapamulin |
|
skin infections |
|
|
|
2021 |
|
2022 |
|
Oncology and emesis |
|
|
|
|
|
|
|
|
|
|
Hycamtin |
|
topotecan |
|
ovarian cancer, small cell lung cancer |
|
Doxil, Gemzar |
|
2010 |
|
2011 |
|
Zofran |
|
ondansetron |
|
nausea and vomiting from cancer |
|
Kytril, Emend, Aloxi |
|
expired |
|
expired |
|
Tykerb |
|
lapatanib |
|
advanced and metastatic |
|
Herceptin
|
|
2020 |
|
2023 |
|
|
|
|
breast cancer in HER2
|
|
|
|
|
|
|
|
|
|
|
positive patients |
|
|
|
|
|
|
|
Vaccines |
|
|
|
|
|
|
|
|
|
|
Infanrix/Pediarix |
|
diphtheria, tetanus, pertussis, |
|
diphtheria, tetanus, pertussis, |
|
Pentavac, Pentaxim, |
|
2017 |
|
2016 |
|
|
polio, hepatitis B (HepB), |
|
polio, hepatitis B (HepB), |
|
Pediacel, Pentacel |
|
|
|
|
|
|
inactivated antigens |
|
|
|
|
|
|
|
|
|
Fluarix |
|
split inactivated influenza virus |
|
seasonal influenza |
|
Vaxigrip, Mutagrip, Fluzone, |
|
none |
|
none |
|
|
subtypes A and type B antigens |
|
|
|
Influvac, Aggripal, Fluad |
|
|
|
|
|
FluLaval |
|
split inactivated influenza virus |
|
seasonal influenza |
|
Vaxigrip, Mutagrip, Fluzone, |
|
none |
|
none |
|
|
subtypes A and type B antigens |
|
|
|
Influvac, Aggripal, Fluad |
|
|
|
|
|
Cervarix |
|
HPV 16 & 18 virus like particles |
|
human papilloma virus |
|
Gardasil, Silgard |
|
2026 |
|
2019 |
|
|
(VLPs), AS04 adjuvant (MPL + |
|
type 16 & 18 |
|
|
|
|
|
|
|
|
aluminium hydroxide) |
|
|
|
|
|
|
|
|
|
Rotarix |
|
live attenuated rotavirus |
|
rotavirus gastroenteritis |
|
Rotateq |
|
2022 |
|
2020 |
|
|
strain G1P(8) |
|
|
|
|
|
|
|
|
|
Trademarks
All of GSKs commercial products are protected by registered trademarks in major markets. There may
be local variations, for example, in the USA the trademark Advair covers the same product sold in
the EU as Seretide. Trademark protection may generally be extended as long as the trademark is used
by renewing it when necessary. GSKs trademarks are important for maintaining the brand identity of
its products. GSK enforces its trademark rights to prevent infringements.
Consumer Healthcare products
Our portfolio comprises three main categories: OTC medicines, Oral healthcare and
Nutritional healthcare.
Sales of key Consumer Healthcare products in 2008 are shown on page
37.
Our leading Consumer Healthcare products include the following:
OTC medicines
|
|
alli, the first licensed weight loss medicine to be available without a prescription,
launched in the USA in 2007 and has now won approval to launch across Europe in 2009
|
|
|
Panadol, the global paracetamol/acetaminophen analgesic
|
|
|
Smoking control products NicoDerm, NiQuitin CQ, Nicabate and in the USA, Nicorette
|
|
|
Other brands include Breathe Right nasal strips, Tums, Citrucel, Contac and FiberChoice. |
|
|
|
|
|
|
|
|
|
|
|
|
20 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Products, intellectual property and competition continued |
|
|
|
|
|
|
|
|
|
Oral healthcare
|
|
Aquafresh, a range of toothpastes,
toothbrushes and mouthwashes
|
|
|
Sensodyne, a range of toothpastes and
toothbrushes, including Pronamel to protect
from acid erosion
|
|
|
Biotene, acquired late in 2008 and the
leading treatment for dry mouth
|
|
|
Polident, PoliGrip and Corega, the denture
care cleansers and adhesives
|
|
|
Other brands include Odol, Macleans and Dr
Best.
|
Nutritional healthcare
|
|
Lucozade, a range of energy and sports drinks
|
|
|
Horlicks, a range of milk-based malted food
and chocolate drinks
|
|
|
Ribena, a blackcurrant juice-based drink. |
Consumer Healthcare competition
GSK holds leading global positions in all its key
consumer product areas. Worldwide it is the third largest
in Oral healthcare and in OTC medicines. In Nutritional
healthcare it holds the leading position in the UK, India
and Ireland.
The environment in which the Consumer Healthcare business operates has become ever more challenging:
|
|
consumers are demanding better quality,
better value and improved performance
|
|
|
retailers have consolidated and globalised
which has strengthened their negotiation power
|
|
|
cycle times for innovation have reduced. |
The
main competitors include the major
international companies Colgate-Palmolive,
Johnson & Johnson, Procter & Gamble, Unilever
and Wyeth. In addition, there are many other
smaller companies that compete with GSK in
certain markets.
The major competitor products in OTC medicines are:
|
|
in the USA: Metamucil (laxative), Pepcid
(indigestion) and private label smoking
control products
|
|
|
in the UK: Lemsip (cold remedy), Nurofen and
Anadin (analgesics), and Nicorette and
Nicotinell (smoking control treatments). |
In Oral healthcare the major competitors are
Colgate-Palmolives Colgate and Procter & Gambles
Crest.
In Nutritional healthcare the major competitors to
Horlicks are Ovaltine and Milo malted food and
chocolate drinks. The competitors to Ribena are
primarily local fruit juice products, while Lucozade
competes with other energy drinks.
Global manufacturing and supply (GMS)
More than 31,000 people work in GMS across our network of
78 sites in 37 countries. GMS supports the commercial
ambition of GSK by delivering quality medicines and
consumer products to patients and customers around the
world.
The scale of manufacturing in GSK is staggering, with
the manufacture of over 4 billion packs per year in
28,000 different presentations (including tablets,
creams/ointments, inhalers, injections, liquids and
steriles), which are then supplied to over 150 markets.
Over £3.6 billion is spent on production each year.
GMS operates a procurement operation on behalf of the Group.
We spend over £2 billion annually with
external suppliers, purchasing active ingredients,
chemical intermediates, packaging components and
part-finished and finished products.
During 2008, as our commercial customers sought every
opportunity to grow their business, we focused on the
cost-competitive supply of quality product to meet their
ambition. We began adapting to the emerging commercial
model by leveraging our network of sites and contractors
to give us built-in flexibility to sustain future growth
and adapt to emerging commercial business models. In an
increasingly rigorous external regulatory environment, we
have continued to leverage technology in support of
process understanding, control, and capability.
Our Primary supply sites supply high quality,
competitively priced bulk actives and focus on
improvements in primary technologies and processes. Our
new product and global supply sites work closely with
R&Ds development teams to ensure that the right technical
competencies are in place to support rapid and successful
new product introduction. These sites serve as the focal
point for developing and introducing new secondary
manufacturing technologies. The sites in our Regional
Pharma supply division focus on reducing costs, allowing
GSK to compete more effectively in all its markets. Our
Consumer Healthcare sites deliver high-quality,
competitively priced products and support rapid new
product introduction in a highly innovative and
competitive business. New technologies have become a
fundamental platform for driving innovation, lowering
costs, and providing flexibility in operations.
We are embedding new ways of working that are simplifying
the business and achieving greater efficiencies. It is our
focus on customer service, including support for new
product launches, our strong compliance culture, our
commitment to health, safety and the environment, and our
commitment to developing our people that have delivered
strong results for GSK even as the external environment
has become more demanding.
Vaccine manufacturing is particularly complex as it
requires the use of innovative technologies and living
micro-organisms. Sophisticated quality assurance and
quality control procedures are in place to ensure the
vaccines quality and safety. This includes animal use
according to health authorities requirements. Due to
their biological nature, individual health authorities may
subject vaccines to a second control to guarantee the
highest quality standards.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 21
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
Research and development Pharmaceuticals
GSK R&D is striving to build one of the strongest
pipelines of potential new medicines in the industry. In
2008, Pharmaceutical R&D was actively managing over 150
projects in human clinical trials across the globe.
Delivering this pipeline to patients safely and
efficiently is the number one goal.
Discovering potential medicines
|
|
The early research identifies the biological targets interfering with a particular disease,
and creates small molecules or biopharmaceuticals that interact with these disease targets.
Drug Discovery (DD) is formed of the Centres of Excellence for Drug Discovery (CEDDs), groups
focused around defined Therapy Areas.
|
|
|
A Therapy Area Review exercise conducted in 2007 and early 2008 helped R&D refocus its
discovery effort around well identified promising areas of science that are more likely to
deliver products of value. R&D invested in growth areas such as ophthalmology and ceased less
promising areas of science such as urology. The focus of Drug Discovery at GSK is summarised
in the table below.
|
|
|
Following this Therapy Area Review, a major transformation of Drug Discovery was conducted in
our company in 2008 to create an even more nimble, creative, and entrepreneurial environment,
building on the success of the existing CEDD model. Each CEDD created Discovery Performance
Units (DPU), gathering small integrated and empowered groups of scientists (size ranging from
5 to 70 people), focusing on a particular disease or pathway, taking the CEDD model one step
further. The number of DPUs in each CEDD varies according to the science, and some standalone
DPUs were created to explore new therapy areas (such as Ophthalmology), or new ways of
working.
|
|
|
Each of the CEDDs and standalone DPUs submits a 3-year business plan with overall budget and
clearly defined objectives. The CEDDs are accountable for the production of quality proofs of
concept, and are tackling this challenge through internal discovery as well as extensive
collaborations with academia and biotech companies. |
Centres of Excellence for Drug Discovery (CEDD)
All include several Discovery Performance
Units (DPU)
|
|
Immuno-Inflammation
|
|
|
Infectious Diseases
|
|
|
Metabolic Pathways
|
|
|
Neurosciences
|
|
|
Respiratory |
|
|
Centre of Excellence for External Drug
Discovery (CEEDD) |
Additional standalone
Discovery Performance Units (DPU)
|
|
Macrolides |
|
|
Opthiris (focusing on
ophthalmology) |
|
|
Virtual PoC |
|
|
Sirtris |
|
|
Academic DPU |
|
|
We continue to identify compounds from other
companies that would enhance the portfolio and to
create innovative collaborations to ensure that we
are seen as a partner of choice for large and small
companies. Our internal R&D expertise allows us to
have a strong position in business development, and
makes us able to complement our internal pipeline
with acquisitions, in-licensing,
co-marketing/co-promotion deals, or future options
collaborations. |
Delivering these medicines to patients
|
|
Progression into late-stage development
consists of optimising both the physical
product properties of the medicine, (the
chemical steps and formulation required to
manufacture and deliver it), as well as the
much larger scale studies in humans confirming
efficacy and safety. The combination of the
results of these two steps into a regulatory
file for submission to regulatory agencies and
approval for patient use is the responsibility
of the regulatory team. |
|
|
Medicines Development is the collection of
four therapeutically aligned Medicine
Development Centres (MDCs): Cardiovascular and
Metabolic (CVM), Infectious Diseases (ID),
Neurosciences and Respiratory. Each MDC has
ultimate accountability for developing
experimental drugs into regulatory-approved
medicines for patients. The MDCs are
responsible for creating value through the
execution of full product development plans
and ensuring strong partnerships with the rest
of R&D and GSK, in particular the CEDDs,
preclinical development, the regulatory and
commercial groups, and manufacturing. |
|
|
In 2008, emphasis was put on the creation of
strongly empowered project teams, with the
creation of Medicine Development Leader roles
for all the key late stage assets. The Centre
for Clinical Study Excellence was also created
as a professional organisation providing study
operations capabilities which, in partnership
with the MDCs and the CEDDs, delivers GSK
clinical trials. |
|
|
|
|
|
|
|
|
|
|
|
|
22 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Research and development continued
|
|
|
|
|
|
|
|
Major opportunity in oncology creation of an Oncology R&D unit in 2008
In 2008, we created an integrated Oncology unit, spanning
from drug target identification through to late stage
development. Its strong pipeline of cancer medicines, as
well as unique aspects of oncology medicines development,
were behind the creation of the Oncology R&D unit.
Oncology is an important investment area for GSK and 2008
has seen its late stage pipeline flourish.
Future growth in biopharmaceuticals creation of a Biopharm R&D unit in 2008
With the goal of becoming a leader in biopharmaceuticals,
we created the Biopharm R&D unit in 2008.
Biopharmaceuticals are large molecules such as antibodies,
proteins or peptides which are manufactured using living
cells. Because they are very different to small molecules
(which are made by chemical synthesis), the R&D process
requires quite specific treatment from a discovery,
development and manufacturing perspective. The Biopharm
R&D unit brings all of these functions together in a
single cohesive group with discovery, biopharmaceutical
process development and late stage development forming
part of one organisation.
Investment in global R&D: growth of R&D China
In line with our aim to access the best science and to
ensure GSK is a truly global company, we announced in 2007
the creation of R&D China. In 2008, this group grew to 200
employees focusing on neurodegeneration and has created
three DPUs during the year. R&D China is currently
focusing on discovery, but as the unit grows and the
pipeline matures, it will expand its capabilities to be a
fully integrated R&D centre.
Governance
Key projects reaching significant milestones are
reviewed each month by the Product Management Board
(PMB), which is responsible for determining if a
medicine has met criteria for passing into the next
phase of development.
GSKs Chief Medical Officer,
working with the Global Safety Board, is ultimately
accountable for oversight of all major decisions
regarding patient safety. Our Global Safety Board is
responsible internally for approving pivotal studies
and investigating any issues related to patient safety
arising during the development programme. Information
from GSK clinical trials is widely and easily
available at the Clinical Trial Register on GSKs
website.
The oversight of strategic issues, organisation
choices and budget management across R&D is owned by
RADEX, the R&D Executive team.
R&D employees
R&D employs staff with a wide variety of educational
backgrounds, with biologists, chemists, clinical
scientists and physicians being some of the more prominent
qualifications. Given the number of structural changes in
2008, we are ensuring that staff retention is a top
priority, through personal development programmes, staff
engagement strategies and active talent management.
Diseases of the developing world
Continued investment in research into diseases of the
developing world is essential if there is to be a
long-term improvement in the health of people who live in
these regions. As part of our response to this challenge,
we operate a drug discovery unit based at Tres Cantos
(Spain), which focuses on malaria and tuberculosis.
Additional R&D sites in the USA and the UK are focused on
the development of new medicines to treat HIV/AIDS and
drug resistant bacteria, while vaccine research is
conducted in Rixensart (Belgium).
Through these R&D efforts, we are addressing the
prevention and treatment of all three of the World Health
Organizations (WHO) priority infectious diseases.
Public/Private Partnerships (PPPs) remain essential to
fund research where there is no commercially viable
market for a potential product. We remain a leader in
working in PPPs and continue to collaborate closely with
many governments, academic centres, United Nations
agencies and other global funding bodies in this area, to
maximise expertise and knowledge.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 23
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Research and development continued
|
|
|
|
|
|
|
|
Vaccines R&D
GSK is active in the fields of vaccine research,
development and production and has a portfolio of over
30 vaccines approved for marketing. We have over 1,600
scientists devoted to discovering innovative vaccines
that contribute to the health and well-being of people
of all generations around the world. The discovery and
development of a new vaccine is a complex process
requiring long-term investment and with more than 20
vaccines in clinical development, we have one of the
strongest vaccine pipelines in the industry. Although
vaccines have traditionally been used to ward off
illness, GSKs vaccine division is developing
therapeutic immunotherapeutics aimed at educating the
patients immune system to identify and attack cancer
cells in a highly specific manner.
Vaccine discovery involves many collaborations with
academia and the biotech industry to identify new vaccine
antigens which are then expressed in yeast, bacteria or
mammalian cells and purified to a very high level. This is
followed by formulation of the clinical lots of the
vaccine. This may involve mixing antigens with selected
GSK novel proprietary adjuvant systems, which are
combinations of selected adjuvants designed to elicit the
most appropriate immune response to a specific antigen.
The right combination of antigen and adjuvant system can
help the body mobilise the most effective immunological
pathway, which is designed to provide maximum protection
against specific diseases in targeted populations.
Once formulated, the candidate vaccine is evaluated from a
safety and efficacy perspective through the different
phases of preclinical testing, then through the clinical
trials involving healthy individuals. These will range
from safety analysis in a small group of volunteers in
phase I, dose adjustment and proof of concept in phase II
to large-scale safety and efficacy analysis in phase III.
The results obtained during clinical trials and data
regarding the development of a quality and large-scale
production process and facilities are then combined into a
regulatory file which is submitted to the authorities in
the countries where the vaccine will be made available.
After launch, post marketing studies of considerable
size are set up to assess vaccination programmes and to
monitor vaccine safety.
Animals and research
For ethical, regulatory and scientific reasons, research
using animals remains a small but vital part of research
and development of new medicines and vaccines. We only use
animals where there is no alternative and only in the
numbers required for each test. We strive to exceed
regulatory standards
in the care and use of the animals used and undertake
internal and external review to assure these standards.
The vast majority of the experimental methods do not use
animals. We are actively engaged in research to develop
and validate more tests that either avoid the use of
animals in research or reduce the numbers needed. When
animals are used in research, unnecessary pain or
suffering is scrupulously avoided.
We decided not to initiate funding of studies using great
apes after 28th October 2008. This is a voluntary
decision and provides a tangible demonstration of our
commitment to the 3Rs of animal research, which advocates
the replacement and reduction of animals in research and
refining of experiments to improve animal welfare.
We understand that use of animals for research purposes
commands a high level of public interest. Our Public
Policy Position The care and ethical use of animals in
research, and further information and reports, are
available on our website.
Research and development Consumer Healthcare
The continuous creation and development of innovative
products keeps our brands relevant, vibrant and valuable.
Our portfolio spans three major categories:
over-the-counter (OTC) medicines, Oral healthcare and
Nutritional healthcare. For our major brands, dedicated
R&D teams partner with and work alongside their
commercial brand team colleagues in office-free hub
environments that foster collaboration and fast
decision-making. Hubs have quickly become a preferred way
of working at our Innovation Centres in Weybridge, UK and
Parsippany, USA.
|
|
|
|
|
|
|
|
|
|
|
|
24 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Research and development continued
|
|
|
|
|
|
|
|
We have a full and diverse product development pipeline. Our key late stage projects are
highlighted here, comprising both new chemical entities and new combinations and formulations of
existing assets. The most advanced status is shown and includes 2008 approvals in at least one
major market.
Key:
Phase III
Large comparative study (compound versus placebo and/or established treatment) in patients to
establish clinical benefit and safety.
Filed
Following successful Phase III trials, we file the product for approval by the regulatory
authorities.
Approval
Only when approval is granted can we begin to market the medicine or vaccine.
Our full pipeline is on pages 199 to 202 and on our website www.gsk.com
|
|
|
Therapeutic area |
|
Compound |
|
|
|
|
|
|
Biopharmaceuticals |
|
belimumab1 |
|
|
|
|
|
otelixizumab1 |
|
|
|
|
|
Syncria1 |
|
|
|
|
|
ofatumumab1 |
|
|
|
|
|
|
|
|
Bosatria (mepolizumab) |
|
|
|
|
Cardiovascular & Metabolic |
|
Avandamet XR |
|
|
|
|
|
Avandia + simvastatin |
|
|
|
|
|
darapladib1 |
|
|
|
|
|
Arixtra |
|
|
|
|
Neurosciences |
|
almorexant1 |
|
|
|
|
|
retigabine1 |
|
|
|
|
|
rosiglitazone XR |
|
|
|
|
|
Lamictal XR |
|
|
|
|
|
Lunivia1 |
|
|
|
|
|
Solzira (1838262)1 |
|
|
|
|
Oncology |
|
Avodart |
|
|
|
|
|
elesclomol1 2 |
|
|
|
|
|
pazopanib +
Tyverb/Tykerb |
|
|
|
|
|
Tyverb/Tykerb |
|
|
|
|
|
|
|
|
pazopanib |
|
|
|
|
|
|
|
|
Duodart (Avodart + alpha blocker) |
|
|
|
|
|
Zunrisa/Rezonic |
|
|
|
|
|
Revolade/Promacta1 |
|
|
|
|
Vaccines |
|
Hib-MenCY-TT |
|
|
|
|
|
MAGE-A3 ASCI |
|
|
|
|
|
|
|
|
MenACWY-TT |
|
|
|
|
|
New generation flu vaccine |
|
|
|
|
|
Simplirix |
|
|
|
|
|
Synflorix |
|
|
|
|
|
Cervarix1 |
|
|
|
|
|
Prepandrix (Flu pre-pandemic)1 |
|
|
|
|
|
|
1 |
|
In-licence or other alliance relationship with third party. |
|
2 |
|
See Note 40 to the financial statements, Post balance sheet events |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 25 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Research and development continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our employees
|
|
|
|
|
|
|
|
Recruitment, talent management and leadership development
In 2008, as with every year, recruiting, retaining and developing our employees was critical to
enhancing and sustaining our performance and reputation. Some areas of focus:
|
|
Our recruiters proactively identify, engage
and attract top external talent and assess
their potential fit with the organisation.
This takes places across all functions,
businesses and geographical areas. Our
assessment process is aligned to a core set of
competencies, of which ethics and integrity
are central. |
|
|
Our streamlined annual performance and
development planning (PDP) process means
employees have business-aligned objectives and
behavioural goals. With regular reviews, the
progress is ongoing, culminating with an
end-of-year review. |
|
|
We have an annual talent management cycle to
identify the highest performing people in each
business, followed up with tailored management
and leadership programmes for key talent. |
Performance and reward
Our reward systems support high performance and help to
attract and retain the best people. Performance-based pay
and bonuses, share rewards and share options align
employee interests with business targets.
Communication and employee involvement
When new full-time employees join our organisation, they
have the opportunity to take part in the GSK Experience,
an interactive induction programme offered at many
locations across the UK and USA. Programme modules are
also provided to support local induction and awareness
seminars around the world. This experience gives
employees a flavour of the communications and engagement
activities on offer throughout GSK.
Our communication channels are designed to keep employees informed, engaged and involved in
activities across all areas of our organisation. We encourage two-way, open and honest
communication with employees, and in 2008 web technology was used increasingly to engage more
employees in a more immediate way. New or updated communication channels in 2008 include:
|
|
myCEO an area on the GSK intranet that
allows employees to engage directly with the
CEO via discussion and Q&A |
|
|
The Ambassador community provides slides,
statements and films which give employees
company information and keep them up-to-date
on the issues affecting GSK and the
pharmaceutical industry |
|
|
GSKtv a web-based library of all GSKs
video assets including presentations on
strategy and employee broadcasts |
|
|
Interactive multimedia events such as web
broadcasts, multi-site Q&A sessions give
regular updates globally from CEO, business or
function leaders |
|
|
Face to face communications activities town
hall presentations led by senior executives, lunches with
CET and senior executives. |
To ensure our communications activities are effective and
to enable us to continue to improve, there are a number of
evaluation processes. Feedback and monitoring mechanisms
are part of every major communication event, and Q&A and
feedback facilities are a core feature of our web
communications channels. Other broader processes include a
Global Leadership Survey every two to three years. The
survey asks over 10,000 managers worldwide to comment on
critical issues such as culture and confidence in GSKs
future.
As our business evolves, there will be changes that
affect employees and we remain committed to consulting on
these changes via a number of internal consultation
forums and discussions with the European Employee
Consultation Forum and similar bodies in countries where
this is national practice.
Diversity
We are committed to employment policies free from
discrimination against existing or potential employees on
the grounds of age, race, ethnic and national origin,
gender, sexual orientation, faith or disability. GSK is
committed to offering people with disabilities access to
the full range of recruitment and career opportunities.
Every effort is made to retain and support employees who
become disabled while working at GSK. For more details on
diversity measures, see our Corporate Responsibility
Report.
Healthy high performance
To be able to meet our mission and strategy, our Employee
Health and Performance initiatives focus on the health
factors
that enable employees to perform at the highest level by
sustaining energy and engagement. The programmes developed
to deliver this health strategy range from the traditional
such as immunisations, smoking control, and weight
management to cutting-edge programmes in the areas of
team and personal resilience, ergonomics and Energy for
Performance. These programmes, available in many
languages, are designed to address the root causes of
excessive work pressure and low energy and engagement at
work and at home. They are complimented by our commitment
to flexible working that enables employees to do their
best work in an environment that helps them integrate
their work and personal lives. For more details on scope
and impact of these programmes, see our Corporate
Responsibility Report.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 27
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our responsibility
|
|
|
|
|
|
|
|
Improving access to medicines
Access to healthcare in the developing world
There are no easy solutions to the challenge of providing
sustainable access to healthcare in developing countries.
Poverty is the single biggest barrier. In many countries
people do not have enough food, access to a clean water
supply, hospitals or clinics in which to receive
treatment and healthcare professionals to care for them.
We are committed to playing a full part in addressing the
healthcare challenges of the developing world by taking an
innovative, responsible and, above all, sustainable
approach. GSK is making a vital contribution to developing
country healthcare through action in a number of areas
including: preferential pricing of our anti-retrovirals
and anti-malarials; tiered pricing of our vaccines;
investing in R&D that targets diseases particularly
affecting the developing world (see page 28); community
investment activities and partnerships that foster
effective healthcare (see page 29); and seeking innovative
partnerships and solutions. We cover our contribution to
improving access to medicines extensively in our Corporate
Responsibility Report.
In 2008, we were a clear leader in the first Access to
Medicines Index produced by the ATM Foundation. We will
continue to build on our product, pricing and partnership
commitments to help improve healthcare in the developing
world. In February 2009, we announced a new approach to
pricing in the UN defined list of least developed
countries. However, a significant increase in funding from
the global community is still needed to support R&D and to
provide access to the resultant medicines and vaccines.
While much has been achieved, sustainable progress will
only occur if the significant barriers that stand in the
way of better access to healthcare are tackled as a
shared responsibility by all sectors of global society -
governments, international agencies, charities, academic
institutions, the pharmaceutical industry and others.
Access to medicines in the developed world
Programmes in the USA
We are working to provide access to medicines for
people with limited financial resources and without
prescription drug insurance.
For uninsured Americans who do not qualify for Medicare or
Medicaid, GSK and 11 other pharmaceutical companies
created Together Rx Access, a programme for qualified
individuals offering reductions in the pharmacy cost on
more than 300 medicines. Over 820,000 Together Rx Access
cardholders saved about $24 million in 2008.
Programmes in other countries
We have also introduced Orange Cards providing
discounts on certain GSK prescription medicines for
eligible patients in a number of other countries. The
nature of the discounts varies between countries and
the ways in which the healthcare systems operate.
Patient Advocacy
The Patient Advocacy initiative has demonstrated
significant progress since its inception in 2002.
Initially launched as a US programme, it is now a critical
initiative throughout GSK. Patient Advocacy teams in the
USA and Europe share best practices and established
processes to optimise interaction with patient groups.
Typically these relationships provide mutual
opportunities: to learn about patient needs and priorities
and for patient groups to develop an understanding of drug
development challenges.
In 2008, we continued to partner with patient groups on
common issues: advocating for access to medicines and
treatment, increasing funding for health programs and
improving health care delivery. We are considered to be a
trustworthy partner with patient groups and we have worked
with patient groups and our trade associations to increase
the transparency of all of our interactions.
Our work with communities
We work as a partner with under-served communities in the
developed and developing world supporting programmes that
are innovative, sustainable and bring real benefits to
these communities. Our global community investment in 2008
was £124 million. This compares with £109 million in 2007
on a like for like basis, an increase of 13%. This
comprised product donations valued at £68 million, cash
giving of £37 million, in-kind donations of £4 million
plus costs of £15 million to manage and deliver community
programmes in over 100 countries. The product donations
include £56 million for GSKs patient assistance
programmes, £7 million worth of albendazole for the
Lymphatic filariasis (LF) programme and £5 million for
humanitarian product donations. Product donations are for
the first time valued at cost (average cost of goods)
rather than wholesale price (WAC). Our new approach to
valuing donations is a more accurate reflection of the
cost to GSK and is therefore more transparent. We believe
we are the first pharmaceutical company to adopt this
practice. For comparative purposes the total value of
donations in 2008 using WAC for products would be £343
million compared with £282 million in 2007.
We do not operate a single charitable foundation for
our community investment programmes, but have a number
of country based foundations and their 2008 grants are
included in the investment total.
|
|
|
|
|
|
|
|
|
|
|
|
28 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our responsibility continued
|
|
|
|
|
|
|
|
Our cash giving was targeted primarily at health and
education initiatives as follows:
Global Health Programmes
Eliminating lymphatic filariasis
Our effort to eliminate the disabling disease, LF from
the world, continued in close partnership with the
governments of countries where the disease is endemic,
the WHO and over 40 partner organisations. We are
committed to donating as much of the anti-parasitic drug
albendazole as required to treat the one billion people
at risk in over 80 countries. In 2008, 266 million
albendazole treatments were donated to 30 countries. We
have donated over one billion albendazole treatments
since the global elimination programme started in 2000.
Positive Action on HIV/AIDS
Positive Action is our pioneering global programme
working with communities affected by AIDS. Started in
1992, it supports community-based organisations to
deliver effective HIV and AIDS education, prevention and
healthcare services. During 2008, Positive Action worked
with 16 partners to support programmes in 21 countries.
Positive Actions larger programmes operate in Mexico,
Kenya, India, China, Cambodia and Vietnam.
The GlaxoSmithKline African Malaria Partnership
Our malaria advocacy programme Mobilising for Malaria
has launched country Coalitions Against Malaria in the
UK, Belgium, France, Ethiopia and Cameroon to increase
awareness of malaria and mobilise resources. During
2008, GSK co-sponsored The Guardian International
Development Journalism Awards to recognise the work of
NGOs in addressing the UN Millennium Development Goals -
which included a focus on malaria.
PHASE
The PHASE programme (Personal Hygiene And Sanitation
Education), initiated by us in 1998, is now providing
education to thousands of school children in 13 countries
to improve their health and hygiene to fight infectious
diseases. In 2008, we committed three years funding of
£320,000 to extend the programme into India.
Humanitarian product donations
During 2008, we donated essential products, such as
antibiotics, through non-profit partners including
AmeriCares,
Direct Relief International, MAP International and
Project HOPE, to support humanitarian relief efforts and
community healthcare. The total value of our
international humanitarian product donations was £5
million at average cost.
Community initiatives
We are dedicated to strengthening the fabric of
communities through providing health and education
initiatives and support for local civic and cultural
institutions that improve the quality of life. In the UK,
we contributed £6 million in 2008 to our continuing
programme of charitable activities supporting over 70
organisations in health, medical research, science
education, the arts and the environment.
Programmes in North America at a national and local level
focused on improving public education, increasing access
to healthcare for children and healthcare (prevention and
access) for breast or gynaecologic cancers. Funding for
these was of $24 million.
GSK was one of 21 companies, and the only manufacturing
company, to be awarded the new CommunityMark, following
independent assessment. The Mark created by Business in
the Community (BitC) was given for our work at local and
national level in the UK as well as for our larger
international programmes.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 29
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our responsibility continued |
|
|
|
|
|
|
|
Health initiatives
Our contribution to improve healthcare included the following grants:
|
|
|
|
|
|
Non Profit partner |
|
Amount in 2008 |
|
Purpose of grant |
|
|
Childrens Health Fund USA
|
|
$888,000
|
|
To extend the Referral Management Initiative (RMI) which ensures continuity of specialist medical care for high-risk children who are often homeless |
|
Pittsburgh Mercy Foundation USA
|
|
$450,000
|
|
To provide access to healthcare for homeless men and women in Pittsburgh, USA |
|
GSK IMPACT Awards UK and Philadelphia
|
|
£489,000
|
|
To recognise excellence in non-profit community health organisations. Charities receive unrestricted grants for their work dealing with diverse and difficult social issues |
|
Medical Research Charities UK
|
|
£449,000
|
|
To support medical research programmes |
|
Education initiatives
|
|
|
|
|
|
Non Profit partner |
|
Amount in 2008 |
|
Purpose of grant |
|
|
Institute for a Competitive Workforce
USA
|
$100,000
|
|
To improve education and create a skilled workforce for the future,
working in partnership with a broad business coalition and staffed
by the US Chamber of Commerce |
|
Science in the Summer
Philadelphia, Pittsburgh and North Carolina
|
|
$575,000
|
|
To teach basic scientific concepts and inspire school children
through a library-based science education programme |
|
Project ENTHUSE
UK
|
|
£200,000
|
|
To support Continuing Professional Development (CPD) for science
teachers and ultimately encourage children to engage with science
and pursue careers in science and technology |
|
CREST Star Investigators
UK
|
|
£120,000
|
|
To provide science activities and awards for after school clubs in
5,000 UK primary schools, working in partnership with the British
Association for the Advancement of Science |
|
Further information about GSK grants and programmes are available on gsk.com.
Employee involvement
Our employees are encouraged to contribute to their local communities through employee volunteering
schemes. Support includes employee time, cash donations to charities where employees volunteer and
matching gift programmes.
Through the US GSK Matching Gift Program, we matched 17,000 employee and retiree gifts at a value
of $5 million in 2008 plus $1 million to the United Way campaign. GSKs GIVE programme provided
grants of over $416,000 to 437 organisations where US employees volunteered and £244,000 to 400
UK-based non-profit organisations via the GSK Making a Difference programme.
|
|
|
|
|
|
|
|
|
|
|
|
30 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our responsibility continued |
|
|
|
|
|
|
|
Responsibility for environment, health and safety
Caring for the environment and the health and safety
(EHS) of employees is a key part of our drive to be a
sustainable company.
Traditional environmental control
programmes address risks and impacts from wastes
generated by manufacturing and other activities. We meet
this responsibility with treatment and waste disposal
systems that comply with laws, regulations and our own
standards of performance. This was the standard of
practice for most companies beginning in the 1970s and
1980s. Even now we continue to improve our handling of
waste but we recognise that these changes are incremental
rather than transformative.
In the early 1990s, the concept of sustainability
was emerging. Sustainability means we need to be
concerned not only with the short term impacts of
pollution but also with the long term impact of resource
consumption, the types of materials used and the
persistence of waste in the environment. Our journey to
sustainability started with looking holistically at
continuing to treat the waste while also finding ways to
prevent waste from being produced. This requires what is
now called sustainable technologies more efficient
chemistries and more efficient processes. We recognise
that sustainability principles apply to all aspects of
our operations. They apply to minimising waste and
consumption of natural resources and possibly using
renewable materials in discovering, manufacturing,
packaging and selling our products and even the impacts
from consumers use of our products.
While traditional environmental programmes are seen as
a cost without a financial return, a sustainable
approach, using less resource, being concerned with
the social impact of our operations, also has a
financial benefit. By using less resource, we spend
less money on operations.
We need to continue to address traditional environmental
issues at the same time as we integrate sustainability
into all aspects of our business from discovering and
developing to manufacturing and selling pharmaceutical and
consumer healthcare products, all of which use energy and
resources and produce emissions and waste.
EHS and sustainability strategy and plan
The 10-year strategic plan for EHS that extends to 2015
is aligned with our strategic priorities and includes
management objectives with performance measures and
targets. In 2008, GSKs progress was evaluated against
the targets set in 2006.
The focus for 2008 was embedding EHS in the business which is fundamental to making GSK a
sustainable business. It involves caring for the present while thinking to the future in making
decisions. This supports all three aspirations in the 2006 to 2015 plan embedding EHS in the
business, environmental sustainability and open and transparent stakeholder relations. In 2008 we
reviewed our EHS and sustainability priorities with our external and internal stakeholders. This
review identified the following key issues:
|
|
Manufacturing efficiency: The mass efficiency
of processes in development continues to
improve and progress is being made to achieve
the target to double mass efficiency and
thereby halve the waste per unit of product
for the manufacturing processes for all phase
III compounds by 2010. Late stage products
have been evaluated since 2005 for efficiency
and we are making progress toward our goal. |
|
|
Climate change: A comprehensive strategy on
climate change and energy efficiency was
approved and is available on GSKs website. A
climate change and energy reduction team has
been formed to manage a special fund which is
used to support climate change projects. The
team identified more than 400 projects for
2007 and 2008 to reduce energy consumption and
to increase our use of renewable energy. |
|
|
Pharmaceuticals in the Environment: We apply
product stewardship principles to the issue of
pharmaceuticals in the environment
principally unmetabolised drugs excreted from
patients. |
|
|
Process safety: Our Process Safety Management
System is being enhanced, with new engineering
standards and training programmes under
development. The standards will be used to
design new process plant and to upgrade
existing plants where needed. The training
programmes will increase process safety
awareness and competencies for engineers,
chemists and managers. |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 31
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Our responsibility continued |
|
|
|
|
|
|
|
EHS management
Responsibility for EHS is at the highest level. The
Corporate Responsibility Committee of the Board of
Directors provides oversight and a Sustainability Council
was formed in 2008 with representatives from all areas of
the company. There is a corporate department reporting to
the Chief of Staff that has overall responsibility for
providing governance and leadership on EHS and
sustainability issues. The head of this department makes
regular reports to the Corporate Executive Team (CET) and
the Audit and Corporate Responsibility Committees of the
Board. Within the businesses all executives and managers
are responsible for EHS and are supported by site-based
EHS and occupational medical staff.
As part of our governance responsibility, we conduct EHS
audits of our sites, operating entities and key suppliers,
assessing the management of key risks and impacts and
performance against our global EHS standards. This
includes providing audited sites and suppliers with
quantitative performance information as well as
highlighting areas for risk reduction and improvement.
EHS targets
As part of the EHS plan, targets are set every five years
with 2006 as the baseline year for the targets to 2010.
We selected our measures of performance improvement
based on the potential for adverse impact on people, the
environment, business continuity or business reputation.
Most of the measures selected are similar to those
reported by other companies and are recommended by the
Global Reporting Initiative, a long-term,
multi-stakeholder, international undertaking, to develop
and disseminate globally applicable sustainability
reporting guidelines.
Targets have been set to eliminate chlorofluorocarbons
(CFCs) from all uses by 2010 and each year to reduce
non-hazardous waste disposed by 1%, reduce water use and
volatile organic compound (VOC) releases to air by 2%,
reduce pollution of wastewater, measured as chemical
oxygen demand, by 3% and reduce energy usage and related
greenhouse gas emissions by 20% by 2010 and 45% by 2015.
All targets are normalised by sales based on constant
exchange rates.
In 2008, GSK remained on track to eliminate the use of
CFCs by 2010 and to meet its target for water
consumption. Progress was made to meet its 2010 targets
for wastewater pollution, disposal of waste and emissions
of volatile organic compounds to air due to a combination
of conservation programmes and reduced production of
several products. The rate of injuries and illnesses also
improved in line with the target due to continued
emphasis on employee safety behaviours.
There was no progress towards the 2010 energy and related
greenhouse gas emissions targets and therefore our carbon
footprint remained unchanged. Our energy efficiency
projects continue with 171 projects completed in 2008 and
another 600 identified. The gains from the 2008 projects
will be fully realised in 2009 and beyond. The gains
experienced in 2008 in some parts of the business were
offset by the continued expansion of the vaccines
business.
Final EHS performance data for 2008 with explanations
of the trends will be published in the Corporate
Responsibility report.
Sustainability
In working towards sustainability, we are addressing the
economic, environmental and social issues in research,
manufacturing, sales and distribution of our medicines and
consumer healthcare products. Sustainability starts with
healthcare solutions found by R&D and continues with
innovations to improve the efficiency of manufacturing
processes for new products. This reduces resource use
which in turn lowers waste and cost. With lower costs our
products may be available to a wider population around the
world. In the future, the EHS plan for excellence proposes
investigating the use of renewable resources in
manufacturing.
We seek dialogue with external stakeholders and consider
their views when developing approaches to sustainable
development. More information on EHS programmes and
performance may be found on GSKs website.
|
|
|
|
|
|
|
|
|
|
|
|
32 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Regulation
|
|
|
|
|
|
|
|
Regulation Pharmaceuticals
GSK operates within a highly regulated environment.
Regional and country-specific laws and regulations define
the data required to show safety and efficacy of
pharmaceutical products, as well as govern testing,
approval, manufacturing, labelling and marketing of drugs.
These regulatory requirements are a major factor in
determining whether a marketable product may be
successfully developed and the amount of time and expense
associated with the development.
Drug safety remains a primary focus of the FDA and US
congressional oversight committees and, as in Europe,
evaluation of benefit and risk continues to be a paramount
consideration for approval of a new drug. The FDA
Amendments Act, US legislation passed in 2007, renewed the
User Fee system for drug reviews and mandates a rigorous
FDA review of safety from approval through the
post-marketing phase of the product. The legislation also
provides the FDA with the authority to convene Advisory
Committees to review all new drugs prior to approval
decisions by FDA, to require sponsors to complete
post-marketing studies and to direct companies to make
product labelling changes. The FDA are routinely
exercising these new authorities.
Regulations requiring development of prescription drugs
and biologics for paediatric populations are now in place
in the US and EU. GSK fully supports the objective of
ensuring the development of better medicines for children.
In Europe, proposals for further legislative change were
announced by the European Commission during 2008. These
aim to strengthen the EU system for the safety monitoring
of medicines, improve citizens access to reliable
information on medicines and strengthen EU laws to protect citizens better from the threats posed by fake medicines.
The regulatory environment in Emerging Markets and
Asia-Pacific continues to evolve, with a number of
countries continuing to develop their regulatory review
systems. GSK actively participates in a number of specific
regional and national regulatory initiatives, which
provide opportunities for meaningful scientific and
regulatory dialogue between industry, agencies and other
stakeholders. GSK continues to include broader sets of
patient populations from a number of these countries in
medicine development programmes in order to increase
global patient access to new innovative medicines and
optimise regulatory approvals.
Regulation Consumer Healthcare
The consumer healthcare industry is subject to national
regulation comparable to that for prescription medicines
for the testing, approval, manufacturing, labelling and
marketing of
products. High standards of technical appraisal
frequently involve a lengthy approval process before a
new product is launched.
Generally, national regulatory authorisation is also
required to approve the switch of products from
prescription to OTC. However, in a history-making first
for the OTC industry, the weight loss medicine alli
received a centralised European positive opinion from the
Committee for Medicinal Products for Human Use (CHMP) in
October. This resulted in approval to market alli across
all 27 EU member countries as the first licensed weight
loss treatment available without a prescription.
Price controls
In many countries the prices of pharmaceutical products
are controlled by law. Governments may also influence
prices through their control of national healthcare
organisations, which may bear a large part of the cost of
supplying medicines to consumers.
Recent government
healthcare reforms in countries such as France, Spain and
Germany may restrict pricing and reimbursement.
In the USA, recent legislative proposals on healthcare
reform, cross-border trade, the acceleration of generics
to market and comparative effectiveness have further
increased the focus on pricing. Currently, there are no
government price controls over private sector purchases,
but federal law requires pharmaceutical manufacturers to
pay prescribed rebates on certain drugs to be eligible for
reimbursement under Medicaid and other state and federal
healthcare programmes. Healthcare remains a leading
domestic issue. During the 2008 US Presidential elections
the candidates focused on health reforms to address
chronic disease as the primary healthcare cost driver,
rather than focusing on drug prices alone.
Medicare
From 2006, the US Medicare program, a federally funded
healthcare insurance programme benefiting senior
citizens and certain disabled Americans, included
coverage for prescription medicines. The coverage is
voluntary, includes brand-name and generic drugs and is
open to the 41 million Americans with Medicare
coverage.
Value for money
Payers around the world are concerned about the cost of
healthcare and the pricing of medicines. The requirement
to satisfy healthcare purchasers on value for money is
becoming an additional hurdle for product acceptance
over and above the regulatory tests of safety, efficacy
and quality.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 33
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Economy, world market and outlook
|
|
|
|
|
|
|
|
World economy
The world economy deteriorated sharply during 2008 as the
financial crisis deepened, particularly following the
bankruptcy of Lehman Brothers in September. Despite
aggressive cuts in official interest rates, fiscal
stimulus measures and national initiatives to support the
international banking system, the International Monetary
Fund forecasts that global growth will slow from an
estimated 3.4% in 2008 to a mere 0.5% in 2009, the lowest
rate since World War II. The advanced economies are
expected to contract by 2% in 2009, the first annual
contraction in the post-war period.
The slump in global demand led to a collapse in equity
prices, with the FTSE 100 Index falling by 31% and the
Dow Jones Industrial Average by 33% in 2008, and also a
collapse in commodity prices. Weak economic activity and
lower commodity prices have dampened inflationary
pressures. In the advanced economies the headline
inflation rate is forecast by the IMF to decline from an
estimated 3.5% in 2008 to a record low of 0.3% in 2009.
In order to engender economic recovery, the Federal Open
Market Committee (FOMC) decided in December to cut the
target for the federal funds rate from 1% to 0-0.25%. The
decision signalled that the FOMC would effectively target
the supply of credit rather than the price of credit.
Nonetheless, the IMF forecasts that real GDP in the USA
will contract by 2% in 2009. The housing market remains of
particular concern.
Like the FOMC, the Monetary Policy Committee of the Bank
of England aggressively eased its monetary stance in 2008,
cutting the bank rate from 5.5% to 2%. The bank rate has
already been cut further in 2009 to 1%. To reinforce the
impact of the cuts in the bank rate, the Government has
empowered the Bank of England to purchase high quality
assets like corporate bonds and commercial paper from
commercial banks. The IMF forecasts that real GDP in the
UK will contract by 2.8% in 2009, more than in any other
advanced economy.
The European Central Bank maintained a more cautious
approach to monetary relaxation, cutting the refinancing
rate from 4.25% to 2.5% in 2008. The refinancing rate was
cut another 0.5 percentage point in January 2009.
Additional monetary easing is anticipated. The IMF
forecasts that real GDP in the euro-zone will contract by
2% in 2009, with real GDP in Germany plunging by 2.5%.
Like the other major industrialised economies, Japan fell
into recession in 2008. The prime factor was the downturn
in external demand. The Bank of Japan cut the overnight
call money rate from 0.5% to 0.1%. Real GDP is forecast by
the IMF to contract by 2.6% in 2009.
China and India remained on a path of economic expansion
in 2008. However, the pace of expansion decelerated.
Further
deceleration is expected in 2009. Economic activity in
Brazil remained buoyant in 2008 but is expected to slow
markedly in 2009. Uncertainties surrounding the economic
outlook are unusually large, with downside risks
continuing to dominate.
World market pharmaceuticals
Global pharmaceutical sales in 2008 were £366 billion
compared with £329 billion in 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
World market by |
|
Value |
|
|
% of |
|
|
Growth |
|
geographic region |
|
£bn |
|
|
total |
|
|
£% |
|
|
USA |
|
|
145 |
|
|
|
39 |
|
|
|
1 |
|
Europe |
|
|
112 |
|
|
|
31 |
|
|
|
18 |
|
France |
|
|
21 |
|
|
|
6 |
|
|
|
18 |
|
Germany |
|
|
20 |
|
|
|
6 |
|
|
|
20 |
|
Italy |
|
|
13 |
|
|
|
3 |
|
|
|
19 |
|
UK |
|
|
12 |
|
|
|
3 |
|
|
|
2 |
|
Rest of World |
|
|
109 |
|
|
|
30 |
|
|
|
19 |
|
Emerging markets |
|
|
49 |
|
|
|
13 |
|
|
|
24 |
|
Asia Pacific |
|
|
17 |
|
|
|
5 |
|
|
|
16 |
|
Japan |
|
|
33 |
|
|
|
9 |
|
|
|
16 |
|
Canada |
|
|
10 |
|
|
|
3 |
|
|
|
17 |
|
|
Total |
|
|
366 |
|
|
|
100 |
|
|
|
11 |
|
|
The US market has increased by 1%. This represents 39% of
the global prescription pharmaceutical market compared
with 30% a decade ago.
At 30th September 2008, GSK held second position in the
world pharmaceutical market with a market share of 5.3%,
behind Pfizer with a market share of 6.4%. GSK had three
of the worlds top 60 pharmaceutical products. These
were Lamictal, Seretide/Advair and Valtrex.
|
|
|
|
|
|
|
|
|
|
|
|
|
World market |
|
Value |
|
|
% of |
|
|
Growth |
|
top six therapeutic classes |
|
£bn |
|
|
total |
|
|
£% |
|
|
Central nervous system |
|
|
60 |
|
|
|
16 |
|
|
|
11 |
|
Cardiovascular |
|
|
54 |
|
|
|
15 |
|
|
|
4 |
|
Alimentary tract and metabolic |
|
|
44 |
|
|
|
12 |
|
|
|
10 |
|
Antineoplastic/Immunomodulatory |
|
|
40 |
|
|
|
11 |
|
|
|
20 |
|
Anti-infectives (bacterial, |
|
|
38 |
|
|
|
10 |
|
|
|
11 |
|
viral and fungal) excluding
vaccines |
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory |
|
|
25 |
|
|
|
7 |
|
|
|
8 |
|
|
(Note: data based on 12 months to 30th September 2008)
Outlook
2008 marked a turning point and those factors which
impacted our performance, in particular declines in
Avandia sales, are now starting to reduce. 2008 also saw
the first steps towards a radical transformation of our
business model. We enter 2009 with confidence and expect
to make further good progress in implementing our
strategic priorities that will enable us to meet our
long-term objective of reducing risk and delivering
sustainable growth to shareholders.
|
|
|
|
|
|
|
|
|
|
|
|
34 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008
|
|
|
|
|
|
|
|
Pharmaceutical turnover
All growth rates included in the review of turnover are at
constant exchange rates (CER) unless otherwise stated.
Sterling growth rates may be found in the tables of
pharmaceutical turnover by therapeutic areas on
page 35 and by geographic region on page 36.
Total pharmaceutical turnover declined 3% for the year to
£20.4 billion, driven largely by US performance, down 11%
to £8.9 billion, which was impacted by expected generic
competition to several mature brands and further declines
in Avandia sales. Sales in Asia Pacific and Japan fell 1%
to £1.9 billion, reflecting lower government orders for
Relenza and the impact of pharmaceutical
price cuts in Japan. These declines were partly offset by
growth in Europe, up 3% to £6.5 billion, and Emerging
Markets, up 12% to £2.3 billion. In sterling terms,
pharmaceutical turnover grew by 6%, reflecting the
weakness of Sterling against most major currencies.
Pharmaceutical turnover by therapeutic area
GSK turnover declined by 3% in 2008 as the impact of
lower Avandia sales, US generic competition to a range
of GSKs products and lower flu pre-pandemic sales was
partly offset by strong growth of key products such as
Advair, Valtrex, Epzicom, Avodart, Lovaza and the
vaccines franchise.
Respiratory
Respiratory sales increased 5% to £5.8 billion.
Sales of Seretide/Advair for asthma and COPD rose 8% to £4.1 billion. In the USA, Advair sales
rose 6% to £2.2 billion, with a return to volume growth in the second half of the year. During
2008, the FDA granted Advair an indication in COPD for prevention of exacerbations and this
has helped grow the COPD segment of our Advair business. In Europe, sales increased by 4% to £1.4
billion. Advair performance was particularly strong in Emerging Markets, up 26% to £215 million,
and Japan, where sales of the product more than doubled to £83 million following its launch in
2007.
Anti-virals
Anti-virals decreased 4% to £3.2 billion.
GSKs HIV business continues to experience strong
competition. Epzicom/Kivexa grew by 23% to £442 million
but this was more than offset by declines across the rest
of the portfolio. Sales of Valtrex, for herpes, rose 16%
to £1.2 billion with US sales up 20% fuelling the growth.
Sales of flu anti-viral Relenza fell 80% to £57 million
reflecting fewer government orders for pre-pandemic
stockpiling.
CNS
CNS sales decreased 21% to £2.9 billion.
The majority of GSKs CNS franchise is now impacted by
generic competition in the USA, as generic competition to
Lamictal, Imigran and the remaining presentation of
Wellbutrin started during the course
of 2008. There was, however, some positive news as
Treximet was approved for migraine by the FDA in April
2008.
Cardiovascular and urogenital
Cardiovascular and urogenital sales increased 8% to £1.8
billion.
Strong growth across most of the portfolio of
products was partly offset by generic competition to
Coreg IR. Lovaza, for very high triglycerides, which was
acquired from Reliant Pharmaceuticals in 2007, grew 71%
on a proforma basis to £290 million and grew its US
market share by 33%. Avodart, for benign prostatic
hyperplasia (enlarged prostate), grew 27% to £399 million
taking a further percentage point of market share,
Arixtra, for deep vein thrombosis and pulmonary embolism,
grew 53% to £170 million and Coreg CR grew 73% to £165
million.
Metabolic
Metabolic sales decreased 28% to £1.2 billion.
Strong growth of Bonviva/Boniva, for postmenopausal
osteoporosis, up 34% to £237 million was not enough to
offset a full year impact to Avandia whose sales started
to fall in May 2007 (see Financial review 2007 on page
54). Avandia product sales declined 40% during the year to
£805 million, with US sales falling 49% to £434 million
and European sales down 22% to £198 million. In Emerging
Markets, Avandia product sales returned to growth in the
second half of the year (Q4 sales were up 12%).
Oncology and emesis
Oncology and emesis sales decreased 6% to £0.5 billion.
Tykerb, for breast cancer, continued to grow following
approval in the USA last year. Approvals in other
countries were achieved throughout 2008, with the
European approval being achieved in June.
Vaccines
Vaccine sales increased 15% to £2.5 billion.
Within the vaccines portfolio, there were strong
performances from Hepatitis vaccines (up 14% to £665
million) and combination paediatric vaccines
Infanrix/Pediarix (up 12% to £682 million). Rotarix, for
rotavirus gastroenteritis, rose 71% to £167 million,
largely driven by government tender orders in Latin
America and the launch of the product in the USA in
August. New cervical cancer vaccine, Cervarix, recorded
sales of £125 million for the year, following several
tender wins, including national government orders in the
UK and the Netherlands.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 35
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008 continued |
|
|
|
|
|
|
|
Pharmaceutical turnover by therapeutic area 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
USA |
|
|
Europe |
|
|
Rest of World |
|
Therapeutic area/ |
|
% of |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
Growth |
|
|
2008 |
|
|
|
|
|
|
Growth |
|
|
2008 |
|
|
|
|
|
|
Growth |
|
|
2008 |
|
|
|
|
|
|
Growth |
|
major products |
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Respiratory |
|
|
29 |
|
|
|
5,817 |
|
|
|
5,032 |
|
|
|
5 |
|
|
|
16 |
|
|
|
2,720 |
|
|
|
6 |
|
|
|
14 |
|
|
|
1,982 |
|
|
|
2 |
|
|
|
14 |
|
|
|
1,115 |
|
|
|
9 |
|
|
|
22 |
|
Seretide/Advair |
|
|
|
|
|
|
4,137 |
|
|
|
3,499 |
|
|
|
8 |
|
|
|
18 |
|
|
|
2,161 |
|
|
|
6 |
|
|
|
14 |
|
|
|
1,416 |
|
|
|
4 |
|
|
|
17 |
|
|
|
560 |
|
|
|
29 |
|
|
|
42 |
|
Flixotide/Flovent |
|
|
|
|
|
|
677 |
|
|
|
621 |
|
|
|
(2 |
) |
|
|
9 |
|
|
|
317 |
|
|
|
3 |
|
|
|
12 |
|
|
|
175 |
|
|
|
(4 |
) |
|
|
11 |
|
|
|
185 |
|
|
|
(9 |
) |
|
|
3 |
|
Serevent |
|
|
|
|
|
|
263 |
|
|
|
269 |
|
|
|
(12 |
) |
|
|
(2 |
) |
|
|
72 |
|
|
|
(9 |
) |
|
|
(3 |
) |
|
|
136 |
|
|
|
(9 |
) |
|
|
1 |
|
|
|
55 |
|
|
|
(23 |
) |
|
|
(10 |
) |
Veramyst |
|
|
|
|
|
|
72 |
|
|
|
21 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
56 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
Flixonase/Flonase |
|
|
|
|
|
|
186 |
|
|
|
199 |
|
|
|
(15 |
) |
|
|
(7 |
) |
|
|
52 |
|
|
|
(29 |
) |
|
|
(28 |
) |
|
|
52 |
|
|
|
(6 |
) |
|
|
6 |
|
|
|
82 |
|
|
|
(8 |
) |
|
|
5 |
|
|
Anti-virals |
|
|
16 |
|
|
|
3,206 |
|
|
|
3,027 |
|
|
|
(4 |
) |
|
|
6 |
|
|
|
1,600 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
850 |
|
|
|
(12 |
) |
|
|
|
|
|
|
756 |
|
|
|
(1 |
) |
|
|
10 |
|
HIV |
|
|
|
|
|
|
1,513 |
|
|
|
1,442 |
|
|
|
(5 |
) |
|
|
5 |
|
|
|
640 |
|
|
|
(7 |
) |
|
|
|
|
|
|
636 |
|
|
|
(6 |
) |
|
|
7 |
|
|
|
237 |
|
|
|
4 |
|
|
|
13 |
|
Epzicom/Kivexa |
|
|
|
|
|
|
442 |
|
|
|
324 |
|
|
|
23 |
|
|
|
36 |
|
|
|
178 |
|
|
|
15 |
|
|
|
25 |
|
|
|
209 |
|
|
|
25 |
|
|
|
40 |
|
|
|
55 |
|
|
|
48 |
|
|
|
67 |
|
Combivir |
|
|
|
|
|
|
433 |
|
|
|
455 |
|
|
|
(14 |
) |
|
|
(5 |
) |
|
|
180 |
|
|
|
(14 |
) |
|
|
(8 |
) |
|
|
166 |
|
|
|
(19 |
) |
|
|
(8 |
) |
|
|
87 |
|
|
|
1 |
|
|
|
10 |
|
Trizivir |
|
|
|
|
|
|
212 |
|
|
|
233 |
|
|
|
(18 |
) |
|
|
(9 |
) |
|
|
106 |
|
|
|
(18 |
) |
|
|
(12 |
) |
|
|
92 |
|
|
|
(18 |
) |
|
|
(6 |
) |
|
|
14 |
|
|
|
(20 |
) |
|
|
(7 |
) |
Agenerase, Lexiva |
|
|
|
|
|
|
160 |
|
|
|
141 |
|
|
|
2 |
|
|
|
13 |
|
|
|
83 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
61 |
|
|
|
|
|
|
|
15 |
|
|
|
16 |
|
|
|
40 |
|
|
|
60 |
|
Epivir |
|
|
|
|
|
|
139 |
|
|
|
156 |
|
|
|
(20 |
) |
|
|
(11 |
) |
|
|
47 |
|
|
|
(19 |
) |
|
|
(11 |
) |
|
|
58 |
|
|
|
(22 |
) |
|
|
(9 |
) |
|
|
34 |
|
|
|
(18 |
) |
|
|
(13 |
) |
Ziagen |
|
|
|
|
|
|
106 |
|
|
|
109 |
|
|
|
(11 |
) |
|
|
(3 |
) |
|
|
45 |
|
|
|
(9 |
) |
|
|
|
|
|
|
36 |
|
|
|
(11 |
) |
|
|
|
|
|
|
25 |
|
|
|
(14 |
) |
|
|
(11 |
) |
Valtrex |
|
|
|
|
|
|
1,195 |
|
|
|
934 |
|
|
|
16 |
|
|
|
28 |
|
|
|
870 |
|
|
|
20 |
|
|
|
30 |
|
|
|
144 |
|
|
|
9 |
|
|
|
25 |
|
|
|
181 |
|
|
|
4 |
|
|
|
20 |
|
Zeffix |
|
|
|
|
|
|
188 |
|
|
|
168 |
|
|
|
|
|
|
|
12 |
|
|
|
15 |
|
|
|
8 |
|
|
|
15 |
|
|
|
27 |
|
|
|
|
|
|
|
17 |
|
|
|
146 |
|
|
|
(1 |
) |
|
|
11 |
|
Relenza |
|
|
|
|
|
|
57 |
|
|
|
262 |
|
|
|
(80 |
) |
|
|
(78 |
) |
|
|
20 |
|
|
|
(86 |
) |
|
|
(85 |
) |
|
|
6 |
|
|
|
(92 |
) |
|
|
(92 |
) |
|
|
31 |
|
|
|
(49 |
) |
|
|
(44 |
) |
|
Central nervous system |
|
|
14 |
|
|
|
2,897 |
|
|
|
3,348 |
|
|
|
(21 |
) |
|
|
(13 |
) |
|
|
1,815 |
|
|
|
(29 |
) |
|
|
(24 |
) |
|
|
565 |
|
|
|
(1 |
) |
|
|
12 |
|
|
|
517 |
|
|
|
(3 |
) |
|
|
11 |
|
Lamictal |
|
|
|
|
|
|
926 |
|
|
|
1,097 |
|
|
|
(22 |
) |
|
|
(16 |
) |
|
|
711 |
|
|
|
(26 |
) |
|
|
(20 |
) |
|
|
147 |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
68 |
|
|
|
2 |
|
|
|
10 |
|
Imigran/Imitrex |
|
|
|
|
|
|
687 |
|
|
|
685 |
|
|
|
(8 |
) |
|
|
|
|
|
|
550 |
|
|
|
(9 |
) |
|
|
(1 |
) |
|
|
96 |
|
|
|
(3 |
) |
|
|
8 |
|
|
|
41 |
|
|
|
(8 |
) |
|
|
8 |
|
Seroxat/Paxil |
|
|
|
|
|
|
514 |
|
|
|
553 |
|
|
|
(19 |
) |
|
|
(7 |
) |
|
|
79 |
|
|
|
(49 |
) |
|
|
(45 |
) |
|
|
115 |
|
|
|
(14 |
) |
|
|
(4 |
) |
|
|
320 |
|
|
|
(7 |
) |
|
|
10 |
|
Wellbutrin |
|
|
|
|
|
|
342 |
|
|
|
529 |
|
|
|
(40 |
) |
|
|
(35 |
) |
|
|
310 |
|
|
|
(44 |
) |
|
|
(39 |
) |
|
|
18 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
14 |
|
|
|
8 |
|
|
|
8 |
|
Requip |
|
|
|
|
|
|
266 |
|
|
|
346 |
|
|
|
(31 |
) |
|
|
(23 |
) |
|
|
102 |
|
|
|
(60 |
) |
|
|
(57 |
) |
|
|
133 |
|
|
|
29 |
|
|
|
46 |
|
|
|
31 |
|
|
|
65 |
|
|
|
82 |
|
Requip XL |
|
|
|
|
|
|
43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treximet |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular and urogenital |
|
|
9 |
|
|
|
1,847 |
|
|
|
1,554 |
|
|
|
8 |
|
|
|
19 |
|
|
|
1,107 |
|
|
|
6 |
|
|
|
14 |
|
|
|
512 |
|
|
|
10 |
|
|
|
28 |
|
|
|
228 |
|
|
|
15 |
|
|
|
25 |
|
Avodart |
|
|
|
|
|
|
399 |
|
|
|
285 |
|
|
|
27 |
|
|
|
40 |
|
|
|
242 |
|
|
|
27 |
|
|
|
38 |
|
|
|
118 |
|
|
|
21 |
|
|
|
39 |
|
|
|
39 |
|
|
|
48 |
|
|
|
56 |
|
Lovaza |
|
|
|
|
|
|
290 |
|
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
289 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Coreg |
|
|
|
|
|
|
203 |
|
|
|
587 |
|
|
|
(68 |
) |
|
|
(65 |
) |
|
|
200 |
|
|
|
(68 |
) |
|
|
(66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
(67 |
) |
|
|
(50 |
) |
Coreg CR |
|
|
|
|
|
|
165 |
|
|
|
88 |
|
|
|
73 |
|
|
|
88 |
|
|
|
163 |
|
|
|
72 |
|
|
|
85 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Coreg IR |
|
|
|
|
|
|
38 |
|
|
|
499 |
|
|
|
(93 |
) |
|
|
(92 |
) |
|
|
37 |
|
|
|
(93 |
) |
|
|
(92 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
(83 |
) |
|
|
(83 |
) |
Fraxiparine |
|
|
|
|
|
|
226 |
|
|
|
184 |
|
|
|
7 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178 |
|
|
|
|
|
|
|
18 |
|
|
|
48 |
|
|
|
36 |
|
|
|
45 |
|
Arixtra |
|
|
|
|
|
|
170 |
|
|
|
100 |
|
|
|
53 |
|
|
|
70 |
|
|
|
88 |
|
|
|
49 |
|
|
|
60 |
|
|
|
71 |
|
|
|
56 |
|
|
|
82 |
|
|
|
11 |
|
|
|
67 |
|
|
|
83 |
|
Vesicare |
|
|
|
|
|
|
71 |
|
|
|
50 |
|
|
|
32 |
|
|
|
42 |
|
|
|
71 |
|
|
|
32 |
|
|
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levitra |
|
|
|
|
|
|
60 |
|
|
|
49 |
|
|
|
12 |
|
|
|
22 |
|
|
|
57 |
|
|
|
11 |
|
|
|
21 |
|
|
|
3 |
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metabolic |
|
|
6 |
|
|
|
1,191 |
|
|
|
1,508 |
|
|
|
(28 |
) |
|
|
(21 |
) |
|
|
590 |
|
|
|
(39 |
) |
|
|
(34 |
) |
|
|
294 |
|
|
|
(11 |
) |
|
|
1 |
|
|
|
307 |
|
|
|
(14 |
) |
|
|
(5 |
) |
Avandia products |
|
|
|
|
|
|
805 |
|
|
|
1,219 |
|
|
|
(40 |
) |
|
|
(34 |
) |
|
|
434 |
|
|
|
(49 |
) |
|
|
(44 |
) |
|
|
198 |
|
|
|
(22 |
) |
|
|
(12 |
) |
|
|
173 |
|
|
|
(25 |
) |
|
|
(19 |
) |
Avandia |
|
|
|
|
|
|
512 |
|
|
|
877 |
|
|
|
(46 |
) |
|
|
(42 |
) |
|
|
299 |
|
|
|
(53 |
) |
|
|
(49 |
) |
|
|
82 |
|
|
|
(33 |
) |
|
|
(26 |
) |
|
|
131 |
|
|
|
(30 |
) |
|
|
(25 |
) |
Avandamet |
|
|
|
|
|
|
256 |
|
|
|
292 |
|
|
|
(21 |
) |
|
|
(12 |
) |
|
|
109 |
|
|
|
(32 |
) |
|
|
(26 |
) |
|
|
111 |
|
|
|
(13 |
) |
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
6 |
|
Bonviva/Boniva |
|
|
|
|
|
|
237 |
|
|
|
161 |
|
|
|
34 |
|
|
|
47 |
|
|
|
156 |
|
|
|
25 |
|
|
|
36 |
|
|
|
74 |
|
|
|
48 |
|
|
|
68 |
|
|
|
7 |
|
|
|
>100 |
|
|
|
>100 |
|
|
Anti-bacterials |
|
|
7 |
|
|
|
1,429 |
|
|
|
1,323 |
|
|
|
(2 |
) |
|
|
8 |
|
|
|
174 |
|
|
|
(17 |
) |
|
|
(11 |
) |
|
|
635 |
|
|
|
(6 |
) |
|
|
8 |
|
|
|
620 |
|
|
|
7 |
|
|
|
15 |
|
Augmentin |
|
|
|
|
|
|
587 |
|
|
|
530 |
|
|
|
|
|
|
|
11 |
|
|
|
49 |
|
|
|
(31 |
) |
|
|
(27 |
) |
|
|
272 |
|
|
|
|
|
|
|
14 |
|
|
|
266 |
|
|
|
11 |
|
|
|
18 |
|
Altabax |
|
|
|
|
|
|
16 |
|
|
|
11 |
|
|
|
36 |
|
|
|
45 |
|
|
|
15 |
|
|
|
27 |
|
|
|
36 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
2 |
|
|
|
496 |
|
|
|
477 |
|
|
|
(6 |
) |
|
|
4 |
|
|
|
243 |
|
|
|
(17 |
) |
|
|
(11 |
) |
|
|
169 |
|
|
|
9 |
|
|
|
25 |
|
|
|
84 |
|
|
|
9 |
|
|
|
20 |
|
Hycamtin |
|
|
|
|
|
|
140 |
|
|
|
119 |
|
|
|
7 |
|
|
|
18 |
|
|
|
81 |
|
|
|
7 |
|
|
|
16 |
|
|
|
49 |
|
|
|
5 |
|
|
|
23 |
|
|
|
10 |
|
|
|
11 |
|
|
|
11 |
|
Zofran |
|
|
|
|
|
|
110 |
|
|
|
196 |
|
|
|
(51 |
) |
|
|
(44 |
) |
|
|
3 |
|
|
|
(97 |
) |
|
|
(96 |
) |
|
|
63 |
|
|
|
(21 |
) |
|
|
(10 |
) |
|
|
44 |
|
|
|
(17 |
) |
|
|
(8 |
) |
Tykerb |
|
|
|
|
|
|
102 |
|
|
|
51 |
|
|
|
80 |
|
|
|
100 |
|
|
|
47 |
|
|
|
22 |
|
|
|
31 |
|
|
|
42 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
13 |
|
|
|
>100 |
|
|
|
>100 |
|
|
Vaccines |
|
|
12 |
|
|
|
2,539 |
|
|
|
1,993 |
|
|
|
15 |
|
|
|
27 |
|
|
|
629 |
|
|
|
(7 |
) |
|
|
|
|
|
|
1,155 |
|
|
|
28 |
|
|
|
44 |
|
|
|
755 |
|
|
|
21 |
|
|
|
34 |
|
Hepatitis |
|
|
|
|
|
|
665 |
|
|
|
529 |
|
|
|
14 |
|
|
|
26 |
|
|
|
275 |
|
|
|
28 |
|
|
|
38 |
|
|
|
263 |
|
|
|
|
|
|
|
14 |
|
|
|
127 |
|
|
|
16 |
|
|
|
27 |
|
Infanrix/Pediarix |
|
|
|
|
|
|
682 |
|
|
|
543 |
|
|
|
12 |
|
|
|
26 |
|
|
|
212 |
|
|
|
1 |
|
|
|
8 |
|
|
|
377 |
|
|
|
21 |
|
|
|
39 |
|
|
|
93 |
|
|
|
11 |
|
|
|
22 |
|
Fluarix, FluLaval |
|
|
|
|
|
|
215 |
|
|
|
174 |
|
|
|
11 |
|
|
|
24 |
|
|
|
85 |
|
|
|
(20 |
) |
|
|
(13 |
) |
|
|
78 |
|
|
|
63 |
|
|
|
90 |
|
|
|
52 |
|
|
|
37 |
|
|
|
49 |
|
Flu-prepandemic |
|
|
|
|
|
|
66 |
|
|
|
146 |
|
|
|
(55 |
) |
|
|
(55 |
) |
|
|
1 |
|
|
|
(99 |
) |
|
|
(99 |
) |
|
|
64 |
|
|
|
25 |
|
|
|
25 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
|
|
|
|
125 |
|
|
|
10 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
21 |
|
|
|
>100 |
|
|
|
>100 |
|
Rotarix |
|
|
|
|
|
|
167 |
|
|
|
91 |
|
|
|
71 |
|
|
|
84 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
43 |
|
|
|
61 |
|
|
|
87 |
|
|
|
103 |
|
|
|
46 |
|
|
|
51 |
|
Boostrix |
|
|
|
|
|
|
70 |
|
|
|
66 |
|
|
|
(5 |
) |
|
|
6 |
|
|
|
35 |
|
|
|
(20 |
) |
|
|
(13 |
) |
|
|
26 |
|
|
|
21 |
|
|
|
37 |
|
|
|
9 |
|
|
|
14 |
|
|
|
29 |
|
|
Other |
|
|
5 |
|
|
|
959 |
|
|
|
901 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
16 |
|
|
|
(78 |
) |
|
|
(75 |
) |
|
|
321 |
|
|
|
14 |
|
|
|
26 |
|
|
|
622 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
|
|
100 |
|
|
|
20,381 |
|
|
|
19,163 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
8,894 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
6,483 |
|
|
|
3 |
|
|
|
17 |
|
|
|
5,004 |
|
|
|
5 |
|
|
|
16 |
|
|
CER% represents growth at constant exchange rates. £% represents growth at actual exchange rates.
Turnover by quarter is given in the Financial record on pages 190 to 193.
|
|
|
|
|
|
|
|
|
|
|
|
36 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008 continued |
|
|
|
|
|
|
|
Regional analysis
Pharmaceutical turnover by geographic region in 2008 on an invoiced basis
The turnover reported in the table below represents sales
invoiced by GSKs local entity to its customers in the
local market plus co-promotion income within each market.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Region/ |
|
% of |
|
|
2008 |
|
|
2007 |
|
|
Growth* |
|
major markets |
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
USA |
|
|
44 |
|
|
|
8,894 |
|
|
|
9,273 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
Europe |
|
|
32 |
|
|
|
6,483 |
|
|
|
5,560 |
|
|
|
3 |
|
|
|
17 |
|
France |
|
|
|
|
|
|
1,069 |
|
|
|
991 |
|
|
|
(7 |
) |
|
|
8 |
|
UK |
|
|
|
|
|
|
900 |
|
|
|
822 |
|
|
|
9 |
|
|
|
9 |
|
Italy |
|
|
|
|
|
|
757 |
|
|
|
620 |
|
|
|
5 |
|
|
|
22 |
|
Germany |
|
|
|
|
|
|
707 |
|
|
|
602 |
|
|
|
2 |
|
|
|
17 |
|
Spain |
|
|
|
|
|
|
700 |
|
|
|
605 |
|
|
|
|
|
|
|
16 |
|
Other Europe |
|
|
|
|
|
|
2,350 |
|
|
|
1,920 |
|
|
|
6 |
|
|
|
22 |
|
|
Rest of World |
|
|
24 |
|
|
|
5,004 |
|
|
|
4,330 |
|
|
|
5 |
|
|
|
16 |
|
Emerging Markets |
|
|
|
|
|
|
2,290 |
|
|
|
1,895 |
|
|
|
12 |
|
|
|
21 |
|
Japan |
|
|
|
|
|
|
1,027 |
|
|
|
867 |
|
|
|
(3 |
) |
|
|
18 |
|
Asia Pacific |
|
|
|
|
|
|
891 |
|
|
|
834 |
|
|
|
1 |
|
|
|
7 |
|
Canada |
|
|
|
|
|
|
503 |
|
|
|
477 |
|
|
|
(4 |
) |
|
|
5 |
|
Other |
|
|
|
|
|
|
293 |
|
|
|
257 |
|
|
|
4 |
|
|
|
14 |
|
|
|
|
|
100 |
|
|
|
20,381 |
|
|
|
19,163 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
|
|
* |
|
CER% represents growth at constant exchange rates. £%
represents growth at actual exchange rates. |
Individual governments determine the pricing of medicines
in most countries within Europe, which can result in wide
price variations for the same product. Parallel trade
occurs when third parties exploit this price differential
by purchasing products in markets where low prices are
enforced and selling them to governments and other
purchasers in those markets where higher prices have been
agreed. This parallel trade is permitted under the single
market rules in the European Union. GSK does not derive
any benefit from the profit on resale at the higher price.
As a result, management believes that within the European
region, turnover by market, on an invoiced basis as
presented above, does not properly represent the
consumption of the products within each market. GSK
employees based in each market are instrumental in the
promotion of the Groups products within the market,
thereby creating a product sale and final consumption in
that market.
The following table gives the adjustments made in order to
restate the turnover for markets within Europe on a
turnover created basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Region/ |
|
Invoiced |
|
|
Adjustment |
|
|
Created |
|
|
Invoiced |
|
|
Adjustment |
|
|
Created |
|
major markets |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Europe |
|
|
6,483 |
|
|
|
|
|
|
|
6,483 |
|
|
|
5,560 |
|
|
|
|
|
|
|
5,560 |
|
France |
|
|
1,069 |
|
|
|
(55 |
) |
|
|
1,014 |
|
|
|
991 |
|
|
|
(43 |
) |
|
|
948 |
|
UK |
|
|
900 |
|
|
|
83 |
|
|
|
983 |
|
|
|
822 |
|
|
|
101 |
|
|
|
923 |
|
Italy |
|
|
757 |
|
|
|
(19 |
) |
|
|
738 |
|
|
|
620 |
|
|
|
(14 |
) |
|
|
606 |
|
Germany |
|
|
707 |
|
|
|
107 |
|
|
|
814 |
|
|
|
602 |
|
|
|
87 |
|
|
|
689 |
|
Spain |
|
|
700 |
|
|
|
(10 |
) |
|
|
690 |
|
|
|
605 |
|
|
|
(12 |
) |
|
|
593 |
|
Other Europe |
|
|
2,350 |
|
|
|
(106 |
) |
|
|
2,244 |
|
|
|
1,920 |
|
|
|
(119 |
) |
|
|
1,801 |
|
|
These adjustments are GSKs estimates based on the most
recent data from independent external sources, valued in
Sterling at relevant exchange rates. Management believes
that this turnover created basis of reporting turnover
by market provides a better reflection of the
performance of the businesses in each market within
Europe.
The total turnover for the Europe region is
unaffected by these adjustments.
Parallel trade occurs occasionally elsewhere in the
world, but it is not sufficiently material to
affect significantly the turnover data by market
presented on an invoiced basis.
Pharmaceutical turnover by geographic region in 2008 on a turnover created basis
Turnover by market within Europe has been adjusted for
the effects of parallel trade to show turnover on the
basis of the country where the product is finally
consumed, not where the product was sold by GSK.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Region/ |
|
% of |
|
|
2008 |
|
|
2007 |
|
|
Growth* |
|
major markets |
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
USA |
|
|
44 |
|
|
|
8,894 |
|
|
|
9,273 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
Europe |
|
|
32 |
|
|
|
6,483 |
|
|
|
5,560 |
|
|
|
3 |
|
|
|
17 |
|
France |
|
|
|
|
|
|
1,014 |
|
|
|
948 |
|
|
|
(8 |
) |
|
|
7 |
|
UK |
|
|
|
|
|
|
983 |
|
|
|
923 |
|
|
|
7 |
|
|
|
7 |
|
Italy |
|
|
|
|
|
|
738 |
|
|
|
606 |
|
|
|
5 |
|
|
|
22 |
|
Germany |
|
|
|
|
|
|
814 |
|
|
|
689 |
|
|
|
2 |
|
|
|
18 |
|
Spain |
|
|
|
|
|
|
690 |
|
|
|
593 |
|
|
|
1 |
|
|
|
16 |
|
Other Europe |
|
|
|
|
|
|
2,244 |
|
|
|
1,801 |
|
|
|
7 |
|
|
|
25 |
|
|
Rest of World |
|
|
24 |
|
|
|
5,004 |
|
|
|
4,330 |
|
|
|
5 |
|
|
|
16 |
|
Emerging Markets |
|
|
|
|
|
|
2,290 |
|
|
|
1,895 |
|
|
|
12 |
|
|
|
21 |
|
Japan |
|
|
|
|
|
|
1,027 |
|
|
|
867 |
|
|
|
(3 |
) |
|
|
18 |
|
Asia Pacific |
|
|
|
|
|
|
891 |
|
|
|
834 |
|
|
|
1 |
|
|
|
7 |
|
Canada |
|
|
|
|
|
|
503 |
|
|
|
477 |
|
|
|
(4 |
) |
|
|
5 |
|
Other |
|
|
|
|
|
|
293 |
|
|
|
257 |
|
|
|
4 |
|
|
|
14 |
|
|
|
|
|
100 |
|
|
|
20,381 |
|
|
|
19,163 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
|
|
* |
|
CER% represents growth at constant exchange rates. £% represents growth
at actual exchange rates. Turnover by quarter is given
in the Financial record on pages 190 to 193. |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 37
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008 continued |
|
|
|
|
|
|
|
USA
Sales in the USA declined 11% to £8.9 billion, principally
reflecting a full year impact on Avandia (down 49%) and
generic competition to significant products such as
Lamictal (down 26%), Imigran (down 9%), Wellbutrin XL
(down 45%), Requip (down 60%) and Coreg IR (down 93%).
These declines were partly offset by Advair (up 6%),
Valtrex (up 20%) and Lovaza (up 71% on proforma basis).
Europe
Sales in Europe increased 3% to £6.5 billion with
continued growth of Seretide and particularly strong
vaccines growth offsetting the impact of generic
competition to a number of products and continued price
cuts from governments across the region.
Emerging Markets
Sales in Emerging Markets increased 12% to £2.3 billion
with strong growth in Russia (up 36%), China (up 22%) and
Latin America (up 16%). The growth was fuelled primarily
by vaccines, up 32% to £0.5 billion, and the respiratory
franchise, up 16% to £0.4 billion.
Asia Pacific/Japan
Increased sales of Seretide/Advair (up 48% to £204
million) were offset by lower Government orders for
Relenza in Japan and some price cuts.
Consumer Healthcare turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
2008 |
|
|
2007 |
|
|
Growth |
|
|
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
49 |
|
|
|
1,935 |
|
|
|
1,788 |
|
|
|
(2 |
) |
|
|
8 |
|
Panadol franchise |
|
|
|
|
|
|
324 |
|
|
|
263 |
|
|
|
12 |
|
|
|
23 |
|
Smoking cessation products |
|
|
|
|
|
|
299 |
|
|
|
314 |
|
|
|
(12 |
) |
|
|
(5 |
) |
Tums |
|
|
|
|
|
|
91 |
|
|
|
88 |
|
|
|
(5 |
) |
|
|
3 |
|
Cold sore franchise |
|
|
|
|
|
|
89 |
|
|
|
79 |
|
|
|
3 |
|
|
|
13 |
|
Breathe Right |
|
|
|
|
|
|
81 |
|
|
|
63 |
|
|
|
17 |
|
|
|
29 |
|
alli |
|
|
|
|
|
|
75 |
|
|
|
150 |
|
|
|
(53 |
) |
|
|
(50 |
) |
|
Oral healthcare |
|
|
31 |
|
|
|
1,240 |
|
|
|
1,049 |
|
|
|
6 |
|
|
|
18 |
|
Aquafresh franchise |
|
|
|
|
|
|
452 |
|
|
|
398 |
|
|
|
3 |
|
|
|
14 |
|
Sensodyne franchise |
|
|
|
|
|
|
363 |
|
|
|
293 |
|
|
|
12 |
|
|
|
24 |
|
Dental care |
|
|
|
|
|
|
271 |
|
|
|
222 |
|
|
|
8 |
|
|
|
22 |
|
|
Nutritional healthcare |
|
|
20 |
|
|
|
796 |
|
|
|
716 |
|
|
|
8 |
|
|
|
11 |
|
Lucozade |
|
|
|
|
|
|
382 |
|
|
|
347 |
|
|
|
7 |
|
|
|
10 |
|
Horlicks |
|
|
|
|
|
|
204 |
|
|
|
174 |
|
|
|
13 |
|
|
|
17 |
|
Ribena |
|
|
|
|
|
|
161 |
|
|
|
156 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
100 |
|
|
|
3,971 |
|
|
|
3,553 |
|
|
|
3 |
|
|
|
12 |
|
|
|
|
|
* |
|
CER% represents growth at constant exchange rates.
£% represents growth at actual exchange rates.
Turnover by quarter is given in the Financial record
on pages 188 to 189. |
Total Consumer Healthcare sales for the year rose 3% to
£4 billion. This compares with growth of 14% in 2007,
which benefited from launch stocking of new anti-obesity
treatment alli. 2008 sales of alli were £75 million, down
53%. Excluding alli, Consumer Healthcare sales rose 5% in
2008 (up 9% in 2007).
OTC medicines
OTC product sales declined 2% to £1.9 billion in 2008,
with sales of smoking cessation products down 12% to
£299 million. Panadol sales grew 12% to £324 million,
twice the global average in 2008.
Oral healthcare
Sales of Oral healthcare products rose 6% to £1.2
billion, whereas the market grew just 2%. There were
strong performances from Sensodyne, up 12% to £363
million, and Aquafresh, up 3% to £452 million.
Sensodynes growth represented 35% of world toothpaste
growth in 2008 in markets where GSK competes.
Nutritional healthcare
Within Nutritionals, Horlicks sales rose 13% to £204
million, Lucozade sales rose 7% to £382 million and Ribena
sales were flat at £161 million, although sales of
Lucozade and Ribena in the second half of the year
declined slightly, largely as a result of poor weather in
the UK.
Results before major restructuring and total results
In October 2007 the Board approved the implementation of a
detailed formal plan for, and GSK announced, a significant
new Operational Excellence restructuring programme. A
second formal plan, representing a significant expansion
of the Operational Excellence programme, was approved by
the Board and announced in February 2009. This
restructuring programme, comprising these detailed formal
plans, covers all areas of GSKs business, including
manufacturing, selling, R&D and infrastructure. With an
estimated total cost of approximately £3.6 billion, the
expanded programme is expected to deliver annual pre-tax
savings of approximately £1.7 billion by the time it is
substantially complete in 2011. Approximately 40% of these
costs were incurred by 31st December 2008, and
approximately 35% are expected to be incurred in 2009, 20%
in 2010 and the balance mostly in 2011. In total,
approximately 75% of these costs are expected to be cash
expenditures and 25% are expected to be accounting
write-downs. Uncertainties exist over the exact amount and
timing of cash outflows, as a result of potential future
exchange rate fluctuations and as many elements of the
restructuring programme are subject to employee
consultation procedures, making it difficult to predict
with precision when these procedures will be completed.
However, the majority of the remaining cash payments are
expected to be made in 2009 and 2010. Given the extent and
cost of the Operational Excellence programme, management
believes it has a material impact on GSKs operating
results and on the manner in which GSKs business is
conducted. GSK presents the restructuring costs incurred
solely as a direct result of the Operational Excellence
programme, which in 2008 amounted to £1,089 million before
tax (2007 £338 million), in a separate column in the
income statement titled Major restructuring.
|
|
|
|
|
|
|
|
|
|
|
|
38 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008 continued |
|
|
|
|
|
|
|
In addition to the restructuring costs of the Operational
Excellence programme, the major restructuring column in
the income statement includes restructuring costs incurred
solely as a direct result of any restructuring programmes
that follow, and relate to, material acquisitions where
the operations of the acquired business overlap
extensively with GSKs existing operations.
The restructuring activities that follow, and relate to,
such acquisitions are of the same nature as those
undertaken under the Operational Excellence programme and
are also carried out following a detailed formal plan.
Management therefore considers it appropriate to present
the costs of these restructuring activities in the same
manner. The $1.65 billion (£814 million) acquisition of
Reliant Pharmaceuticals Inc. in December 2007 is the only
acquisition since October 2007 that meets the criteria set
out above and thus is the only acquisition where the costs
incurred as a direct result of a related restructuring
programme have been included within the major
restructuring column. The total restructuring costs
incurred as a direct result of this acquisition were £34
million, all of which have been charged and paid in 2008.
The Groups results before the costs of the Operational
Excellence programme and acquisition-related
restructuring programmes meeting the criteria described
above are also presented in a separate column in the
income statement and are described as Results before
major restructuring. This presentation, which GSK
intends to apply consistently to future major
restructuring programmes that have a material impact on
GSKs operating results and on the manner in which GSKs
business is conducted, has been adopted to show clearly
the Groups results both before and after the costs of
these restructuring programmes. Management believes that
this presentation assists shareholders in gaining a
clearer understanding of the Groups financial
performance and in making projections of future financial
performance, as results that include such costs, by
virtue of their size and nature, have limited comparative
value. This presentation is also consistent with the way
management assesses the Groups financial performance.
Only the restructuring costs incurred solely as a direct
result of the Operational Excellence programme and the
restructuring programme following the Reliant acquisition
have been reported in the major restructuring column in
the income statement. These restructuring costs
principally have arisen from impairments to property,
plant and equipment and the termination of the employment
contracts of staff made redundant as part of the
restructuring activities. As set out in Note 7 to the
financial statements, Major restructuring programmes,
asset impairments and staff redundancies together
accounted for £887 million of the £1,123 million
restructuring costs incurred in 2008 and reported in the
major restructuring column (2007 £338 million).
The remaining costs of £236 million in 2008 arose from
miscellaneous expenditures incurred solely as a direct
result of the restructuring programmes, including
consultancy and project management fees, the termination
of leases, site closure costs and, with respect to 2008,
the recognition of foreign exchange losses following the
liquidation of a subsidiary in Puerto Rico. No costs
arising from GSKs ongoing operating activities have been
reported in the major restructuring column.
Any restructuring costs that do not arise solely as a
direct result of the Operational Excellence programme and
restructuring programmes following, and relating to,
acquisitions meeting the criteria described above continue
to be reported in operating expenses within results before
major restructuring. These costs included restructuring
costs related to minor acquisitions and £20 million of
costs in 2008 (2007 £92 million) that related to
restructuring activity initiated before the commencement
of the Operational Excellence programme. None of this
restructuring activity had a material impact on GSKs
operating results or on the manner in which its business
is conducted.
During the anticipated duration of the
Operational Excellence programme, GSK does not currently expect to incur any material
restructuring costs except those related to
that programme and acquisitions meeting the criteria
described above. If any further, unanticipated material
restructuring costs were to arise during this period, GSK
would expect also to include them in the major
restructuring column.
GSKs operating profit, profit before taxation, taxation
and profit for the year are discussed below in terms of
both total results, which include major restructuring
costs, and results before major restructuring.
Operating profit total results
Total results include restructuring costs related
to the new Operational Excellence programme, which
commenced in October 2007, and the Reliant
restructuring programme.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
Growth |
|
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
CER% |
|
|
£% |
|
|
Turnover |
|
|
24,352 |
|
|
|
100 |
|
|
|
22,716 |
|
|
|
100.0 |
|
|
|
(3 |
) |
|
|
7 |
|
|
Cost of sales |
|
|
(6,415 |
) |
|
|
(26.3 |
) |
|
|
(5,317 |
) |
|
|
(23.4 |
) |
|
|
13 |
|
|
|
21 |
|
Selling, general
and administration |
|
|
(7,656 |
) |
|
|
(31.4 |
) |
|
|
(6,954 |
) |
|
|
(30.6 |
) |
|
|
2 |
|
|
|
10 |
|
Research and
development |
|
|
(3,681 |
) |
|
|
(15.2 |
) |
|
|
(3,327 |
) |
|
|
(14.7 |
) |
|
|
4 |
|
|
|
11 |
|
Other operating
income |
|
|
541 |
|
|
|
2.2 |
|
|
|
475 |
|
|
|
2.1 |
|
|
|
11 |
|
|
|
14 |
|
|
Operating profit |
|
|
7,141 |
|
|
|
29.3 |
|
|
|
7,593 |
|
|
|
33.4 |
|
|
|
(20 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 39
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008
continued
|
|
|
|
|
|
|
|
Cost of sales
Cost of sales increased to 26.3% of turnover (2007 23.4%). At constant exchange rates, cost of
sales as a percentage of turnover increased by 3.8 percentage points to 27.2%, reflecting charges
related to the major restructuring programmes of £639 million (2007 £111 million) and
unfavourable product and regional mix compared with 2007, partly offset by savings from the
restructuring programmes.
Selling, general and administration
SG&A costs, including legal charges, were 31.4% of turnover (2007 30.6%), a increase of 0.8
percentage points. At constant exchange rates, the increase was 1.4 percentage points. Legal costs
of £611 million (2007 £255 million) included a £278 million charge announced in January 2009
related to the US investigation into GSKs marketing and promotional practices which originated in
Colorado. SG&A costs included charges of £304 million (2007 £137 million) related to the major
restructuring programmes. Excluding legal costs, SG&A decreased by 1.6%.
Research and development
R&D expenditure increased 4% and included charges related to the major restructuring programmes of
£175 million (2007 £90 million). Excluding these charges, R&D expenditure increased 2% in CER
terms as investment in the late stage pipeline was partly offset by restructuring savings.
Other operating income
Other operating income of £541 million (2007 £475 million) included strong growth in royalty
income to £307 million (2007 £216 million). Product, intellectual property and equity investment
disposals realised £230 million in 2008 compared with £90 million in 2007. The Roche litigation
settlement was included in 2007.
Operating profit total results
Total operating profit of £7,141 million decreased by 6% in sterling terms and 20% in CER terms
compared with 2007. Pharmaceuticals operating profit was £6,331 million, down 21%, while Consumer
Healthcare operating profit fell by only 2% to £810 million.
In the year, gains from asset disposals and settlements were £293 million (2007 £213 million),
costs for legal matters were £611 million (2007 £255 million), fair value movements on financial
instruments resulted in a charge of £10 million (2007 income of £41 million) and charges
relating to previous restructuring programmes were £20 million (2007 £92 million). Charges
related to the major restructuring programmes were £1,118 million (2007 £338 million). The
impact of all these items on total operating profit was a £1,466 million charge in 2008 compared
with a £431 million charge in 2007.
Profit before taxation total results
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Finance income |
|
£m |
|
|
£m |
|
|
Interest and other finance income |
|
|
322 |
|
|
|
255 |
|
Fair value adjustments and hedges |
|
|
(9 |
) |
|
|
7 |
|
|
|
|
|
313 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
Interest costs |
|
|
(829 |
) |
|
|
(434 |
) |
Unwinding of discount on liabilities |
|
|
(16 |
) |
|
|
(27 |
) |
Fair value adjustments and hedges |
|
|
2 |
|
|
|
8 |
|
|
|
|
|
(843 |
) |
|
|
(453 |
) |
|
Share of after tax profits of associates and joint ventures
The share of after tax profits of associates of £48 million
(2007 £50 million) arises principally from the Groups holding in Quest Diagnostics Inc.
Profit before taxation total results
Taking account of net finance costs and the share of profits of associates, total profit before
taxation was £6,659 million compared with £7,452 million in 2007, a 24% CER decline and an 11%
sterling decline.
Operating profit results before major restructuring
The results before major restructuring are set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
Growth |
|
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
CER% |
|
|
£% |
|
|
Turnover |
|
|
24,352 |
|
|
|
100 |
|
|
|
22,716 |
|
|
|
100.0 |
|
|
|
(3 |
) |
|
|
7 |
|
|
Cost of sales |
|
|
(5,776 |
) |
|
|
(23.7 |
) |
|
|
(5,206 |
) |
|
|
(22.9 |
) |
|
|
4 |
|
|
|
11 |
|
Selling, general
and administration |
|
|
(7,352 |
) |
|
|
(30.2 |
) |
|
|
(6,817 |
) |
|
|
(30.0 |
) |
|
|
|
|
|
|
8 |
|
Research and
development |
|
|
(3,506 |
) |
|
|
(14.4 |
) |
|
|
(3,237 |
) |
|
|
(14.3 |
) |
|
|
2 |
|
|
|
8 |
|
Other operating
income |
|
|
541 |
|
|
|
2.2 |
|
|
|
475 |
|
|
|
2.1 |
|
|
|
11 |
|
|
|
14 |
|
|
Operating profit |
|
|
8,259 |
|
|
|
33.9 |
|
|
|
7,931 |
|
|
|
34.9 |
|
|
|
(10 |
) |
|
|
4 |
|
|
Cost of sales
Cost of sales increased by 0.8 percentage points to 23.7% of turnover. At constant exchange rates
the increase was 1.5 percentage points of turnover, principally reflecting the impact of generic
competition to higher margin products in the USA, lower Avandia sales and a higher proportion of
sales generated in lower margin vaccines, brands sold in Emerging Markets and Consumer Healthcare
products. This was partly offset by savings from the restructuring programmes.
|
|
|
|
|
|
|
|
|
|
|
|
40 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008
continued |
|
|
|
|
|
|
|
Selling, general and administration
SG&A costs, including legal charges, were 30.2% of turnover (2007 30.0%). At constant exchange
rates, SG&A costs increased by 0.7 percentage points to 30.7% of turnover. Legal costs of £611
million (2007 £255 million) included a £278 million charge announced in January 2009 related to
the US investigation into GSKs marketing and promotional practices which originated in Colorado.
Excluding legal costs, SG&A as a percentage of turnover fell 1.2 percentage points to 27.7% (2007
28.9%). This was a 3% growth in sterling terms, but a 4% reduction at constant exchange rates,
reflecting the benefits of the restructuring programmes. Selling and distribution fell by 1%,
advertising and promotion by 5% and general and administration expenditure, excluding legal
charges, by 7%.
Research and development
R&D expenditure increased by 2% to 14.4% of turnover
(2007 14.3%) as investment in the late stage pipeline was partly offset by restructuring
savings.
Other operating income
Other operating income of £541 million (2007 £475 million) included strong growth in royalty
income to £307 million (2007 £216 million). Product, intellectual property and equity investment
disposals realised £230 million in 2008 compared with £90 million in 2007. The Roche litigation
settlement was included in 2007.
Operating profit results before major restructuring
Operating profit before major restructuring of £8,259 million for the year increased by 4% in
sterling terms but decreased by 10% in CER terms compared with 2007. Pharmaceuticals operating
profit was £7,427 million, down 11%, while Consumer Healthcare operating profit was flat in CER
terms at £832 million. Excluding legal costs, operating profit decreased by 6%, which was greater
than the turnover decline of 3%, primarily due to higher cost of sales as a percentage of
turnover.
In the year, gains from asset disposals and settlements were £293 million (2007 £213 million),
costs for legal matters were £611 million (2007 £255 million), fair value movements on financial
instruments resulted in a charge of £10 million (2007 income of £41 million) and charges
relating to previous restructuring programmes were £20 million (2007 £92 million). The impact of
these items on operating profit before major restructuring was a £348 million charge in 2008 (2007
£93 million).
Profit before taxation results before major
restructuring
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Finance income |
|
£m |
|
|
£m |
|
|
Interest and other income |
|
|
322 |
|
|
|
255 |
|
Fair value adjustments and hedges |
|
|
(9 |
) |
|
|
7 |
|
|
|
|
|
313 |
|
|
|
262 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
Interest costs |
|
|
(829 |
) |
|
|
(434 |
) |
Unwinding of discount on liabilities |
|
|
(11 |
) |
|
|
(27 |
) |
Fair value adjustments and hedges |
|
|
2 |
|
|
|
8 |
|
|
|
|
|
(838 |
) |
|
|
(453 |
) |
|
Taking account of net finance costs and the share of profits of associates, profit before tax
before major restructuring was £7,782 million compared with £7,790 million in 2007, a 14% CER
decline but flat in sterling terms.
Taxation
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
UK corporation tax |
|
|
289 |
|
|
|
452 |
|
Overseas taxation |
|
|
1,589 |
|
|
|
1,962 |
|
|
Current taxation |
|
|
1,878 |
|
|
|
2,414 |
|
Deferred taxation |
|
|
69 |
|
|
|
(272 |
) |
|
Taxation on total profits |
|
|
1,947 |
|
|
|
2,142 |
|
|
The charge for taxation on profit before major
restructuring charges, amounting to £2,231 million (2007
£2,219 million), and represents an effective tax rate
of 28.7% (2007 28.5%). The charge for taxation on total
profits amounted to £1,947 million (2007 £2,142
million) and represented an effective tax rate of 29.2%
(2007 28.7%). The Groups balance sheet at 31st
December 2008 included a tax payable liability of £780
million and a tax recoverable asset of £76 million.
The Groups main open tax issues are in the USA, Canada
and Japan.
In July, following discussions with HMRC, the
Group settled substantially all outstanding UK tax issues
for all periods up to and including 31st December 2006.
Following its audit of the period 2001 to 2003, the IRS
issued Statutory Notices of Deficiency to GSK asserting
income and withholding tax deficiencies, and associated
penalties, arising from its reclassification of an
intercompany financing arrangement in those years from
debt to equity, and its consequent recharacterisation of
the amounts paid as dividends subject to withholding tax
under the US UK treaty. All amounts due under the
financing arrangement were timely paid, with the final
payment made in April 2008.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 41
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008
continued |
|
|
|
|
|
|
|
The IRS commenced its audit of the period 2004 to 2006 in June 2008, and is examining the issue
for these years. GSK disagrees with the IRSs position and, in August 2008, initiated actions in
the United States Tax Court to contest the Statutory Notices of Deficiency. GSK estimates that the
IRS claim for tax, penalties, and interest at 31st December 2008, net of federal tax relief, for
2001 through 2003 is $864 million. GSK believes that this claim has no merit and that no
adjustment is warranted. If, contrary to GSKs view, the IRS prevailed in its argument before a
court in respect of the years 2001-2003, GSK would expect to have an additional liability for the
five year period 2004-2008 in the amount of $1,059 million in tax, penalties, and interest at 31st
December 2008, net of federal tax relief for those years. In the event that the company is not
able to resolve this issue with the IRS, a court decision would not be expected before 2011.
Lower courts in Japan have upheld claims by the tax authorities for Yen 39 billion (£177 million)
relating to Japanese CFC legislation. The company has paid and fully provided for the full tax but
is pursuing a claim for refund to the Japanese Supreme Court. In Canada a court decision in
respect of transfer pricing in the early 1990s was completed in May 2008. GSK filed an appeal in
June and a court date is awaited.
GSK continues to believe that it has made adequate provision for the liabilities likely to arise
from open assessments. The ultimate liability for such matters may vary from the amounts provided
and is dependent upon the outcome of litigation proceedings and negotiations with the relevant tax
authorities.
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
Growth |
|
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Total profit after taxation
for the year |
|
|
4,712 |
|
|
|
5,310 |
|
|
|
(25 |
) |
|
|
(11 |
) |
Total profit attributable to
shareholders |
|
|
4,602 |
|
|
|
5,214 |
|
|
|
(26 |
) |
|
|
(12 |
) |
Basic earnings per share (pence) |
|
|
88.6 |
p |
|
|
94.4 |
p |
|
|
(21 |
) |
|
|
(6 |
) |
Basic earnings per ADS (US$) |
|
$ |
3.28 |
|
|
$ |
3.77 |
|
|
|
|
|
|
|
|
|
|
Results before major restructuring
profit after taxation for the year |
|
|
5,551 |
|
|
|
5,571 |
|
|
|
(14 |
) |
|
|
|
|
Results before major restructuring
profit attributable to shareholders |
|
|
5,441 |
|
|
|
5,475 |
|
|
|
(15 |
) |
|
|
(1 |
) |
Adjusted earnings per share (pence) |
|
|
104.7 |
p |
|
|
99.1 |
p |
|
|
(9 |
) |
|
|
6 |
|
Adjusted earnings per ADS (US$) |
|
$ |
3.87 |
|
|
$ |
3.96 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares (millions) |
|
|
5,195 |
|
|
|
5,524 |
|
|
|
|
|
|
|
|
|
|
Diluted total earnings per share (pence) |
|
|
88.1 |
p |
|
|
93.7 |
p |
|
|
|
|
|
|
|
|
Diluted total earnings per ADS (US$) |
|
$ |
3.26 |
|
|
$ |
3.75 |
|
|
|
|
|
|
|
|
|
Diluted weighted average number
of shares (millions) |
|
|
5,226 |
|
|
|
5,567 |
|
|
|
|
|
|
|
|
|
|
Total results including restructuring costs produced a basic EPS of 88.6p compared with 94.4p in
2007. This was a 21% decline at CER and a 6% decline in sterling terms. Excluding major
restructuring costs, EPS was 104.7p compared with 99.1p. This was a 9% decline at CER but a 6%
increase in sterling terms. The 15 percentage point currency benefit arose from the weakness of
Sterling against most major currencies.
Dividend
The Board has declared a fourth interim dividend of 17 pence per share resulting in a dividend for
the year of 57 pence, a four pence increase over the dividend of 53 pence per share for 2007. The
equivalent fourth interim dividend receivable by ADR holders is 49.4564 cents per ADS based on an
exchange rate of
£1/$1.4546. The ex-dividend date will be 11th February 2009, with a record date of 13th February
2009 and a payment date of 9th April 2009.
Critical accounting policies
The consolidated financial statements are prepared in accordance with IFRS, as adopted for use in
the European Union, and also with IFRS as issued by the IASB, following the accounting policies
approved by the Board and described in Note 2 to the financial statements, Accounting principles
and policies. Management is required to make estimates and assumptions that affect the amounts of
assets, liabilities, revenue and expenses reported in the financial statements. Actual amounts and
results could differ from those estimates. The critical accounting policies adopted relate to the
following areas:
|
|
Turnover |
|
|
|
Taxation |
|
|
|
Legal and other disputes |
|
|
|
Property, plant & equipment |
|
|
|
Goodwill |
|
|
|
Other intangible assets |
|
|
|
Pensions and other post-employment benefits. |
Information on the judgements and estimates made in these areas is given in Note 3 to the financial
statements, Key accounting judgements and estimates.
In respect of the Turnover accounting policy, the Groups largest business is US pharmaceuticals,
and the US market has the most complex arrangements for rebates, discounts and allowances. The
following briefly describes the nature of the arrangements in existence in the Groups US
pharmaceuticals business.
|
|
GSK has arrangements with certain indirect customers whereby the customer is able to buy
products from wholesalers at reduced prices. A chargeback represents the difference between
the invoice price to the wholesaler and the indirect customers contractual discounted price.
Accruals for estimating chargebacks are calculated based on the terms of each agreement,
historical experience and product growth rates. |
|
|
|
|
|
|
|
|
|
|
|
|
42 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2008
continued |
|
|
|
|
|
|
|
|
|
Customer rebates are offered to key managed care and group purchasing organisations (GPO) and
other direct and indirect customers. These arrangements require the customer to achieve certain
performance targets relating to value of product purchased, formulary status or pre-determined
market shares relative to competitors. Rebates given under Medicare, Part D are included in this
category. The Medicare, Part D programme was introduced in 2006 and replaced the Government
Medicaid subsidies for some individuals with subsidised coverage provided through private
prescription plans. The accrual for these rebates is estimated based on the specific terms in each
agreement, historical experience and product growth rates. |
|
|
|
The US Medicaid programme is a state-administered programme providing assistance to certain poor
and vulnerable patients. In 1990, the Medicaid Drug Rebate Program was established to reduce state
and federal expenditure on prescription drugs. GSK participates by providing rebates to states.
Accruals for Medicaid rebates are calculated based on the specific terms of individual state
agreements using a combination of historical experience, product and population growth, anticipated
price increases and the impact of contracting strategies. |
|
|
|
Cash discounts are offered to customers to encourage prompt payment. These are accrued for at the
time of invoicing and adjusted subsequently to reflect actual experience. |
|
|
|
Where there is historical experience of customer returns, GSK records an accrual for estimated
sales returns by applying historical experience of customer returns to the amounts invoiced,
together with market related information such as stock levels at wholesalers, anticipated price
increases and competitor activity. |
A reconciliation of gross turnover to net turnover for the US pharmaceuticals business is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
Gross turnover |
|
|
11,602 |
|
|
|
100 |
|
|
|
11,826 |
|
|
|
100 |
|
|
|
13,131 |
|
|
|
100 |
|
Chargebacks |
|
|
892 |
|
|
|
8 |
|
|
|
917 |
|
|
|
8 |
|
|
|
846 |
|
|
|
6 |
|
Managed care, Medicare
Part D and GPO
rebates |
|
|
764 |
|
|
|
6 |
|
|
|
727 |
|
|
|
6 |
|
|
|
912 |
|
|
|
7 |
|
US government and
state programmes |
|
|
554 |
|
|
|
5 |
|
|
|
481 |
|
|
|
4 |
|
|
|
507 |
|
|
|
4 |
|
Cash discounts |
|
|
207 |
|
|
|
2 |
|
|
|
208 |
|
|
|
2 |
|
|
|
248 |
|
|
|
2 |
|
Customer returns |
|
|
126 |
|
|
|
1 |
|
|
|
131 |
|
|
|
1 |
|
|
|
140 |
|
|
|
1 |
|
Prior year adjustments |
|
|
(38 |
) |
|
|
|
|
|
|
(73 |
) |
|
|
|
|
|
|
(69 |
) |
|
|
|
|
Other items |
|
|
203 |
|
|
|
1 |
|
|
|
162 |
|
|
|
1 |
|
|
|
194 |
|
|
|
1 |
|
|
Total deductions |
|
|
2,708 |
|
|
|
23 |
|
|
|
2,553 |
|
|
|
22 |
|
|
|
2,778 |
|
|
|
21 |
|
|
Net turnover |
|
|
8,894 |
|
|
|
77 |
|
|
|
9,273 |
|
|
|
78 |
|
|
|
10,353 |
|
|
|
79 |
|
|
Sterling values have increased by approximately 8%
compared with 2007 as a result of exchange rate
movements.
Chargebacks have decreased in 2008 as a result of sales of products into US government stockpiles
during 2007, which did not arise in 2008. Managed care, Medicare Part D and GPO rebates were flat
in dollar terms, despite additional Tricare prescription rebates. In January 2008, the National
Defense Authorisation Act was approved, which authorises the Department of Defense to access
discounted federal pricing on drugs dispensed at Tricare network retail pharmacies to members of
the US armed forces, their dependants and military retirees. Rebates given under the US government
and state programmes have risen in 2008 mainly due to pricing adjustments on Imitrex and Lamictal
following the introduction of generic competition, together with the inclusion of new products from
the Reliant Pharmaceuticals acquisition.
The total accruals for rebates, discounts, allowances and returns in the US pharmaceuticals
business were as follows:
|
|
|
|
|
|
|
|
|
|
|
At 31st |
|
|
At 31st |
|
|
|
December |
|
|
December |
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Chargebacks |
|
|
50 |
|
|
|
38 |
|
Managed care, Medicare Part D
and GPO rebates |
|
|
474 |
|
|
|
340 |
|
US government and state programmes |
|
|
345 |
|
|
|
240 |
|
Cash discounts |
|
|
25 |
|
|
|
21 |
|
Customer returns |
|
|
259 |
|
|
|
194 |
|
Other |
|
|
50 |
|
|
|
37 |
|
|
Total |
|
|
1,203 |
|
|
|
870 |
|
|
Sterling values have increased largely as a result of exchange rate movements. In dollar terms, the
2008 provision is largely unchanged from 2007. A monthly process is operated to monitor inventory
levels at wholesalers for any abnormal movements. This process uses gross sales volumes,
prescription volumes based on third party data sources and information received from key
wholesalers. The aim of this is to maintain inventories at a consistent level from year to year
based on the pattern of consumption. On this basis, US pharmaceutical inventory levels at
wholesalers and in other distribution channels at 31st December 2008 were estimated to amount to
approximately one month of turnover. This calculation uses third party information, the accuracy of
which cannot be totally verified, but is believed to be sufficiently reliable for this purpose.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 43
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial position and resources
|
|
|
|
|
|
|
|
Financial position
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Assets |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
9,678 |
|
|
|
7,821 |
|
Goodwill |
|
|
2,101 |
|
|
|
1,370 |
|
Other intangible assets |
|
|
5,869 |
|
|
|
4,456 |
|
Investments in associates and joint ventures |
|
|
552 |
|
|
|
329 |
|
Other investments |
|
|
478 |
|
|
|
517 |
|
Deferred tax assets |
|
|
2,760 |
|
|
|
2,196 |
|
Derivative financial instruments |
|
|
107 |
|
|
|
1 |
|
Other non-current assets |
|
|
579 |
|
|
|
687 |
|
|
Total non-current assets |
|
|
22,124 |
|
|
|
17,377 |
|
|
Current assets |
|
|
|
|
|
|
|
|
Inventories |
|
|
4,056 |
|
|
|
3,062 |
|
Current tax recoverable |
|
|
76 |
|
|
|
58 |
|
Trade and other receivables |
|
|
6,265 |
|
|
|
5,495 |
|
Derivative financial instruments |
|
|
856 |
|
|
|
475 |
|
Liquid investments |
|
|
391 |
|
|
|
1,153 |
|
Cash and cash equivalents |
|
|
5,623 |
|
|
|
3,379 |
|
Assets held for sale |
|
|
2 |
|
|
|
4 |
|
|
Total current assets |
|
|
17,269 |
|
|
|
13,626 |
|
|
Total assets |
|
|
39,393 |
|
|
|
31,003 |
|
|
Liabilities |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
(956 |
) |
|
|
(3,504 |
) |
Trade and other payables |
|
|
(6,075 |
) |
|
|
(4,861 |
) |
Derivative financial instruments |
|
|
(752 |
) |
|
|
(262 |
) |
Current tax payable |
|
|
(780 |
) |
|
|
(826 |
) |
Short-term provisions |
|
|
(1,454 |
) |
|
|
(892 |
) |
|
Total current liabilities |
|
|
(10,017 |
) |
|
|
(10,345 |
) |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
(15,231 |
) |
|
|
(7,067 |
) |
Deferred tax provision |
|
|
(714 |
) |
|
|
(887 |
) |
Pensions and other post-employment benefits |
|
|
(3,039 |
) |
|
|
(1,383 |
) |
Other provisions |
|
|
(1,645 |
) |
|
|
(1,035 |
) |
Derivative financial instruments |
|
|
(2 |
) |
|
|
(8 |
) |
Other non-current liabilities |
|
|
(427 |
) |
|
|
(368 |
) |
|
Total non-current liabilities |
|
|
(21,058 |
) |
|
|
(10,748 |
) |
|
Total liabilities |
|
|
(31,075 |
) |
|
|
(21,093 |
) |
|
Net assets |
|
|
8,318 |
|
|
|
9,910 |
|
|
Equity |
|
|
|
|
|
|
|
|
Share capital |
|
|
1,415 |
|
|
|
1,503 |
|
Share premium account |
|
|
1,326 |
|
|
|
1,266 |
|
Retained earnings |
|
|
4,622 |
|
|
|
6,475 |
|
Other reserves |
|
|
568 |
|
|
|
359 |
|
|
Shareholders equity |
|
|
7,931 |
|
|
|
9,603 |
|
|
Minority interests |
|
|
387 |
|
|
|
307 |
|
|
Total equity |
|
|
8,318 |
|
|
|
9,910 |
|
|
Property, plant and equipment
GSKs business is science-based, technology-intensive and highly regulated by governmental
authorities. The Group allocates significant financial resources to the renewal and maintenance of
its property, plant and equipment to minimise risks of interruption of production and to achieve
compliance with regulatory standards. A number of its processes use chemicals and hazardous
materials.
The total cost of the Groups property, plant and equipment at 31st December 2008 was £18,987
million, with a net book value of £9,678 million. Of this, land and buildings represented £3,756
million, plant and equipment £3,644 million and assets in construction £2,278 million. In 2008, GSK
invested £1,444 million in new and renewal property, plant and equipment. This is mainly related to
a large number of projects for the renewal, improvement and expansion of facilities at various
worldwide sites. Property is mainly held freehold. New investment is financed from Group liquid
resources. At 31st December 2008, GSK had capital contractual commitments for future expenditure of
£489 million and operating lease commitments of £448 million. GSK believes that its facilities are
adequate for its current needs.
The Group observes stringent procedures and uses specialist skills to manage environmental risks
from these activities. Environmental issues, sometimes dating from operations now modified or
discontinued, are reported under Responsibility for environment, health and safety (page 30) and
in Note 44 to the financial statements, Legal proceedings.
Goodwill
Goodwill has increased during the year from £1,370 million at
31st December 2007 to £2,101 million. The increase primarily reflects the goodwill arising on the
acquisition of Sirtris Pharmaceuticals Inc. of £242 million and that arising on the acquisition of
the BMS Egypt business of £52 million as well as a significant strengthening of overseas currencies
on the translation of existing foreign currency goodwill balances.
Other intangible assets
Other intangible assets include the cost of intangibles acquired from third parties and computer
software. The net book value of other intangible assets as at 31st December 2008 was £5,869 million
(2007 £4,456 million). The increase in 2008 reflects additions of £847 million and currency
movements partly offset by the amortisation and impairment of existing intangibles. The largest
element of the additions is £106 million relating to the acquisition of Sirtris Pharmaceuticals
Inc., reflecting the existence of the technology and a large patent application portfolio covering
areas of sirtuin biology.
|
|
|
|
|
|
|
|
|
|
|
|
44 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial position and resources
continued
|
|
|
|
|
|
|
|
Investments
GSK held investments, including associates and joint ventures, with a carrying value at 31st
December 2008 of £1,030 million (2007 £846 million). The market value at 31st December 2008 was
£1,883 million (2007 £1,517 million). The largest of these investments is in an associate, Quest
Diagnostics Inc., which had a book value at 31st December 2008 of £463 million (2007 £299
million). The investments include equity stakes in companies where the Group has research
collaborations, which provide access to biotechnology developments of potential interest or
interests in companies that arise from business divestments.
Derivative financial instruments: assets
GSK had both non-current and current derivative financial instruments held at fair value of £963
million (2007 £476 million). The increase primarily reflects fluctuations in far forward
valuations on foreign exchange contracts hedging inter-company loans and deposits.
Exchange movements are largely due to changes in Euro, US dollar and Yen market rates.
Inventories
Inventory of £4,056 million has increased by £994 million during the year. The majority of this
increase arises from a strengthening of overseas currencies, with the remainder caused partly by
strategic stock building to support growth in specific products.
Trade and other receivables
Trade and other receivables of £6,265 million have increased from 2007 reflecting the impact of
strengthening overseas currencies on the translation of foreign currency receivables partly offset
by the completion of non-recourse factoring arrangements in Japan and reductions in overdue
receivables in certain European markets.
Derivative financial instruments: liabilities
GSK held both non-current and current derivative financial instruments held at fair value of £754
million (2007 £270 million) relating primarily to hedging exchange on translation of currency
assets on consolidation. The increase again reflects the impact from Euro, US dollar and Yen
currency fluctuations.
Trade and other payables
Trade and other payables amounting to £6,075 million have increased from 2007 primarily reflecting
the strengthening of overseas currencies.
Provisions
The Group carried deferred tax provisions and other short-term and non-current provisions of £3,813
million at 31st December 2008 (2007 £2,814 million) in respect of estimated future liabilities,
of which £1,903 million related to legal and other disputes. Provision has been made for legal and
other disputes, indemnified disposal liabilities and the costs of restructuring programmes to the
extent that at the balance sheet date an actual or constructive obligation existed and could be
reasonably estimated.
Pensions and other post-employment benefits
The Group accounts for pension and other post-employment arrangements in accordance with IAS 19.
The net deficits before allowing for deferred taxation were £1,736 million (2007 £411 million) on
pension arrangements and £1,303 million (2007 £972 million) on unfunded post-employment liabilities. The
pension liabilities increased following declines in asset values and a negative impact of exchange
movements only partially offset by further special funding contributions to the UK pension funds of
£200 million (2007 £285 million to the UK pension schemes); a strengthening of long-term interest
rates, including an increase in the rate used to discount UK pension liabilities from 5.75% to
6.20% and a decrease in the estimated long term inflation rate in the UK.
Net debt
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Cash, cash equivalents and
liquid investments |
|
|
6,014 |
|
|
|
4,532 |
|
Borrowings repayable within one year |
|
|
(956 |
) |
|
|
(3,504 |
) |
Borrowings repayable after one year |
|
|
(15,231 |
) |
|
|
(7,067 |
) |
|
Net debt |
|
|
(10,173 |
) |
|
|
(6,039 |
) |
|
Net debt increased by £4,134 million primarily due to share repurchases, further acquisition of
businesses and a significant strengthening of the foreign currencies in which group debt is
denominated, partly offset by increased cash inflows from operating activities.
Total equity
A summary of the movements in equity is set out below.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Total equity at beginning of year |
|
|
9,910 |
|
|
|
9,648 |
|
Total recognised income and expense
for the year |
|
|
4,829 |
|
|
|
6,134 |
|
Dividends to shareholders |
|
|
(2,929 |
) |
|
|
(2,793 |
) |
Ordinary Shares issued |
|
|
62 |
|
|
|
417 |
|
Ordinary Shares purchased and held as
Treasury shares |
|
|
|
|
|
|
(3,537 |
) |
Ordinary Shares purchased and cancelled |
|
|
(3,706 |
) |
|
|
(213 |
) |
Consideration received for shares transferred
by ESOP Trusts |
|
|
10 |
|
|
|
116 |
|
Ordinary Shares acquired by ESOP Trusts |
|
|
(19 |
) |
|
|
(26 |
) |
Share-based incentive plans |
|
|
241 |
|
|
|
237 |
|
Tax on share-based incentive plans |
|
|
(1 |
) |
|
|
4 |
|
Distributions to minority interests |
|
|
(79 |
) |
|
|
(77 |
) |
|
Total equity at end of year |
|
|
8,318 |
|
|
|
9,910 |
|
|
At 31st December 2008, total equity had decreased from £9,910 million at 31st December 2007 to
£8,318 million. The decrease arises principally from actuarial losses on defined benefit pension
plans in the year and further share repurchases, partially offset by recognised income and expenses
for the year.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 45
|
|
|
|
|
Report of the Directors
|
|
|
Financial position and resources
continued |
|
|
|
|
|
Share purchases
In 2008, the Employee Share Ownership Plan (ESOP) Trusts acquired £19 million of shares in GSK plc
(2007 £26 million). Shares are held by the Trusts to satisfy future exercises of options and
awards under the Group share option and award schemes. A proportion of the shares held by the
Trusts are in respect of awards where the rules of the scheme require GSK to satisfy exercises
through market purchases rather than the issue of new shares. The shares held by the Trusts are
matched to options and awards granted.
At 31st December 2008, the ESOP Trusts held 129 million GSK shares against the future exercise of
share options and share awards. The carrying value of £1,445 million (2007 £1,617 million) has
been deducted from other reserves. The market value of these shares was £1,657 million (2007
£1,721 million).
GSK repurchased £3,706 million of shares for cancellation in 2008 (2007 £213 million) and £nil of
shares to be held as Treasury shares (2007 £3,537 million). In order to ensure that GSK has
sufficient flexibility to deliver its strategic priorities the company does not expect to make any
significant repurchases under the existing share buy-back programme during 2009. The exact amount
and timing of future purchases, and the extent to which repurchased shares will be held as Treasury
shares rather than being cancelled, will be determined by the company and is dependent on market
conditions and other factors. At 31st December 2008, GSK held 474.2 million shares as Treasury
shares (2007 504.2 million shares), at a cost of £6,286 million (2007 £6,683 million), which
has been deducted from retained earnings.
There have been no purchases since 31 December 2008 under the existing programme.
Commitments and contingent liabilities
Financial commitments are summarised in Note 39 to the financial statements, Commitments. Other
contingent liabilities and obligations in respect of short and long-term debt are set out in Note
31 to the financial statements, Contingent liabilities and Note 32 to the financial statements,
Net debt.
Amounts provided for pensions and post-retirement benefits are set out in Note 28 to the financial
statements, Pensions and other post-employment benefits. Amounts provided for restructuring
programmes and legal, environmental and other disputes are set out in Note 29 to the financial
statements, Other provisions.
Contractual obligations and commitments
The following table sets out the Groups contractual obligations and commitments at 31st December
2008 as they fall due for payment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Under 1 yr |
|
|
1-3 yrs |
|
|
3-5 yrs |
|
|
5 yrs+ |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Loans |
|
|
16,051 |
|
|
|
911 |
|
|
|
703 |
|
|
|
4,600 |
|
|
|
9,837 |
|
Interest on loans |
|
|
11,868 |
|
|
|
782 |
|
|
|
1,525 |
|
|
|
1,339 |
|
|
|
8,222 |
|
Finance lease obligations |
|
|
136 |
|
|
|
48 |
|
|
|
62 |
|
|
|
19 |
|
|
|
7 |
|
Finance lease charges |
|
|
18 |
|
|
|
5 |
|
|
|
7 |
|
|
|
4 |
|
|
|
2 |
|
Operating lease
commitments |
|
|
448 |
|
|
|
140 |
|
|
|
185 |
|
|
|
76 |
|
|
|
47 |
|
Intangible assets |
|
|
13,048 |
|
|
|
660 |
|
|
|
1,269 |
|
|
|
1,556 |
|
|
|
9,563 |
|
Property, plant & equipment |
|
|
489 |
|
|
|
388 |
|
|
|
100 |
|
|
|
1 |
|
|
|
|
|
Investments |
|
|
56 |
|
|
|
46 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
Purchase commitments |
|
|
145 |
|
|
|
70 |
|
|
|
74 |
|
|
|
1 |
|
|
|
|
|
Business combinations |
|
|
227 |
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions |
|
|
597 |
|
|
|
334 |
|
|
|
132 |
|
|
|
131 |
|
|
|
|
|
Other commitments |
|
|
46 |
|
|
|
17 |
|
|
|
19 |
|
|
|
5 |
|
|
|
5 |
|
|
Total |
|
|
43,129 |
|
|
|
3,628 |
|
|
|
4,086 |
|
|
|
7,732 |
|
|
|
27,683 |
|
|
Commitments in respect of loans and future interest payable on loans are disclosed after taking
into account the effect of derivatives. The Group has entered into a number of research
collaborations to develop new compounds with other pharmaceutical companies. The terms of these
arrangements can include up-front fees, equity investments, loans and commitments to fund specified
levels of research. In addition, the Group will often agree to make further payments if future
milestones are achieved. As some of these agreements relate to compounds in the early stages of
development, milestone payments will continue for a number of years if the compounds move
successfully through the development process. Generally the closer the product is to marketing
approval the greater the possibility of success. The payments shown above within intangible assets
represent the maximum that would be paid if all milestones are achieved.
A number of new commitments were made in 2008 under licensing and other agreements, including
arrangements with Actelion Pharmaceuticals Limited, Archemix Corporation, Dynavax Technologies
Corporation, and Mpex Pharmaceuticals, Inc. The commitments relating to business combinations
reflect agreements to acquire the issued share capital of Genelabs Technologies, Inc., Bristol
Myers Squibb Pakistan (Private) Limited and AZ Tika SNC, the latter being subject to clearance by
the Swedish Competition Authority.
In 2006, GSK formalised an agreement with the trustees of the UK
pension schemes to make additional contributions, in addition to the normal contributions, over a
four year period ending 31st December 2009 in order to eliminate the then funded pension deficits
on an IAS 19 basis by that point. The table above shows this commitment, net of £166 million of
additional contributions made in 2008, but excludes the normal ongoing annual funding requirement
of approximately £150 million. GSK has also committed to eliminate any future deficits that may
arise over a rolling five-year period. This agreement will be reviewed during 2009. For further
information on pension obligations, see Note 28 to the financial statements, Pensions and other
post-employment benefits.
|
|
|
|
|
|
|
|
46 GSK Annual Report 2008
|
|
|
Report of the Directors
|
|
|
Financial position and resources
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent liabilities
The following table sets out contingent liabilities, comprising discounted bills, performance
guarantees, letters of credit and other items arising in the normal course of business, and when
they are expected to expire.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Under 1 yr |
|
|
1-3 yrs |
|
|
3-5 yrs |
|
|
5 yrs+ |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Guarantees |
|
|
98 |
|
|
|
73 |
|
|
|
14 |
|
|
|
|
|
|
|
11 |
|
Other contingent liabilities |
|
|
36 |
|
|
|
3 |
|
|
|
12 |
|
|
|
3 |
|
|
|
18 |
|
|
Total |
|
|
134 |
|
|
|
76 |
|
|
|
26 |
|
|
|
3 |
|
|
|
29 |
|
|
In the normal course of business GSK has provided various indemnification guarantees in respect of
business disposals in which legal and other disputes have subsequently arisen. A provision is made
where a reasonable estimate can be made of the likely outcome of the dispute and this is included
in Note 29 to the financial statements, Other provisions.
It is the Groups policy to provide for the settlement costs of asserted claims and environmental
disputes when a reasonable estimate may be made. Prior to this point no liability is recorded.
Legal and environmental costs are discussed in Risk factors on pages 50 to 53 and Note 44 to the
financial statements, Legal proceedings. GSK continues to believe that it has made adequate provision for the
liabilities likely to arise from open taxation assessments. The ultimate liability for such matters
may vary significantly from amounts provided and is dependent upon the outcome of litigation
proceedings and negotiations with the relevant tax authorities. This is discussed further in Note
14 to the financial statements, Taxation.
Cash flow
A summary of the consolidated cash flow is set out below.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Net cash inflow from operating activities |
|
|
7,205 |
|
|
|
6,161 |
|
Net cash outflow from investing activities |
|
|
(1,149 |
) |
|
|
(3,048 |
) |
Net cash outflow from financing activities |
|
|
(4,908 |
) |
|
|
(1,702 |
) |
|
Increase/(decrease) in cash and bank overdrafts |
|
|
1,148 |
|
|
|
1,411 |
|
|
|
|
|
|
|
|
|
|
Exchange adjustments |
|
|
1,103 |
|
|
|
48 |
|
Cash and bank overdrafts at beginning of year |
|
|
3,221 |
|
|
|
1,762 |
|
|
Cash and bank overdrafts at end of year |
|
|
5,472 |
|
|
|
3,221 |
|
|
Cash and bank overdrafts at end of year
comprise: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
5,623 |
|
|
|
3,379 |
|
Overdrafts |
|
|
(151 |
) |
|
|
(158 |
) |
|
|
|
|
5,472 |
|
|
|
3,221 |
|
|
The net cash inflow from operating activities after taxation paid was £7,205 million, an increase
of £1,044 million over 2007 reflecting an unchanged profit before tax (excluding the
impact of the significant increase in non-cash charges made in the year, primarily from the major
restructuring programmes), together with improved working capital management.
The net cash outflow from investing activities was £1,149 million, a decrease of £1,899 million
which reflected marginally lower capital expenditure, repayments of liquid investments and a
reduced cost of business purchases during 2008, including Sirtris Pharmaceuticals for £324 million,
net of cash acquired of £52 million, and the Egyptian business of BMS for £130 million, net of
deferred consideration of £10 million. In 2007, the comparable acquisitions comprised of Reliant
Pharmaceuticals for £794 million and Domantis for £218 million, net of cash acquired.
Free cash flow is the amount of cash generated by the business after meeting its obligations for
interest, tax and dividends paid to minority interests, and after capital expenditure on
non-current tangible and intangible assets. It was £4,679 million, an increase of 21% over 2007,
principally reflecting the higher operating profit before non-cash charges, primarily from the
major restructuring programmes, and working capital improvements, partly offset by higher levels of
interest paid as a result of the significant debt issuances during the year of US $9 billion under
the US shelf registration and £0.7 billion under the EMTN programme.
Free cash flow is used by
GSKs management for planning and reporting purposes and in discussions with and presentations to
investment analysts and rating agencies. GSKs free cash flow measure is not defined in IFRS. This
measure may not be directly comparable with similarly described measures used by other companies. A
reconciliation of net cash inflow from operating activities, which is the closest equivalent IFRS
measure, to free cash flow is shown below.
Reconciliation of free cash flow
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Net cash inflow from operating activities |
|
|
7,205 |
|
|
|
6,161 |
|
Purchase of non-current tangible assets |
|
|
(1,437 |
) |
|
|
(1,516 |
) |
Purchase of non-current intangible assets |
|
|
(632 |
) |
|
|
(627 |
) |
Disposal of non-current tangible fixed assets |
|
|
20 |
|
|
|
35 |
|
Interest paid |
|
|
(730 |
) |
|
|
(378 |
) |
Interest received |
|
|
320 |
|
|
|
247 |
|
Dividends received from joint ventures and
associated undertaking |
|
|
12 |
|
|
|
12 |
|
Dividends paid to minority interests |
|
|
(79 |
) |
|
|
(77 |
) |
|
Free cash flow |
|
|
4,679 |
|
|
|
3,857 |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 47
|
|
|
|
|
Report of the Directors
|
|
|
Financial position and resources
continued |
|
|
|
|
|
Movements in net debt
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Net debt at beginning of year |
|
|
(6,039 |
) |
|
|
(2,450 |
) |
Increase in cash and bank overdrafts |
|
|
1,148 |
|
|
|
1,411 |
|
Cash (inflow)/outflow from liquid investments |
|
|
(905 |
) |
|
|
39 |
|
Net increase in long-term loans |
|
|
(5,523 |
) |
|
|
(3,276 |
) |
Net repayment of/(increase in) short-term loans |
|
|
3,059 |
|
|
|
(1,632 |
) |
Exchange movements |
|
|
(1,918 |
) |
|
|
(88 |
) |
Other movements |
|
|
5 |
|
|
|
(43 |
) |
|
Net debt at end of year |
|
|
(10,173 |
) |
|
|
(6,039 |
) |
|
Investment appraisal
GSK has a formal process for assessing potential investment proposals in order to ensure decisions
are aligned with the Groups overall strategy. This process includes an analysis of the impact of
the project on earnings, its return on invested capital and an assessment of the return based on
discounted cash flows. The discount rate used to perform financial analysis is decided internally,
to allow determination of the extent to which investments cover the Groups cost of capital. For
specific investments the discount rate may be adjusted to take into account country or other risk
weightings.
Capital expenditure and financial investment
Cash payments for tangible and intangible fixed assets amounted to £2,069 million (2007 £2,143
million, 2006 £1,590 million). Disposals realised £191 million (2007 £44 million, 2006 £218 million). Cash payments to acquire equity
investments of £87 million (2007 £186 million, 2006 £57 million) were made in the year and sales of equity
investments realised £42 million (2007 £45 million, 2006 £32 million).
Future cash flow
The Group expects that future operating cash flow will be sufficient to fund its operating and debt
service costs, to satisfy normal levels of capital expenditure, to meet obligations under existing
licensing agreements, to meet the expenditure arising from the major restructuring programmes (the
precise timing of which is uncertain) outlined in Note 7 to the financial statements Major restructuring programmes. and to meet other routine outflows
including tax and dividends, subject to the Risk factors discussed on pages 50 to 53. GSK may
from time to time have additional demands for finance, such as for acquisitions. It has access to
other sources of liquidity from short and long-term capital markets and banks and other financial
institutions, in addition to the cash flow from operations, for such needs.
Payment policies
Group companies are responsible for monitoring and managing their working capital. The terms of
sales collections and supplier payments reflect local commercial practice.
In the UK, the company and each of its UK subsidiaries have policies to ensure that suppliers are
paid on time. In particular, the UK companies seek:
|
|
to settle terms of payment with suppliers when agreeing the terms of the transaction |
|
|
|
to ensure that suppliers are made aware of the agreed terms of payment |
|
|
|
to abide by the terms of payment. |
|
The policy permits arrangements for accelerated payment to small suppliers.
Payment performance
At 31st
December 2008, the average number of days payable outstanding represented by trade payables
of the parent company was nil (2007 nil) and in respect of the company and its UK subsidiaries in
aggregate was 20 days (2007 21 days).
Treasury policies
GSK reports in Sterling and pays dividends out of Sterling profits. The role of Corporate Treasury
is to manage and monitor our external and internal funding requirements and financial risks in
support of our corporate objectives. Treasury activities are governed by policies and procedures
approved by the Board of Directors, most recently on 25th September 2008.
A Treasury Management Group (TMG) chaired by our Chief Financial Officer, meets on a monthly basis
to review treasury activities. Its members receive management information relating to treasury
activities.
Capital management
Our operations are global, primarily through subsidiary companies established in the markets in
which we trade. With significant levels of patent protection, our products compete largely on
product efficacy rather than on price. Selling margins are sufficient to cover normal operating
costs and our operating subsidiaries are generally cash generative.
Operating cash flow is used to fund investment in research and development of new products. It is
also used to make the routine outflows of capital expenditure, tax, dividends, repayment of
maturing debt and, to the extent determined by the Board, share repurchases.
Our policy is to borrow centrally using a variety of capital market issues and borrowing facilities
to meet anticipated funding requirements.
|
|
|
|
|
|
|
|
48 GSK Annual Report 2008
|
|
|
Report of the Directors
|
|
|
Financial position and resources
continued |
|
|
|
These borrowings, together with cash generated from operations, are on-lent, contributed as equity
to certain subsidiaries or used to pay dividends, make acquisitions or fund share buy-backs.
For further details of GSKs share buy-back programme, please see Note 33, Share capital and share
premium account.
Liquidity
As at 31st December 2008, our cash and liquid investments were held as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Bank balances and deposits |
|
|
3,778 |
|
|
|
1,431 |
|
Treasuries and treasury-repo only money
market funds |
|
|
1,852 |
|
|
|
1,713 |
|
Corporate debt instruments |
|
|
75 |
|
|
|
1,170 |
|
Government securities |
|
|
309 |
|
|
|
218 |
|
|
|
|
|
6,014 |
|
|
|
4,532 |
|
|
£4.3 billion of this amount is managed centrally and available
within three months. We had net debt
at 31st December
2008 of £10.2 billion. The table below summarises cash and gross debt.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Cash and liquid investments |
|
|
6,014 |
|
|
|
4,532 |
|
Gross debt fixed |
|
|
(13,814 |
) |
|
|
(6,254 |
) |
floating |
|
|
(2,373 |
) |
|
|
(4,317 |
) |
|
Net debt |
|
|
(10,173 |
) |
|
|
(6,039 |
) |
|
The maturity profile of gross debt is shown in the table below:
At 31st December 2008, we had centrally available cash reserves of £4.3 billion and committed
undrawn bank facilities of $3.9 billion. As at that date we had short-term debt and bank overdrafts
and loans repayable within one year of £1.0 billion.
We manage our net borrowing requirements through a portfolio of long-term borrowings, including
bonds, together with short-term finance under a $10 billion commercial paper programme. During the
year, our committed undrawn bank facilities reduced from $5 billion to $3.9 billion as a
consequence of Royal Bank of Scotlands acquisition of ABN AMRO and the collapse of Lehman
Brothers. The facilities were renewed in October 2008. We consider this level of committed facilities to be adequate given our current cash holdings. For
further information on these facilities, please refer to Note 32 to the financial statements, Net
debt. We also benefit from strong positive cash flow from operating units.
We have a European
Medium Term Note programme of £10 billion. At 31st December 2008, we had £7.9 billion of notes in
issue under this programme. We also have a US shelf registration statement. At 31st December 2008,
we had $11.1 billion (£7.7 billion) of notes in issue under this programme. The TMG monitors the
cash flow forecast on a monthly basis.
The long-term borrowings mature at dates between 2010 and 2042. Our long-term debt ratings have
remained stable since February 2008. Currently we are rated A+ stable outlook by Standard and
Poors and A1 negative outlook by Moodys. Our short-term debt ratings are A-1 and P-1 with
Standard and Poors and Moodys respectively.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 49
|
|
|
|
|
Report of the Directors
|
|
|
Financial position and resources
continued |
|
|
|
|
|
Treasury operations
The objective of treasury activity is to manage the post-tax net cost or income of financial
operations to the benefit of earnings. Corporate Treasury does not operate as a profit centre. We
use a variety of financial instruments, including derivatives, to finance our operations and to
manage market risks from those operations.
Derivatives, principally comprising forward foreign
currency contracts, interest rate and currency swaps, are used to swap borrowings and liquid assets
into our required currencies and to manage exposure to funding risks from changes in foreign
exchange and interest rates.
We do not hold or issue derivative financial instruments for speculative purposes. Our treasury
policies specifically prohibit such activity. All transactions in financial instruments are
undertaken to manage the risks arising from underlying business activities, not for speculation.
Foreign exchange management
Foreign currency transaction exposure arising on internal and external trade flows is not hedged.
The exposure of overseas operating subsidiaries to transaction risk is minimised by matching local
currency income with local currency costs.
For this purpose, our internal trading transactions are matched centrally and we manage
intercompany payment terms to reduce risk. Exceptional foreign currency cash flows are hedged
selectively under the management of Corporate Treasury.
We manage the short-term cash surpluses or borrowing requirements of subsidiary companies centrally
using forward contracts to hedge future repayments back into the originating currency.
We seek to denominate borrowings in the currencies of our principal assets and cash flows. These
are primarily denominated in US dollars, Euros and Sterling. Certain borrowings are swapped into
other currencies as required.
Borrowings denominated in, or swapped into, foreign currencies that match investments in our
overseas assets are treated as a hedge against the relevant assets. Forward contracts are also used
in major currencies to reduce our exposure to our investment in overseas Group assets (see Net
Investment Hedges section of Note 41 for further details). The TMG review the ratio of borrowings
to assets for major currencies.
Interest rate risk management
The policy on interest rate risk management requires the minimum amount of net borrowings at fixed
rates to increase with the ratio of forecast interest payable to trading profit. The fixed to
floating ratio is reviewed monthly by the TMG.
We use an interest rate swap to redenominate one of our external borrowings into the interest rate
coupon required by GSK. The duration of this swap matches the duration of the principal instrument.
Interest rate derivative instruments are accounted for as fair value or cash flow hedges of the
relevant assets or liabilities.
Counterparty risk management
Our policy on counterparty risk management is to work with a select group of relationship banks.
Global counterparty limits are assigned to each of GSKs banking and investment counterparties
based on long-term credit ratings from Moodys and Standard and Poors. Corporate Treasurys usage
of these limits is monitored daily by a Corporate Compliance Officer (CCO) independent of Corporate
Treasury. Any breach
of these limits is reported to the CFO immediately. The CCO also monitors the credit rating of these
counterparties and, when changes in ratings occur, notifies Corporate Treasury so the appropriate
amendment can be made to limits. A full counterparty analysis is presented to the TMG annually for
approval.
Since July 2007, we have tightened our criteria for holding cash equivalents and liquid investments
in response to the credit crisis.
On 15th September 2008, Lehman Brothers filed for Chapter 11 proceedings in the USA and appointed
administrators in the UK. Although Lehman was one of GSKs relationship banks, our exposure to
Lehman at the time of the collapse was limited to immaterial costs on foreign exchange contracts
and the termination of the Quest Collar referred to in more detail in Note 20 to the financial
statements, Investments in associates and joint ventures.
Financial assets and liabilities
An analysis of net debt is given in Note 32 to the financial statements, Net debt. An analysis of
financial assets and liabilities at carrying value and fair value is given in Note 41 to the
financial statements, Financial instruments and related disclosures.
We continue to benefit from strong positive cash flow from operating activities. Our net debt
would have decreased in the year to 31st December 2008, but for our purchase of our own shares in
the market of £3.7 billion and acquisitions of approximately £0.5 billion.
The financial assets and liabilities at 31st December 2008 are representative of our treasury
policies and strategies applied since July 2007. GSK raised £8.0 billion in the Capital Markets
between December 2007 and May 2008 of which £2.4 billion was raised in 2007. We do not expect to
make any significant share repurchases in 2009.
|
|
|
|
|
|
|
|
50 GSK Annual Report 2008
|
|
|
Report of the Directors
|
|
|
Risk factors
|
|
|
|
Risk factors
There are risks and uncertainties relevant to the Groups business, financial condition and results
of operations that may affect future performance. These include R&D, anticipated sales growth and
expected earnings. The factors below are among those that the Group thinks could cause its actual
results to differ materially from expected and historical results. There are other risks and
uncertainties not currently known to the Group or which are deemed immaterial. The management and
mitigation of risk is discussed on page 72 Corporate Governance.
The major risks that might affect GSKs business are:
Risk that R&D will not deliver commercially successful new products
Continued development of commercially viable new products as well as the development of additional
uses for existing products is critical to the Groups ability to replace sales of older products
that decline upon expiration of exclusive rights, and to increase overall sales. Developing new
products is a costly, lengthy and uncertain process.
A new product candidate can fail at any stage
of the process, and one or more late-stage product candidates could fail to receive regulatory
approval.
New product candidates may appear promising in development but, after significant investment, fail
to reach the market or have only limited commercial success. This, for example, could be as a
result of efficacy or safety concerns, inability to obtain necessary regulatory approvals,
difficulty or excessive costs to manufacture, erosion of patent term as a result of a lengthy
development period, infringement of patents or other intellectual property rights of others or
inability to differentiate the product adequately from those with which it competes.
Health authorities such as the US FDA, the European Medicines Agency and the Japan Pharmaceuticals
and Medicines Device Agency have increased their focus on safety when assessing the benefit/risk
balance of drugs. Payers are also becoming increasingly more demanding with regard to the
incremental benefit required to gain reimbursement and secure appropriate pricing.
Risk of unplanned loss of patents
Patent infringement litigation
The Groups patents, in common with all patents, can be challenged at any time. Efforts by generic
manufacturers may involve challenges to the validity or enforceability of a patent or assertions
that their generic product does not infringe the Groups patents. If GSK is not successful in
defending an attack on its patents and maintaining exclusive rights to market one or more of its
major products, particularly in the USA where the Group has its highest turnover and margins, the
Groups turnover and margins would be adversely affected. See Note 44 to the financial statements,
Legal proceedings, for a discussion of patent-related proceedings in which the Group is involved
and page 18 for a description of resolution of prior proceedings which affect the dates on which
generic versions of the Groups products may be introduced.
Generic drug manufacturers are seeking to market generic versions of many of the Groups most
important products, prior to the expiration of the Groups patents, and have exhibited a readiness
to do so for other products in the future. The US launch of generic products competing with
Lamictal, Imitrex, Paxil CR, Requip and Wellbutrin XL had a significant impact on the Groups
overall turnover and earnings for 2008.
Potential changes in intellectual property laws and regulations
Proposals to change existing patent and data exclusivity laws and regulations in major markets in
which the Group sells its products are a continuing feature of the political process in those
countries. These include proposals that could have the effect of making prosecution of patents for
new products more difficult and time-consuming or adversely affecting the exclusivity period for
the Groups products, including biological products. Should such proposals be enacted they could
have an adverse impact on the Groups future sales and results of operations.
Weakness of intellectual property protection in certain countries
In some of the countries in which the Group operates, patent protection may be significantly weaker
than in the USA or the European Union. In an effort to control public health crises, some
developing countries, such as South Africa, Thailand and Brazil, have considered plans for
substantial reductions in the scope of patent protection for pharmaceutical products. In
particular, these countries could facilitate competition within their markets from generic
manufacturers who would otherwise be unable to introduce competing products for a number of years.
Any loss of patent protection, including abrogation of patent rights or compulsory licensing, is
likely to affect adversely the Groups operating results in those national markets but is not
expected to be material to the Group overall. Absence of adequate patent protection could limit the
opportunity to look to such markets for future sales growth.
Risk of substantial adverse outcome of litigation and government investigations
See Note 44 to the financial statements, Legal proceedings, for a discussion of proceedings and
governmental investigations involving matters which if proven could give rise to civil and/ or
criminal liabilities in which the Group is currently involved. Unfavourable resolution of these
and similar future proceedings or investigations may have a material adverse effect on the Groups
financial condition and results of operations. The Group has made material provisions in 2006, 2007
and 2008 related to legal proceedings and investigations which reduced its earnings.
The Group may also make additional significant provisions related to legal proceedings and
investigations in the future, which would reduce its earnings. In many cases the practice of the
plaintiff bar is to claim damages in amounts that bear no relationship to the underlying harm.
Accordingly it is potentially misleading to quantify the potential exposure to claims, proceedings
and investigations of the type described in Note 44 to the financial statements, Legal
proceedings.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 51
|
|
|
|
|
Report of the Directors
|
|
|
Risk factors
continued |
|
|
|
|
|
Recent insurance loss experience, including pharmaceutical product liability exposures, has
increased the cost of, and narrowed the coverage afforded by, insurance for pharmaceutical
companies generally, including the Group.
In order to contain insurance costs in recent years the Group has continued to adjust its coverage
profile, accepting a greater degree of un-insured exposure. In addition, where claims are made
under insurance policies, insurers may reserve the right to deny coverage on various grounds. If
denial of coverage is ultimately upheld on these claims, this could result in material additional
charges.
Product liability litigation
Pre-clinical and clinical trials are conducted during the development of potential products to
determine the safety and efficacy of products for use by humans following approval by regulatory
bodies. Notwithstanding these efforts, when drugs and vaccines are introduced into the marketplace,
unanticipated side effects may become evident.
In other instances third parties may perform analyses of published clinical trial results which,
although not necessarily accurate or meaningful, may raise questions regarding safety of
pharmaceutical products which may be publicised by the media and may result in product liability
claims. The Group is currently a defendant in a number of product liability lawsuits, including
class actions, that involve substantial claims for damages related to the Groups pharmaceutical
products. Litigation, particularly in the USA, is inherently unpredictable and excessive verdicts
that are not justified by the evidence can occur. Class actions that sweep together all persons who
were prescribed the Groups products can inflate the potential liability by the force of numbers.
Claims for pain and suffering and punitive damages are frequently asserted in product liability
actions and, if allowed, can represent potentially open-ended exposure.
Anti-trust litigation
In the USA it has become increasingly common that following publicity around government
investigations or an adverse outcome in prosecution of patent infringement actions, the defendants
and direct and indirect purchasers and other payers initiate anti-trust actions as well. Claims by
direct and indirect purchasers and other payers are typically filed as class actions. The relief
sought may include treble damages and restitution claims. Damages in adverse anti-trust verdicts
are subject to automatic trebling in the USA. Similarly, anti-trust claims may be brought following
settlement of patent litigation, alleging that such settlements are anticompetitive and in
violation of anti-trust laws.
Sales, marketing and regulation
The Group operates globally in complex legal and regulatory environments that often vary among
jurisdictions. The failure to comply with applicable laws, rules and regulations in these
jurisdictions may result in civil and criminal legal proceedings. As those rules and regulations
change or as governmental interpretation of those rules and regulations evolve, prior conduct may
be called into question.
In the USA, for example, the Group is responding to federal and state governmental investigations
into pricing, marketing and reimbursement of its prescription drug products. These investigations
could result in related restitution or civil false claims act litigation on behalf of the federal
or state governments, as well as related proceedings initiated against the Group by or on behalf of
consumers and private payers. Such proceedings may result in trebling of damages awarded or fines
in respect of each violation of law. Criminal proceedings may also be initiated against the Group.
Risks of competition, price controls and limitations on sales
Third party competition
The Group operates in highly competitive markets. In the pharmaceuticals business, it faces
competition both from proprietary products of large international manufacturers and producers of
generic pharmaceuticals. Significant product innovations, technical advances or the intensification
of price competition by competitors could adversely affect the Groups operating results. The Group
cannot predict the timing or impact of competitive products or their potential impact on sales of
the Groups products. Continued consolidation in the pharmaceutical industry could adversely affect
the Groups competitive position, while continued consolidation among the Groups customers may
increase pricing pressures.
The Group had eight products with over £500 million in annual global sales in 2008. Among these
products are Augmentin IR, Imitrex and Lamictal for which there is generic competition, and Avandia
and Valtrex, with respect to which the Groups intellectual property rights in the USA are
currently the subject of litigation or settlement agreements related to such litigation.
If any of the Groups major products were to become subject to a problem such as
unplanned loss of patent protection, unexpected side effects, regulatory proceedings, publicity
affecting doctor or patient confidence or pressure from competitive products, or if a new, more
effective treatment should be introduced, the adverse impact on the Groups revenues and operating
results could be significant. In particular, the Group faces intense competition from manufacturers
of generic pharmaceutical products in all of its major markets. Generic products often enter the
market upon expiration of patents or data exclusivity periods for the Groups products.
Introduction of generic products typically leads to a dramatic loss of sales and reduces the
Groups revenues and margins for its proprietary products. The expiration dates for patents for the
Groups major products and a description of litigation settlements which may affect the dates on
which generic versions of the Groups products may be introduced are set out on page 18. Legal
proceedings involving patent challenges are set out in Note 44 to the financial statements, Legal
proceedings.
Governmental and payer controls
Pharmaceutical products are subject to price controls or pressures and other restrictions in many
markets, including Japan, Germany, Spain, France and Italy. Some governments intervene directly in
setting prices.
|
|
|
|
|
|
|
|
52 GSK Annual Report 2008
|
|
|
Report of the Directors
|
|
|
Risk factors
continued |
|
|
|
In addition, in some markets major purchasers of pharmaceutical products (whether governmental
agencies or private health care providers) have the economic power to exert substantial pressure on
prices or the terms of access to formularies.
The Group cannot predict whether existing controls, pressures or restrictions will increase or new
controls, pressures or restrictions will be introduced that will reduce the Groups margins or
affect adversely its ability to introduce new products profitably.
For example, in the USA, where the Group has its highest margins and the most sales for any
country, pricing pressures could significantly increase as experience develops under the outpatient
pharmaceutical programme covering Medicare beneficiaries that began in 2006. The private insurers
through which coverage is offered, through their enormous purchasing power under the programme,
could demand discounts that may implicitly create price controls on prescription drugs.
Changes to the enabling legislation could afford the US government a direct role in negotiating
prices under the Medicare programme. Additionally, a number of states have proposed or implemented
various schemes to control prices for their own senior citizens programmes, including importation
from other countries and bulk purchases of drugs. The growth in the number of patients covered
through large managed care institutions in the USA, which has increased with implementation of the
Medicare benefit, also increases pricing pressures on the Groups products. These trends may
adversely affect the Groups revenues and margins from sales in the USA.
Regulatory controls
The Group must comply with a broad range of regulatory controls on the testing, approval,
manufacturing and marketing of many of its pharmaceutical and consumer healthcare products,
particularly in the USA and countries of the European Union, that affect not only the cost of
product development but also the time required to reach the market and the uncertainty of
successfully doing so. Health authorities have increased their focus on safety when assessing the
benefit risk/ balance of drugs in the context of not only initial product approval but also in the
context of approval of additional indications and review of information regarding marketed
products. Stricter regulatory controls also heighten the risk of changes in product profile or
withdrawal by regulators on the basis of post-approval concerns over product safety, which could
reduce revenues and can result in product recalls and product liability lawsuits. There is also
greater regulatory scrutiny, especially in the USA, on advertising and promotion and in particular
on direct-to-consumer advertising.
In addition, in some cases the Group may voluntarily cease marketing a product or face declining
sales based on concerns about efficacy or safety (for example, declines in sales of Avandia in 2007
following publicity around questions regarding risks associated with the product), whether or not
scientifically justified, even in the absence of regulatory action. The development of the
post-approval adverse event profile for a product or the product class may have a major impact on
the marketing and sale of the product.
Risk of interruption of product supply
The manufacture of pharmaceutical products and their constituent materials requires compliance with
good manufacturing practice regulations. The Groups manufacturing sites are subject to review and
approval by the FDA and other regulatory agencies. Compliance failure by suppliers of key services
and materials or the Groups own manufacturing facilities could lead to product recalls and
seizures, interruption of production and delays in the approvals of new products pending resolution
of manufacturing issues. Non-compliance can also result in fines and disgorgement of profits.
Any interruption of supply or fines or disgorgement remedy could materially and adversely affect
the Groups financial results. For example, during resolution of FDA observations of deficiencies
in manufacturing practices at the Groups Cidra, Puerto Rico facility, as referred to in Note 44 to
the financial statements, Legal proceedings, supplies of certain products manufactured at that site were curtailed or
constricted which had an adverse impact on sales in 2005 and 2006.
Although the Group undertakes
business continuity planning, single sourcing for certain components, bulk active materials and
finished products creates a risk of failure of supply in the event of regulatory non-compliance or
physical disruption at the manufacturing sites.
Risk from concentration of sales to wholesalers
In the USA, in line with other pharmaceutical companies, the Group sells its products through a
small number of wholesalers in addition to hospitals, pharmacies, physicians and other groups.
Sales to the three largest wholesalers amounted to approximately 84% of the Groups US
pharmaceutical sales. At 31st December 2008 the Group had trade receivables due from these three
wholesalers totalling £1,067 million (31st December 2007 £915 million). The Group is exposed to a
concentration of credit risk in respect of these wholesalers such that, if one or more of them is
affected by financial difficulty, it could materially and adversely affect the Groups financial
results.
Reliance on information technology
The Group is increasingly dependent on information technology systems, including Internet-based
systems, for internal communication as well as communication with customers and suppliers. Any
significant disruption of these systems, whether due to computer viruses or other outside
incursions, could materially and adversely affect the Groups operations.
Global political and economic conditions
As described on page 33, many of the worlds largest economies, including the major markets in
which the Group operates, and financial institutions currently face extreme financial difficulty,
including a decline in asset prices, liquidity problems and limited availability of credit. It is
uncertain how long this crisis will last, but many countries are concerned that their economies may
enter a deep and prolonged recession.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 53
|
|
|
|
|
Report of the Directors
|
|
|
Risk factors
continued |
|
|
|
|
|
Such a decline in economic activity may have a material adverse effect on the Groups sales,
results of operations, financial condition and ability to raise capital. Some of the Groups
businesses, including Consumer Healthcare, may be particularly sensitive to declines in consumer
spending. In addition, the financial crisis may result in a lower return on the Groups financial
investments and may cause the value of the Groups investments in its pension plans to decrease,
requiring the Group to increase its funding of those pension plans.
The Group conducts a substantial portion of its operations outside the UK. The Groups management
of foreign exchange rates is discussed in Business Review, Foreign exchange management (see page
49). Fluctuations in exchange rates between Sterling and other currencies, especially the US
dollar, the Euro and the Japanese Yen, could materially affect the Groups financial results.
The
Group has no control over changes in inflation and interest rates, foreign currency exchange rates
and controls or other economic factors affecting its businesses or the possibility of political
unrest, legal and regulatory changes or nationalisation in jurisdictions in which the Group
operates.
Taxation
The effective tax rate on the Groups earnings benefits from the fact that a portion of its
earnings is taxed at more favourable rates in some jurisdictions outside the UK. Changes in tax
laws or in their application with respect to matters such as transfer pricing, foreign dividends,
controlled companies or a restriction in tax relief allowed on the interest on intra-Group debt,
could increase the Groups effective tax rate and adversely affect its financial results. The Group
has open issues with the revenue authorities in the USA, Japan and Canada. These matters are
discussed in Note 14 to the financial statements, Taxation.
Disruption from pandemic influenza
In the event of pandemic influenza, the Group could be subject to disruption from a range of
factors. National governments may be more willing to abrogate intellectual property rights for
medicines that might otherwise be in short supply.
In a country afflicted by pandemic flu, there would be a risk that employees and their families
will be affected with the consequence that sales and distribution and manufacturing activities
could be shut down and supply continuity for active ingredients and finished goods affected.
Environmental liabilities
The environmental laws of various jurisdictions impose actual and potential obligations on the
Group to remediate contaminated sites. The Group has also been identified as a potentially
responsible party under the US Comprehensive Environmental Response Compensation and Liability Act
at a number of sites for remediation costs relating to the Groups use or ownership of such sites.
Failure to manage properly the environmental risks could result in additional remedial costs that
could materially and adversely affect the Groups operations. See Note 44 to the financial
statements, Legal proceedings, for a discussion of environmental-related proceedings in which the
Group is involved.
Accounting standards
New or revised accounting standards, rules and interpretations circulated from time to time by an
international standard setting board could result in changes to the recognition of income and
expense that
may adversely impact the Groups reported financial results. International standard changes in the
market valuation of certain financial instruments are reflected in the Groups reported results
before those gains or losses are actually realised and could have a significant impact on the
income statement in any given period.
Accounting for deferred taxation on inter-company inventory may give rise to volatility depending
upon the ownership of the inventory.
Regulators regularly review the financial statements of listed companies for compliance with
accounting and regulatory requirements.
The Group believes that it complies with the appropriate regulatory requirements concerning its
financial statements and disclosures. However, other companies have experienced investigations into
potential non-compliance with accounting and disclosure requirements that have resulted in
restatements of previously reported results and sometimes significant penalties.
Human resources
The Group
has approximately 99,000 employees globally and is subject to laws and regulations concerning its
employees ranging from discrimination and harassment to personal privacy to labour relations -
that vary significantly from jurisdiction to jurisdiction. The Group faces intense competition for
qualified individuals from other pharmaceutical and biotechnology companies, universities,
governmental entities and other research institutions. Failure to continue to recruit and retain
the right people and maintain a culture of compliance may have a significant adverse effect.
Failure of third party providers
Unaffiliated third-party suppliers provide a number of goods and services to the Groups
operations. Many of these services, for example services provided by clinical research
organizations to support development of key products, are very important to the operations of the
Groups businesses. Materials provided by third-party suppliers are necessary for the commercial
production of our products, including speciality chemicals, commodities and components necessary
for the manufacture, fill-finish and packaging of many of the Groups pharmaceutical and consumer
health products. While the Group does not believe that any of these third-party relationships are
individually significant in the context of the overall Group, the failure of any third-party
supplier to fulfil its contractual obligations in a timely manner may result in delays or service
interruptions which could constrain the sales of the Groups products.
|
|
|
|
|
|
|
|
54 GSK Annual Report 2008
|
|
|
Report of the Directors
|
|
|
Financial review 2007 |
|
|
|
In accordance with US SEC disclosure requirements, the following discussion compares results for
the year to 31st December 2007 with the results for the year to 31st December 2006.
In 2008, the Group realigned the regional
reporting structure within the Pharmaceuticals business and reallocated entities and expenses
between the Pharmaceuticals and Consumer Healthcare businesses. Comparative information for 2007 and
2006 below has been restated on a consistent basis. See Note 2 to the
financial statements, Accounting
principles and policies.
Exchange
The currencies that most influence the Groups results are the US dollar, the Euro and the Japanese
Yen.
In 2007, the US dollar fell by 2% against the pound, to $1.99 at the year-end. The year-end rates
for the Euro strengthened by 8% and the Japanese yen by 5% against Sterling.
World market pharmaceuticals
Global pharmaceutical sales in 2007 were £329 billion
compared with £328 billion in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
World market by |
|
Value |
|
|
% of |
|
|
Growth |
|
geographic region |
|
£bn |
|
|
total |
|
|
£% |
|
|
USA |
|
|
140.8 |
|
|
|
43 |
|
|
|
(3 |
) |
Europe |
|
|
97.6 |
|
|
|
30 |
|
|
|
5 |
|
Rest of World |
|
|
90.4 |
|
|
|
27 |
|
|
|
1 |
|
|
Total |
|
|
328.8 |
|
|
|
100 |
|
|
|
|
|
|
The US market has decreased by 3%, but it still represents 43% of the global prescription
pharmaceutical market compared with 30% a decade ago.
At 30th September 2007, GSK held second position in the world pharmaceutical market with a market
share of 5.9%, behind Pfizer with a market share of 7%. GSK had four of the worlds top 60
pharmaceutical products. These were Avandia, Lamictal, Seretide/ Advair and Valtrex.
|
|
|
|
|
|
|
|
|
|
|
|
|
World market - |
|
Value |
|
|
% of |
|
|
Growth |
|
top six therapeutic classes |
|
£bn |
|
|
total |
|
|
£% |
|
|
Central nervous system |
|
|
54.4 |
|
|
|
17 |
|
|
|
1 |
|
Cardiovascular |
|
|
50.7 |
|
|
|
15 |
|
|
|
(6 |
) |
Alimentary tract and metabolic |
|
|
39.7 |
|
|
|
12 |
|
|
|
(1 |
) |
Antineoplastic/Immunomodulatory |
|
|
35.6 |
|
|
|
11 |
|
|
|
8 |
|
Anti-infectives (bacterial, |
|
|
32.9 |
|
|
|
10 |
|
|
|
(1 |
) |
viral and fungal) excluding
vaccines
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory |
|
|
22.1 |
|
|
|
7 |
|
|
|
2 |
|
|
(Note: data based on 12 months to 30th September 2007.)
Pharmaceutical turnover
Total pharmaceutical turnover in 2007 was £19,163 million compared with £20,013 million in 2006, in
line with 2006 turnover at CER.
In sterling terms total pharmaceutical turnover decreased 4%, four
percentage points less than CER, principally due to the strength of Sterling against the US dollar.
Pharmaceutical turnover by therapeutic area
Turnover in 2007 was in line with 2006 as high-value growth products were offset by lower Avandia
sales and US generic competition to Coreg IR, Flonase, Wellbutrin XL and Zofran. The high-value
growth products included Seretide/Advair, vaccines,
Lamictal, Valtrex, Requip, Avodart and Boniva.
Respiratory
We continued to be a global leader in respiratory pharmaceuticals with sales of our three key
products, Seretide/Advair, Flixotide/ Flovent and Serevent amounting to £4.4 billion, up 8%. Total
sales of Seretide/Advair, for asthma and COPD, rose 10% to £3.5 billion. In the USA, sales grew 9%
to £1.9 billion. In Europe sales grew 8.1% to £1.2 billion and in Rest of World markets sales grew
24% to £393 million, enhanced by its launch in Japan in June.
CNS
CNS sales decreased 2% to £3.3 billion. Sales decreased in the USA and Europe, reflecting generic
competition to Seroxat/Paxil in both regions. Rest of World sales grew 6% which included 4% growth
in Paxil in Japan. Total Seroxat/Paxil sales declined 6% to £553 million. Total Wellbutrin sales
declined 37% to £529 million, owing to US generic competition to Wellbutrin SR/IR and Wellbutrin XL
300mg tablet.
Sales of Lamictal, for the treatment of epilepsy and bipolar disorder, grew 18% to £1.1 billion,
driven by sales in the USA which were up 26% to £892 million, benefiting from its new indication.
Sales of Requip, for Parkinsons disease and Restless Legs Syndrome (RLS), grew 36% to £346
million.
Anti-virals
Total sales of HIV products were £1.4 billion, down 1%. Competition to older products, Combivir
down 10% to £455 million and Epivir down 20% to £156 million, was largely offset by strong sales
growth of new products Epzicom/Kivexa, which grew 39% to £324 million and Lexiva/Agenerase, up 13%
to £141 million.
Sales of Valtrex, for herpes, rose 18% to £934 million, with US sales up 20% to £668 million driven
by increased use of the product for prevention of disease transmission. Sales in Europe grew 9% to
£115 million and in Rest of World grew 14% to £151 million. Sales of Relenza, an antiviral
treatment for flu, were £262 million (2006
£91 million), driven primarily by one-off government
orders for stockpiling against a possible flu pandemic.
Metabolic
In 2007, sales of the Avandia product group, for type 2 diabetes, declined 22% to £1.2 billion. In
the USA sales fell 29% to £780 million, with fourth quarter sales down 55% to £130 million.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 55
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2007
continued
|
|
|
|
|
|
|
|
Pharmaceutical turnover by therapeutic area 2007 (restated)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
USA |
|
|
Europe |
|
|
Rest of World |
|
Therapeutic area/ |
|
% of |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
Growth |
|
|
2007 |
|
|
|
|
|
|
Growth |
|
|
2007 |
|
|
|
|
|
|
Growth |
|
|
2007 |
|
|
|
|
|
|
Growth |
|
major products |
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Respiratory |
|
|
26 |
|
|
|
5,032 |
|
|
|
4,991 |
|
|
|
5 |
|
|
|
1 |
|
|
|
2,377 |
|
|
|
4 |
|
|
|
(3 |
) |
|
|
1,740 |
|
|
|
4 |
|
|
|
4 |
|
|
|
915 |
|
|
|
10 |
|
|
|
6 |
|
Seretide/Advair |
|
|
|
|
|
|
3,499 |
|
|
|
3,313 |
|
|
|
10 |
|
|
|
6 |
|
|
|
1,891 |
|
|
|
9 |
|
|
|
1 |
|
|
|
1,215 |
|
|
|
8 |
|
|
|
9 |
|
|
|
393 |
|
|
|
24 |
|
|
|
21 |
|
Flixotide/Flovent |
|
|
|
|
|
|
621 |
|
|
|
659 |
|
|
|
(1 |
) |
|
|
(6 |
) |
|
|
284 |
|
|
|
3 |
|
|
|
(5 |
) |
|
|
158 |
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
179 |
|
|
|
(3 |
) |
|
|
(7 |
) |
Serevent |
|
|
|
|
|
|
269 |
|
|
|
291 |
|
|
|
(4 |
) |
|
|
(8 |
) |
|
|
74 |
|
|
|
(7 |
) |
|
|
(14 |
) |
|
|
134 |
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
61 |
|
|
|
|
|
|
|
(6 |
) |
Veramyst |
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Flixonase/Flonase |
|
|
|
|
|
|
199 |
|
|
|
309 |
|
|
|
(34 |
) |
|
|
(36 |
) |
|
|
72 |
|
|
|
(60 |
) |
|
|
(61 |
) |
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
78 |
|
|
|
5 |
|
|
|
3 |
|
|
Anti-virals |
|
|
16 |
|
|
|
3,027 |
|
|
|
2,826 |
|
|
|
13 |
|
|
|
7 |
|
|
|
1,494 |
|
|
|
19 |
|
|
|
10 |
|
|
|
846 |
|
|
|
|
|
|
|
1 |
|
|
|
687 |
|
|
|
15 |
|
|
|
9 |
|
HIV |
|
|
|
|
|
|
1,442 |
|
|
|
1,515 |
|
|
|
(1 |
) |
|
|
(5 |
) |
|
|
637 |
|
|
|
(2 |
) |
|
|
(9 |
) |
|
|
595 |
|
|
|
(3 |
) |
|
|
(3 |
) |
|
|
210 |
|
|
|
9 |
|
|
|
4 |
|
Epzicom/Kivexa |
|
|
|
|
|
|
324 |
|
|
|
241 |
|
|
|
39 |
|
|
|
34 |
|
|
|
142 |
|
|
|
23 |
|
|
|
14 |
|
|
|
149 |
|
|
|
54 |
|
|
|
54 |
|
|
|
33 |
|
|
|
74 |
|
|
|
74 |
|
Combivir |
|
|
|
|
|
|
455 |
|
|
|
528 |
|
|
|
(10 |
) |
|
|
(14 |
) |
|
|
195 |
|
|
|
(11 |
) |
|
|
(18 |
) |
|
|
181 |
|
|
|
(15 |
) |
|
|
(15 |
) |
|
|
79 |
|
|
|
6 |
|
|
|
1 |
|
Trizivir |
|
|
|
|
|
|
233 |
|
|
|
268 |
|
|
|
(9 |
) |
|
|
(13 |
) |
|
|
120 |
|
|
|
(8 |
) |
|
|
(15 |
) |
|
|
98 |
|
|
|
(14 |
) |
|
|
(13 |
) |
|
|
15 |
|
|
|
14 |
|
|
|
7 |
|
Agenerase, Lexiva |
|
|
|
|
|
|
141 |
|
|
|
131 |
|
|
|
13 |
|
|
|
8 |
|
|
|
78 |
|
|
|
14 |
|
|
|
5 |
|
|
|
53 |
|
|
|
10 |
|
|
|
10 |
|
|
|
10 |
|
|
|
22 |
|
|
|
11 |
|
Epivir |
|
|
|
|
|
|
156 |
|
|
|
202 |
|
|
|
(20 |
) |
|
|
(23 |
) |
|
|
53 |
|
|
|
(16 |
) |
|
|
(23 |
) |
|
|
64 |
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
39 |
|
|
|
(11 |
) |
|
|
(13 |
) |
Ziagen |
|
|
|
|
|
|
109 |
|
|
|
117 |
|
|
|
(3 |
) |
|
|
(7 |
) |
|
|
45 |
|
|
|
2 |
|
|
|
(6 |
) |
|
|
36 |
|
|
|
(10 |
) |
|
|
(10 |
) |
|
|
28 |
|
|
|
(3 |
) |
|
|
(3 |
) |
Valtrex |
|
|
|
|
|
|
934 |
|
|
|
845 |
|
|
|
18 |
|
|
|
11 |
|
|
|
668 |
|
|
|
20 |
|
|
|
11 |
|
|
|
115 |
|
|
|
9 |
|
|
|
10 |
|
|
|
151 |
|
|
|
14 |
|
|
|
8 |
|
Zeffix |
|
|
|
|
|
|
168 |
|
|
|
162 |
|
|
|
8 |
|
|
|
4 |
|
|
|
13 |
|
|
|
8 |
|
|
|
|
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
132 |
|
|
|
10 |
|
|
|
5 |
|
Relenza |
|
|
|
|
|
|
262 |
|
|
|
91 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
21 |
|
|
|
23 |
|
|
|
55 |
|
|
|
>100 |
|
|
|
90 |
|
|
Central nervous system |
|
|
17 |
|
|
|
3,348 |
|
|
|
3,642 |
|
|
|
(2 |
) |
|
|
(8 |
) |
|
|
2,377 |
|
|
|
(1 |
) |
|
|
(8 |
) |
|
|
505 |
|
|
|
(15 |
) |
|
|
(14 |
) |
|
|
466 |
|
|
|
6 |
|
|
|
|
|
Lamictal |
|
|
|
|
|
|
1,097 |
|
|
|
996 |
|
|
|
18 |
|
|
|
10 |
|
|
|
892 |
|
|
|
26 |
|
|
|
17 |
|
|
|
143 |
|
|
|
(17 |
) |
|
|
(17 |
) |
|
|
62 |
|
|
|
10 |
|
|
|
5 |
|
Imigran/Imitrex |
|
|
|
|
|
|
685 |
|
|
|
711 |
|
|
|
3 |
|
|
|
(4 |
) |
|
|
558 |
|
|
|
9 |
|
|
|
1 |
|
|
|
89 |
|
|
|
(25 |
) |
|
|
(25 |
) |
|
|
38 |
|
|
|
(2 |
) |
|
|
(10 |
) |
Seroxat/Paxil |
|
|
|
|
|
|
553 |
|
|
|
620 |
|
|
|
(6 |
) |
|
|
(11 |
) |
|
|
143 |
|
|
|
(12 |
) |
|
|
(18 |
) |
|
|
120 |
|
|
|
(19 |
) |
|
|
(18 |
) |
|
|
290 |
|
|
|
5 |
|
|
|
(3 |
) |
Wellbutrin |
|
|
|
|
|
|
529 |
|
|
|
900 |
|
|
|
(37 |
) |
|
|
(41 |
) |
|
|
512 |
|
|
|
(38 |
) |
|
|
(42 |
) |
|
|
4 |
|
|
|
100 |
|
|
|
100 |
|
|
|
13 |
|
|
|
(13 |
) |
|
|
(19 |
) |
Requip |
|
|
|
|
|
|
346 |
|
|
|
268 |
|
|
|
36 |
|
|
|
29 |
|
|
|
238 |
|
|
|
46 |
|
|
|
35 |
|
|
|
91 |
|
|
|
11 |
|
|
|
12 |
|
|
|
17 |
|
|
|
64 |
|
|
|
55 |
|
|
Cardiovascular and urogenital |
|
|
8 |
|
|
|
1,554 |
|
|
|
1,636 |
|
|
|
|
|
|
|
(5 |
) |
|
|
970 |
|
|
|
(2 |
) |
|
|
(10 |
) |
|
|
401 |
|
|
|
3 |
|
|
|
4 |
|
|
|
183 |
|
|
|
7 |
|
|
|
2 |
|
Avodart |
|
|
|
|
|
|
285 |
|
|
|
216 |
|
|
|
38 |
|
|
|
32 |
|
|
|
175 |
|
|
|
44 |
|
|
|
34 |
|
|
|
85 |
|
|
|
22 |
|
|
|
23 |
|
|
|
25 |
|
|
|
63 |
|
|
|
56 |
|
Lovaza |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg |
|
|
|
|
|
|
587 |
|
|
|
779 |
|
|
|
(18 |
) |
|
|
(25 |
) |
|
|
581 |
|
|
|
(19 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
17 |
|
|
|
|
|
Fraxiparine |
|
|
|
|
|
|
184 |
|
|
|
209 |
|
|
|
(12 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151 |
|
|
|
(13 |
) |
|
|
(11 |
) |
|
|
33 |
|
|
|
(10 |
) |
|
|
(15 |
) |
Arixtra |
|
|
|
|
|
|
100 |
|
|
|
58 |
|
|
|
81 |
|
|
|
72 |
|
|
|
55 |
|
|
|
88 |
|
|
|
72 |
|
|
|
39 |
|
|
|
70 |
|
|
|
70 |
|
|
|
6 |
|
|
|
100 |
|
|
|
100 |
|
Vesicare |
|
|
|
|
|
|
50 |
|
|
|
32 |
|
|
|
69 |
|
|
|
56 |
|
|
|
50 |
|
|
|
69 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levitra |
|
|
|
|
|
|
49 |
|
|
|
43 |
|
|
|
23 |
|
|
|
14 |
|
|
|
47 |
|
|
|
24 |
|
|
|
15 |
|
|
|
2 |
|
|
|
100 |
|
|
|
100 |
|
|
|
|
|
|
|
(100 |
) |
|
|
(100 |
) |
|
Metabolic |
|
|
8 |
|
|
|
1,508 |
|
|
|
1,870 |
|
|
|
(15 |
) |
|
|
(19 |
) |
|
|
895 |
|
|
|
(24 |
) |
|
|
(30 |
) |
|
|
290 |
|
|
|
15 |
|
|
|
16 |
|
|
|
323 |
|
|
|
(2 |
) |
|
|
(6 |
) |
Avandia products |
|
|
|
|
|
|
1,219 |
|
|
|
1,645 |
|
|
|
(22 |
) |
|
|
(26 |
) |
|
|
780 |
|
|
|
(29 |
) |
|
|
(35 |
) |
|
|
225 |
|
|
|
3 |
|
|
|
4 |
|
|
|
214 |
|
|
|
(6 |
) |
|
|
(9 |
) |
Avandia |
|
|
|
|
|
|
877 |
|
|
|
1,399 |
|
|
|
(34 |
) |
|
|
(37 |
) |
|
|
592 |
|
|
|
(40 |
) |
|
|
(45 |
) |
|
|
111 |
|
|
|
(11 |
) |
|
|
(10 |
) |
|
|
174 |
|
|
|
(14 |
) |
|
|
(16 |
) |
Avandamet |
|
|
|
|
|
|
292 |
|
|
|
204 |
|
|
|
49 |
|
|
|
43 |
|
|
|
147 |
|
|
|
85 |
|
|
|
71 |
|
|
|
111 |
|
|
|
20 |
|
|
|
21 |
|
|
|
34 |
|
|
|
35 |
|
|
|
31 |
|
Bonviva/Boniva |
|
|
|
|
|
|
161 |
|
|
|
95 |
|
|
|
79 |
|
|
|
69 |
|
|
|
115 |
|
|
|
49 |
|
|
|
39 |
|
|
|
44 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Anti-bacterials |
|
|
7 |
|
|
|
1,323 |
|
|
|
1,363 |
|
|
|
(1 |
) |
|
|
(3 |
) |
|
|
195 |
|
|
|
(3 |
) |
|
|
(10 |
) |
|
|
588 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
540 |
|
|
|
3 |
|
|
|
|
|
Augmentin |
|
|
|
|
|
|
530 |
|
|
|
570 |
|
|
|
(6 |
) |
|
|
(7 |
) |
|
|
67 |
|
|
|
(23 |
) |
|
|
(29 |
) |
|
|
238 |
|
|
|
(9 |
) |
|
|
(8 |
) |
|
|
225 |
|
|
|
6 |
|
|
|
4 |
|
Altabax |
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
2 |
|
|
|
477 |
|
|
|
1,069 |
|
|
|
(54 |
) |
|
|
(55 |
) |
|
|
272 |
|
|
|
(65 |
) |
|
|
(67 |
) |
|
|
135 |
|
|
|
(10 |
) |
|
|
(9 |
) |
|
|
70 |
|
|
|
(13 |
) |
|
|
(17 |
) |
Hycamtin |
|
|
|
|
|
|
119 |
|
|
|
113 |
|
|
|
10 |
|
|
|
5 |
|
|
|
70 |
|
|
|
6 |
|
|
|
(3 |
) |
|
|
40 |
|
|
|
18 |
|
|
|
21 |
|
|
|
9 |
|
|
|
13 |
|
|
|
13 |
|
Zofran |
|
|
|
|
|
|
196 |
|
|
|
847 |
|
|
|
(77 |
) |
|
|
(77 |
) |
|
|
78 |
|
|
|
(88 |
) |
|
|
(89 |
) |
|
|
70 |
|
|
|
(34 |
) |
|
|
(34 |
) |
|
|
48 |
|
|
|
(21 |
) |
|
|
(23 |
) |
Tykerb |
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Vaccines |
|
|
11 |
|
|
|
1,993 |
|
|
|
1,692 |
|
|
|
20 |
|
|
|
18 |
|
|
|
628 |
|
|
|
44 |
|
|
|
35 |
|
|
|
800 |
|
|
|
14 |
|
|
|
15 |
|
|
|
565 |
|
|
|
7 |
|
|
|
6 |
|
Hepatitis |
|
|
|
|
|
|
529 |
|
|
|
479 |
|
|
|
14 |
|
|
|
10 |
|
|
|
199 |
|
|
|
33 |
|
|
|
24 |
|
|
|
230 |
|
|
|
5 |
|
|
|
6 |
|
|
|
100 |
|
|
|
3 |
|
|
|
|
|
Infanrix/Pediarix |
|
|
|
|
|
|
543 |
|
|
|
511 |
|
|
|
9 |
|
|
|
6 |
|
|
|
196 |
|
|
|
23 |
|
|
|
14 |
|
|
|
271 |
|
|
|
(4 |
) |
|
|
(3 |
) |
|
|
76 |
|
|
|
26 |
|
|
|
25 |
|
Fluarix, FluLaval |
|
|
|
|
|
|
174 |
|
|
|
170 |
|
|
|
7 |
|
|
|
2 |
|
|
|
98 |
|
|
|
16 |
|
|
|
8 |
|
|
|
41 |
|
|
|
11 |
|
|
|
14 |
|
|
|
35 |
|
|
|
(16 |
) |
|
|
(19 |
) |
Flu-prepandemic |
|
|
|
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95 |
|
|
|
|
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Rotarix |
|
|
|
|
|
|
91 |
|
|
|
44 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
68 |
|
|
|
79 |
|
|
|
74 |
|
Boostrix |
|
|
|
|
|
|
66 |
|
|
|
60 |
|
|
|
15 |
|
|
|
10 |
|
|
|
40 |
|
|
|
5 |
|
|
|
(2 |
) |
|
|
19 |
|
|
|
27 |
|
|
|
27 |
|
|
|
7 |
|
|
|
75 |
|
|
|
75 |
|
|
Other |
|
|
5 |
|
|
|
901 |
|
|
|
924 |
|
|
|
|
|
|
|
(2 |
) |
|
|
65 |
|
|
|
(18 |
) |
|
|
(22 |
) |
|
|
255 |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
581 |
|
|
|
3 |
|
|
|
(1 |
) |
|
|
|
|
100 |
|
|
|
19,163 |
|
|
|
20,013 |
|
|
|
|
|
|
|
(4 |
) |
|
|
9,273 |
|
|
|
(3 |
) |
|
|
(10 |
) |
|
|
5,560 |
|
|
|
1 |
|
|
|
2 |
|
|
|
4,330 |
|
|
|
6 |
|
|
|
3 |
|
|
CER% represents growth at constant exchange rates. £% represents growth at actual exchange rates.
|
|
|
|
|
|
|
|
|
|
|
|
56 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2007
continued
|
|
|
|
|
|
|
|
This followed publication of an article in the New England Journal of Medicine. This article
suggested that there may be cardiovascular risk associated with Avandia. Despite GSKs efforts,
doctors became reluctant to start new patients on Avandia without further guidance from the FDA.
Following clarification from the FDA in October, there was a new approved label for Avandia.
Outside the USA, sales in Europe grew 3% to £225 million, and in Rest of World markets, sales
declined 6% to £214 million.
We recorded in turnover a £161 million share of co-promotion income for Boniva/Bonviva, a
once-monthly oral bisphosphonate for the treatment of postmenopausal osteoporosis.
Vaccines
Vaccine sales increased 20% to £2.0 billion, with good performances in all regions: US sales rose
44% to £628 million; European sales grew 14% to £800 million and sales in Rest of World were up 7%
to £565 million. Sales of hepatitis vaccines grew 14% to £529 million, driven by US growth of 33%.
Infanrix/Pediarix grew 9% to £543 million, again driven by US growth of 23%. Sales of the new
two-dose vaccine, Rotarix, to prevent rotavirus gastroenteritis, doubled to £91 million, with
strong growth in both Europe and Rest of World. Sales of Cervarix, GSKs vaccine to prevent
cervical cancer, were £10 million.
Cardiovascular and urogenital
Sales of Coreg, for heart disease, fell 18% to £587 million, following the introduction of US
generic competition to Coreg IR in September. Sales of Coreg CR, which was launched in March 2007,
were £88 million. Avodart, for benign prostatic hyperplasia (enlarged prostate), continued to
perform strongly with sales up 38% to £285 million.
Anti-bacterials
Anti-bacterial sales declined 1% to £1,323 million reflecting generic competition in all regions.
Oncology and emesis
Tykerb achieved sales of £51 million in its first year, £36 million of which arose in the USA
following its launch in March. Sales of Zofran declined 77% to £196 million, reflecting generic
competition in the USA, Europe and Rest of World where sales declined 88%, 34% and 21%
respectively.
Consumer Healthcare sales
OTC medicines
Over-the-counter
medicine sales grew 20% to £1.8 billion, with Panadol up 14% to £263 million and
alli sales of £150 million since launch in the USA in June. Smoking control products declined 6% to
£314 million due to strong competition in the US market. Breathe Right and FiberChoice, added to
the portfolio with the acquisition of CNS in December 2006, achieved combined sales of £81 million.
Consumer Healthcare turnover
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
Growth |
|
|
|
total |
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
50 |
|
|
|
1,788 |
|
|
|
1,561 |
|
|
|
20 |
|
|
|
15 |
|
Panadol franchise |
|
|
|
|
|
|
263 |
|
|
|
234 |
|
|
|
14 |
|
|
|
12 |
|
Smoking cessation products |
|
|
|
|
|
|
314 |
|
|
|
353 |
|
|
|
(6 |
) |
|
|
(11 |
) |
Tums |
|
|
|
|
|
|
88 |
|
|
|
93 |
|
|
|
2 |
|
|
|
(5 |
) |
Cold sore franchise |
|
|
|
|
|
|
79 |
|
|
|
69 |
|
|
|
19 |
|
|
|
14 |
|
Breathe Right |
|
|
|
|
|
|
63 |
|
|
|
2 |
|
|
|
>100 |
|
|
|
>100 |
|
alli |
|
|
|
|
|
|
150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oral healthcare |
|
|
30 |
|
|
|
1,049 |
|
|
|
993 |
|
|
|
8 |
|
|
|
6 |
|
Aquafresh franchise |
|
|
|
|
|
|
398 |
|
|
|
374 |
|
|
|
9 |
|
|
|
6 |
|
Sensodyne franchise |
|
|
|
|
|
|
293 |
|
|
|
257 |
|
|
|
16 |
|
|
|
14 |
|
Dental care |
|
|
|
|
|
|
222 |
|
|
|
217 |
|
|
|
6 |
|
|
|
2 |
|
|
Nutritional healthcare |
|
|
20 |
|
|
|
716 |
|
|
|
658 |
|
|
|
9 |
|
|
|
9 |
|
Lucozade |
|
|
|
|
|
|
347 |
|
|
|
301 |
|
|
|
16 |
|
|
|
15 |
|
Horlicks |
|
|
|
|
|
|
174 |
|
|
|
156 |
|
|
|
12 |
|
|
|
12 |
|
Ribena |
|
|
|
|
|
|
156 |
|
|
|
169 |
|
|
|
(7 |
) |
|
|
(8 |
) |
|
|
|
|
100 |
|
|
|
3,553 |
|
|
|
3,212 |
|
|
|
14 |
|
|
|
11 |
|
|
|
|
|
* |
|
CER% represents growth at constant exchange rates.
£% represents growth at actual exchange rates. |
Oral healthcare
Oral healthcare sales grew 8% to over £1 billion. Sales of
Aquafresh were up 9% to £398 million, helped by the
success of the new Aquafresh White Trays. Sensodyne also
grew strongly, up 16% for the year to £293 million, driven
by a successful launch of
Sensodyne ProNamel.
Nutritional healthcare
Nutritional healthcare product sales grew 9% to £716
million. Lucozade grew 16% to £347 million, and Horlicks
grew 12% to £174 million. Ribena sales were down 7% to
£156 million.
Operating profit total results
Total results include restructuring costs related
to the new Operational Excellence programme, which
commenced in October 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
Growth |
|
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
CER% |
|
|
£% |
|
|
Turnover |
|
|
22,716 |
|
|
|
100.0 |
|
|
|
23,225 |
|
|
|
100.0 |
|
|
|
2 |
|
|
|
(2 |
) |
|
Cost of sales |
|
|
(5,317 |
) |
|
|
(23.4 |
) |
|
|
(5,010 |
) |
|
|
(21.6 |
) |
|
|
8 |
|
|
|
6 |
|
Selling, general
and administration |
|
|
(6,954 |
) |
|
|
(30.6 |
) |
|
|
(7,257 |
) |
|
|
(31.2 |
) |
|
|
|
|
|
|
(4 |
) |
Research and
development |
|
|
(3,327 |
) |
|
|
(14.7 |
) |
|
|
(3,457 |
) |
|
|
(14.9 |
) |
|
|
(1 |
) |
|
|
(4 |
) |
Other operating
income |
|
|
475 |
|
|
|
2.1 |
|
|
|
307 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
7,593 |
|
|
|
33.4 |
|
|
|
7,808 |
|
|
|
33.6 |
|
|
|
3 |
|
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 57
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2007
continued
|
|
|
|
|
|
|
|
Cost of sales
Cost of sales as a percentage of turnover increased by 1.8 percentage points. At constant exchange
rates, cost of sales as a percentage of turnover increased by 1.3 percentage points, reflecting
charges related to the new Operational Excellence programme of £111 million (2006 £nil) and
unfavourable product and regional mixes compared with 2006.
Selling, general and administration
Selling, general and administration (SG&A) costs as a percentage of turnover reduced 0.6 percentage
points. At constant exchange rates, the decrease was 0.7 percentage points, reflecting flat
expenditure compared with the prior year on a turnover growth of 2%. SG&A costs included charges
related to the new Operational Excellence programme of £137 million (2006 £nil). Advertising and
promotion increased by 2%, selling and distribution increased by 2%, and general and administration
expenditure declined 5%.
Research and development
R&D expenditure declined 1% and included charges related to the new Operational Excellence
programme of £90 million (2006 £nil). The benefit arose from lower impairment charges and the
winding-down of previous restructuring activities. Excluding these items, R&D expenditure declined
2% on last year. Pharmaceutical R&D expenditure represented 16.7% (2006 16.7%) of pharmaceutical
turnover.
Other operating income
Other operating income includes royalty income, equity investment disposals and impairments,
product disposals and fair value adjustments to financial instruments. Other operating income was
£475 million in 2007 (2006 £307 million). The increase is primarily due to higher royalty income
(£216 million in 2007 compared with £94 million in 2006), favourable fair value movements on
financial instruments (£41 million in 2007 compared with £29 million in 2006), and the Roche
litigation settlement relating to carvedilol, partially offset by lower asset disposal profits.
Operating profit total results
Overall, the operating profit margin decreased 0.2 percentage points as operating profit decreased
3% in sterling terms to £7,593 million. Operating profit increased 3% at constant exchange rates
and the CER margin increased 0.5 percentage points, reflecting flat SG&A expenditure and higher
other operating income, partially offset by an increase in cost of sales.
In 2007, gains from asset
disposals were £109 million (£169 million in 2006), costs for legal matters were £255 million (£333
million in 2006), fair value movements on financial instruments resulted in an income of £41
million (income of £29 million in 2006), charges related to old restructuring activity were £92
million (£205 million in 2006) and charges related to the new Operational Excellence programme were
£338 million (2006 £nil).
The total operating profit impact of these items was
a £535 million charge in 2007 (£340 million
charge in 2006).
Profit before taxation total results
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Finance income |
|
£m |
|
|
£m |
|
|
Interest and other income |
|
|
255 |
|
|
|
285 |
|
Fair value adjustments and hedges |
|
|
7 |
|
|
|
2 |
|
|
|
|
|
262 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
Interest costs |
|
|
(434 |
) |
|
|
(314 |
) |
Unwinding of discount on liabilities |
|
|
(27 |
) |
|
|
(36 |
) |
Fair value adjustments and hedges |
|
|
8 |
|
|
|
(2 |
) |
|
|
|
|
(453 |
) |
|
|
(352 |
) |
|
Finance costs increased owing to increased levels of debt to finance the share buy-back programme.
Share of after tax profits of associates and joint ventures
The share of profits of associates arises principally from the Groups holding in Quest Diagnostics
Inc.
Profit before taxation total results
Taking account of net finance costs and the contribution from associates, total profit before
taxation was £7,452 million compared with £7,799 million in 2006, an increase of 2% at constant
exchange rates, but a 4% sterling decline.
Major restructuring programmes
In October 2007, GSK announced a significant new £1.5 billion Operational Excellence programme to
improve the effectiveness and productivity of its operations.
An
expansion to the programme was announced in February 2009 and this programme is now expected to
deliver annual pre-tax savings of £1.7 billion by 2011. One-off charges of £338 million before tax
relating to the programme were recorded in Q4 2007. There were no significant acquisition-related
restructuring costs incurred in 2006 or 2007.
Because of the extent and cost of the Operational Excellence programme, a columnar presentation has
been adopted in the income statement. The analysis below of operating profit and the subsequent
discussion excludes restructuring costs related to the new Operational Excellence programme.
Management believes that this presentation assists shareholders in gaining a clearer understanding
of the Groups financial performance and is consistent with the way management assesses the Groups
financial performance.
|
|
|
|
|
|
|
|
|
|
|
|
58 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Financial review 2007
continued
|
|
|
|
|
|
|
|
Operating profit results before major
restructuring
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
Growth |
|
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
CER% |
|
|
£% |
|
|
Turnover |
|
|
22,716 |
|
|
|
100.0 |
|
|
|
23,225 |
|
|
|
100.0 |
|
|
|
2 |
|
|
|
(2 |
) |
|
Cost of sales |
|
|
(5,206 |
) |
|
|
(22.9 |
) |
|
|
(5,010 |
) |
|
|
(21.6 |
) |
|
|
6 |
|
|
|
4 |
|
Selling,
general
and administration |
|
|
(6,817 |
) |
|
|
(30.0 |
) |
|
|
(7,257 |
) |
|
|
(31.2 |
) |
|
|
(2 |
) |
|
|
(6 |
) |
Research and
development |
|
|
(3,237 |
) |
|
|
(14.3 |
) |
|
|
(3,457 |
) |
|
|
(14.9 |
) |
|
|
(3 |
) |
|
|
(6 |
) |
Other operating
income |
|
|
475 |
|
|
|
2.1 |
|
|
|
307 |
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
7,931 |
|
|
|
34.9 |
|
|
|
7,808 |
|
|
|
33.6 |
|
|
|
8 |
|
|
|
2 |
|
|
Cost of sales
Cost of sales as a percentage of turnover increased by 1.3 percentage points. At constant exchange
rates, cost of sales as a percentage of turnover increased by 0.8 percentage points, reflecting
unfavourable product and regional mix.
Selling, general and administration
Selling, general and administration (SG&A) costs as a percentage of turnover reduced 1.2 percentage
points and at constant exchange rates, the decrease was 1.3 percentage points, reflecting a 2%
decline in expenditure compared with prior year on a turnover growth of 2%. SG&A costs were down 2%
due to lower selling and general and administration expenditure partly offset by higher advertising
and promotion. Advertising and promotion increased 2% and accounted for less than a 1% increase in
total SG&A. Selling and distribution declined 1% and general and administration expenditure
declined 7%. Collectively these items accounted for a 2% decline in total SG&A, of which one
percentage point was due to lower charges related to legal matters.
Research and development
R&D expenditure decreased 3% partly as a result of lower impairment charges and the winding-down of
previous restructuring activities. Excluding these items, R&D expenditure was flat. Pharmaceutical
R&D expenditure represented 16.2% (2006 16.7%) of pharmaceutical turnover.
Other operating income
Other operating income was £475 million in 2007 (2006 £307 million). The increase is primarily
due to higher royalty income (£216 million in 2007 compared with £94 million in 2006), favourable
fair value movements on financial instruments (£41 million in 2007 compared with £29 million in
2006), and the Roche litigation settlement relating to carvedilol, partially offset by lower asset
disposal profits.
Operating profit results before major restructuring
Overall, the operating profit margin increased 1.3 percentage points as operating profit increased
2% in sterling terms to £7,931 million. Operating profit increased 8% at constant exchange rates
and the margin increased 2 percentage points, reflecting declines in SG&A and R&D expenditure on
turnover growth of 2%, and higher other operating income.
In 2007, gains from asset disposals were £109 million (2006 £169 million), costs for legal
matters were £255 million (2006 £333 million), fair value movements on financial instruments
resulted in an income of
£41 million (2006 £29 million) and charges related to old restructuring activity were £92 million
(2006 £205 million). The operating profit impact of these items was a £197 million charge in 2007
(2006 £340 million).
Profit before taxation results before major
restructuring
Net finance costs
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
Finance income |
|
£m |
|
|
£m |
|
|
Interest and other income |
|
|
255 |
|
|
|
285 |
|
Fair value adjustments and hedges |
|
|
7 |
|
|
|
2 |
|
|
|
|
|
262 |
|
|
|
287 |
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
|
|
|
Interest costs |
|
|
(434 |
) |
|
|
(314 |
) |
Unwinding of discount on liabilities |
|
|
(27 |
) |
|
|
(36 |
) |
Fair value adjustments and hedges |
|
|
8 |
|
|
|
(2 |
) |
|
|
|
|
(453 |
) |
|
|
(352 |
) |
|
Profit before taxation results before major
restructuring
Taking account of net finance
costs and the contribution from associates,
results before major restructuring, profit before taxation was
£7,790 million compared with £7,799 million in 2006, an
increase of 6% CER, but flat in sterling terms.
Taxation
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
UK corporation tax |
|
|
452 |
|
|
|
400 |
|
Overseas taxation |
|
|
1,962 |
|
|
|
2,310 |
|
|
Current taxation |
|
|
2,414 |
|
|
|
2,710 |
|
Deferred taxation |
|
|
(272 |
) |
|
|
(409 |
) |
|
Taxation on total profits |
|
|
2,142 |
|
|
|
2,301 |
|
|
The charge for taxation on total profit amounting to £2,142 million, represents an effective tax
rate of 28.7% (2006 29.5%). The charge for taxation on results before major restructuring profit,
amounting to £2,219 million, represents an effective tax rate of 28.5% (2006 29.5%).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 59
|
|
|
|
|
Report of the Directors |
|
|
|
|
Financial
review
2007continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Group balance sheet at 31st December 2007 included a tax payable liability of £826 million and
a tax recoverable asset of £58 million.
The integrated nature of the Groups worldwide operations, involving significant investment in
research and strategic manufacture at a limited number of locations, with consequential
cross-border supply routes into numerous end-markets, gives rise to complexity and delay in
negotiations with revenue authorities as to the profits on which individual Group companies are
liable to tax. Disagreements with, and between, revenue authorities as to intra-Group transactions,
in particular the price at which goods should be transferred between Group companies in different
tax jurisdictions, can produce conflicting claims from revenue authorities as to the profits to be
taxed in individual territories. Resolution of such issues is a continuing fact of life for GSK.
In 2007, our main open tax issues were in the UK, USA, Canada and Japan.
For the latest position on Taxation see Taxation in the 2008 Financial Review on page 40.
Profit for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
Growth |
|
|
|
£m |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Total profit after taxation
for the year |
|
|
5,310 |
|
|
|
5,498 |
|
|
|
3 |
|
|
|
(3 |
) |
Total profit attributable to
shareholders |
|
|
5,214 |
|
|
|
5,389 |
|
|
|
3 |
|
|
|
(3 |
) |
Basic earnings per share (pence) |
|
|
94.4 |
p |
|
|
95.5 |
p |
|
|
5 |
|
|
|
(1 |
) |
Basic earnings per ADS (US$) |
|
|
$3.77 |
|
|
|
$3.53 |
|
|
|
|
|
|
|
|
|
|
Results
before major restructuring profit after taxation for the year |
|
|
5,571 |
|
|
|
5,498 |
|
|
|
8 |
|
|
|
1 |
|
Results before major restructuring
profit attributable to shareholders |
|
|
5,475 |
|
|
|
5,389 |
|
|
|
8 |
|
|
|
2 |
|
Adjusted earnings per share (pence) |
|
|
99.1 |
p |
|
|
95.5 |
p |
|
|
10 |
|
|
|
4 |
|
Adjusted earnings per ADS (US$) |
|
|
$3.96 |
|
|
|
$3.53 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares (millions) |
|
|
5,524 |
|
|
|
5,643 |
|
|
|
|
|
|
|
|
|
|
Diluted total earnings per share (pence) |
|
|
93.7 |
p |
|
|
94.5 |
p |
|
|
|
|
|
|
|
|
Diluted total earnings per ADS (US$) |
|
|
$3.75 |
|
|
|
$3.50 |
|
|
|
|
|
|
|
|
|
Weighted average number
of shares (millions) |
|
|
5,567 |
|
|
|
5,700 |
|
|
|
|
|
|
|
|
|
|
Total results including restructuring costs related to the new
Operational Excellence programme produced a basic EPS of 94.4p compared with 95.5p in 2006. This
was a 5% increase in CER terms compared with 2006, but a 1% decline in sterling terms.
Results before major restructuring profit for the year were £5,571 million, an increase of 8% (1%
in sterling terms). Profit attributable to minority interests was £96 million and profit
attributable to shareholders was £5,475 million, an increase of 8% (2% in sterling terms). The
interest cost of the share buy-back programme adversely impacts the Groups profits but benefits
EPS. Results before major restructuring EPS increased 10%, reflecting higher profits and also the
reduction in the weighted average number of shares resulting from the Groups share buy-back
programme. At actual rates of exchange, earnings per share increased 4%. The unfavourable currency
impact on EPS of six percentage points reflected a strengthening of Sterling against the US dollar
and compared with a four percentage point unfavourable currency impact on turnover.
Dividend
The Board declared a fourth interim dividend of 16 pence per share resulting in a dividend for the
year of 53 pence, a five pence increase over the dividend of 48 pence per share for 2006.
|
|
|
|
|
|
|
|
|
|
|
|
60 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
The
Board |
|
|
|
|
|
|
|
|
|
|
|
|
1 Sir Christopher Gent (Aged 60)
Appointed on 1st June 2004. Chairman. Sir Christopher was the Chief Executive Officer of Vodafone
Group plc, until his retirement in July 2003. He is a Non-Executive Director of Lehman Brothers
Holdings Inc, a Non-Executive Director of Ferrari SpA, a member of KPMGs Chairmans Advisory
Group, a Senior Adviser at Bain & Co. and a member of the Advisory Board of Reform.
2 Andrew Witty (Aged 44)
Appointed on 31st January 2008. Chief Executive Officer.
Mr Witty was named Chief Executive Officer Designate for GSK in October 2007 and was appointed
Chief Executive Officer (CEO) on 21st May 2008. He joined the Group in 1985 and has held senior
positions in Asia, Africa and the USA. Immediately prior to being appointed CEO, Andrew was
President, Pharmaceuticals Europe, a position he held from January 2003. He is a member of the
Business Council for Britain, a Board Member of PhRMA, a Vice-President of EFPIA and a Member of
the Singapore Economic Development Boards International Advisory Council.
3 Professor Sir Roy Anderson (Aged 61)
Appointed on 1st October 2007. Non-Executive Director.
Professor Anderson is Professor of Infectious Disease Epidemiology in the Faculty of Medicine,
Imperial College, London, and is Rector of Imperial College. He is a fellow of the Royal Society
and a Foreign Associate Member of the Institute of Medicine at the US National Academy of Sciences.
Until September 2007, Professor Anderson was the Chief Scientific Adviser at the Ministry of
Defence in the UK.
4 Dr Stephanie Burns (Aged 54)
Appointed on 12th February 2007. Non-Executive Director.
Dr Burns is Chairman, President and Chief Executive Officer of Dow Corning Corporation. She is also
a member of the American Chemical Society and sits on the Executive Committee of the Society of
Chemical Industry, America Section, serves on the Board of Directors of the American Chemistry
Council, and on the Board of Directors for the Society for Womens Health Research. Dr Burns holds
a PhD in organic chemistry from Iowa State University.
5 Lawrence Culp (Aged 45)
Appointed on 1st July 2003. Non-Executive Director.
Mr Culp is President and Chief Executive Officer of Danaher Corporation. Prior to joining Danaher,
he held positions in Accenture, previously Andersen Consulting.
6 Sir Crispin Davis (Aged 59)
Appointed on 1st July 2003. Non-Executive Director.
Sir Crispin is Chief Executive Officer of Reed Elsevier PLC. Prior to that, he was Chief Executive
of Aegis Group plc, which he joined from Guinness plc, where he was a member of the main Board and
Group Managing Director of United Distillers. He spent his early career with Procter & Gamble.
7 Julian Heslop (Aged 55)
Appointed on 1st April 2005. Chief Financial Officer.
Mr Heslop joined Glaxo Wellcome as Financial Controller in April 1998. In January 2001 he was
appointed Senior Vice President, Operations Controller. Prior to joining the Group he held senior
finance roles at Grand Metropolitan.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 61
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8 Sir Deryck Maughan (Aged 61)
Appointed on 1st June 2004. Non-Executive Director.
Sir Deryck is a Partner of Kohlberg Kravis Roberts & Co, and a Non-Executive Director of Thomson
Reuters and BlackRock Inc. He was formerly Chairman and Chief Executive Officer of Citigroup
International and of Salomon Brothers Inc.
9 Dr Daniel Podolsky (Aged 55)
Appointed on 1st July 2006. Non-Executive Director.
Dr Podolsky is President of the University of Texas Southwestern Medical Center in Dallas and holds
the Phillip OBryan Montgomery, Jr., M.D. Distinguished Presidential Chair in Academic
Administration, and the Doris and Bryan Wildenthal Distinguished Chair in Medical Science. He is a
member of the Board of the Southwest Medical Foundation, and is also Chairman of the Board and
Scientific Co-Founder of the GI Company.
10 Sir Ian Prosser (Aged 65)
Appointed on 23rd May 2000. Senior Independent Director.
Sir Ian was formerly a Non-Executive Director of SmithKline Beecham plc. He is Non-Executive Deputy
Chairman of BP plc, Chairman of the Navy, Army and Air Force Institutes (NAAFI), a Non-Executive
Director of Sara Lee Corporation and a member of the CBI
Presidents Committee.
11 Dr Ronaldo Schmitz (Aged 70)
Appointed on 23rd May 2000. Non-Executive Director.
Dr Schmitz was formerly a Non-Executive Director of Glaxo Wellcome plc. He is a Non-Executive
Director of Legal & General Group plc, a member of the Board of Directors of Rohm and Haas Company
and Cabot Corporation and of the Supervisory Board of SICK AG.
Details of membership of the Board Committees may be found on page 66.
12 Dr Moncef Slaoui (Aged 49)
Appointed on 17th May 2006. Chairman, Research & Development. Dr Slaoui joined GSK Biologicals in
1988 where he engineered the development of a robust vaccines pipeline and subsequently led
Worldwide Business Development for pharmaceuticals before his appointment to lead R&D. He is a
member of the Board of the Agency for Science, Technology & Research (A*STAR) and has a PhD in
Molecular Biology and Immunology from Université Libre de Bruxelles.
13 Tom de Swaan (Aged 62)
Appointed on 1st January 2006. Non-Executive Director.
Mr de Swaan is a member of the Board of Directors of Zurich Financial Services and Vice Chairman of
the Supervisory Board and Chairman of the Audit Committee of Royal Ahold, a member of the
Supervisory Board of Royal DSM, and Chairman of the Supervisory Board of VanLanschot Bankiers.
Until January 2006, he was a member of the Managing Board and Chief Financial Officer of ABN AMRO.
14 Sir Robert Wilson (Aged 65)
Appointed on 1st November 2003. Non-Executive Director.
Sir Robert is Non-Executive Chairman of BG Group plc and The
Economist Group and was previously Executive Chairman of Rio Tinto.
James Murdoch (Aged 36)
To join the Board on 20th May 2009. Non-Executive Director.
Mr Murdoch is Chairman and Chief Executive of News Corporation, Europe and Asia. He is also
Non-Executive Chairman of BSkyB and a member of the Board of News Corporation. He served as Chief
Executive Officer of BSkyB from 2003 to 2007 and was also previously Chairman and Chief Executive
Officer of Star TV. He also serves on the Leadership Council of The Climate Group.
Other Directors
Dr Jean-Pierre Garnier, formerly Chief Executive Officer, retired from the Board on 21st May 2008.
Mr Christopher Viehbacher, formerly President, North American Pharmaceuticals, who was appointed to
the Board on 31st January 2008, resigned from the Board with effect from 8th September 2008.
|
|
|
|
|
|
|
|
|
|
|
|
62 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
The Corporate Executive Team (CET) |
|
|
|
|
|
|
|
|
|
|
|
|
1 Andrew Witty
Chief Executive Officer. Andrew succeeded JP Garnier as Chief Executive Officer in May 2008. He
joined Glaxo UK in 1985. During his career with the company he has held the roles of Managing
Director South Africa, Vice President and General Manager Marketing in the US and Senior Vice
President, Asia Pacific.
He was appointed President, Pharmaceuticals Europe for GlaxoSmithKline in January 2003.
2 Simon Bicknell
Senior Vice President, Company Secretary and Compliance Officer. Simon ensures that compliance and
risk management are effectively embedded within the business and oversees corporate governance for
the Group. Simon joined the Corporate Secretariat in 1984. He was
appointed Deputy Company Secretary of Glaxo Wellcome in 1995 and Company Secretary of GlaxoSmithKline plc in 2000.
3 John Clarke
President, Consumer Healthcare. John is responsible for the Consumer Healthcare business which
produces oral healthcare, over-the-counter and nutritional healthcare products. He joined Beecham
in 1976 and was the President of the Futures Group before his current appointment in January 2006.
4 Deirdre Connelly
President, North American Pharmaceuticals. Deirdre joined GSK in February 2009 after working at Eli
Lilly and Company for 24 years. She held a variety of positions including sales professional,
General Manager of Puerto Rico, Executive Director of Human Resources and most recently President
of US operations.
5 Marc Dunoyer
President, Pharmaceuticals Asia Pacific/Japan. Marc was appointed President, Pharmaceuticals Asia
Pacific/Japan in May 2008. He joined the Group in 1999 and was President, Pharmaceuticals Japan
from January 2000 until his current appointment.
6 Eddie Gray
President, Pharmaceuticals Europe. Eddie became responsible for the Groups operations in Europe in
January 2008. He joined Beecham in 1988 and, prior to his current appointment, was Senior Vice
President and General Manager, Pharmaceuticals UK.
7 Julian Heslop
Chief Financial Officer. Julian became Chief Financial Officer in April 2005. As head of the
finance function he is responsible for activities such as financial reporting and control, tax and
treasury, finance systems, internal audit and insurance. He joined Glaxo Wellcome as Financial
Controller in April 1998.
8 Abbas Hussain
President, Emerging Markets. Abbas joined GSK in June 2008 from Eli Lilly and Company, where he
spent 20 years overseeing markets throughout Europe, Africa/Middle East and Australasia.
9 Duncan Learmouth
Senior Vice President, Corporate Communications and Community Partnerships. Duncan is responsible
for the Groups investor relations, internal and external communications, its image and
partnerships with communities. He joined Glaxo in 1991 and was Vice President, Global Investor
Relations, before appointment to his current position in July 2006.
10 Bill Louv
Chief Information Officer. Bill was appointed Chief Information Officer in January 2007. He is
responsible for information technology across GSK. Bill joined Glaxo in 1994 as Vice President,
Medical Data Sciences. Prior to his current role, Bill was Senior Vice President, R&D Information
Technology.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 63
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11 Dan Phelan
Chief of Staff. Dan is responsible for Corporate Strategy and Development, IT, HR, Real Estate and
Facilities, Environmental Health and Safety, and Global Security. He joined Smith Kline & French in
1981 and previously held the role of Senior Vice President Human Resources until his appointment as
Chief of Staff in May 2008.
12 David Pulman
President, Global Manufacturing and Supply. David is responsible for the Global Manufacturing and
Supply organisation and Global Procurement. He joined Glaxo in 1978. He has broad experience of
manufacturing operations having previously led the Primary Supply, European manufacturing, North
American manufacturing, Global Logistics and Manufacturing Strategy organisations.
13 David Redfern
Chief Strategy Officer. David is responsible for proactive exploration of new business
opportunities and strategic planning. He began his career with GSK in 1994 in Corporate Development
before being appointed Finance Director of Europe Pharmaceuticals in 1999. He was appointed Area
Director for Central Europe in 2003 and Northern Europe in 2005.
14 Moncef Slaoui
Chairman, Research & Development. Moncef leads the Groups drug discovery and development
activities. He joined the Group in 1988 and was a key player in building GSKs vaccines pipeline.
In 2003 he was appointed Senior Vice President, Worldwide Business Development until his current
appointment in June 2006.
15 Jean Stéphenne
President and General Manager, Biologicals. Jean has led GSKs global vaccines business since 1989.
Previously he was Vice President of Human Vaccines Research and Development and Production. He
joined the company in 1974 as Head of Bacterial and Viral Vaccines production. Jean was named Baron
by King Albert II of the Belgians in 2000 in recognition of his leading contribution to R&D and
industry in Belgium.
16 Claire Thomas
Senior Vice President, Human Resources. Claire leads the global Human Resources (HR) function.
Previously, she oversaw HR in Pharmaceuticals International and in Pharmaceuticals Europe. Claire
joined the company in 1996 and was appointed Director of Human Resources for UK Pharmaceuticals in
1997. Claire was honoured as an Outstanding European Woman of Achievement in 2007.
17 Dan Troy
Senior Vice President and General Counsel. Dan joined GSK as Senior Vice President and General
Counsel in September 2008. Previously he was a Partner at the Washington law firm Sidley Austin LLP
and Chief Counsel for the FDA where he served as a primary liaison to the White House and the US
Department of Health and Human Services (HHS).
Other members
Bob Ingram continues to act as a special consultant to the Group and attends some CET meetings in
that capacity.
Changes to the CET in 2008
JP Garnier, Chief Executive Officer, retired from GSK in May 2008. Rupert Bondy, Senior Vice
President and General Counsel, left GSK in March 2008. Russell Greig, President, Pharmaceuticals
International, left the CET in May 2008 for a new role as President of the GSK Venture Fund. Chris
Viehbacher, President, US
Pharmaceuticals, left GSK in December 2008.
|
|
|
|
|
|
|
|
64 GSK Annual Report 2008 |
|
|
Report of the Directors |
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
Governance and policy
This section discusses GSKs management structures and governance procedures. It includes
disclosures on compliance with the Combined Code on Corporate Governance of the Financial Reporting
Council (Combined Code) and with US laws and regulation.
The Board and Corporate Executive Team
The Directors are listed under The Board on page 60.
The Board is responsible for the Groups system of corporate governance and is ultimately
accountable for the Groups activities, strategy and financial performance.
Independence
The Board considers all its Non-Executive Directors to be independent in character and judgement.
Dr Schmitz has served on the Board for more than ten years, having been appointed to the Board of
Glaxo Wellcome plc on 1st January 1997. During consideration of the Annual Review of Board
effectiveness at its meeting in January 2009, the Board concluded that Dr Schmitz remained
independent, notwithstanding his length of service. In the opinion of the Board, Dr Schmitz
continued to demonstrate the characteristics of independence, such as objectively challenging
management and taking part in rigorous debate, while at the same time possessing an outstanding
knowledge of the companys business and affairs, together with his experience gained as Chairman of
the Audit Committee. In a long cycle investment business, such as GSK, it was considered to be
particularly important to have experienced members on the Board.
When Sir Christopher Gent was appointed to the Board as Deputy Chairman, he was determined by the
Board to be independent. Upon taking up the chairmanship of the Board on 1st January 2005, in
accordance with the Combined Code, he was excluded from the determination of whether at least half
the Board are independent Non-Executive Directors. Sir Christopher Gent is a member of the
Remuneration Committee, as permitted by the Combined Code, in light of his independence upon
appointment as Chairman.
The Board considers that Professor Sir Roy Anderson, Dr Burns, Mr Culp, Sir Crispin Davis, Sir
Deryck Maughan, Dr Podolsky, Sir Ian Prosser, Dr Schmitz, Mr de Swaan and Sir Robert Wilson are
independent in accordance with the recommendations of the Combined Code.
Mr James Murdoch will join the Board with effect from 20th May 2009 and the Board has determined
that he will be an independent Non-Executive Director in accordance with the Combined Code.
Sir Ian Prosser and Dr Schmitz will retire from the Board following the AGM in May 2009.
At the date of publication and throughout 2008, a majority of the Board members, excluding the
Chairman, were independent Non-Executive Directors.
Chairman and CEO
Sir Christopher Gent has chaired the company since 1st January 2005 and was Chairman throughout
2008. Mr Witty is the Chief Executive Officer (CEO). He succeeded Dr Garnier, who retired from the
Board at the end of the AGM on 21st May 2008.
Mr Wittys biographical details can be found on page 60. The Chairman leads the Board, and
represents the Board to the CEO and other CET members as necessary between Board meetings. The CEO
manages the Group and implements the strategy and policies adopted by the Board. The Chairman and
the chairmen of Board Committees communicate regularly with the CEO and other CET members. The
division of responsibilities between the role of Chairman and the CEO has been set out in writing,
agreed by the Board and appears in full on the companys website.
The CEO is responsible for executive management of the Group and is assisted by the CET. The CET
meets at least 11 times per year and otherwise as necessary. The members and their responsibilities
are listed under Corporate Executive Team (page 62).
Senior Independent Director
Sir Ian Prosser was appointed Senior Independent Director (SID) on 1st January 2005 and held this
role throughout 2008. Sir Robert Wilson will become the SID following Sir Ians retirement from the
Board in May 2009.
Board process
The Board has the authority, and is accountable to shareholders, for ensuring that the company is
appropriately managed and achieves the strategic objectives it sets. The Board discharges those
responsibilities through an annual programme of meetings which includes the approval of overall
budgetary planning and business strategy. The Board reviews the companys internal controls and
risk management policies and approves its governance structure and code of ethics.
The Board appraises and approves major financing, investment and licensing decisions in excess of
defined thresholds. In addition, the Board evaluates and monitors the performance of the Group as a
whole. This includes:
|
|
engaging at Board meetings with the CEO, the other Executive Directors and
members of the CET as appropriate, on the financial and operating performance of GSK and external
issues material to the Groups prospects |
|
|
|
evaluating progress towards the achievement of the
Groups financial and business objectives and annual plans |
|
|
|
monitoring, through reports received
directly or from various committees, the significant risks facing the Group. |
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 65
|
|
|
|
|
Report of the Directors |
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
|
|
The Board has overall responsibility for succession planning for the CEO and the other Executive
Directors. The Board has given the CEO broad authority to operate the business of the Group, and
the CEO is accountable for, and reports to the Board on, the performance of the business. CET
members make regular presentations to the Board on their areas of responsibility, and the Board
meets with all the CET members on an annual basis to discuss collectively the Groups strategy.
A
primary element of the induction process for new Non-Executive Directors is undertaken by members
of the CET, and all Non-Executive Directors are encouraged to have separate informal discussions at
their discretion with any CET members.
The Board met six times in 2008, with each member attending as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of meetings |
|
|
|
|
|
|
held whilst a Board |
|
|
Number of |
|
Name |
|
member |
|
|
meetings attended |
|
|
Sir Christopher Gent |
|
|
6 |
|
|
|
6 |
|
Mr A Witty* |
|
|
6 |
|
|
|
6 |
|
Mr J Heslop |
|
|
6 |
|
|
|
6 |
|
Dr M Slaoui |
|
|
6 |
|
|
|
6 |
|
Professor Sir Roy Anderson |
|
|
6 |
|
|
|
6 |
|
Dr S Burns |
|
|
6 |
|
|
|
6 |
|
Mr L Culp |
|
|
6 |
|
|
|
6 |
|
Sir Crispin Davis |
|
|
6 |
|
|
|
6 |
|
Sir Deryck Maughan |
|
|
6 |
|
|
|
6 |
|
Dr D Podolsky |
|
|
6 |
|
|
|
6 |
|
Sir Ian Prosser |
|
|
6 |
|
|
|
6 |
|
Dr R Schmitz |
|
|
6 |
|
|
|
6 |
|
Mr T de Swaan |
|
|
6 |
|
|
|
6 |
|
Sir Robert Wilson |
|
|
6 |
|
|
|
6 |
|
Dr JP Garnier* |
|
|
3 |
|
|
|
3 |
|
Mr C Viehbacher* |
|
|
4 |
|
|
|
4 |
|
|
|
|
|
* |
|
Mr Witty and Mr Viehbacher were appointed to the Board on 31st January 2008. Dr Garnier retired
from the Board on 21st May 2008. Mr Viehbacher resigned from the Board on 8th September 2008. |
In addition to the six scheduled meetings, the Board also met on a quorate basis on six occasions.
Business environment development
To ensure that the Board is kept up-to-date on important matters, including legal, governance and
regulatory developments, presentations are made on a regular basis by both external and internal
advisers.
Independent advice
The Board recognises that there may be occasions when one or more of the Directors feel it is
necessary to take independent legal and/or financial advice at the companys expense. There is an
agreed procedure to enable them to do so. This is explained in the Governance section of the
companys website.
Indemnification of Directors
Qualifying third party indemnity provisions (as defined in section 234 of the Companies Act 2006)
are in force for the benefit of the Directors and former Directors who held office during 2008.
Directors Conflicts of Interest
Directors have a duty to avoid a situation in which they have, or can have, a direct or indirect
conflict of interest or possible conflict of interest with the company. The duty applies in
particular to the exploitation of any property, information or opportunity, whether or not GSK
could take advantage of it. The companys Articles of Association
include a general power for the Board to authorise such conflicts. There is no breach of duty if
the relevant matter has been so authorised in advance.
The Board has established procedures for handling situational conflicts of interest, which are in
line with the best practice guidance issued by the General Counsel 100 Group and in accordance with
the companys Articles. It has authorised the Nominations Committee to grant and review
periodically, but in any event annually, any potential or actual conflict authorisations. Directors
are not counted in the quorum for the authorisation of their own actual or potential conflicts. The
Company Secretary minutes the consideration of any conflict. Authorisations granted are recorded by
the Company Secretary in a register of conflict authorisations which are noted by the Board at its
next meeting. On an ongoing basis, the Directors are responsible for informing the Company
Secretary of any new, actual or potential conflicts that may arise or, if there are any changes in
circumstances that may affect an authorisation previously given. Even when provided with
authorisation, a Director is not absolved from his or her duty to promote the success of the
company. If an actual conflict arises, post authorisation, the Board will choose to exclude the
Director from the relevant information and debate, or suspend the Director from the Board, or, as a
last resort, require the Director to resign.
Company Secretary
The Company Secretary is responsible to the Board and is available to individual Directors in
respect of Board procedures. The Company Secretary is Mr Simon Bicknell, who was appointed in May
2000. He is a barrister and joined the Group in 1984. He is Secretary to all of the Board
Committees except the Remuneration Committee. The Deputy Company Secretary, Mrs Victoria Whyte, was
appointed Secretary to the Remuneration Committee with effect from 27th January 2009. She is a
solicitor and a Fellow of the Institute of Chartered Secretaries and Administrators.
Board Committees
The Board has established a number of Committees and provides sufficient resources to enable them
to undertake their duties. Executive Directors are not members of the Audit, Remuneration,
Nominations or Corporate Responsibility Committees, although they may be invited to attend
meetings. Each Director is a member of the Corporate Administration & Transactions and Finance
Committees.
|
|
|
|
|
|
|
|
66 GSK Annual Report 2008
|
|
|
Report of the Directors |
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
Current membership of these Committees is shown in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate |
|
|
|
Audit |
|
|
Remuneration |
|
|
Nominations |
|
|
Responsibility |
|
|
Sir Christopher Gent |
|
|
|
|
|
|
M |
|
|
|
C |
|
|
|
C |
|
Professor Sir Roy Anderson |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr S Burns |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M |
|
Mr L Culp |
|
|
|
|
|
|
M |
|
|
|
M |
|
|
|
|
|
Sir Crispin Davis |
|
|
|
|
|
|
M |
|
|
|
|
|
|
|
|
|
Sir Deryck Maughan |
|
|
M |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr D Podolsky |
|
|
M |
|
|
|
|
|
|
|
|
|
|
|
M |
|
Sir Ian Prosser |
|
|
M |
|
|
|
|
|
|
|
M |
|
|
|
M |
|
Dr R Schmitz |
|
|
M |
|
|
|
M |
|
|
|
M |
|
|
|
|
|
Mr T de Swaan |
|
|
C |
|
|
|
|
|
|
|
|
|
|
|
M |
|
Sir Robert Wilson |
|
|
M |
|
|
|
C |
|
|
|
M |
|
|
|
|
|
|
Key: C = Chairman M = Member
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 67
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
|
|
Each Committee has written terms of reference which have been approved by the Board. The following
is a summary of the role and terms of reference of each Committee. The current full terms of
reference of each Committee may be obtained from the Company Secretary or the Governance section of
the companys website.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No of meetings |
|
Committee Report |
Committee |
|
Role and Terms of Reference |
|
Membership comprises |
|
per year |
|
on page |
|
Audit
|
|
Reviews the financial and internal reporting process,
the system of internal controls, the management
of risks and the external and internal audit process.
The Committee also proposes to shareholders the
appointment of the external auditors and is directly
responsible for their remuneration and oversight of
their work.
|
|
Independent Non-
Executive Directors
|
|
³ 4
|
|
73-74
|
|
Remuneration
|
|
Determines the terms of service and remuneration of
the Executive Directors and members of the CET and,
with the assistance of external independent advisers,
it evaluates and makes recommendations to the Board
on overall executive remuneration policy.
|
|
Independent Non-
Executive Directors
& the Chairman
|
|
³ 4
|
|
|
78-98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(The Chairman and the CEO are responsible for
evaluating and making recommendations to the Board
on the remuneration of Non-Executive Directors.) |
|
|
|
|
|
|
|
|
|
Nominations
|
|
Reviews the structure, size and composition of the
Board and appointment of members to the Board
and the CET, and makes recommendations to the
Board as appropriate. The Committee also monitors
the planning of succession to the Board and Senior
Management.
|
|
Independent Non-
Executive Directors
& the Chairman
|
|
³ 1
|
|
|
75 |
|
Corporate
Responsibility
|
|
Provides a Board-level forum for the regular review
of external issues that have the potential for serious
impact upon the Groups business and reputation.
The Committee is also responsible for oversight of
GSKs worldwide donations and community support.
|
|
Independent Non-
Executive Directors
& the Chairman
|
|
³ 3
|
|
|
75-76 |
|
Finance
|
|
Reviews and approves, on behalf of the Board, the
Annual Report and Form 20-F, and convening of the
AGM, together with the preliminary and quarterly
statements of trading results. It also approves
certain major licensing and capital transactions and
changes to the Groups Investment Instrument and
Counterparty Limits.
|
|
Executive & Non-
Executive Directors
|
|
As necessary
|
|
|
|
|
Corporate
Administration
& Transactions
|
|
Reviews and approves matters in connection with
the administration of the Groups business and
certain corporate transactions.
|
|
Executive & Non-
Executive Directors,
CET members
and the Company
Secretary
|
|
As necessary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
|
|
Evaluation of the Board, Board Committees and Directors
In previous years the evaluation of the performance of the Chairman, the Board, its Committees and
Directors has been undertaken by the SID, in collaboration with the Committee Chairmen. In 2008 the
Board engaged Dr Long of Boardroom Review to act as an independent facilitator for the Board
evaluation process.
The process included a tailored questionnaire, a one-to-one interview with each Director and the
Company Secretary, observation of the Board and Committee meetings held in December 2008 and a
review of associated papers. The questions covered a variety of aspects associated with Board
effectiveness including Board and Committee roles and responsibilities, culture and dynamics,
processes and support and individual effectiveness. Feedback from the review was provided in the
form of a written report and presentation to the Board, which then discussed its findings.
The review concluded that the Chairman, the Board and its Committees were operating effectively to
a high level. The Board agreed the following actions to generate more inclusive engagement with the
executive management team and further improve its collective decision making process:
|
|
Identify how
to utilise the time spent in Board and Committee meetings more effectively and facilitate further
contribution by Non-Executive Directors on a broader range of issues |
|
|
|
Seek to enhance further the
Non-Executive Directors continuing education process beyond their initial induction |
|
|
|
Provide
greater visibility to the Board of GSKs executive talent and the management succession planning
process. |
The Board members also met separately, without the Chairman being present, to discuss the
Chairmans performance and contribution. It was agreed during this meeting that the Chairman was
performing well and had the unanimous and unequivocal support of the other Directors, both
Executive and Non-Executive.
Dialogue with shareholders
Financial results are announced quarterly.
The company reports formally to shareholders twice a year, when its half-year and full-year results
are announced. The full-year results are included in the companys Annual Report which is published
for shareholders. The company now produces an annual Summary which is sent to all shareholders to
advise them of the availability of the Annual Report and Notice of Meeting on www.gsk.com. The CEO
and CFO give presentations on the full-year results to institutional investors, analysts and the
media.
There are
normally webcast teleconferences after the release of the first, second and third quarter
results for institutional investors, analysts and the media. The Annual Report, Summary and
quarterly results are available on the companys website.
The AGM takes place in London, and formal notification is sent to shareholders at least one month
in advance. At the Meeting, a business presentation is made to shareholders and all Directors able
to attend are available, formally during the AGM, and informally afterwards, for questions.
Committee Chairmen ordinarily attend the AGM to respond to shareholders questions. The entire
Board was in attendance at the companys AGM in May 2008. All resolutions at the AGM are decided on
a poll as required by the companys Articles of Association. The results of the poll are announced
to the London Stock Exchange and posted on the companys website. Details of the 2009 AGM are set
out in the section Annual General Meeting (see page 71) and the Notice of AGM is published on the
companys website.
To ensure that the Non-Executive Directors are aware of and understand the views of major
shareholders about the company, the Board has in place a process focusing on sector-specific
issues, as well as general shareholder preferences.
The CEO and CFO maintain a dialogue with institutional shareholders on performance, plans and
objectives through a programme of regular meetings. Following his appointment as CEO in May 2008,
Andrew Witty has undertaken an extensive series of meetings with GSKs institutional shareholders.
The Groups Investor Relations department, with offices in London and Philadelphia, acts as a focal
point for contact with investors throughout the year.
The Chairman meets regularly with institutional investors to hear their views and discuss issues of
mutual importance and communicates the views of investors to the Board as a whole. The SID is also
available to shareholders.
The Chairman of the Remuneration Committee meets annually with major shareholders to discuss
executive remuneration policy.
All Non-Executive Directors, including new appointees, are available
to meet with major shareholders if requested.
The companys website provides access to current financial and business information about the
Group.
Share capital and control
Details of the companys authorised and issued share capital and the number of shares held in
Treasury, as at 31st December 2008, can be found in Note 33 to the financial statements, Share
capital and share premium account. GSKs shares are listed on the London Stock Exchange and are
also quoted on the New York Stock Exchange (NYSE) in the form of American Depositary shares (ADS).
Each ADS represents two Ordinary Shares.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 69
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
Corporate governance
continued |
|
|
|
|
|
|
|
|
|
|
|
|
The holders of Ordinary Shares are entitled to receive dividends, when declared, the companys
reports and accounts, to attend and speak at General Meetings of the company, to appoint proxies
and to exercise voting rights.
There are no restrictions on transfer, or limitations on the holding of Ordinary Shares and no
requirements to obtain prior approval to any transfers. No Ordinary Shares carry any special rights
with regard to control of the company and there are no restrictions on voting rights. Major
shareholders have the same voting rights per share as all other shareholders. There are no known
arrangements under which financial rights are held by a person other than the holder of the shares
and no known agreements on restrictions on share transfers or on voting rights.
Shares acquired through GSK share schemes and plans rank equally with the other shares in issue and
have no special rights. The trustees of the companys Employee Share Ownership Plan (ESOP) trusts
have waived their rights to dividends on shares held by the ESOP trusts.
Change of control and essential contracts
The company does not have contracts or other arrangements which individually are essential to the
businesses nor is it party to any significant agreements that would take effect, alter or terminate
upon a change of control following a takeover bid.
The company does not have agreements with any
Director or Officer that would provide compensation for loss of office or employment resulting from
a takeover, except that provisions of the companys share plans may cause options and awards
granted under such plans to vest on a takeover.
Interests in voting rights
Other than as stated below, as far as the company is aware, there are no persons with significant
direct or indirect holdings in the company. Information provided to the company pursuant to the
Financial Services Authoritys (FSA) Disclosure and Transparency Rules (DTRs) is published on a
Regulatory Information Service and on the companys website.
At 24th February 2009, the company had received notifications in accordance with the FSAs DTRs of
the following notifiable interests, in the voting rights in the companys issued share capital:
|
|
|
|
|
|
|
|
|
|
|
No . of |
|
|
Percentage of issued |
|
|
|
shares |
|
|
capital (%)* |
|
|
Barclay PLC |
|
|
186,518,653 |
|
|
|
3.59 |
|
|
* |
|
Percentage of Ordinary Shares in issue, excluding Treasury shares as at 24th February 2009. |
The Bank
of New York Mellon is the Depositary for the companys ADS, which are listed on the New
York Stock Exchange. Ordinary Shares representing the companys
ADS program, which are managed by
the Depositary, are registered in the name of BNY (Nominees) Limited. Details of the number of
Ordinary Shares held by the Depositary can be found on page 181.
The company has not acquired or disposed of any interests in its own shares, other than in
connection with the companys share buy-back programme. Details of the shares purchased, cancelled
and held in Treasury are disclosed in Note 33 to the financial statements, Share capital and share
premium account.
Directors and Officers
The interests of Directors and Officers and their connected persons in the issued share capital of
the company are given in the Remuneration Report (pages 78 to 98).
The rules about the appointment and replacement of Directors are contained in the companys
Articles of Association. The companys Articles must be approved by shareholders in accordance with
the legislation in force from time to time.
The Articles provide that Directors may be appointed by an ordinary resolution of the members or by
a resolution of the Directors, provided that, in the latter instance, a director appointed in this way retires at the
first AGM following his appointment.
The Articles also provide that Directors should be subject to
re-election at the AGM at intervals of three years or if they have held office for a continuous
period of nine years or more. The companys members may remove a director by passing an ordinary
resolution of which special notice has been given. A Director may automatically cease to be a
Director if:
|
|
he becomes bankrupt or compounds with his creditors generally |
|
|
|
he ceases to be a Director by virtue of the Companies Acts or the Articles |
|
|
|
he is suffering from mental ill health |
|
|
|
he has missed Directors meetings for a continuous period of six months without permission and
the Board resolves that he shall cease to be a Director |
|
|
|
he is prohibited from being a Director by law |
|
|
|
he resigns |
|
|
|
he offers to resign and the Board accept that offer, or |
|
|
|
all other Directors (being at least three in number) require him to resign. |
|
|
|
|
|
|
|
|
70 GSK Annual Report 2008 |
|
|
Report of the Directors |
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
Memorandum and Articles of Association
The powers of the Directors are determined by UK legislation and the companys Memorandum and
Articles of Association, available on GSKs website. The articles may be amended by a special
resolution of the members. The Directors may exercise all the companys powers provided that the
Articles or applicable legislation do not stipulate that any such powers must be exercised by the
members. The Directors have been authorised to issue and allot Ordinary Shares under Article 10 and
the company is authorised to make purchases of its own shares under Article 7. The powers under
Articles 8 and 10 are subject to shareholder authorities which are sought on an annual basis at the
AGM. Any shares purchased by the company may be cancelled or held as Treasury shares.
Share buy-back programme
A
£12 billion programme of share repurchases commenced in July 2007. Shares costing £6.2
billion have been repurchased under this programme and the company does not expect to make any
significant repurchases in 2009. The programme covered purchases by the company of shares for
cancellation or to be held as Treasury shares, in accordance with the authority renewed by
shareholders at the companys AGM in 2008.
In May 2008, the company was authorised to purchase a maximum of 584 million shares. Details of
shares purchased, those held as Treasury shares and those cancelled are disclosed in Note 33 to the
financial statements Share capital and share premium account. In total, the company has purchased
£15.3 billion of its own shares since 1st January 2001.
The exact amount and timing of future purchases, and the extent to which repurchased shares will be
held as Treasury shares rather than being cancelled, will be determined by the company and is
dependent on market conditions and other factors.
Donations to EU political organisations and EU political expenditure
At the AGM in May 2001, shareholders first authorised the company to make donations to EU political
organisations and to incur EU political expenditure, under the provisions of the Political Parties,
Elections and Referendums Act 2000, of up to £100,000 each year. This authority has since been
renewed annually. The law requires companies to continue to obtain shareholder approval before they
can make donations to EU political organisations or incur EU political expenditure. However, the
company does not make and does not intend to make donations to political parties or independent
election candidates, nor does it make any donations to EU political organisations or incur EU
political expenditure.
The definitions of political donations, political expenditure and political organisations used in
the legislation are very wide. In particular, the definition of EU political organisations may
extend to bodies such as those concerned with policy review, law reform, the representation of the
business community and special interest groups such as those concerned with the environment, which
the company and its subsidiaries might wish to support. As a result, the definitions may cover
legitimate business activities not in the ordinary sense considered to be political donations or
political expenditure. Such activities are not designed to support any political party or
independent election candidate. The authority which the Board has sought annually is a
precautionary measure to ensure that the company and its subsidiaries do not inadvertently breach
the legislation.
With effect from 1st January 2009, to ensure a consistent approach to political contributions
across the GSK group, GSK introduced a global policy to stop voluntarily all political
contributions.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Political Donations to: |
|
£ |
|
|
£ |
|
|
EU Political Organisations |
|
|
|
|
|
|
|
|
|
Non-EU Political Organisations
comprising: |
|
|
|
|
|
|
|
|
USA |
|
|
319,000 |
|
|
|
249,000 |
|
Canada |
|
|
28,000 |
|
|
|
27,000 |
|
|
|
|
|
347,000 |
|
|
|
276,000 |
|
|
Prior to the introduction of the Groups new approach to political contributions, the USA was the
largest recipient of political donations. In line with US law, the corporate donations were not
made at a federal level, but only to candidates and political parties at the state and local
levels. In 2008, GSK supported those candidates who sought an environment that appropriately
rewarded high-risk, high-investment industries.
The situation was similar in Canada, and in the rest of the world donations were very rare and of
low value.
Notwithstanding the new policy, the company continues to support a GSK Political Action Committee
(PAC) for employees in the USA which gives political donations. A PAC is an employee organisation
which allows employees to contribute to a fund for political donations. Employees decide upon the
recipients of the PAC donations. In 2008, a total of £539,359 (£522,172 in 2007) was donated to
political organisations by the GSK PAC.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 71
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
Annual General Meeting
The AGM will be held at 2.30pm on Wednesday, 20th May 2009 at The Queen Elizabeth II Conference
Centre, Broad Sanctuary, Westminster, London SW1P 3EE. The business to be transacted at the meeting
will include:
|
|
Receiving and adopting GlaxoSmithKlines 2008 Annual Report |
|
|
|
Approving the 2008 Remuneration Report |
|
|
|
The Remuneration Report on pages 78 to 98 sets out the remuneration policies operated by
GlaxoSmithKline and disclosures on Directors remuneration, including those required by the
Companies Act 2006 and the Directors Remuneration Report Regulations 2002. A resolution will be
proposed to approve the Remuneration Report. |
|
|
|
Retirement, election and re-election of Directors |
|
|
|
Mr Larry Culp, Sir Crispin Davis, Dr Moncef Slaoui and Mr Tom de Swaan will each retire and offer
themselves for re-election to the Board under Article 85 of the companys Articles of Association. |
|
|
|
Sir Ian Prosser and Dr Ronaldo Schmitz will also be retiring by rotation but will not be seeking
re-appointment as they will be retiring from the Board after the conclusion of the AGM. Mr James
Murdoch has been appointed a Director with effect from 20th May 2009 and will offer himself for
election to the Board. |
|
|
|
Re-appointment and remuneration of Auditors |
|
|
|
Resolutions will be proposed to re-appoint |
|
|
|
PricewaterhouseCoopers LLP as auditors and to authorise the Audit Committee to determine their
remuneration. |
|
|
|
Special business |
|
|
|
The company will seek authority to: |
|
|
|
make donations to EU political organisations and incur EU political expenditure, each
capped at £50,000 |
|
|
|
|
allot Ordinary Shares in the company |
|
|
|
|
give the Directors authority to disapply pre-emption rights when allotting new shares in
connection with rights issues or otherwise up to a maximum of 5% of the current issued share
capital and purchase its own Ordinary Shares up to a maximum of just under 10% of the current
issued share capital |
|
|
|
|
exempt the Auditors from having to state the name of their senior statutory auditor for the
company in GSKs Annual Report |
|
|
|
|
reduce the notice required to call a general meeting to not less than 14 clear days |
|
|
|
|
adopt new Performance Share, Share Option and Deferred
Annual Bonus plans. |
Shareholders are entitled to appoint one or more proxies to attend the AGM and to speak and vote on
their behalf.
Details on how to appoint or be appointed a corporate representative or proxy can be found on page
198. The Notice of AGM will be published on the companys website.
Internal control framework
The Board recognises its responsibility to present a balanced and understandable assessment of the
Groups position and prospects.
The Board has accountability for reviewing and approving the adequacy and effectiveness of internal
controls operated by the Group, including financial, operational and compliance controls and risk
management. The Board has delegated responsibility for such review to the Audit Committee, which
receives reports from those individuals identified in the
Committees Report on pages 73 to 74. It is the responsibility of management, through the CET, to implement Board policies on risk and
control. The CET is responsible for identifying, approving, monitoring and enforcing key policies
that go to the heart of how the Group conducts business. The internal control framework includes
central direction, resource allocation and risk management of the key activities of research and
development, manufacturing, marketing and sales, legal, human resources, information systems and
financial practice. As part of this framework, there is a comprehensive planning system with an
annual budget approved by the Board. The results of operating units are reported monthly and
compared with the budget. Forecasts are prepared regularly during the year.
Extensive financial controls, procedures and risk activities are reviewed by the Groups internal
auditors. Commercial and financial responsibility, however, is clearly delegated to local business
units, supported by a regional management structure. These principles are designed to provide an
environment of central leadership coupled with local operating autonomy as the framework for the
exercise of accountability and control within the Group.
The Group also attaches importance to clear principles and procedures designed to achieve
appropriate accountability and control. A Group policy, Risk Management and Legal Compliance,
mandates that business units establish processes for managing and monitoring risks significant to
their businesses and the Group.
The internal control framework also relies on the following for
overseeing and reporting risk and compliance issues.
|
|
|
|
|
|
|
|
|
|
72 GSK Annual Report 2008
|
|
|
|
|
Report of the Directors |
|
|
|
|
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
Risk Oversight and Compliance Council (ROCC)
The ROCC is a council of senior executives authorised by the Board to assist the Audit Committee
oversee the risk management and internal control activities of the Group. Membership comprises
several CET members and some of the heads of departments with internal control, risk management,
assurance, audit and compliance responsibilities.
The ROCC meets on a regular basis to review and assess significant risks and their mitigation plans
and provide oversight of internal controls to ensure compliance with applicable laws, regulations
and internal GSK policies. The ROCC, responding to the Group policy referred to above, has provided
the business units with a framework for risk management and upward reporting of significant risks.
Mitigation planning and identification of a manager with overall responsibility for management of
any given risk is a requirement.
Risk Management and Compliance Boards (RMCBs)
Risk Management and Compliance Boards (RMCBs) have been established in each of the major business
units. Membership often comprises members of the senior executive team of the respective business
unit, augmented by specialists where appropriate. The RMCBs oversee management of all risks that
are considered important for their respective business units, including those risks that are
designated as significant to GlaxoSmithKline as a whole, thus increasing the number of risks that
are actively managed across the Group.
Each RMCB regularly reports the status regarding its significant risks to the ROCC.
Compliance functions
In a number of risk areas, specific standards that meet or exceed requirements of applicable law
have been established. Specialist audit and compliance functions (for example Corporate
Environment, Health & Safety Audit, Global Manufacturing and Supply Audit and Risk Management, and
Research and Development Global Quality and Compliance) assist in the dissemination, implementation
and audit of these standards. These audit functions are coordinated by a Corporate Assurance group
reporting to the Corporate Compliance Officer.
Corporate Ethics & Compliance (CEC)
The ROCC is also supported by the Corporate Ethics & Compliance department which is responsible for
supporting the development and implementation of practices that facilitate employees compliance
with laws and Group policy.
The thrust of the Groups compliance effort is due diligence in preventing and detecting misconduct
or non-compliance with law or regulation by promoting ethical behaviour, compliance with all laws
and regulations, corporate responsibility at all levels and effective compliance systems.
The CEC is managed by the Corporate Compliance Officer, who reports directly to the
CEO. The Corporate Compliance Officer chairs the ROCC and provides summary reports on the ROCCs
activities and the Groups significant risks to the CET and the Audit Committee on a regular basis.
The Corporate Compliance Officers direct reporting line to the Audit Committee provides a
mechanism for bypassing the executive management should the need ever arise.
Areas of potentially significant risk
For details of risks affecting the Group, see Risk factors on pages 50 to 53 and Note 44 to the
financial statements, Legal proceedings.
Effectiveness of controls
The internal control framework has been in operation for the whole of the year under review and
continues to operate up to the date of approval of this report. The system of internal controls is
designed to manage rather than eliminate the risk of not achieving business
objectives, and can only provide reasonable and not absolute assurance against material
misstatement or loss.
The Audit Committee receives reports on areas of significant risk to the Group and on related
internal controls. Following consideration of these reports, the Audit Committee reports annually
to the Board on the effectiveness of controls. Such controls may mitigate but cannot eliminate
risks. In addition, there are areas of the Groups business where it is necessary to take risks to
achieve a satisfactory return for shareholders, such as investment in R&D and in acquiring new
products or businesses.
In these cases, it is the Groups objective to apply its expertise in the
prudent management rather than elimination of risk. The Directors review relates to the company
and its subsidiaries and does not extend to material associated undertakings, joint ventures or
other investments.
The Board, through the Audit Committee, has reviewed the assessment of risks and the internal
control framework that operates in GlaxoSmithKline and has considered the effectiveness of the
system of internal control in operation in the Group for the year covered by this report and up to
the date of its approval by the Board. The process followed by the Board in reviewing the system of
internal controls accords with the guidance on internal control issued by the Turnbull Committee.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 73
|
|
|
|
|
Report of the Directors |
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
Committee reports
Board Committees report regularly to the Board on the performance of the activities they have been
assigned.
Audit Committee Report
|
|
|
|
|
|
|
|
|
|
|
Attendance at meetings |
|
|
|
|
during 2008 |
|
|
|
|
Full |
|
Quorate |
Members |
|
Committee member since |
|
meetings |
|
meetings |
|
Mr Tom de Swaan
|
|
1st January 2006
|
|
6/6
|
|
5/5 |
(Chairman from |
|
|
|
|
|
|
1st September 2006) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Deryck Maughan
|
|
21st January 2005
|
|
6/6
|
|
4/5 |
|
|
|
|
|
|
|
Dr Daniel Podolsky
|
|
1st January 2007
|
|
6/6
|
|
5/5 |
|
|
|
|
|
|
|
Sir Ian Prosser
|
|
27th December 2000
|
|
6/6
|
|
4/5 |
|
|
|
|
|
|
|
Dr Ronaldo Schmitz
|
|
27th December 2000
|
|
6/6
|
|
5/5 |
|
|
|
|
|
|
|
Sir Robert Wilson
|
|
12th December 2003
|
|
6/6
|
|
4/5 |
|
Other attendees at Committee meetings:
|
|
CEO |
|
|
|
CFO |
|
|
|
Chairman |
|
|
|
General Counsel |
|
|
|
Head of Global Internal Audit |
|
|
|
Company Secretary & Corporate Compliance Officer |
|
|
|
External Auditors. |
The Committees main responsibilities include:
|
|
Reviewing the corporate accounting and financial reporting process |
|
|
|
Monitoring the integrity of the financial statements |
|
|
|
Evaluating the system of internal control and management of risks |
|
|
|
Overseeing activities of each of the Groups compliance audit functions and overseeing
compliance with
laws, regulations and ethical codes of practice. |
The Committees oversight role requires it to address regularly the relationships between
management and the internal and external auditors and understand and monitor the reporting
relationships and tiers of accountability between them.
The Committee receives regular reports from members of the CET and senior managers covering the key
compliance activities of the Group, including those concerning R&D, manufacturing, sales and
marketing and Environment, Health & Safety.
Qualifications of Audit Committee Members
Committee members, with the exception of Dr Podolsky, bring considerable financial and accounting
experience to the Committees work. Members have past employment experience in either finance or
accounting roles or comparable experience in corporate activities. Dr Podolskys background as a
world renowned researcher enables him to bring scientific expertise to the Committees
deliberations.
|
|
|
|
|
|
|
Financial & Accounting Experience |
|
Mr Tom de Swaan
|
|
|
|
Chief Financial Officer of ABN AMRO until
31st December 2005 |
|
|
|
|
|
|
|
|
|
Determined by the Board to be the Audit
Committee Financial Expert, as defined by the
Sarbanes Oxley Act of 2002 (Sarbanes-Oxley) |
|
Sir Deryck Maughan
|
|
|
|
A Partner of Kohlberg Kravis Roberts & Co.
(KKR) and Chairman of KKR Japan |
|
|
|
|
|
|
|
|
|
Former Chairman & CEO of Citigroup
International and Vice Chairman of
Citigroup Inc. |
|
|
|
|
|
|
|
|
|
Former Chairman and Co-Chief Executive
Officer of Salomon Smith Barney |
|
|
|
|
|
|
|
|
|
Former Chairman and Chief Executive
Officer of Salomon Brothers Inc. |
|
|
|
|
|
|
|
|
|
|
|
Sir Ian Prosser
|
|
|
|
Former CFO and subsequently CEO of Bass plc |
|
|
|
|
|
|
|
|
|
Chartered Accountant |
|
|
|
|
|
|
|
|
|
|
|
Dr Ronaldo Schmitz
|
|
|
|
Former Member of Glaxo Wellcome plcs
Audit Committee |
|
|
|
|
|
|
|
|
|
Former Member of Executive Board of
Directors of Deutsche Bank AG |
|
|
|
|
|
|
|
|
|
Former Head of Investment Banking of
Deutsche Bank |
|
|
|
|
|
|
|
|
|
Former member of the Executive Board of
Directors of BASF from 1980 to 1990. CFO
of BASF from 1985 to 1990 |
|
|
|
|
|
|
|
|
|
Former Chairman of the Committee from
April 2001 to September 2006 |
|
|
|
|
|
|
|
|
|
MBA from INSEAD |
|
|
|
|
|
|
|
|
|
|
|
Sir Robert Wilson
|
|
|
|
Economist |
|
|
|
|
|
|
|
|
|
Chairman of BG Group plc |
|
|
|
|
|
|
|
|
|
Retired from Rio Tinto in 2003 where he held
Senior Management positions culminating in
his appointment as Executive Chairman |
|
|
|
|
|
|
|
|
Scientific Expertise
|
|
|
|
|
|
|
Dr Daniel Podolsky
|
|
|
|
A world renowned researcher with advanced
knowledge of underlying mechanisms of disease
and new therapies for gastrointestinal disorders |
|
|
|
|
|
|
|
|
|
President of the University of Texas
Southwestern Medical Centre |
|
|
|
|
|
|
|
|
|
Former Mallinkrodt Professor of Medicine
and Chief of Gastroenterology at
Massachusetts General Hospital and Harvard
Medical School. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
|
|
In 2008, the Committee worked to a structured programme of
activities, with standing items that the Committee is
required to consider at each meeting together with other
matters focused to coincide with key events of the annual
financial reporting cycle:
|
|
|
External Auditors
|
|
reported on all critical accounting
policies, significant judgements and
practices used by the Group, alternative
accounting treatments which had been
discussed with management and their
resultant conclusion, material written
communications with management and
any restrictions on access to information |
|
CFO
|
|
reported on the financial performance of
the company and on technical financial
and accounting matters |
|
General Counsel
|
|
reported on material litigation |
|
Company Secretary
& Corporate
Compliance Officer
|
|
reported on corporate governance and
on the activities undertaken by the ROCC |
|
Heads of the
Groups Compliance
and Audit Groups
|
|
the majority of the Heads of these groups
reported on their audit scope, annual
coverage, audit resources and on the
results of audits conducted throughout
the year |
|
Company Secretary,
as Chairman of
the Disclosure Committee
|
|
reported on matters that affected the
quality and timely disclosure of financial
and other material information to the
Board, to the public markets and to
shareholders. This enabled the Committee
to review the clarity and completeness
of the disclosures in the published
annual financial statements, interim
reports, quarterly and preliminary results
announcements and other formal
announcements relating to financial
performance prior to their release by
the Board. |
|
The Audit Committee, management, internal auditors and the
full Board work together to ensure the quality of the
companys corporate accounting and financial reporting. The
Committee serves as the primary link between the Board and
the external and internal auditors. This facilitates the
necessary independence from management and encourages the
external and internal auditors to communicate freely and
regularly with the Committee. In 2008, the Committee met both
collectively and separately with the external auditors and
the Head of Global Internal Audit, and the Corporate
Compliance Officer without members of management being
present.
The Committee has primary responsibility for making a
recommendation to shareholders on the appointment,
reappointment and removal of the external auditors by
annually assessing the qualifications, expertise, resources
and independence of the external auditors and the
effectiveness of the audit process.
In making its assessment,
the Committee considers papers which detail the relevant
regulatory requirements relating to external auditors and
evaluates reports from the external auditors on their
compliance with the requirements. Where the external auditors
provide non-audit services, the Committee ensures that
auditor objectivity and independence are safeguarded by a
policy requiring pre-approval by the Committee for such
services. These services may include audit services,
audit-related services, tax services and other services.
Pre-approval is detailed as to the particular service or
categories of services, and is subject to a specific budget.
The external auditors and management report regularly to the
Committee regarding the extent of services provided in
accordance with this pre-approval and the fees for the
services performed. The Committee may also pre-approve
additional services on a case-by-case basis. Expenditure on
audit and non-audit services is set out in Note 9 to the
financial statements, Operating profit.
The guidelines set
out in the companys policy on engaging the external auditors
to provide non-audit services include ascertaining that: the
skills and experience of the external auditors make them a
suitable supplier of the non-audit services; adequate
safeguards are in place so that the objectivity and
independence of the audit are not compromised; and the fee
levels relative to the annual audit fee are within the limits
set by the Committee.
The company also has well-established policies, including a
Code of Ethics, which is available on its website, and a
help-line facility for the reporting and investigation of
unlawful conduct. No waivers to the Code were made in 2008.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 75
|
|
|
|
|
Report of the Directors
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
Nominations Committee Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attendance at |
|
|
|
|
|
|
|
meetings during |
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
Full |
|
Members |
|
Committee member since |
|
|
meetings |
|
|
Sir Christopher Gent |
|
9th December 2004 |
|
|
|
3/3 |
|
(Chairman from |
|
|
|
|
|
|
|
|
1st January 2005) |
|
|
|
|
|
|
|
|
Mr Larry Culp |
|
28th March 2008 |
|
|
|
2/2 |
|
Sir Ian Prosser |
|
27th December 2000 |
|
|
|
2/3 |
|
(Committee Chairman |
|
|
|
|
|
|
|
|
February-December 2003) |
|
|
|
|
|
|
|
|
Dr Ronaldo Schmitz |
|
17th May 2004 |
|
|
|
3/3 |
|
Sir Robert Wilson |
|
28th March 2008 |
|
|
|
2/2 |
|
|
Other attendees at Committee meetings:
CEO
Chief of Staff
Head of HR
Company Secretary.
The Committees main responsibilities include proposing
the appointment of Board and Committee members.
During 2008, the Committees main focus was on the
recruitment of new Non-Executive Directors to refresh the
Board.
When recruiting Non-Executive Directors, the Committee
considers the particular skills, knowledge and experience
that would benefit the Board most significantly for each
appointment. Broad selection criteria are used which focus on
achieving a balance between the representation of European,
UK and US markets, and having individuals with CEO experience
and skills developed in various sectors and specialities.
During 2008, particular focus was placed upon recruiting
replacements for Sir Ian Prosser and Dr Ronaldo Schmitz, who
will retire at the AGM in 2009. The process continues into
2009, with the Committee placing emphasis on candidates who
are current CEOs or have had government or administration
experience. Professional search agencies are engaged
specialising in the recruitment of high calibre Non-Executive
Directors. Dossiers of potential Non-Executive appointees are
provided to the Committee and candidates are shortlisted for
interview after considering their relevant qualifications.
A customised induction process is conducted for each of the
new Non-Executive Directors focusing on their particular
experience and taking
account of their different backgrounds. This process includes
meeting members of the CET and other senior executives and
visiting particular operational facilities of the Group.
When appointing new Executive Directors and CET members, the
Committee considers the skills, knowledge and experience
required for the particular executive position. The Committee
will consider potential external and internal candidates
before recommending to the Board to approve the new
appointment. All new Directors offer themselves for election
at the companys next AGM. Their appointments are announced
publicly.
The Committee recommended the appointment of Mr Larry Culp
and Sir Robert Wilson to the Nominations Committee in March
2008.
The Committee also recommended to the Board the
appointment of Mr James Murdoch as a Non-Executive Director
and as a member of the Corporate Responsibility Committee
with effect from 20th May 2009.
Additionally, on the
Committees recommendation, the Board approved the following
changes which take effect on Sir Ian Prosser and Dr Schmitzs
retirement from the Board at the conclusion of the AGM in May
2009; Sir Robert Wilson will replace Sir Ian as the SID, Sir
Crispin Davis will replace Sir Robert as the Chairman of the
Remuneration Committee, Professor Sir Roy Anderson will
become a member of the Audit Committee and Sir Crispin and
Sir Deryck Maughan will become members of the Nominations
Committee.
Remuneration Report
The Remuneration Report can be found on pages 78 to 98.
Corporate Responsibility Committee Report
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attendance at |
|
|
|
|
|
|
|
meetings during |
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
Full |
|
Members |
|
Committee member since |
|
|
meetings |
|
|
Sir Christopher Gent |
|
9th December 2004 |
|
|
|
3/3 |
|
(Chairman from |
|
|
|
|
|
|
|
|
1st January 2005) |
|
|
|
|
|
|
|
|
Dr Stephanie Burns |
|
6th December 2007 |
|
|
|
3/3 |
|
Dr Daniel Podolsky |
|
1st July 2006 |
|
|
|
3/3 |
|
Sir Ian Prosser |
|
17th May 2004 |
|
|
|
3/3 |
|
Mr Tom de Swaan |
|
1st July 2006 |
|
|
|
3/3 |
|
|
Following his appointment to the Board with effect from 20th
May 2009, Mr James Murdoch will also become a member of the
Committee.
Other
attendees at Committee meetings may include:
CEO
General Counsel
Head of Corporate Communications & Community
Partnerships
Head of Corporate Responsibility
Chief of Staff
Head of HR
Company Secretary.
|
|
|
|
|
|
|
|
|
|
|
|
76
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
|
|
The main responsibilities of the Corporate Responsibility
Committee are set out on page 67. The Committee has a
rolling agenda and receives reports from the members of the
CET and senior managers to ensure that progress on meeting
GSKs Corporate Responsibility Principles is reviewed. Five
Principles: access to medicines; standards of ethical
conduct; research and innovation; employment practices; and
global community partnerships are reviewed annually. Other
Principles are discussed at least once every two years. The
Committee also reviews and approves the Corporate
Responsibility Report.
During the year the Committee reviewed the following areas:
|
|
|
access to medicines in developing countries |
|
|
|
|
community partnerships and investment |
|
|
|
|
humanitarian donations |
|
|
|
|
employee volunteering |
|
|
|
|
sales and marketing practices |
|
|
|
|
disclosure of funding of medical education and patient advocacy groups |
|
|
|
|
product safety and communication of clinical trial results |
|
|
|
|
R&D on diseases of the developing world |
|
|
|
|
use of animals in research |
|
|
|
|
globalisation and externalisation of R&D |
|
|
|
|
reduction of employee numbers through restructuring |
|
|
|
|
employee consultation requirements |
|
|
|
|
employment litigation in the USA. |
GSKs Corporate Responsibility Report is available on
the companys website.
The Combined Code
Throughout 2008, the company complied with the provisions
of the Combined Code, except as follows:
|
|
|
B.1.1 In designing schemes of
performance-related remuneration, the Remuneration
Committee should follow the provisions in Schedule A to
the Code. Item 6 of Schedule A states that, in general,
only basic salary should be pensionable. The companys
position is explained in the Remuneration Report on
pages 78 to 98. |
US law and regulation
A number of provisions of US law and regulation apply to GSK
because the companys shares are quoted on the NYSE in the form of ADS.
NYSE RULES
In general, the NYSE rules permit the company to follow UK
corporate governance practices instead of those applied in the
USA, provided that the company explains any significant
variations. This explanation is contained in the companys
Form 20-F filing, which can be accessed from the Securities and
Exchange Commissions
(SEC) Edgar database or via the
companys website. NYSE rules that came into effect in 2005
require the company to file annual and interim written
affirmations concerning the Audit Committee and the companys
statement on significant differences in corporate governance.
Sarbanes-Oxley Act of 2002
Following a number of corporate and accounting scandals in the
USA, Congress passed the Sarbanes-Oxley Act of 2002. Sarbanes-Oxley is a wide ranging piece of
legislation concerned largely with financial reporting and
corporate governance.
As
recommended by the SEC GSK has established a Disclosure Committee. The
Committee reports to the CEO, the CFO and to the Audit
Committee. It is chaired by the Company Secretary and the
members consist of senior managers from finance, legal,
compliance, corporate communications and investor relations.
External legal counsel and the external auditors are invited
to attend its meetings periodically. It has responsibility
for considering the materiality of information and, on a
timely basis, determining the disclosure of that information.
It has responsibility for the timely filing of reports with
the SEC and the formal review of the Annual Report and Form
20-F. In 2008, the Committee met 11 times.
Sarbanes-Oxley requires that the Annual Report contains a
statement as to whether a member of the companys Audit
Committee is an Audit Committee Financial Expert as defined by
Sarbanes-Oxley. For a summary regarding the Boards
judgement on this matter, refer to page 73. Additional
disclosure requirements arise under Section 302 and Section
404 of Sarbanes-Oxley in respect of disclosure controls and
procedures, and internal control over financial reporting.
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 77
|
|
|
|
|
Report of the Directors
|
|
|
Corporate governance continued |
|
|
|
|
|
|
|
|
|
|
Section 302: Corporate responsibility for financial reports
Sarbanes-Oxley also introduced a requirement for the CEO and
the CFO to complete formal certifications, confirming that:
|
|
they have each reviewed the Annual Report and Form 20-F |
|
|
|
based on their knowledge, it contains no material misstatements
or omissions |
|
|
|
based on their knowledge, the financial statements and other financial information fairly present, in all material respects, the financial condition, results of operations and cash flows as of the dates, and for the periods, presented in the Annual Report and Form 20-F |
|
|
|
they are responsible for establishing and maintaining disclosure
controls and procedures that ensure that material information is
made known to them, have evaluated the effectiveness of these
controls and procedures as at the year-end, the results of such
evaluation being contained in the Annual Report and Form 20-F |
|
|
|
they are responsible for establishing and maintaining internal
control over financial reporting that provides reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles |
|
|
|
they have disclosed in the Annual Report and Form 20-F any
changes in internal controls over financial reporting during the
period covered by the Annual Report and Form 20-F that have
materially affected, or are reasonably likely to affect materially,
the companys internal control over financial reporting |
|
|
|
they have disclosed, based on their most recent evaluation of
internal control over financial reporting, to the external auditors
and the Audit Committee, all significant deficiencies and material
weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to affect adversely
the companys ability to record, process, summarise and report
financial information and any fraud (regardless of materiality)
involving persons that have a significant role in the companys
internal control over financial reporting. |
The Group has carried out an evaluation under the supervision
and with the participation of the Groups management,
including the CEO and CFO, of the effectiveness of the design
and operation of the Groups disclosure controls and
procedures as at 31st December 2008.
There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the
possibility of human error and the circumvention or
overriding of the controls and procedures. Accordingly, even
effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives.
Based on the Groups evaluation, the CEO and CFO have
concluded that, as at 31st December 2008, the disclosure
controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the
reports that the Group files and submits under the US
Securities Exchange Act of 1934, as amended, is recorded,
processed, summarised and reported as and when required and
that it is accumulated and communicated to management,
including the CEO and CFO, as appropriate, to allow timely
decisions regarding disclosure.
The CEO and CFO completed these certifications on 4th
March 2009.
Section 404: Managements annual report on internal control over financial reporting
In accordance with the requirements of section 404 of
Sarbanes-Oxley, the following report is provided by
management in respect of the Companys internal control over
financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the US Securities Exchange Act of 1934):
|
|
Management is responsible for establishing and maintaining
adequate internal control over financial reporting for the Group.
Internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with IFRS |
|
|
|
Management conducted an evaluation of the effectiveness
of internal control over financial reporting based on the
framework in Internal Control Integrated Framework issued
by the Committee of Sponsoring Organisations of the Treadway
Commission |
|
|
|
Management has assessed the effectiveness of internal control
over financial reporting, as at 31st December 2008 and has
concluded that such internal control over financial reporting was
effective. In addition, there have been no changes in the Groups
internal control over financial reporting during 2008 that have
materially affected, or are reasonably likely to affect materially,
the Groups internal control over financial reporting |
|
|
|
PricewaterhouseCoopers LLP, which has audited the consolidated
financial statements of the Group for the year ended 31st
December 2008, has also assessed the effectiveness of the
Groups internal control over financial reporting under Auditing
Standard No. 5 of the Public Company Accounting Oversight
Board (United States). Their audit report may be found on
page 101. |
|
|
|
|
|
|
|
|
|
|
78 GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report |
|
|
|
|
|
|
|
|
|
|
On behalf of the Board, I am pleased to present the
Committees Report on Remuneration for 2008 for which we
will be seeking approval from shareholders at our AGM in
May.
Background and principles for proposed changes
Following the appointment of a new Chief Executive Officer in May 2008, the Remuneration Committee decided to
review senior executive arrangements to ensure that our
remuneration policy supports the future direction of the
business.
Our current long-term incentive plans expire in 2010 and we
are therefore reviewing them a year earlier than necessary.
The current economic climate, as well as the change from a
US-based to a UK-based Chief Executive Officer, has
provided an opportunity to make
some fundamental changes to GSKs remuneration policy. The
proposed changes are designed to strengthen the alignment of
GSKs remuneration arrangements with views expressed by
investors, particularly those in the UK, and to reflect better GSKs UK home base. As such, the most fundamental
changes will apply largely to some of the companys UK-based
executives, including the Chief Executive Officer and the
Chief Financial Officer.
The following sets out the key principles for the
review and highlights some of the main changes
proposed:
Aligning pay with the relevant market
Remuneration for some of the UK-based members of the CET,
including the Chief Executive Officer and the Chief
Financial Officer, will be benchmarked primarily against a
UK cross-industry comparator group although, for obvious
reasons, we cannot ignore intra-industry comparison.
Remuneration for the Chairman, Research & Development, as
well as certain other roles, will continue to be
benchmarked against other global pharmaceutical companies
to reflect the market in which GSK competes for that
talent.
As far as benchmarking the Chief Executive Officer role is
concerned, this shift from global pharmaceuticals to UK
cross-industry companies represents a major change and will
have a significant impact on the structure and quantum of
his remuneration. At this time, at least, the proposed
remuneration package of the Chief Executive Officer would
be well below the median of his pharmaceutical industry
peers.
Managing the balance of quantum versus risk
The current economic crisis has emphasised the need to
ensure that the potential quantum and the stretch of
performance targets do not implicitly encourage
inappropriate behaviour. We are satisfied that our proposed
structure does not do this. It also improves alignment to UK
investor expectations through the capping of long-term
incentive plans.
Reflecting perhaps the problems in the banking sector,
several shareholders have raised the question of whether
there should be a claw-back mechanism if and when problems
arise years after awards have been made. In an effort to
address this, we propose that where there has been
continuity of executive responsibility (between initiation
of an adverse event and its emergence as a problem), the
adverse event should be taken into account in assessing
annual bonuses in the year the problem can be identified.
This means, of course, that we do not intend to penalise an
executive for the misjudgements of his predecessor as far as
annual bonus is concerned, although the consequences of an
adverse event for the share price will inevitably reduce the
potential value of long-term incentives.
Rebalancing long-term incentives
Under the new policy those executives (including the Chief
Executive Officer and Chief Financial Officer) whose
remuneration is benchmarked primarily against a UK
cross-industry comparator group, will not receive share
option grants for the foreseeable future. Instead, their
long-term incentives will be focused on performance shares.
In order to remain competitive against the global
pharmaceutical market, certain other Executives, including
the Chairman, Research & Development, will continue to
receive share options, although their weighting in the
overall package will be kept under review.
Annual Bonus Plan
We will not operate the additional bonus flagged in the
2007 Remuneration Report, but will integrate it within the
existing annual bonus structure. The maximum annual bonus
opportunity will remain at 200% of salary. We are reducing
the 96% performance threshold for annual plans to 90%, reflecting more stretching annual bonus plan targets.
In addition, the Chief Executive Officer and Chief
Financial Officer (and other Executives who do not
participate in the share option plan) will also have the
opportunity to invest up to half of their annual bonus in
GSK shares and this will be matched subject to relative
total shareholder return performance over three years.
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008
79
|
|
|
|
|
Report of the Directors
|
|
|
Remuneration Report
continued |
|
|
|
|
|
|
|
|
|
|
Aligning performance measures to strategy
The performance conditions for the performance share plan
will be broadened so that the CET is incentivised against a
range of measures. It is intended that broadly half of the
award will continue to be based on relative total
shareholder return against other global pharmaceutical
companies. The remaining half will be based on an additional
measure or measures to support GSKs strategy over the
coming years.
For awards made in 2009, 60% of the award will remain on
relative total shareholder return against global
pharmaceutical companies. The remaining 40% will be targeted
at generating cash for investment and/or return to
shareholders. Accordingly, for 2009 awards, 40% will be
subject to the achievement of adjusted free cash flow
targets. The Committee may make adjustments for acquisitions
and divestments, currency movements and other distortions
which may arise. Subject to shareholder approval, the 2009
performance share awards will be made following the AGM in
May 2009. To satisfy concerns about transparency, we will
disclose the adjusted free cash flow targets for the
performance share awards in the announcement to the London
Stock Exchange each time an award is made.
Reflecting the long-term nature of the pharmaceutical
industry
To reflect better the long-term nature of the
pharmaceutical industry, the performance period for the
performance shares granted to members of the CET will be
extended so that half of the total shareholder return
element of each award will be measured over three years
and half over four years. The performance period for share
options granted to CET members in 2009 will similarly be
extended.
In addition, to support further our emphasis on
long-term decision making, the timeframes for vesting of
awards on retirement and redundancy will be extended to
maturity rather than vesting in the year of departure.
Over time, the Committee would like to see the range of
long-term performance measures more fully reflect the
companys strategic direction (eg turnover growth and R&D
productivity). However, before introducing such metrics, the
Committee wants to be satisfied that the measures are
robust and not capable of creating unintended behaviour.
The Committee believes that the new policy represents a
significant step forward in supporting the future
direction of the business and is in the best interests of
shareholders.
Sir Robert Wilson
Chairman of the Remuneration Committee
3rd March 2009
|
|
|
|
|
|
|
|
|
|
80
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
This Directors Remuneration Report has been prepared
in accordance with the Directors Remuneration Report
Regulations 2002 (the Regulations) and meets the
relevant requirements of the FSA Listing Rules.
The Remuneration Committee
Sir Robert Wilson has been Chairman of the Committee since
17th May 2004. Sir Crispin Davis, Mr Culp, Sir Christopher
Gent and Dr Schmitz were members of the Committee
throughout 2008. The Board deemed all of the members of the
Committee to be independent Non-Executive Directors in
accordance with the Combined Code, with the exception of
the Chairman of the company, Sir Christopher Gent, who was
independent on appointment to the company.
The Committee met 7 times during 2008, with each member
attending as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attendance at |
|
|
|
|
|
|
|
full meetings |
|
Members |
|
Committee member since |
|
|
during 2008 |
|
|
Sir Robert Wilson |
|
1st January 2004 |
|
|
|
|
|
(Committee Chairman |
|
|
|
|
|
|
|
|
since May 2004) |
|
|
|
|
|
7/7 |
|
Mr L Culp |
|
1st January 2004 |
|
|
|
7/7 |
|
Sir Crispin Davis |
|
1st July 2003 |
|
|
|
7/7 |
|
Sir Christopher Gent |
|
1st January 2007 |
|
|
|
7/7 |
|
Dr R Schmitz |
|
25th May 2005 |
|
|
|
7/7 |
|
|
Sir Robert will step down as Chairman of the Committee
following the conclusion of the 2009 AGM and will be
succeeded by Sir Crispin Davis. Sir Robert will remain a
member of the Committee.
The role of the Committee is to set the companys
remuneration policy for Executive Directors and CET members
(together the Executives), ensuring that it is consistent
with the companys scale and scope of operations, supports
the business strategy and growth plans and helps drive the
creation of shareholder value. In setting remuneration
policy and levels for the most senior executives, the
Committee gives consideration to remuneration policy and
levels for the wider employee population. The Committees
full terms of reference are available on the companys
website.
During the course of 2008, the Committees principal focus
was to review the appropriateness of GSKs current
remuneration policy in light of the appointment of a new
CEO, changes to the management team and GSKs new strategy.
This led to the development of a policy which will
appropriately support the business going forward, including
the design of new long-term incentive (LTI) plans to
replace the existing plans which expire in 2010.
Two quorate meetings were held during the year to approve
the formal grant of share options and performance share
awards in accordance with GSKs remuneration policy.
With the exceptions of Mr Bicknell (Company Secretary) and
Mrs Whyte (Deputy Company Secretary), no employees of the
company were involved in the conduct of Committee meetings.
Dr Garnier (former CEO), Mr Witty (CEO), Mr Phelan (Chief
of Staff) and Ms Thomas (Senior Vice President, Human
Resources) were invited to attend part of some meetings of
the Committee as required.
Deloitte LLP has been appointed by the Committee to provide
it with independent advice on executive remuneration. They
provided other tax services to GSK during the year, but did
not provide advice on executive remuneration matters other
than to the Committee. Towers Perrin provided additional
market data to the Committee.
Commitment to shareholders
The Committee engages in regular dialogue with
shareholders and holds an annual meeting with GSKs
largest investors to discuss and take feedback on its
remuneration policy and any key developments during the
year. In particular, the Committee will discuss any
significant changes to the policy or the measures used to
assess performance. In line with this commitment, GSKs
largest investors were consulted on the proposed changes
set out in this report.
Summary of proposals
Until now, GSKs remuneration policy has been based on the
principle of achieving competitiveness with the global
pharmaceutical industry, which has been the primary pay
comparator. The essential policy change underlying these
new proposals is that the Committee will decide on an
individual executive basis whether the primary pay
comparator should be the global pharmaceutical sector, the
UK-based large cross-industry multinationals or some other
comparator group. For example, of the three Executive
Directors, the Committee proposes that the primary
comparator group for the CEO and CFO, at this time, should
be UK-based large cross-industry multinationals. For the
Chairman, Research & Development (Chairman, R&D), the
comparator group should continue to be the global
pharmaceutical companies.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 81
|
|
|
|
|
Report of the Directors
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
The following charts summarise the proposed changes to GSKs remuneration policy and more
particularly to GSKs individual remuneration elements.
Summary of proposed changes to GSKs Remuneration Policy
|
|
|
|
|
|
|
|
|
|
Current |
|
Proposed policy for 2009 |
|
|
All Executive Directors |
|
CEO & CFO |
|
Chairman, R&D |
|
|
Remuneration |
|
Global pharmaceutical |
|
UK-based large cross-industry |
|
Global pharmaceutical |
benchmarking |
|
comparator group |
|
comparator group |
|
comparator group |
|
|
|
|
|
Annual bonus |
|
Bonus based on financial and |
|
Some changes to calculation of bonus and target ranges to reflect |
|
|
personal performance |
|
changes in target setting in line with new strategy |
|
|
|
|
|
Operational bonus |
|
N/A |
|
Operational targets will be included within the overall annual bonus |
|
|
|
|
framework and there will be no stand-alone operational bonus |
|
|
|
|
|
LTI and share mix |
|
LTIs provided though a mix of |
|
Eligible for performance shares and |
|
Eligible for performance shares |
|
|
c.60% performance shares and |
|
deferred annual bonus with |
|
and share options. |
|
|
c.40% share options by value |
|
a performance based match. |
|
Not eligible for deferred annual |
|
|
|
|
Will not receive share options |
|
bonus and performance based |
|
|
|
|
for the foreseeable future |
|
match |
|
|
|
|
|
Plan limits |
|
Levels of LTI awards set annually |
|
Annual individual limits will be introduced |
|
|
|
|
|
Benchmarking |
|
Projected value |
|
Expected value |
|
|
methodology |
|
|
|
|
|
|
|
Key terms for remuneration elements
|
|
|
|
|
|
|
|
Current |
|
Proposed policy for 2009 |
|
|
Salary
|
|
Benchmarked against the global
pharmaceutical comparator group
|
|
Benchmarked against a UK cross-industry comparator
group or the global pharmaceutical comparator group
or another comparator group as appropriate |
|
|
|
|
|
Annual bonus
|
|
Most of the bonus is based on the achievement
of financial targets (based on Group profit before
interest and tax and on business unit operating
profit). There are R&D specific key performance
indicators for R&D employees. Individual
performance is also taken into account in
determining individual bonus payments
|
|
In addition to the current targets, achievement of
operational efficiency will also be taken into account
in determining the annual bonuses in respect of 2009
and 2010 |
|
|
|
|
|
Performance
Share Plan (PSP)
|
|
Based on relative total shareholder return (TSR)
against comparator group of 14 pharmaceutical
companies
Measured over three years
Further two-year holding period
35% vesting at median, with 100% vesting for
performance in line with the second company
Three-month averaging period for TSR
Dividend equivalents
|
|
60% based on relative TSR against comparator group
currently comprising 12 pharmaceutical companies and
40% based on adjusted free cash flow
TSR component measured half over three years and half over four years
Adjusted free cash flow measured over three years
Two-year holding period removed
For the TSR elements, 30% vesting at median, with 100% vesting for upper quartile performance
For the cash flow element, 25% vesting at threshold,
rising to 100% for stretching performance exceeding
the set threshold by a specified margin
Twelve-month averaging period for TSR
Dividend equivalents |
|
|
|
|
|
Share Option
Plan
|
|
Based on EPS growth relative to RPI
Measured over three years
50% vesting for threshold performance
|
|
Intended only for certain Executives
Based on EPS growth relative to RPI
Will be measured over three and/or four years
30% vesting for threshold performance |
|
|
|
|
|
Deferred Annual
Bonus Plan
|
|
N/A
|
|
Only for individuals not eligible for share options
50% of bonus may be deferred
Up to one-for-one match subject to relative TSR performance over three years (vesting as for PSP)
Dividend equivalents |
|
|
|
|
|
|
|
|
|
|
82
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
Total remuneration benchmarking
The Committee reviews GSKs total remuneration against
comparable companies on a regular basis, to ensure that
remuneration arrangements are competitive, are structured
appropriately and deliver value for money for shareholders.
Under the new remuneration policy, the relevant comparator
group(s) will be determined for each individual Executive.
For benchmarking purposes, total remuneration incorporates
base salary, annual bonus (including any deferred element)
and LTIs . When setting pay, the Committee also takes into
account pension arrangements.
|
|
|
|
|
|
UK cross-industry comparator group |
|
|
Global pharmaceutical comparator group |
|
|
|
|
AngloAmerican |
|
|
France |
|
Sanofi-Aventis |
AstraZeneca |
|
|
Switzerland |
|
Novartis |
Barclays |
|
|
|
|
Roche Holdings |
BG Group |
|
|
UK |
|
AstraZeneca |
BHP Billiton |
|
|
USA |
|
Abbott Laboratories |
BP |
|
|
|
|
Amgen* |
British American Tobacco |
|
|
|
|
Bristol-Myers Squibb |
Diageo |
|
|
|
|
Eli Lilly |
HSBC |
|
|
|
|
Johnson & Johnson |
Reckitt Benckiser |
|
|
|
|
Merck |
Royal Dutch Shell |
|
|
|
|
Pfizer |
Rio Tinto |
|
|
|
|
Schering-Plough |
Standard Chartered |
|
|
|
|
Wyeth |
Tesco |
|
|
|
|
|
Unilever |
|
|
|
|
|
Vodafone |
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Amgen is included for pay benchmarking but not in the TSR comparator group. |
Since 2004, GSK has used a projected value methodology to
benchmark remuneration. The principal reason for this was
to recognise the difference in LTI arrangements and, in
particular, the less common use of performance targets in
other global pharmaceutical companies.
Given the increased emphasis on benchmarking against UK
companies and the increasing introduction of performance
targets for LTIs in the pharmaceutical comparators, the
Committee has decided to move to an expected value
benchmarking methodology. This approach provides a benchmark
which takes all possible outcomes into account based on the
probability of achieving different performance levels.
Individual elements of remuneration
The balance between the fixed (base salary) and variable
(annual bonus and LTI) elements of remuneration varies
depending on performance. The charts opposite show the
anticipated mix between fixed and variable pay on an
expected value basis under the new remuneration policy. The
actual mix may be higher or lower, depending on the
performance of GSK and the individual. Typically, a significant portion (approximately 75%85%) of an Executive
Directors package is variable.
Base salary
Base salaries are set by reference to the relevant
comparator group to secure the talent needed to deliver
GSKs strategic priorities.
Salary levels are reviewed annually and are influenced by the Executives role
and experience. The table below sets out current base
salaries and those proposed for 2009.
Mr Witty and Mr Heslops salary increases form part of the
wider changes proposed to their remuneration packages and,
in particular, reflect the move to benchmark remuneration
against a UK cross-industry comparator group. Mr Wittys
proposed salary increase also reflects the Committees
assessment of his performance in his role since
appointment. Dr Slaouis increase reflects his progression
within the role and is intended to bring him more in line
with the market. Salary increases typically take effect in
April 2009. However, as an integral part of the wider
remuneration policy, Mr Wittys and Mr Heslops salary
increases will not be implemented until after the 2009 AGM.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 base |
|
|
Effective date for |
|
|
2009 base |
|
|
Effective date for |
|
|
|
salary |
|
|
2008 salary |
|
|
salary |
|
|
2009 salary |
|
|
Mr Witty |
|
£ |
850,000 |
* |
|
22nd May 2008 |
|
|
|
£1,000,000 |
|
|
1st April 2009 |
|
Mr Heslop |
|
|
£485,000 |
|
|
1st April 2008 |
|
|
|
£525,000 |
|
|
1st April 2009 |
|
Dr Slaoui |
|
|
$825,000 |
|
|
1st April 2008 |
|
|
|
$875,000 |
|
|
1st April 2009 |
|
|
|
|
|
* |
|
This reflects Mr Wittys base salary which took effect
on his succession as CEO in May 2008. |
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 83
|
|
|
|
|
Report of the Directors
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
Annual bonus
The annual bonus is designed to drive the achievement of
GSKs annual financial targets and personal objectives.
The maximum annual bonus for the CEO remains at 200% of
salary and the maximum bonuses for Executives other than the
CEO range between 100% and 200% of salary. There will be no
increases to the maximum bonus opportunity of 200% in 2009.
As part of the wider remuneration review, the Committee
revised the annual bonus plan to
strengthen the alignment to the new business strategy and
budgeting process.
For 2009, the majority of the annual bonus opportunity will
be based on a formal review of performance against stretching
financial targets based on Group profit before interest and
tax and business unit operating profit targets, with the
remainder being based on achievements against individual
objectives. Annual bonuses will be calibrated to reflect the
stretching targets which have been established to drive
significant changes to GSKs business model. The bonus
threshold will be 90% of target with the maximum being
payable for achievement of 110% of target. The reduction of
the bonus threshold from 96% to 90% reflects more stretching
bonus targets.
In the 2007 Remuneration Report, reference was made to the
possible introduction of additional bonuses to encourage
delivery of operational targets in 2009 and 2010. After
further review, the Committee determined not to increase the
overall bonus opportunity and that these measures should be
incorporated within the existing overall bonus.
Bonus
targets for the CEO are set by the Board. In setting the
objectives for the CEO, the Board focuses on the strategies
that have been developed for the company, which are set out
on page 5 of the Annual Report. For reasons of commercial
sensitivity, the specific objectives are kept confidential. Following the end of the financial year, the Board
reviews the CEOs performance generally and against the set
objectives, and the Committee then determines the bonus
payable.
For the other Executives, the CEO makes recommendations to
the Committee regarding performance against objectives. These
recommendations are considered by the Committee in
determining the level of bonuses payable. The Committee
considered whether to reduce any individual Executives bonus
award for 2008 to reflect revised provisions relating to any
prior year activities, and determined that no current
Executives were materially involved in the management of any
relevant issues and therefore that no reduction of bonus
payments would be appropriate. For future bonus years, the
Committee will continue to review the ongoing financial
impact of any prior year activities and the role of
individual Executives in such activities, and the Committee
may make appropriate adjustments to future individual bonus
awards to reflect those circumstances.
The strategic objectives set for 2008 focused in particular
on the continued development and launch of late-stage
pipeline assets, delivery of commercial targets and
execution of restructuring programmes to simplify the
operating model.
Bonus measures for R&D employees, including Dr Slaoui, are
linked to the pipeline. A robust governance structure has
been established to ensure that the bonus payable fairly reflects R&D productivity and performance as well as performance
against profit targets. As the plan is relatively new, the
Committee reviewed its operation during the year and decided
that it should continue as the annual bonus for R&D. The
Committee will continue to keep its operation under review
and may in future consider extending it to other Executives
including the CEO.
The Committee took into account GSKs success in achieving
the above objectives, as well as each individuals
performance, when determining the bonus awards for 2008.
Actual bonus payments are shown on page 90 and ranged from
86% to 118% of base salaries as at 31st December 2008.
LTIs
Currently, LTI awards are provided through a mix of
performance shares and share options. GSKs existing LTI
plans (the performance share and share option plans) expire
in 2010 and in light of changes within the company, the
Committee decided it was appropriate to review the terms of
the LTI plans as part of the wider remuneration review during
2008. The new long-term incentive plans will therefore be
submitted for shareholder approval at the 2009 AGM.
In line with the new remuneration policy based on individual
market focus, and to provide better alignment to market
practice, it is intended that the CEO and the CFO will not
receive share option grants for the foreseeable future.
Instead, their LTIs will be in the form of performance
shares. They will also have the opportunity to defer part of
any bonus earned into shares and to receive matching shares
subject to the achievement of additional performance
conditions. These changes are based on established practices
within the UK cross-industry comparator group.
The Chairman, R&D and certain other Executives will
continue to receive share option grants as well as
performance shares to remain competitive against the global
pharmaceutical market. However, the use of share options
will be kept under review and their relative importance may
be reduced in the future. Share options will continue to be
used to incentivise our employees below the CET.
Under the proposed new LTI plans, the Committee may reduce
grant or vesting levels if it determines that a participant
has engaged in conduct which is contrary to the legitimate
expectations of the company for an employee in the
participants position.
|
|
|
|
|
|
|
|
|
|
84
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
Typically, performance shares and share options are delivered
to US resident executives in the form of ADS. Awards are
delivered in the form of Ordinary Shares to executives
resident in the UK and other countries. All awards are made
under plans which incorporate dilution limits consistent with
the guidelines provided by the Association of British
Insurers. Current estimated dilution from existing awards
under all GSK employee share schemes made since the merger is
approximately 6.7% of the companys share capital at 31st
December 2008.
The new plans are summarised in the relevant sections
below together with the basis on which awards will be
made to the Executives in 2009.
a) Performance shares
The Performance Share Plan ensures focus on GSKs long-term
shareholder returns relative to other pharmaceutical
companies and on the delivery of GSKs strategic priorities.
Under the plan, measurement of performance will be broadened
so that the most senior team is incentivised against
operational measures aligned with GSKs business strategy as
well as TSR. TSR is considered to remain an appropriate
comparative measure since it focuses on the return to
shareholders, is a well-understood and tested mechanism to
measure performance and allows comparison between companies
operating in different countries. Therefore, typically
between 40% and 60% of any award made to Executives will
continue to be subject to relative TSR. The balance will be
based on strategic or operational measures to support the
business strategy.
2009 Awards
Performance share awards to Executives for 2009 will be made
following approval of the new Performance Share Plan at the
2009 AGM.
For awards made in 2009, 60% of the award will be based on
relative TSR against a group currently comprising 12 global
pharmaceutical companies.
In order to recognise the importance of effective working capital management and of
generating cash, the remaining 40% will vest subject to the
achievement of adjusted free cash flow targets. The adjusted
free cash flow target may be adjusted for material factors
which could distort free cash flow as a performance measure.
These will typically include exchange rate movements and may
include legal and major taxation settlements and special
pension contributions, which could materially distort this
calculation in either direction. The impact of any
acquisition or divestment will be quantified and adjusted
for at the time of the event. Major adjustments in the
calculation will be disclosed to shareholders. For the awards
in 2009, the threshold free cash flow target will be £13.5
billion, with maximum vesting for £16 billion.
To provide a focus on sustained longer-term performance, the
performance period will be extended so that half of the TSR
element of each award will be measured over three years and
half over four years. The element based on adjusted free cash
flow will be measured over three years. There will be no
retesting of performance.
For the TSR element, the percentage vesting at median will be
reduced from 35% to 30% to align better the remuneration
policy with shareholder expectations. Full vesting will take
place for upper quartile performance. For the adjusted free
cash flow element, 25% will vest for threshold performance,
rising to 100% for stretching performance exceeding the set
threshold by a specified margin. The graph below shows the
TSR vesting schedule for awards to be granted in 2009. Where
GSKs performance falls between two companies, vesting is
calculated on a straight-line basis.
An individual annual limit on the maximum value of
performance shares that may be granted to an individual in
any one year will be introduced. Other than in exceptional
circumstances, the maximum face value of performance shares
that may be granted to an individual in any one year will be
six times salary. It is intended that the value of
performance shares granted to the CEO in 2009 will be five
times salary. The CFO will receive an award of four times
salary and the Chairman, R&D will receive
an award of 69,000 ADS.
To provide a stable assessment of performance and to
reflect better the long-term nature of the pharmaceutical industry,
the TSR averaging period will be twelve months for awards
from 2009 onwards.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 85
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
|
|
To provide a closer link between shareholder returns and
payments to the Executives, notional dividends are reinvested
and paid out in proportion to the vesting of the award. The
value of reinvested dividends has been incorporated into the
benchmarking of award levels.
The Performance Share Plan awards granted to the Executive
Directors, excluding Dr Slaoui, in February 2006, with the
performance period starting on 1st January 2006 and ending on
31st December 2008 did not vest as GSKs TSR performance was
below median. The awards made to other senior executives in
2006, including Dr Slaoui (who was not on the CET at the time
the awards were made), were dependent in part on TSR
performance and in part on EPS performance. The TSR element
did not vest, but the EPS element vested in full.
The vesting
tables for recent performance share awards are shown on page
96.
b) Share options
GSKs share option plan is designed to ensure GSK remains
competitive against its global pharmaceutical peers. It also
incentivises sustained delivery of earnings growth and
shareholder value creation.
As noted earlier, the Chairman,
R&D as well as certain other Executives
will continue to be granted share options but will not
participate in the new deferred annual bonus. The CEO and CFO
will not receive share options for the foreseeable future.
As part of the wider review, the Committee reviewed the
performance measure used for share options and concluded
that EPS remains an important measure of success. The
vesting of share options granted to Executives will
therefore continue to be linked to the achievement of
compound annual EPS growth over the performance period.
Targets will be reviewed and set annually taking into
account company and market expectations.
2009 Awards
The targets for the 2009 awards will remain unchanged.
To
reflect better the long-term nature of the pharmaceutical
industry, the performance period will be extended so that
half of each share option grant will be measured over three
years and half will be measured over four years. There will
be no retesting of performance.
From 2009, the percentage vesting for threshold performance
will be reduced from 50% to 30% of the award to reflect better shareholder expectations. Threshold vesting will take
place for compound EPS growth of RPI plus 3% p.a. with full
vesting for compound EPS growth of RPI plus 6% p.a. EPS is
measured at CER in line with GSKs practice to measure
performance on a CER basis.
The vesting schedule for the 2009 awards is shown below.
An individual annual limit on the maximum value of share
options that may be granted to an individual in any one year
will be introduced. Where an individual receives an award of
both performance shares and share options, the expected value
of share options granted in any year will typically not
exceed 60% of the expected value of the aggregate LTIs. Where
an individual is not granted performance shares, the annual
award limit for share options will be calculated on an
equivalent basis to that which applies to the performance
share plan.
The Committee will set out the basis of its decision if it
considers it appropriate to make any significant adjustments
to the calculation of EPS for performance measurement
purposes.
No significant adjustments were made in respect of
the share options granted in February 2006, of which 50.7%
vested.
c) Deferred annual bonus
A new deferred annual bonus plan will be introduced for those
Executives who will no longer receive share option grants,
including the CEO and the CFO. The plan is designed to
encourage long-term shareholding and to help drive long-term
shareholder returns relative to other global pharmaceutical
companies.
Up to 50% of any annual bonus earned may be invested in
shares and will be deferred for three years. The company will
match these shares up to one-for-one depending on the
companys relative TSR over this period. The performance
measure and vesting schedule will be the same as under the
three-year TSR component of the performance share plan
described above.
Dividend equivalents will accrue and be delivered in respect
of any invested shares and matching shares that vest.
|
|
|
|
|
|
|
|
|
|
|
|
86
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued
|
|
|
|
|
|
|
|
GSKs LTI performance conditions continue to be challenging
as is demonstrated by the table below. TSR has been an
important part of the LTI measures for many years. This has
been maintained under the proposed policy and, for the
reasons set out on page 84, it remains the primary measure
under the PSP despite the TSR element not paying out.
The following table shows the vesting levels of GSKs
Performance Share and Share Option awards to Executives since
2001. A total
vesting percentage of 0% indicates that GSKs TSR performance
was below the median of the comparator group for that
performance period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
|
Performance Share Plan |
|
|
Option |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan |
|
|
|
|
|
|
|
Vesting |
|
|
Vesting |
|
|
|
|
|
|
Vesting |
|
|
|
Performance |
|
|
under TSR |
|
|
under EPS |
|
|
Total |
|
|
under EPS |
|
|
|
Period |
|
|
measure % |
|
|
measure % |
|
|
vesting % |
|
|
measure % |
|
|
2001 |
|
|
01/01/02 31/12/04 |
|
|
|
0 |
|
|
|
100 |
|
|
|
50 |
|
|
|
100 |
|
2002 |
|
|
01/01/03 31/12/05 |
|
|
|
0 |
|
|
|
100 |
|
|
|
50 |
|
|
|
100 |
|
2003 |
|
|
01/01/04 31/12/06 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
100 |
|
2004 |
|
|
01/01/05 31/12/07 |
|
|
|
38.47 |
|
|
|
|
|
|
|
38.47 |
|
|
|
100 |
|
2006 |
|
|
01/01/06 31/12/08 |
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
50.7 |
|
|
The performance measure for PSP awards for Executives was
changed to exclude EPS following the Remuneration Review
during 2003. No award was made during 2005 due to a change in
the award cycle.
Pensions
The Executives participate in GSK senior executive pension
plans. The pension arrangements are structured in accordance
with the plans operated for Executives in the country in
which they are likely to retire. Details of individual
arrangements for the Executive Directors are set out on page
97.
New Executives to GSK will be eligible for either a defined contribution scheme or a cash balance plan. Existing
obligations under defined benefit schemes in the UK will
continue to be honoured.
During the year, the Committee reviewed the competitiveness
of its pension policy for new employees to ensure that it
remains competitive and enables the company to attract the
talent required to run the business successfully. The review
highlighted that the defined contribution pension policy was
uncompetitive for UK Executives. The Committee therefore made
some changes to align this better to evolving practice in the
wider market.
a) UK pension arrangements
The company currently operates a defined contribution
plan, and legacy final salary plans which are closed to
new entrants. Newly hired Executives in the UK will
participate in the defined contribution plan.
Executives participating in the defined contribution plan
will now benefit from a company contribution of 15%20% of
base salary depending on grade. They will also have the
opportunity to receive up to a further 4% in matched
contributions in line with policy for all other members of
the pension plan.
The legacy final salary plans provide for up to two-thirds of final salary at age 60. For employees subject to the cap,
benefits in excess of the cap are currently provided through
unfunded arrangements. Under the legacy final salary plans,
actuarial reduction factors apply where a participant leaves
employment of his/her own accord before the age of 60. If
employment is terminated by the company other than for cause
the reduction factors will not apply in the same way as for
all other members of the legacy final salary plans.
b) US pension arrangements
In the USA, GSK operates a US Cash Balance Plan which
provides for an annual contribution and interest on the sum
accumulated in the cash balance plan but with no contractual
promise to provide specific levels of retirement income. The
plan incorporates an Executive Pension Credit for senior US
executives. Contribution rates under the plan range from 15%
to 38% of base salary depending on grade. All current senior
US executives are eligible for the new executive Pension
Credit.
For capped employees in the USA, benefits above the cap
are provided through an unfunded non-qualified plan.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 87
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
|
|
Share ownership requirements
To align the interests of Executives with those of
shareholders, Executives are required to build up and maintain
significant holdings of shares in GSK over time. The CEO is
required to build a shareholding to the value of four times
base salary. Other Executive Directors are required to build a
value of three times base salary and other members of the CET
a value of two times base salary.
Shareholdings for the
purpose of share ownership requirements (SOR) as at 31st
December 2008 were:
|
|
|
|
|
|
|
|
Holding for SOR purposes |
|
|
Mr Witty |
|
73,753 Ordinary Shares |
Mr Heslop |
|
47,750 Ordinary Shares |
Dr Slaoui |
|
49,799 Ordinary Shares |
|
Executives are required to continue to satisfy these
shareholding requirements for a minimum of twelve months
following retirement from the company to support the
long-term nature of the business. As at 31st December 2008,
Dr Garniers holding was in excess of the share ownership
requirements.
Other remuneration elements
The Executives participate in various all-employee share
plans in either the UK or the USA.
The Sharesave plan and the ShareReward plan are UK HM Revenue
& Customs approved plans open to all UK employees on the same
terms. Mr Witty and Mr Heslop are members of the Sharesave
plan. Mr Witty contributes £250 a month into the plan and, up
until the maturity of his savings contract in December 2008,
Mr Heslop also contributed £250 a month into the plan. This
provides them with the option to buy shares at the end of the
three-year savings period in line with the opportunity
available to all UK employees.
Mr Witty and Mr Heslop also contribute £125 per month to
buy shares under the ShareReward plan. The company
matches the number of shares bought each month.
The Executives also receive other benefits including
healthcare (medical and dental), personal financial advice
and life assurance. The cash value of the benefits received
by the Executive Directors in 2008 is shown on page 90.
On 19th February 2008, the company made a conditional award
of 111,750 ADS to Mr Viehbacher, with vesting subject to his
continued employment with GSK and the Committees assessment
of his performance over the vesting period. Following Mr
Viehbachers resignation on 8th September 2008 the award
lapsed.
Executive Director terms, conditions and remuneration
Executive Director contracts
The policy set out below provides the framework for
contracts for Executive Directors.
|
|
|
|
Notice period on
termination by the
employing company or
executive
|
|
12 calendar months |
|
Termination payment
|
|
1 x annual salary and |
|
|
1 x annual on-target bonus1 |
|
|
No mitigation required2 |
|
Vesting of LTIs
|
|
Rules of relevant incentive plan3 |
|
Pension
|
|
Based on existing arrangements and
terms of the relevant pension plan |
|
Non-compete clause
|
|
12 months from termination notice
date2 |
|
1 |
|
Mr Wittys target bonus is 125% of salary, Dr Slaouis
is 85% and Mr Heslops is 75% of salary. When reviewing
the policy for the level of severance payments, the
Committee considered shareholder and Department for
Business Enterprise & Regulatory Reform guidance.
However, it determined that in line with competitive
practice it is appropriate to provide for the payment
of salary and target bonus on termination. |
|
2 |
|
The imposition of a 12-month non-compete period (and
a non-solicitation restriction) on the Executives is
considered vitally important by the company in order
to protect the Groups intellectual property and
staff. In light of the non-compete clause and
competitor practice, the Committee believes that it
would not be appropriate to provide for mitigation in
the contracts. |
|
3 |
|
As approved by shareholders of GlaxoSmithKline,
Glaxo Wellcome and SmithKline Beecham, as
appropriate. |
The following table sets out the details of the Executive
Directors service contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Directors |
|
Date of contract |
|
Effective date |
|
Expiry date |
|
|
Mr A Witty* |
|
|
18.06.08 |
|
|
|
22.05.08 |
|
|
|
31.08.24 |
|
Mr J Heslop |
|
|
16.03.05 |
|
|
|
01.04.05 |
|
|
|
31.01.14 |
|
Dr M Slaoui |
|
|
16.05.06 |
|
|
|
01.06.06 |
|
|
|
01.08.19 |
|
|
* |
|
Mr Wittys contract was renewed in June 2008
following his appointment as CEO. |
No termination payments will be made in respect of any
part of a notice period extending beyond the contract
expiry date.
|
|
|
|
|
|
|
|
|
|
|
|
88
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued
|
|
|
|
|
|
|
|
Other entitlements
In addition to the contractual provisions outlined above, in
the event that Executive Directors service agreements are
terminated by their employing company, the following will
apply:
|
|
in the case of outstanding awards under the GlaxoSmithKline
Annual Investment Plan, provided that their agreement is
terminated other than for cause, any deferred amount, and any
income and gains, are automatically distributed as soon as
administratively practicable after termination. If they
resign, retire or the termination is for cause, then any
deferred amount is not distributed until the end of the
minimum three-year deferral period |
|
|
|
in line with the policy applicable to US senior executives,
Dr Garnier is entitled to receive continuing medical and
dental insurance after retirement. Dr Slaoui is a member of
the same plan and may become eligible, at a future date, to
receive continuing medical and dental cover into retirement. |
Following the merger, those participants in the legacy share
option schemes who elected to exchange their legacy options
for options over GlaxoSmithKline shares will receive an
additional cash benefit equal to 10% of the grant price of
the original option. This additional benefit is triggered
when the new option is exercised or lapses. To qualify for
this additional cash benefit, participants had to retain
their options until at least the second anniversary of the
effective date of the merger.
Outside appointments for Executive Directors
Any outside appointments must be approved by the Chairman
on behalf of the Board. It is the companys policy that
remuneration earned from such appointments may be kept by
the individual Executive Director.
Non-Executive Director terms, conditions and fees
Non-Executive Directors of GlaxoSmithKline do not have
service contracts but instead have letters of appointment
under which it is agreed that they serve the company as a
Non-Executive Director until the conclusion of the AGM
following the third anniversary of their appointment. In
each case this can be extended for a further term of three
years by mutual agreement. No Directors serve a term longer
than three years without offering themselves for
re-election by the shareholders.
The following table shows
the date of the initial letter of appointment of each
Non-Executive Director:
|
|
|
|
|
|
Non-Executive Director |
|
Date of letter of appointment |
|
|
|
Professor Sir Roy Anderson |
|
|
28.09.07 |
|
Dr S Burns |
|
|
12.02.07 |
|
Mr L Culp |
|
|
09.06.03 |
|
Sir Crispin Davis |
|
|
09.06.03 |
|
Sir Deryck Maughan |
|
|
26.05.04 |
|
Mr James Murdoch |
|
|
26.02.09 |
|
Dr D Podolsky |
|
|
03.07.06 |
|
Sir Ian Prosser |
|
|
19.06.00 |
|
Dr R Schmitz |
|
|
19.06.00 |
|
Mr T de Swaan |
|
|
21.12.05 |
|
Sir Robert Wilson |
|
|
09.06.03 |
|
|
The fee structures for the Non-Executive Directors and the
Chairman were reviewed during the year and some changes were
made by the Board to ensure that these remained competitive.
The company aims to provide Non-Executive Directors with fees
that are competitive with other companies of equivalent size
and complexity. Fees applying from 2008 are as follows:
|
|
|
|
|
|
|
|
Per annum |
|
|
|
Standard annual cash retainer fee |
|
|
£75,000 |
|
|
|
|
|
|
Supplemental fees |
|
|
|
|
|
|
|
|
|
Senior Independent Director, the Audit Committee |
|
|
£30,000 |
|
Chairman and Scientific/Medical Experts |
|
|
|
|
|
|
|
|
|
Chairman of the Remuneration and Corporate |
|
|
£20,000 |
|
Responsibility Committee |
|
|
|
|
|
|
|
|
|
Non-Executive Director undertaking |
|
|
£7,500 |
|
intercontinental travel to meetings |
|
per meeting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 89
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate
Fees that are paid in US dollars were converted at a rate of
£1/US$1.8162 for the period from 1st January to 31st March
2008, being the exchange rate that applied on 29th July 2004
when the fee arrangements were initially approved by the
Board. Following the approval of the new fee arrangements,
the exchange rate applicable was set by the Board at
£1/US$1.9918. This rate applied from 1st April to 31st
December 2008.
Non-Executive Directors share allocation plan
To enhance the link between Directors and shareholders
GlaxoSmithKline requires Non-Executive Directors to receive
a significant part of their fees in the form of shares. At
least 25% of the Non-Executive Directors total fees,
excluding the Chairman, are paid in the form of shares or
ADS and allocated to a share account. The Non-Executive
Directors may also take the opportunity to invest part or
all of the balance of their fees into the same share
account.
The shares or ADS which are notionally awarded to the
Non-Executive Directors and allocated to their interest
accounts are included within the Directors interests tables
on page 92. The accumulated balance of these shares or ADS,
together with notional dividends subsequently reinvested,
are not paid out to the Non-Executive Directors until
retirement from the Board. Upon retirement, the
Non-Executive Directors will receive either the shares or
ADS or a cash amount equal to the value of the shares or ADS
at the date of retirement. Non-Executive Directors are not
entitled to compensation if their appointment is terminated.
Chairman
Sir Christopher Gents letter of appointment to the Board
was dated 26th May 2004, under which it was agreed that he
would serve the company as Deputy Chairman until 31st
December 2004 and from 1st January 2005 as Chairman until
the conclusion of the AGM following the third anniversary of
his appointment. This was extended for a further term of
three years by mutual agreement.
The Chairmans fees were
increased from £460,000 to £540,000 per annum plus an
allocation of shares to the value of £135,000 per annum
(previously £115,000) with effect from 1st April 2008. This
was in line with GSKs policy to ensure Non-Executive
Directors fees remained competitive.
TSR performance graph
The following graph sets out the performance of the company
relative to the FTSE 100 Index of which the company is a
constituent and to the pharmaceutical performance comparator
group from 1st January 2003 to 31st December 2008. The graph
has been prepared in accordance with the Regulations and is
not an indication of the likely vesting of awards granted
under any of the companys incentive plans.
Directors and Senior Management remuneration
The following tables set out for the Directors of
GlaxoSmithKline plc the remuneration earned in 2008, their
interests in shares of GlaxoSmithKline plc, their interests
in share options and incentive plans and their pension
benefits. The members of the CET also participate in the
same remuneration plans as the Executive Directors. The
aggregate remuneration and interests of the Directors and
Senior Management are also provided.
|
|
|
|
|
|
|
|
|
|
|
|
90
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration
Report
continued |
|
|
|
|
|
|
|
|
|
|
|
|
Annual remuneration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Fees and |
|
|
Other |
|
|
Annual |
|
|
annual |
|
|
Fees and |
|
|
Other |
|
|
Annual |
|
|
annual |
|
|
|
|
|
|
|
salary |
|
|
benefits |
|
|
bonus |
|
|
remuneration |
|
|
salary |
|
|
benefits |
|
|
bonus |
|
|
remuneration |
|
|
|
Footnote |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr A Witty |
|
|
a,b |
|
|
|
£687 |
|
|
|
£92 |
|
|
|
£999 |
|
|
|
£1,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr J Heslop |
|
|
b |
|
|
|
£476 |
|
|
|
£32 |
|
|
|
£418 |
|
|
|
£926 |
|
|
|
£438 |
|
|
|
£16 |
|
|
|
£410 |
|
|
|
£864 |
|
|
Dr M Slaoui |
|
|
c |
|
|
|
$805 |
|
|
|
$405 |
|
|
|
$942 |
|
|
|
$2,152 |
|
|
|
$701 |
|
|
|
$321 |
|
|
|
$843 |
|
|
|
$1,865 |
|
|
Non-Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor Sir Roy Anderson |
|
|
|
|
|
|
£116 |
|
|
|
|
|
|
|
|
|
|
|
£116 |
|
|
|
£23 |
|
|
|
|
|
|
|
|
|
|
|
£23 |
|
Sir Crispin Davis |
|
|
|
|
|
|
£86 |
|
|
|
|
|
|
|
|
|
|
|
£86 |
|
|
|
£70 |
|
|
|
|
|
|
|
|
|
|
|
£70 |
|
Sir Christopher Gent |
|
|
|
|
|
|
£650 |
|
|
|
£1 |
|
|
|
|
|
|
|
£651 |
|
|
|
£575 |
|
|
|
£1 |
|
|
|
|
|
|
|
£576 |
|
Sir Ian Prosser |
|
|
|
|
|
|
£111 |
|
|
|
|
|
|
|
|
|
|
|
£111 |
|
|
|
£95 |
|
|
|
|
|
|
|
|
|
|
|
£95 |
|
Dr R Schmitz |
|
|
|
|
|
|
£86 |
|
|
|
|
|
|
|
|
|
|
|
£86 |
|
|
|
£70 |
|
|
|
|
|
|
|
|
|
|
|
£70 |
|
Mr T de Swaan |
|
|
|
|
|
|
£116 |
|
|
|
|
|
|
|
|
|
|
|
£116 |
|
|
|
£100 |
|
|
|
|
|
|
|
|
|
|
|
£100 |
|
Sir Robert Wilson |
|
|
|
|
|
|
£106 |
|
|
|
|
|
|
|
|
|
|
|
£106 |
|
|
|
£90 |
|
|
|
|
|
|
|
|
|
|
|
£90 |
|
|
Dr S Burns |
|
|
|
|
|
|
$194 |
|
|
|
|
|
|
|
|
|
|
|
$194 |
|
|
|
$124 |
|
|
|
|
|
|
|
|
|
|
|
$124 |
|
Mr L Culp |
|
|
|
|
|
|
$179 |
|
|
|
|
|
|
|
|
|
|
|
$179 |
|
|
|
$127 |
|
|
|
|
|
|
|
|
|
|
|
$127 |
|
Sir Deryck Maughan |
|
|
|
|
|
|
$179 |
|
|
|
|
|
|
|
|
|
|
|
$179 |
|
|
|
$136 |
|
|
|
|
|
|
|
|
|
|
|
$136 |
|
Dr D Podolsky |
|
|
|
|
|
|
$252 |
|
|
|
|
|
|
|
|
|
|
|
$252 |
|
|
|
$191 |
|
|
|
|
|
|
|
|
|
|
|
$191 |
|
|
Former Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr J Coombe |
|
|
|
|
|
|
|
|
|
|
£3 |
|
|
|
|
|
|
|
£3 |
|
|
|
|
|
|
|
£69 |
|
|
|
|
|
|
|
£69 |
|
Dr M Barzach |
|
|
d |
|
|
|
£71 |
|
|
|
|
|
|
|
|
|
|
|
£71 |
|
|
|
£56 |
|
|
|
|
|
|
|
|
|
|
|
£56 |
|
Sir Richard Sykes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£1 |
|
|
|
|
|
|
|
£1 |
|
|
Dr JP Garnier |
|
|
b,c |
|
|
|
$756 |
|
|
|
$1,586 |
|
|
|
$759 |
|
|
|
$3,101 |
|
|
|
$1,810 |
|
|
|
$1,516 |
|
|
|
$2,709 |
|
|
|
$6,035 |
|
Mr C Viehbacher |
|
|
f |
|
|
|
$687 |
|
|
|
$123 |
|
|
|
|
|
|
|
$810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr T Yamada |
|
|
b |
|
|
|
|
|
|
|
$2,243 |
|
|
|
|
|
|
|
$2,243 |
|
|
|
|
|
|
|
$250 |
|
|
|
|
|
|
|
$250 |
|
Dr L Shapiro |
|
|
e |
|
|
|
$85 |
|
|
|
|
|
|
|
|
|
|
|
$85 |
|
|
|
$85 |
|
|
|
|
|
|
|
|
|
|
|
$85 |
|
|
Total remuneration |
|
|
|
|
|
|
£4,201 |
|
|
|
£2,483 |
|
|
|
£2,336 |
|
|
|
£9,020 |
|
|
|
£3,104 |
|
|
|
£1,131 |
|
|
|
£2,186 |
|
|
|
£6,421 |
|
|
|
Analysed as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Directors |
|
|
|
|
|
|
£1,598 |
|
|
|
£343 |
|
|
|
£1,926 |
|
|
|
£3,867 |
|
|
|
£789 |
|
|
|
£177 |
|
|
|
£831 |
|
|
|
£1,797 |
|
Non-Executive Directors |
|
|
|
|
|
|
£1,706 |
|
|
|
£1 |
|
|
|
|
|
|
|
£1,707 |
|
|
|
£1,312 |
|
|
|
£1 |
|
|
|
|
|
|
|
£1,313 |
|
Former Directors |
|
|
|
|
|
|
£897 |
|
|
|
£2,139 |
|
|
|
£410 |
|
|
|
£3,446 |
|
|
|
£1,003 |
|
|
|
£953 |
|
|
|
£1,355 |
|
|
|
£3,311 |
|
|
Total remuneration |
|
|
|
|
|
|
£4,201 |
|
|
|
£2,483 |
|
|
|
£2,336 |
|
|
|
£9,020 |
|
|
|
£3,104 |
|
|
|
£1,131 |
|
|
|
£2,186 |
|
|
|
£6,421 |
|
|
Remuneration for Directors on the US payroll is reported in Dollars. Dollar amounts are included in
the totals based on conversion to Sterling at the average exchange rates for each year.
a) |
|
Mr Witty joined the Board on 31st January 2008 and his remuneration is disclosed from this date. |
|
b) |
|
Following the merger, and in order to encourage employees to convert their non-savings related
options held over Glaxo Wellcome or SmithKline Beecham shares or ADS, for options over
GlaxoSmithKline shares or ADS, employees were granted an additional cash benefit equal to 10% of
the grant price of the original option. This additional benefit, known as the Exchange Offer
Incentive (EOI), is only payable when the new option is exercised or lapses. To qualify for this
additional cash benefit, participants had to retain these options until at least the second
anniversary of the effective date of the merger. During the year, Mr Witty received £9,374 in EOI
payments as a result of options granted to him in March 1998 lapsing
and Mr Heslop received £14,499 as a result of options granted to him in July 1998 lapsing. Dr
Garnier received $1,227,599 (2007 $1,132,994), Mr Viehbacher received $50,744 and Dr Yamada
received $2,225,018 (2007 $184,516). |
|
c) |
|
Dr Garnier retired as a Director on 21st May 2008 and
retired from the company on 31st May 2008. He is a Non-Executive Director of United Technologies
Corporation, in respect of which he received $89,651 up to the end of May 2008 (2007 $230,000)
in the form of deferred stock units which is not included above. Dr Slaoui is a Non-Executive
Director of the Agency for Science, Technology and Research (A*STAR) in respect of which he
received $3,961 during 2008 (2007 $667) which are not included above. |
|
d) |
|
Dr Barzach received
fees of 89,700 (2007 81,933) from GlaxoSmithKline France for healthcare consultancy provided.
These are included within fees and salary above. |
|
e) |
|
Dr Shapiro retired from the Board on 17th May
2006 and stepped down as a member of GlaxoSmithKlines Scientific Advisory Board on 21st July
2008. During 2008 she received fees of $85,000 (2007 $85,000), of which $30,000 (2007
$30,000) was in the form of ADS. These are included within fees and salary above. |
|
f) |
|
Mr Viehbacher
was appointed to the Board on 31st January 2008 and his remuneration is disclosed from this date.
He resigned from the Board on 8th September 2008. |
|
None of the above Directors received reimbursement for expenses during the year requiring separate
disclosure as required by the Regulations.
|
|
|
|
|
|
GSK Annual Report 2008 91
|
|
|
Report of the Directors
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
Non-Executive Directors remuneration
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Total |
|
|
Cash |
|
|
Shares/ADS |
|
|
Total |
|
|
Cash |
|
|
Shares/ADS |
|
Fees |
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
Current Non-Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor Sir Roy Anderson |
|
|
£116 |
|
|
|
£87 |
|
|
|
£29 |
|
|
|
£23 |
|
|
|
£17 |
|
|
|
£6 |
|
Sir Crispin Davis |
|
|
£86 |
|
|
|
|
|
|
|
£86 |
|
|
|
£70 |
|
|
|
|
|
|
|
£70 |
|
Sir Christopher Gent |
|
|
£650 |
|
|
|
£520 |
|
|
|
£130 |
|
|
|
£575 |
|
|
|
£460 |
|
|
|
£115 |
|
Sir Ian Prosser |
|
|
£111 |
|
|
|
£56 |
|
|
|
£55 |
|
|
|
£95 |
|
|
|
£48 |
|
|
|
£47 |
|
Dr R Schmitz |
|
|
£86 |
|
|
|
£51 |
|
|
|
£35 |
|
|
|
£70 |
|
|
|
£42 |
|
|
|
£28 |
|
Mr T de Swaan |
|
|
£116 |
|
|
|
£87 |
|
|
|
£29 |
|
|
|
£100 |
|
|
|
£75 |
|
|
|
£25 |
|
Sir Robert Wilson |
|
|
£106 |
|
|
|
£79 |
|
|
|
£27 |
|
|
|
£90 |
|
|
|
£68 |
|
|
|
£22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr S Burns |
|
|
$194 |
|
|
|
$97 |
|
|
|
$97 |
|
|
|
$124 |
|
|
|
$62 |
|
|
|
$62 |
|
Mr L Culp |
|
|
$179 |
|
|
|
|
|
|
|
$179 |
|
|
|
$127 |
|
|
|
|
|
|
|
$127 |
|
Sir Deryck Maughan |
|
|
$179 |
|
|
|
|
|
|
|
$179 |
|
|
|
$136 |
|
|
|
|
|
|
|
$136 |
|
Dr D Podolsky |
|
|
$252 |
|
|
|
$126 |
|
|
|
$126 |
|
|
|
$191 |
|
|
|
$96 |
|
|
|
$95 |
|
|
Total Remuneration |
|
|
£1,706 |
|
|
|
£1,001 |
|
|
|
£705 |
|
|
|
£1,312 |
|
|
|
£789 |
|
|
|
£523 |
|
|
The table above sets out the remuneration received as Non-Executive Directors of GlaxoSmithKline.
Non-Executive Directors are required to take at least a part of their total fees in the form of
shares allocated to a share account which is not paid out until retirement from the Board (see page
89 for further details). The total value of these shares and ADS as at the date of award, together
with the cash payment, forms their total fees, which are
included within the Annual remuneration table under Fees and salary. The table above sets out the
value of their fees received in the form of cash and shares and ADS.
The table below sets out the accumulated number of shares and ADS held by the Non-Executive
Directors in relation to their fees received as Board members as at 31st December 2008, together
with the movements in their accounts over the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares and ADS |
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
Non-Executive Directors share arrangements |
|
At 31.12.07 |
|
|
Elected |
|
|
reinvested |
|
|
At 31.12.08 |
|
|
Current Non-Executive Directors
Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor Sir Roy Anderson |
|
|
438 |
|
|
|
2,526 |
|
|
|
37 |
|
|
|
3,001 |
|
Sir Crispin Davis |
|
|
24,069 |
|
|
|
7,511 |
|
|
|
1,103 |
|
|
|
32,683 |
|
Sir Christopher Gent |
|
|
27,153 |
|
|
|
11,192 |
|
|
|
1,244 |
|
|
|
39,589 |
|
Sir Ian Prosser |
|
|
24,861 |
|
|
|
4,828 |
|
|
|
1,113 |
|
|
|
30,802 |
|
Dr R Schmitz |
|
|
19,639 |
|
|
|
3,005 |
|
|
|
875 |
|
|
|
23,519 |
|
Mr T de Swaan |
|
|
3,156 |
|
|
|
2,526 |
|
|
|
102 |
|
|
|
5,784 |
|
Sir Robert Wilson |
|
|
6,607 |
|
|
|
2,310 |
|
|
|
304 |
|
|
|
9,221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr S Burns |
|
|
1,184 |
|
|
|
2,378 |
|
|
|
83 |
|
|
|
3,645 |
|
Mr L Culp |
|
|
11,747 |
|
|
|
4,347 |
|
|
|
728 |
|
|
|
16,822 |
|
Sir Deryck Maughan |
|
|
9,800 |
|
|
|
4,347 |
|
|
|
609 |
|
|
|
14,756 |
|
Dr D Podolsky |
|
|
2,796 |
|
|
|
3,084 |
|
|
|
184 |
|
|
|
6,064 |
|
|
|
|
|
|
|
|
|
|
|
|
92
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
Directors interests
The following interests of the Directors of the company and their connected persons are shown in
accordance with the Listing Rules.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
ADS |
|
|
|
|
|
|
|
24th February |
|
|
31st December |
|
|
1st January |
|
|
24th February |
|
|
31st December |
|
|
1st January |
|
|
|
Footnote |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr A Witty |
|
|
a,c |
|
|
|
74,535 |
|
|
|
73,753 |
|
|
|
51,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr J Heslop |
|
|
c |
|
|
|
48,304 |
|
|
|
47,750 |
|
|
|
41,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr M Slaoui |
|
|
b |
|
|
|
59,518 |
|
|
|
48,636 |
|
|
|
40,961 |
|
|
|
485 |
|
|
|
411 |
|
|
|
286 |
|
|
Non-Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professor Sir Roy Anderson |
|
|
d |
|
|
|
3,001 |
|
|
|
3,001 |
|
|
|
438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr S Burns |
|
|
d |
|
|
|
44 |
|
|
|
44 |
|
|
|
44 |
|
|
|
3,805 |
|
|
|
3,805 |
|
|
|
1,344 |
|
Mr L Culp |
|
|
d |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,822 |
|
|
|
16,822 |
|
|
|
11,747 |
|
Sir Crispin Davis |
|
|
d |
|
|
|
39,443 |
|
|
|
39,443 |
|
|
|
29,236 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Christopher Gent |
|
|
d |
|
|
|
39,589 |
|
|
|
39,589 |
|
|
|
27,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Deryck Maughan |
|
|
d |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,756 |
|
|
|
14,756 |
|
|
|
9,800 |
|
Dr D Podolsky |
|
|
d |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,065 |
|
|
|
6,065 |
|
|
|
2,796 |
|
Sir Ian Prosser |
|
|
d |
|
|
|
31,712 |
|
|
|
31,712 |
|
|
|
25,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr R Schmitz |
|
|
d |
|
|
|
29,199 |
|
|
|
29,199 |
|
|
|
25,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr T de Swaan |
|
|
d |
|
|
|
5,784 |
|
|
|
5,784 |
|
|
|
3,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Sir Robert Wilson |
|
|
d |
|
|
|
15,349 |
|
|
|
15,349 |
|
|
|
12,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One GlaxoSmithKline ADS represents two GlaxoSmithKline shares. The interests of the above-mentioned
Directors at 24th February 2009 reflect the change between the year-end and that date.
|
a) |
|
Mr Witty joined the Board on 31st January 2008 and his holdings are disclosed from this date. |
|
b) |
|
Includes ADS purchased in the GlaxoSmithKline Stock Fund within the US Retirement Savings Plan and US
Executive Supplemental Savings Plan. |
|
c) |
|
Includes shares purchased through the GlaxoSmithKline
ShareReward Plan for Mr Heslop totalling 1,853 at 31st December 2008 (31st December 2007 1,523)
and 1,911 shares at 24th February 2009 and Mr Witty totalling 1,853 at 31st December 2008 and 1,911
shares at 24th February 2009. |
|
d) |
|
Includes shares and ADS received as part or all of their fees, as
described under Non-Executive Directors share allocation plan on page 89. Dividends received on
these shares and ADS were converted to shares and ADS as at 31st December 2008. |
Share options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Shares |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
Footnote |
|
|
At 31.12.07 |
|
|
Date of grant |
|
|
Exercise period |
|
|
Grant price |
|
|
Number |
|
|
Exercised |
|
|
Lapsed |
|
|
At 31.12.08 |
|
|
Mr A Witty |
|
|
a,c |
|
|
|
999,244 |
|
|
|
19.02.08 |
|
|
|
19.02.11 18.02.18 |
|
|
|
£11.47 |
|
|
|
525,000 |
|
|
|
|
|
|
|
5,630 |
|
|
|
1,664,623 |
|
|
|
|
|
|
|
|
|
|
|
|
23.07.08 |
|
|
|
23.07.11 22.07.18 |
|
|
|
£12.21 |
|
|
|
145,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01.12.08 |
|
|
|
01.12.11 31.05.15 |
|
|
|
£9.51 |
|
|
|
1,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mr J Heslop |
|
|
c |
|
|
|
785,254 |
|
|
|
19.02.08 |
|
|
|
19.02.11 18.02.18 |
|
|
|
£11.47 |
|
|
|
242,750 |
|
|
|
|
|
|
|
7,643 |
|
|
|
1,020,361 |
|
Dr M Slaoui |
|
|
b |
|
|
|
170,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170,712 |
|
Mr C Viehbacher |
|
|
d |
|
|
|
778,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
778,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options ADS |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31.12.07 |
|
|
Date of grant |
|
|
Exercise period |
|
|
Grant price |
|
|
Number |
|
|
Exercised |
|
|
Lapsed |
|
|
At 31.12.08 |
|
|
Dr M Slaoui |
|
|
b,c |
|
|
|
162,320 |
|
|
|
19.02.08 |
|
|
|
19.02.11 18.02.18 |
|
|
|
$44.75 |
|
|
|
162,320 |
|
|
|
|
|
|
|
|
|
|
|
324,640 |
|
Dr JP Garnier |
|
|
e |
|
|
|
4,453,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
225,324 |
|
|
|
4,228,124 |
|
Mr C Viehbacher |
|
|
d |
|
|
|
364,000 |
|
|
|
19.02.08 |
|
|
|
19.02.11 18.02.18 |
|
|
|
$44.75 |
|
|
|
97,750 |
|
|
|
|
|
|
|
461,750 |
|
|
|
|
|
|
|
a) |
|
Mr Witty joined the Board on 31st January 2008 and his options are disclosed from this date. |
|
b) |
|
These details include the interests of Dr Slaouis connected person who is also an employee of GSK. |
|
c) |
|
As part of the main option grant that occurred on 17th February 2009, Dr Slaoui and his
connected person were awarded 164,690 ADS options with a grant price of
$33.42. The options granted to Dr Slaoui will vest in two parts, with 50% of awards vesting in
February 2012 and the remaining 50% vesting in February 2013. In line with the new remuneration
policy, Mr Witty and Mr Heslop will not receive share options for the forseeable future. |
|
d) |
|
Mr Viehbacher joined the Board on 31st January 2008 and his options are
disclosed above from this date
until 8th September 2008 when he resigned from the Board. His
unvested options lapsed on 1st December 2008 when he left the company. |
|
e) |
|
Dr Garnier retired from the Board on 21st May 2008 and the closing balance of his options is disclosed
as at that date. |
|
|
|
|
|
|
GSK Annual
Report 2008 93
|
|
|
Report of the Directors
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
For those options outstanding at 31st December 2008, the earliest and latest vesting and lapse
dates for options above and below the market price for a GlaxoSmithKline share at the year-end are
given in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
Vesting date |
|
|
Lapse date |
|
Mr A Witty |
|
|
|
grant price |
|
|
Number |
|
|
earliest |
|
|
latest |
|
|
earliest |
|
|
latest |
|
|
Options above market price at year-end: |
|
vested |
|
|
£17.17 |
|
|
|
234,298 |
|
|
|
24.03.02 |
|
|
|
28.11.04 |
|
|
|
23.03.09 |
|
|
|
27.11.11 |
|
|
|
unvested |
|
|
£14.78 |
|
|
|
373,000 |
|
|
|
21.02.09 |
|
|
|
20.02.10 |
|
|
|
20.02.16 |
|
|
|
19.02.17 |
|
|
Options below market price at year-end: |
|
vested |
|
|
£11.85 |
|
|
|
386,316 |
|
|
|
03.12.05 |
|
|
|
27.10.08 |
|
|
|
27.04.09 |
|
|
|
01.12.14 |
|
|
|
unvested |
|
|
£11.63 |
|
|
|
671,009 |
|
|
|
18.02.11 |
|
|
|
01.12.11 |
|
|
|
31.05.12 |
|
|
|
21.07.18 |
|
|
Total share options as at 31st December 2008 |
|
|
|
|
£13.17 |
|
|
|
1,664,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
Vesting date |
|
|
Lapse date |
|
Mr J Heslop |
|
|
|
|
|
grant price |
|
|
Number |
|
|
earliest |
|
|
latest |
|
|
earliest |
|
|
latest |
|
|
Options above market price at year-end: |
|
vested |
|
|
£16.96 |
|
|
|
186,795 |
|
|
|
24.03.02 |
|
|
|
28.11.04 |
|
|
|
22.03.09 |
|
|
|
27.11.11 |
|
|
|
unvested |
|
|
£14.78 |
|
|
|
473,750 |
|
|
|
21.02.09 |
|
|
|
20.02.10 |
|
|
|
20.02.16 |
|
|
|
19.02.17 |
|
|
Options below market price at year-end: |
|
vested |
|
|
£11.91 |
|
|
|
117,066 |
|
|
|
28.10.06 |
|
|
|
27.10.08 |
|
|
|
27.04.09 |
|
|
|
01.12.14 |
|
|
|
unvested |
|
|
£11.47 |
|
|
|
242,750 |
|
|
|
19.02.11 |
|
|
|
19.02.11 |
|
|
|
18.02.18 |
|
|
|
18.02.18 |
|
|
Total share options as at 31st December 2008 |
|
|
|
|
|
|
£14.06 |
|
|
|
1,020,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
Vesting date |
|
|
Lapse date |
|
Dr M Slaoui |
|
|
|
|
|
grant price |
|
|
Number |
|
|
earliest |
|
|
latest |
|
|
earliest |
|
|
latest |
|
|
Options above market price at year-end: |
|
vested |
|
|
£18.56 |
|
|
|
15,522 |
|
|
|
24.11.02 |
|
|
|
24.11.02 |
|
|
|
23.11.09 |
|
|
|
23.11.09 |
|
|
|
unvested |
|
|
£14.68 |
|
|
|
73,340 |
|
|
|
21.02.09 |
|
|
|
21.02.09 |
|
|
|
20.02.16 |
|
|
|
20.02.16 |
|
|
Options below market price at year-end: |
|
vested |
|
|
£11.59 |
|
|
|
81,850 |
|
|
|
03.12.05 |
|
|
|
02.12.07 |
|
|
|
02.10.12 |
|
|
|
01.12.14 |
|
|
Total share options as at 31st December 2008 |
|
|
|
|
|
|
£13.55 |
|
|
|
170,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options above market price at year-end: |
|
unvested |
|
|
$51.38 |
|
|
|
324,640 |
|
|
|
20.02.10 |
|
|
|
19.02.11 |
|
|
|
19.02.17 |
|
|
|
18.02.18 |
|
|
Total ADS options as at 31st December 2008 |
|
|
|
|
|
|
$51.38 |
|
|
|
324,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This includes those share options held by Dr Slaouis connected person, who is also an employee of
GSK.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
|
|
|
|
|
|
Vesting date |
|
|
Lapse date |
|
Dr JP Garnier |
|
|
|
|
|
grant price |
|
|
Number |
|
|
earliest |
|
|
latest |
|
|
earliest |
|
|
latest |
|
|
Options above market price at year-end: |
|
vested |
|
|
$52.13 |
|
|
|
2,728,124 |
|
|
|
15.03.02 |
|
|
|
02.12.07 |
|
|
|
14.03.09 |
|
|
|
01.12.14 |
|
|
|
unvested |
|
|
$54.68 |
|
|
|
1,050,000 |
|
|
|
21.02.09 |
|
|
|
20.02.10 |
|
|
|
20.02.16 |
|
|
|
19.02.17 |
|
|
Options below market price at year-end: |
|
vested |
|
|
$37.25 |
|
|
|
450,000 |
|
|
|
03.12.05 |
|
|
|
03.12.05 |
|
|
|
02.12.12 |
|
|
|
02.12.12 |
|
|
Total ADS options as at 21st May 2008 |
|
|
|
|
|
|
$51.18 |
|
|
|
4,228,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
GSK Annual Report 2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration Report continued |
|
|
|
|
|
|
|
|
|
|
|
|
GSK grants share options to Executive Directors and Senior Managers on an annual basis. The
Directors hold these options under the various share option plans referred to in Note 42 to the financial statements, Employee share schemes. None of the Non-Executive Directors had an interest
in any option over the companys shares. The table below sets out, for share options granted in
respect of 2006, 2007 and 2008, the performance period, whether or not the options have vested at
31st December 2008 and the performance targets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance target |
|
|
|
|
|
|
|
|
|
|
|
Vesting status |
|
Annualised growth |
|
|
Percentage of |
|
Grant |
|
Footnote |
|
|
Performance period |
|
|
at 31.12.08 |
|
in EPS |
|
|
award vesting |
|
|
February 2006 |
|
|
a |
|
|
|
01.01.06 31.12.08 |
|
|
Unvested |
|
³ RPI + 6% |
|
|
100 |
% |
February 2007 |
|
|
|
|
|
|
01.01.07 31.12.09 |
|
|
Unvested |
|
RPI + 5% |
|
|
83 |
% |
February 2008 |
|
|
|
|
|
|
01.01.08 31.12.10 |
|
|
Unvested |
|
RPI + 4% |
|
|
67 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPI + 3% |
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< RPI + 3% |
|
|
0 |
% |
|
|
a) The performance targets for these share options were partially met, and as a result part of the
option grant vested on the third anniversary of the date of grant. |
|
The table below sets out, for share options granted in respect of 2009, the performance period
and targets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance target |
|
|
|
|
|
|
|
|
|
|
|
Vesting status |
|
Annualised growth |
|
|
Percentage of |
|
Grant |
|
|
|
|
|
Performance period |
|
|
at 31.12.08 |
|
in EPS |
|
|
award vesting |
|
|
February 2009 50% of award |
|
|
|
|
|
|
01.01.09 31.12.11 |
|
|
Unvested |
|
> RPI + 6% |
|
|
100 |
% |
February 2009 50% of award |
|
|
|
|
|
|
01.01.09 31.12.12 |
|
|
Unvested |
|
RPI + 5% |
|
|
85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPI + 4% |
|
|
65 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RPI + 3% |
|
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
< RPI + 3% |
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
Grant |
|
|
Market |
|
|
|
|
|
|
|
Options
exercised |
|
Date |
|
|
Number |
|
|
price |
|
|
price |
|
|
Gain |
|
|
Gain |
|
|
Dr JP Garnier |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,222,318 |
|
|
Aggregate gain on options exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£ |
2,111,159 |
|
|
The highest and lowest closing prices during the year ended 31st December 2008 for GlaxoSmithKline
shares were £13.85 and £9.95, respectively. The highest and lowest prices for GlaxoSmithKline ADS
during the year ended 31st December 2008 were $54.36 and $32.02, respectively. The market price for
a GlaxoSmithKline share on 31st December 2008 was £12.85 (31st December 2007 £12.79) and for a
GlaxoSmithKline ADS was $37.27 (31st December 2007 $50.39). The prices on 24th February 2009 were
£11.06 per GlaxoSmithKline share and $32.19 per GlaxoSmithKline ADS.
Incentive plans
Performance Share Plan (PSP) awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Mr A Witty - Shares |
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
shares by |
|
|
|
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
Performance period |
|
at 31.01.08 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 31.12.08 |
|
|
01.01.05 31.12.07 |
|
|
85,250 |
|
|
|
|
|
|
£ |
11.63 |
|
|
|
33,271 |
|
|
£ |
11.23 |
|
|
£ |
373,633 |
|
|
|
53,215 |
|
|
|
1,236 |
|
|
|
|
|
01.01.06 31.12.08 |
|
|
81,838 |
|
|
|
|
|
|
£ |
14.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,104 |
|
|
|
85,942 |
|
01.01.07 31.12.09 |
|
|
87,436 |
|
|
|
|
|
|
£ |
14.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,385 |
|
|
|
91,821 |
|
01.01.08 31.12.10 |
|
|
|
|
|
|
225,000 |
|
|
£ |
11.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,908 |
|
|
|
232,908 |
|
01.01.08 31.12.10 |
|
|
|
|
|
|
62,000 |
|
|
£ |
12.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,443 |
|
|
|
63,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 95
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration
Report continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Mr J Heslop - Shares |
|
|
|
|
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
shares by |
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
Performance period |
|
|
|
|
|
at 31.12.07 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 31.12.08 |
|
|
01.01.05 - 31.12.07 |
|
|
|
|
|
|
16,982 |
|
|
|
|
|
|
£ |
11.63 |
|
|
|
6,698 |
|
|
£ |
11.23 |
|
|
£ |
75,219 |
|
|
|
10,712 |
|
|
|
428 |
|
|
|
|
|
01.01.06 - 31.12.08 |
|
|
|
|
|
|
105,178 |
|
|
|
|
|
|
£ |
14.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,435 |
|
|
|
111,613 |
|
01.01.07 - 31.12.09 |
|
|
|
|
|
|
106,887 |
|
|
|
|
|
|
£ |
14.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,539 |
|
|
|
113,426 |
|
01.01.08 - 31.12.10 |
|
|
|
|
|
|
|
|
|
|
105,000 |
|
|
£ |
11.47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,690 |
|
|
|
108,690 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Dr M Slaoui - Shares |
|
|
|
|
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
shares by |
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
Performance period |
|
|
|
|
|
at 31.12.07 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 31.12.08 |
|
|
01.01.05 - 31.12.07 |
|
|
|
|
|
|
14,260 |
|
|
|
|
|
|
£ |
11.63 |
|
|
|
10,122 |
|
|
£ |
11.23 |
|
|
£ |
113,670 |
|
|
|
4,498 |
|
|
|
360 |
|
|
|
|
|
01.01.06 - 31.12.08 |
|
|
|
|
|
|
30,208 |
|
|
|
|
|
|
£ |
14.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,847 |
|
|
|
32,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
Dr M Slaoui - ADS |
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
ADS by |
|
|
|
|
|
|
Number |
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
|
granted |
|
Performance period |
|
at 31.12.07 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 31.12.08 |
|
|
in 2009 |
|
|
01.01.07 - 31.12.09 |
|
|
71,840 |
|
|
|
|
|
|
$ |
58.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,444 |
|
|
|
76,284 |
|
|
|
|
|
01.01.08 - 31.12.10 |
|
|
|
|
|
|
70,570 |
|
|
$ |
44.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,545 |
|
|
|
73,115 |
|
|
|
|
|
01.01.09 - 31.12.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,620 |
|
|
This includes those performance shares held by Dr Slaouis connected person, who is also an
employee of GSK.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Dr JP Garnier - ADS |
|
|
|
|
Vested & |
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
ADS by |
|
|
|
|
|
|
Unvested |
|
|
deferred at |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
Performance period |
|
at 31.12.07 |
|
|
31.12.07 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 21.05.08 |
|
|
01.01.01 - 31.12.03 (Deferred) |
|
|
|
|
|
|
39,216 |
|
|
|
|
|
|
$ |
51.30 |
|
|
|
40,599 |
|
|
$ |
47.53 |
|
|
$ |
1,929,657 |
|
|
|
|
|
|
|
1,383 |
|
|
|
|
01.01.01 - 31.12.03 (Deferred) |
|
|
|
|
|
|
36,826 |
|
|
|
|
|
|
$ |
37.25 |
|
|
|
38,125 |
|
|
$ |
35.44 |
|
|
$ |
1,351,156 |
|
|
|
|
|
|
|
1,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
01.01.05 - 31.12.07 |
|
|
218,945 |
|
|
|
|
|
|
|
|
|
|
$ |
43.73 |
|
|
|
86,326 |
|
|
$ |
44.75 |
|
|
$ |
3,863,089 |
|
|
|
138,072 |
|
|
|
5,453 |
|
|
|
|
|
01.01.06 - 31.12.08 |
|
|
231,300 |
|
|
|
|
|
|
|
|
|
|
$ |
51.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,549 |
|
|
|
239,849 |
|
01.01.07 - 31.12.09 |
|
|
244,320 |
|
|
|
|
|
|
|
|
|
|
$ |
58.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,029 |
|
|
|
253,349 |
|
|
As set out in Dr Garniers contract, his unvested PSP awards all vest, subject to achievement of
the performance conditions, at the end of the performance periods set out above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
Mr C Viehbacher - ADS* |
|
|
|
|
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested |
|
|
|
|
|
|
ADS by |
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
dividends |
|
|
Unvested |
|
Performance period |
|
|
|
|
|
at 31.01.08 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
reinvested |
|
|
at 08.09.08 |
|
|
01.01.05 - 31.12.07 |
|
|
|
|
|
|
42,585 |
|
|
|
|
|
|
$ |
43.73 |
|
|
|
16,618 |
|
|
$ |
44.75 |
|
|
$ |
743,656 |
|
|
|
26,579 |
|
|
|
612 |
|
|
|
|
|
01.01.06 - 31.12.08 |
|
|
|
|
|
|
40,898 |
|
|
|
|
|
|
$ |
51.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,982 |
|
|
|
2,084 |
|
|
|
|
|
01.01.07 - 31.12.09 |
|
|
|
|
|
|
43,715 |
|
|
|
|
|
|
$ |
58.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,942 |
|
|
|
2,227 |
|
|
|
|
|
01.01.08 - 31.12.10 |
|
|
|
|
|
|
|
|
|
|
42,500 |
|
|
$ |
44.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,033 |
|
|
|
1,533 |
|
|
|
|
|
|
|
|
|
* |
|
Mr Viehbacher joined the Board on 31st January 2008 and his PSPs are disclosed from this date
until 8th September when he resigned from the Board. All unvested PSPs lapsed when Mr
Viehbacher left the company on 1st December 2008. |
Under the terms of the PSP the number of shares actually vesting is determined following the end of
the relevant measurement period and is dependent on GSKs performance during that period as
described on pages 84 to 85.
|
|
|
|
|
|
|
|
|
|
|
|
96
GSK Annual Report
2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration
Report continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends are reinvested on the performance shares awarded to Executives, throughout the
performance period and up to the date of the final award. The dividend reinvestment is calculated
as of the ex-dividend date. Under the terms of the PSP, US participants may defer receipt of all or
part of their vested awards. The total gain on vesting of PSP awards made by Executive Directors is
£4,826,067 (2007 £74,400).
The PSP awards granted to Executive Directors in February 2006, excluding Dr Slaoui, with the
performance period starting on 1st January 2006 and ending on 31st December 2008 lapsed because
GSKs relative TSR performance was below the median of the comparator group.
The awards made to other senior Executives, including Dr Slaoui who was not a member of the CET at
the time of the award, in 2006 were dependent in part on TSR performance and in part on EPS
performance. The TSR portion lapsed and the EPS portion vested in full.
The following vesting
schedule applies to PSP awards made in 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting schedule |
|
|
|
|
|
|
|
Award |
|
Performance Period |
|
|
TSR rank with 13 companies |
|
|
Percentage of award vesting* |
|
2006 |
|
|
01.01.06 - 31.12.08 |
|
|
|
1 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
2 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
3 |
|
|
|
87 |
% |
|
|
|
|
|
|
|
4 |
|
|
|
74 |
% |
|
|
|
|
|
|
|
5 |
|
|
|
61 |
% |
|
|
|
|
|
|
|
6 |
|
|
|
48 |
% |
|
|
|
|
|
|
Median |
|
|
|
35 |
% |
|
|
|
|
|
|
Below median |
|
|
|
0 |
% |
|
|
The following vesting schedules apply to PSP awards made in 2007 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting schedule |
|
|
|
|
|
|
|
Award |
|
Performance Period |
|
|
TSR rank with 14 companies |
|
|
Percentage of award vesting* |
|
2007 |
|
|
01.01.07 - 31.12.09 |
|
|
|
1 |
|
|
|
100 |
% |
2008 |
|
|
01.01.08 - 31.12.10 |
|
|
|
2 |
|
|
|
100 |
% |
|
|
|
|
|
|
|
3 |
|
|
|
90 |
% |
|
|
|
|
|
|
|
4 |
|
|
|
80 |
% |
|
|
|
|
|
|
|
5 |
|
|
|
70 |
% |
|
|
|
|
|
|
|
6 |
|
|
|
60 |
% |
|
|
|
|
|
|
|
7 |
|
|
|
50 |
% |
|
|
|
|
|
|
Median |
|
|
|
35 |
% |
|
|
|
|
|
|
Below median |
|
|
|
0 |
% |
|
|
|
|
* |
|
TSR is measured on a pro-rata basis. Where GlaxoSmithKlines performance falls between two of
the comparators, the level of vesting will be determined by the actual relative level of TSR
rather than simple ranking. Dividends will be treated as reinvested during the performance
period. |
The 2009 awards will be made following approval of the new PSP at the 2009 AGM.
Share Value Plan awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr M Slaoui - Shares and ADS |
|
|
|
|
|
Number |
|
|
price on |
|
|
Vested & deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
granted in |
|
|
date of |
|
|
|
|
|
|
Market |
|
|
|
|
|
|
|
|
|
|
Unvested |
|
|
Number of ADS |
|
Plan year |
|
at 31.12.07 |
|
|
2008 |
|
|
grant |
|
|
Number |
|
|
price |
|
|
Gain |
|
|
Lapsed |
|
|
at 31.12.08 |
|
|
granted in 2009 |
|
|
2006 (shares) |
|
|
1,200 |
|
|
|
|
|
|
£ |
14.68 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,200 |
|
|
|
|
|
2007 (ADS) |
|
|
890 |
|
|
|
|
|
|
$ |
58.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890 |
|
|
|
|
|
2008 (ADS) |
|
|
|
|
|
|
890 |
|
|
$ |
44.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
890 |
|
|
|
|
|
2008 (ADS) |
|
|
|
|
|
|
2,980 |
|
|
$ |
48.55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,980 |
|
|
|
|
|
2009 (ADS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,490 |
|
|
As an Executive Director, Dr Slaoui is not eligible to receive awards under the Share Value Plan.
The awards shown above reflect the holdings of Dr Slaouis connected person, an employee of GSK.
The awards are subject to three-year vesting periods and vesting is contingent on continued
employment with GSK.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 97
|
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration
Report continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
Additional ADS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and |
|
|
|
deferred |
|
|
by dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
deferred |
|
|
|
participations |
|
|
reinvested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
participations |
|
Mid-Term Incentive Plan - ADS |
|
at 31.12.07 |
|
|
in 2008 |
|
|
Exercised |
|
|
Market Price |
|
|
Gain |
|
|
at 21.05.08 |
|
|
Dr JP Garnier |
|
|
180,137 |
|
|
|
6,353 |
|
|
|
186,490 |
|
|
|
$47.53 |
|
|
$ |
8,863,870 |
|
|
|
|
|
|
The Mid-Term Incentive Plan (MTIP) was a share award scheme operated by SmithKline Beecham. The
plan closed to new entrants upon completion of the merger and no further participations have been
granted.
Where a final award of ADS is made, receipt of the award may be deferred by a Director.
Dr Garnier deferred receipt of the full amounts which vested in each year between 1999 and 2003.
The deferred awards, together with any additional ADS subsequently received through dividend
reinvestment, are not included in the Directors interests table on page 92 since they are retained
in the MTIP until paid out.
On 19th February 2008, the company made a conditional award of 111,750 ADS to Mr Viehbacher.
Following Mr Viehbachers resignation from the Board, with effect from 8th September 2008, this
conditional award lapsed in full.
Pension benefits
The accrued annual pension benefits and transfer values for Executive Directors in office on 31st
December 2008 on retirement are set out below.
The
Companies Act 1985 requires disclosure of the accrued benefit at the end of the year, the change in
accrued benefit over the year, the transfer value at both the beginning and end of the year and
the change in the transfer value over the year. The Listing Rules require additional disclosure of
the change in the accrued benefit net of inflation and the transfer value of this change.
Pensions for the Executive Directors have been disclosed in the currency in which the pension is
payable.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
Personal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
accrued |
|
|
Transfer value |
|
|
|
Accrued |
|
|
Accrued |
|
|
accrued |
|
|
contributions |
|
|
Transfer |
|
|
Transfer |
|
|
Change |
|
|
benefit over |
|
|
of change |
|
|
|
benefit at |
|
|
benefit at |
|
|
benefit |
|
|
made during |
|
|
value at |
|
|
value at |
|
|
in transfer |
|
|
year net |
|
|
in accrued |
|
|
|
31.12.07 |
|
|
31.12.08 |
|
|
over year |
|
|
the year |
|
|
31.12.07 |
|
|
31.12.08 |
|
|
value |
|
|
of inflation |
|
|
benefit* |
|
Executive Directors |
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000 |
|
|
000* |
|
|
000 |
|
|
000 |
|
|
Mr A Witty |
|
|
£218 |
|
|
|
£315 |
|
|
|
£97 |
|
|
|
£22 |
|
|
|
£2,598 |
|
|
|
£3,848 |
|
|
|
£1,228 |
|
|
|
£89 |
|
|
|
£1,112 |
|
Mr J Heslop |
|
|
£142 |
|
|
|
£170 |
|
|
|
£28 |
|
|
|
£14 |
|
|
|
£2,609 |
|
|
|
£2,837 |
|
|
|
£214 |
|
|
|
£23 |
|
|
|
£374 |
|
Dr M Slaoui |
|
|
$72 |
|
|
|
$131 |
|
|
|
$59 |
|
|
|
|
|
|
|
$399 |
|
|
|
$731 |
|
|
|
$332 |
|
|
|
$58 |
|
|
|
$332 |
|
Dr M Slaoui |
|
|
53 |
|
|
|
55 |
|
|
|
2 |
|
|
|
|
|
|
|
572 |
|
|
|
608 |
|
|
|
36 |
|
|
|
1 |
|
|
|
36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Executive Directors |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr JP Garnier |
|
|
$1,235 |
|
|
|
$1,353 |
|
|
|
$118 |
|
|
|
|
|
|
|
$16,239 |
|
|
|
$17,423 |
|
|
|
$1,184 |
|
|
|
$106 |
|
|
|
$1,184 |
|
Mr C Viehbacher |
|
|
$126 |
|
|
|
$187 |
|
|
|
$61 |
|
|
|
|
|
|
|
$682 |
|
|
|
$1,013 |
|
|
|
$331 |
|
|
|
$60 |
|
|
|
$331 |
|
|
|
|
|
* |
|
These are shown net of contributions made by the individual. |
Mr Witty and Mr Heslop participate in the Glaxo Wellcome Defined Benefit Plan with an accrual
rate of 1/30th of final pensionable salary per annum. In 2000 all benefits accrued under the
Glaxo Wellcome UK pension arrangements were augmented by the Trustees of the plans by 5% to reflect a distribution of surplus. This augmentation will apply to that element of Mr Witty and Mr
Heslops pension earnings before 31st March 2000.
Mr Wittys and Mr Heslops transfer values have been calculated on the basis of actuarial advice in
accordance with pensions regulation. The transfer value represents the present value of future
payments to be made under the pension plan. Mr Wittys annual accrued benefit has increased by
£97,331 (£88,814 excluding the effects of inflation), and the transfer value less personal
contributions has increased by £1,228,350 over the year. The increase in Mr Wittys pensionable
salary of £300,000 reflecting his appointment to CEO is the primary reason for the increase in
transfer value. Mr Heslops annual accrued benefit has increased by £28,459 (£22,911 excluding the
effects of inflation) and the transfer value less personal contributions has increased by £214,095
over the year.
|
|
|
|
|
|
|
|
|
|
|
|
98
GSK Annual Report
2008 |
|
|
|
|
Report of the Directors
|
|
|
|
|
Remuneration
Report continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension benefits
Dr Slaoui and Mr Viehbacher are
members of the US Executive Cash Balance Pension Plan. The plan
provides for an Executive Pension Credit, under which GSK makes annual contributions calculated as
a percentage of the executives base salary. GSK makes contributions at 38% of base pay. The fund
increases at an interest rate set annually in advance based on the 30 year US Treasury bond rate to
provide a cash sum at retirement. The plan has no entitlement to a spouses pension or to pension
increases.
Mr Viehbacher resigned from the Board on 8th September 2008 and left the company on 1st December
2008.
The transfer value, or cash sum, has increased by $331,860 for Dr Slaoui and $331,407 for Mr
Viehbacher over the year as a result of further accumulation of interest and contributions paid by
the company.
Dr Slaoui was an active participant in the Belgium Fortis Plan until 31st May 2006. This plan is a
defined benefit plan with a lump sum payable at normal retirement which is age 60 for the plan.
The transfer value, or cash sum, of Dr Slaouis plan has
increase by 36,380 over the year as a
result of further accumulation of interest.
Dr Garnier retired from the company on 31st May 2008. He was a member of the US Cash Balance
Pension Plan, under which GSK made annual contributions calculated as a percentage of base salary
and bonus. GSK made annual contributions of 15% of Dr Garniers annual salary and bonus as detailed
in his contract. The fund increased at an interest rate set annually based on the 30 year US
Treasury bond rate to provide a cash sum at retirement. The plan has no entitlement to a spouses
pension or to pension increases. Dr Garnier has selected to receive his pension payments on an
annual basis paid over 15 years commencing January 2009. The transfer value, or cash sum, has
increased by $1,184,468 over the year for Dr Garniers plan as a result of further accumulation of
interest and contributions paid by the company.
Dr Slaoui, Dr Garnier and Mr Viehbacher are also members of the US Retirement Savings Plan, a 401k
savings scheme open to all US employees and the Executive Supplemental Savings Plan, a savings
scheme open to executives to accrue benefits above US government limits imposed on the Retirement
Savings Plan. Contributions to both plans are invested in a range of funds and the value of the
accumulated funds is paid at retirement.
During 2008, contributions of $98,474 (£53,229) were paid into these two schemes by GSK in respect
of Dr Slaoui, $143,314 (£77,467) in respect of Dr Garnier and $96,958 (£52,410) in respect of Mr
Viehbacher.
Further information is also provided on compensation and interests of Directors and Senior
Management as a group (the group). For this purpose, the group is defined as the Executive and
Non-Executive Directors and members of the CET. For the financial year 2008, the total
compensation paid to members of the group for the periods during which they served in that capacity
was £17,352,130, the aggregate increase in accrued pension benefits, net of inflation, was
£772,637 and the aggregate payment to defined contribution schemes was £485,612.
During 2008, the members of the group were granted 1,454,517 share options and 607,836 ADS options
under the Share Option Plan, were awarded 629,176 shares and 291,547 ADS under the Performance
Share Plan, were awarded 2,520 shares and 3,870 ADS under the Share Value Plan and were awarded
35,778 notional shares under the Deferred Investment Award Plan. Members of the group were also
awarded through the reinvestment of dividends 71,755 shares and 54,110 ADS in the Performance Share
Plan and 2,100 notional shares and 144 notional ADS in the Deferred Investment Award Plan.
At 24th February 2009, the group (comprising 28 persons) owned 765,249 shares and 78,770 ADS,
constituting less than 1% of the issued share capital of the company. The group also held, at that
date: options to purchase 6,742,286 shares and 2,170,034 ADS; 1,124,013 shares and 417,316 ADS
awarded under the Performance Share Plan, including those shares and ADS that are vested and
deferred; 38,113 vested and deferred ADS under the legacy SmithKline Beecham Mid-Term Incentive
Plan; 20,130 shares and 6,250 ADS awarded under the Share Value Plan and 83,460 notional shares
awarded under the Deferred Investment Award Plan. These holdings were issued under the various
executive share option plans described in Note 42 to the financial statements, Employee share
schemes.
Except as described in Note 35 to the financial statements,
Related party transactions, during or at the end of the financial year no Director or connected person had any material
interest in any contract of significance in relation to the
Groups business with a Group company.
The Directors Remuneration Report has been approved by the Board
of Directors and signed on its behalf by
Sir Christopher Gent
Chairman
3rd March 2009
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 99
|
|
|
|
|
Financial
statements
|
|
|
Financial statements
|
|
|
|
|
|
|
|
|
|
|
The financial statements set out below/(overleaf) provide a summary
of the Groups financial performance throughout 2008 and its
position as at 31st December 2008. The financial statements are
prepared in accordance with the IFRS as adopted by the European
Union and also IFRS as issued by the International Accounting
standards board. The financial statements comprise of the following
audited primary statements and related notes:
|
|
Consolidated income statement; |
|
|
|
Consolidated balance sheet; |
|
|
|
Consolidated cash flow statement, and |
|
|
|
Consolidated statement of recognised income and expense. |
Directors statement of responsibilities in relation to the Group
financial statements
The Directors are responsible for preparing the Annual Report, the
Remuneration Report and the Group financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under
that law the Directors have prepared the Group financial statements in accordance with
International Financial Reporting Standards (IFRS) as adopted by the European Union. In preparing
the Group financial statements, the Directors have also elected to comply with IFRS, as issued by
the International Accounting Standards Board (IASB). The Group financial statements are required by
law to give a true and fair view of the state of affairs of the Group as at the end of the
financial period and of the profit or loss of the Group for that period.
In preparing those financial statements, the Directors are required to:
|
|
select suitable accounting policies and then apply them consistently; |
|
|
|
|
make judgements and estimates that are reasonable and prudent; |
|
|
|
|
state that the Group financial statements comply with IFRS as adopted by the European Union and
IFRS as issued by the IASB, subject to any material departures disclosed and explained in the
financial statements. |
The Directors are responsible for keeping proper accounting records that disclose with reasonable
accuracy at any time the financial position of the Group and to enable them to ensure that the
Group financial statements and the Directors Remuneration Report comply with the Companies Acts
1985 and 2006 and Article 4 of the IAS Regulation. They are also responsible for taking reasonable
steps to safeguard the assets of the Group and ensuring the operation of systems of internal
control, and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities. The Group financial statements for the year ended 31st December 2008, comprising
principal statements and supporting notes, are set out in Financial statements on pages 102 and
180 of this Report.
The responsibilities of the auditors in relation to the Group financial statements are set out in
the Independent Auditors report on page 101.
The Group financial statements for the year ended 31st December 2008 are included in the Annual
Report, which is published in hard-copy printed form and made available on the companys website.
The Directors are responsible for the maintenance and integrity of the Annual Report on the website
in accordance with UK legislation governing the preparation and dissemination of financial
statements. Access to the website is available from outside the UK, where comparable legislation
may be different.
Each of the current Directors, whose names and functions are listed in the Corporate governance
section of the Annual Report 2008 confirms that, to the best of his or her knowledge:
|
|
the Group financial statements, which have been prepared in accordance with IFRS as adopted by the
EU and IFRS as issued by IASB, give a true and fair view of the assets, liabilities, financial
position and profit of the Group; and |
|
|
|
the Business review section contained in the Annual Report includes a fair review of the
development and performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces. |
Disclosure of information to auditors
The Directors in office at the date of this Report have each confirmed that:
|
|
so far as he or she is aware, there is no relevant audit information of which the companys
auditors are unaware; and |
|
|
|
he or she has taken all the steps that he or she ought to have taken as a Director to make himself
or herself aware of any relevant audit information and to establish that the companys auditors are
aware of that information. |
This confirmation is given and should be interpreted in accordance
with the provisions of Section 234 ZA of the Companies Act 1985.
Going concern basis
After making enquiries, the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue
to adopt the going concern basis in preparing the financial
statements.
Internal control
The Board, through the Audit Committee, has reviewed the assessment
of risks and the internal control framework that operates in GSK and
has considered the effectiveness of the system of internal control in
operation in the Group for the year covered by this report and up to
the date of its approval by the Board of Directors.
The Combined Code
The Board considers that GlaxoSmithKline plc applies the principles
of the Combined Code on Corporate Governance of the Financial
Reporting Council, as described under Corporate governance on pages
60 to 77, and has complied with its provisions except as described on
page 76.
As required by the Listing Rules of the Financial Services
Authority, the auditors have considered the Directors statement of
compliance in relation to those points of the Combined Code which
are specified for their review.
Annual Report
The Annual Report for the year ended 31st December 2008, comprising
the Report of the Directors, the Remuneration Report, the Financial
statements and additional information for investors, has been
approved by the Board of Directors and signed on its behalf by
Sir Christopher Gent
Chairman
3rd March 2009
In our opinion, the accompanying consolidated balance sheets and the related consolidated income
statement, consolidated statement of cash flows and, consolidated statements of recognised income
and expense present fairly, in all material respects, the financial position of GlaxoSmithKline and
its subsidiaries at 31st December 2008 and 31st December 2007, and the results of their operations
and their cash flows for each of the three years in the period ended 31st December 2008 in
conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board. Also in our opinion, the company maintained, in all material respects,
effective internal control over financial reporting as of 31st December 2008, based on criteria
established in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Groups management is responsible for these
financial statements, for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in
Managements annual report on internal control over financial
reporting on page 77. Our
responsibility is to express opinions on these financial statements and on the companys internal
control over financial reporting based on our audits (which were integrated audits in 2008 and
2007). We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles.
A companys internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorised acquisition, use, or disposition of the companys assets that could have a material
effect on the financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
London
4th March 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
|
|
|
|
Results |
|
|
|
|
|
|
|
|
|
|
Results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
before major |
|
|
Major |
|
|
Total |
|
|
before major |
|
|
Major |
|
|
Total |
|
|
Total |
|
|
|
Notes |
|
|
restructuring |
|
|
restructuring |
|
|
£m |
|
|
restructuring |
|
|
restructuring |
|
|
£m |
|
|
£m |
|
|
Turnover |
|
|
6 |
|
|
|
24,352 |
|
|
|
|
|
|
|
24,352 |
|
|
|
22,716 |
|
|
|
|
|
|
|
22,716 |
|
|
|
23,225 |
|
Cost of sales |
|
|
|
|
|
|
(5,776 |
) |
|
|
(639 |
) |
|
|
(6,415 |
) |
|
|
(5,206 |
) |
|
|
(111 |
) |
|
|
(5,317 |
) |
|
|
(5,010 |
) |
|
Gross profit |
|
|
|
|
|
|
18,576 |
|
|
|
(639 |
) |
|
|
17,937 |
|
|
|
17,510 |
|
|
|
(111 |
) |
|
|
17,399 |
|
|
|
18,215 |
|
Selling, general and administration |
|
|
|
|
|
|
(7,352 |
) |
|
|
(304 |
) |
|
|
(7,656 |
) |
|
|
(6,817 |
) |
|
|
(137 |
) |
|
|
(6,954 |
) |
|
|
(7,257 |
) |
Research and development |
|
|
|
|
|
|
(3,506 |
) |
|
|
(175 |
) |
|
|
(3,681 |
) |
|
|
(3,237 |
) |
|
|
(90 |
) |
|
|
(3,327 |
) |
|
|
(3,457 |
) |
Other operating income |
|
|
8 |
|
|
|
541 |
|
|
|
|
|
|
|
541 |
|
|
|
475 |
|
|
|
|
|
|
|
475 |
|
|
|
307 |
|
|
Operating profit |
|
|
9,10 |
|
|
|
8,259 |
|
|
|
(1,118 |
) |
|
|
7,141 |
|
|
|
7,931 |
|
|
|
(338 |
) |
|
|
7,593 |
|
|
|
7,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance income |
|
|
11 |
|
|
|
313 |
|
|
|
|
|
|
|
313 |
|
|
|
262 |
|
|
|
|
|
|
|
262 |
|
|
|
287 |
|
Finance costs |
|
|
12 |
|
|
|
(838 |
) |
|
|
(5 |
) |
|
|
(843 |
) |
|
|
(453 |
) |
|
|
|
|
|
|
(453 |
) |
|
|
(352 |
) |
Share of after tax profits of associates
and joint ventures |
|
|
13 |
|
|
|
48 |
|
|
|
|
|
|
|
48 |
|
|
|
50 |
|
|
|
|
|
|
|
50 |
|
|
|
56 |
|
|
Profit before taxation |
|
|
|
|
|
|
7,782 |
|
|
|
(1,123 |
) |
|
|
6,659 |
|
|
|
7,790 |
|
|
|
(338 |
) |
|
|
7,452 |
|
|
|
7,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation |
|
|
14 |
|
|
|
(2,231 |
) |
|
|
284 |
|
|
|
(1,947 |
) |
|
|
(2,219 |
) |
|
|
77 |
|
|
|
(2,142 |
) |
|
|
(2,301 |
) |
|
Profit after taxation for the year |
|
|
|
|
|
|
5,551 |
|
|
|
(839 |
) |
|
|
4,712 |
|
|
|
5,571 |
|
|
|
(261 |
) |
|
|
5,310 |
|
|
|
5,498 |
|
|
Profit attributable to minority interests |
|
|
|
|
|
|
110 |
|
|
|
|
|
|
|
110 |
|
|
|
96 |
|
|
|
|
|
|
|
96 |
|
|
|
109 |
|
Profit attributable to shareholders |
|
|
|
|
|
|
5,441 |
|
|
|
(839 |
) |
|
|
4,602 |
|
|
|
5,475 |
|
|
|
(261 |
) |
|
|
5,214 |
|
|
|
5,389 |
|
|
|
|
|
|
|
|
|
5,551 |
|
|
|
(839 |
) |
|
|
4,712 |
|
|
|
5,571 |
|
|
|
(261 |
) |
|
|
5,310 |
|
|
|
5,498 |
|
|
Basic earnings per share (pence) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
88.6 |
p |
|
|
|
|
|
|
|
|
|
|
94.4 |
p |
|
|
95.5 |
p |
Diluted earnings per share (pence) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
88.1 |
p |
|
|
|
|
|
|
|
|
|
|
93.7 |
p |
|
|
94.5 |
p |
|
The calculation of Results before major restructuring is described in Note 1, Presentation of the financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Notes |
|
|
£m |
|
|
£m |
|
|
Non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
17 |
|
|
|
9,678 |
|
|
|
7,821 |
|
Goodwill |
|
|
18 |
|
|
|
2,101 |
|
|
|
1,370 |
|
Other intangible assets |
|
|
19 |
|
|
|
5,869 |
|
|
|
4,456 |
|
Investments in associates and joint ventures |
|
|
20 |
|
|
|
552 |
|
|
|
329 |
|
Other investments |
|
|
21 |
|
|
|
478 |
|
|
|
517 |
|
Deferred tax assets |
|
|
14 |
|
|
|
2,760 |
|
|
|
2,196 |
|
Derivative financial instruments |
|
|
41 |
|
|
|
107 |
|
|
|
1 |
|
Other non-current assets |
|
|
22 |
|
|
|
579 |
|
|
|
687 |
|
|
Total non-current assets |
|
|
|
|
|
|
22,124 |
|
|
|
17,377 |
|
|
Current assets |
|
|
|
|
|
|
|
|
|
|
|
|
Inventories |
|
|
23 |
|
|
|
4,056 |
|
|
|
3,062 |
|
Current tax recoverable |
|
|
14 |
|
|
|
76 |
|
|
|
58 |
|
Trade and other receivables |
|
|
24 |
|
|
|
6,265 |
|
|
|
5,495 |
|
Derivative financial instruments |
|
|
41 |
|
|
|
856 |
|
|
|
475 |
|
Liquid investments |
|
|
32 |
|
|
|
391 |
|
|
|
1,153 |
|
Cash and cash equivalents |
|
|
25 |
|
|
|
5,623 |
|
|
|
3,379 |
|
Assets held for sale |
|
|
26 |
|
|
|
2 |
|
|
|
4 |
|
|
Total current assets |
|
|
|
|
|
|
17,269 |
|
|
|
13,626 |
|
|
Total assets |
|
|
|
|
|
|
39,393 |
|
|
|
31,003 |
|
|
Current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Short-term borrowings |
|
|
32 |
|
|
|
(956 |
) |
|
|
(3,504 |
) |
Trade and other payables |
|
|
27 |
|
|
|
(6,075 |
) |
|
|
(4,861 |
) |
Derivative financial instruments |
|
|
41 |
|
|
|
(752 |
) |
|
|
(262 |
) |
Current tax payable |
|
|
14 |
|
|
|
(780 |
) |
|
|
(826 |
) |
Short-term provisions |
|
|
29 |
|
|
|
(1,454 |
) |
|
|
(892 |
) |
|
Total current liabilities |
|
|
|
|
|
|
(10,017 |
) |
|
|
(10,345 |
) |
|
Non-current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings |
|
|
32 |
|
|
|
(15,231 |
) |
|
|
(7,067 |
) |
Deferred tax liabilities |
|
|
14 |
|
|
|
(714 |
) |
|
|
(887 |
) |
Pensions and other post-employment benefits |
|
|
28 |
|
|
|
(3,039 |
) |
|
|
(1,383 |
) |
Other provisions |
|
|
29 |
|
|
|
(1,645 |
) |
|
|
(1,035 |
) |
Derivative financial instruments |
|
|
41 |
|
|
|
(2 |
) |
|
|
(8 |
) |
Other non-current liabilities |
|
|
30 |
|
|
|
(427 |
) |
|
|
(368 |
) |
|
Total non-current liabilities |
|
|
|
|
|
|
(21,058 |
) |
|
|
(10,748 |
) |
|
Total liabilities |
|
|
|
|
|
|
(31,075 |
) |
|
|
(21,093 |
) |
|
Net assets |
|
|
|
|
|
|
8,318 |
|
|
|
9,910 |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Share capital |
|
|
33 |
|
|
|
1,415 |
|
|
|
1,503 |
|
Share premium account |
|
|
33 |
|
|
|
1,326 |
|
|
|
1,266 |
|
Retained earnings |
|
|
34 |
|
|
|
4,622 |
|
|
|
6,475 |
|
Other reserves |
|
|
34 |
|
|
|
568 |
|
|
|
359 |
|
|
Shareholders equity |
|
|
|
|
|
|
7,931 |
|
|
|
9,603 |
|
|
Minority interests |
|
|
34 |
|
|
|
387 |
|
|
|
307 |
|
|
Total equity |
|
|
|
|
|
|
8,318 |
|
|
|
9,910 |
|
|
Approved by the Board on 3rd March 2009
Sir Christopher Gent
Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
Notes |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash flow from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation for the year |
|
|
|
|
|
|
4,712 |
|
|
|
5,310 |
|
|
|
5,498 |
|
Adjustments reconciling profit after tax to operating cash flows |
|
|
36 |
|
|
|
4,343 |
|
|
|
2,770 |
|
|
|
2,705 |
|
|
Cash generated from operations |
|
|
|
|
|
|
9,055 |
|
|
|
8,080 |
|
|
|
8,203 |
|
Taxation paid |
|
|
|
|
|
|
(1,850 |
) |
|
|
(1,919 |
) |
|
|
(3,846 |
) |
|
Net cash inflow from operating activities |
|
|
|
|
|
|
7,205 |
|
|
|
6,161 |
|
|
|
4,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
|
|
|
|
(1,437 |
) |
|
|
(1,516 |
) |
|
|
(1,366 |
) |
Proceeds from sale of property, plant and equipment |
|
|
|
|
|
|
20 |
|
|
|
35 |
|
|
|
43 |
|
Purchase of intangible assets |
|
|
|
|
|
|
(632 |
) |
|
|
(627 |
) |
|
|
(224 |
) |
Proceeds from sale of intangible assets |
|
|
|
|
|
|
171 |
|
|
|
9 |
|
|
|
175 |
|
Purchase of equity investments |
|
|
|
|
|
|
(87 |
) |
|
|
(186 |
) |
|
|
(57 |
) |
Proceeds from sale of equity investments |
|
|
|
|
|
|
42 |
|
|
|
45 |
|
|
|
32 |
|
Share transactions with minority shareholders |
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
(157 |
) |
Purchase of businesses, net of cash acquired |
|
|
38 |
|
|
|
(454 |
) |
|
|
(1,027 |
) |
|
|
(273 |
) |
Disposal of businesses and interest in associates |
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
Investments in associates and joint ventures |
|
|
38 |
|
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(13 |
) |
Decrease/(increase) in liquid investments |
|
|
|
|
|
|
905 |
|
|
|
(39 |
) |
|
|
(55 |
) |
Interest received |
|
|
|
|
|
|
320 |
|
|
|
247 |
|
|
|
299 |
|
Dividends from associates and joint ventures |
|
|
|
|
|
|
12 |
|
|
|
12 |
|
|
|
15 |
|
|
Net cash outflow from investing activities |
|
|
|
|
|
|
(1,149 |
) |
|
|
(3,048 |
) |
|
|
(1,576 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from own shares for employee share options |
|
|
|
|
|
|
9 |
|
|
|
116 |
|
|
|
151 |
|
Shares acquired by ESOP Trusts |
|
|
|
|
|
|
(19 |
) |
|
|
(26 |
) |
|
|
|
|
Issue of share capital |
|
|
33 |
|
|
|
62 |
|
|
|
417 |
|
|
|
316 |
|
Purchase of own shares for cancellation |
|
|
|
|
|
|
(3,706 |
) |
|
|
(213 |
) |
|
|
|
|
Purchase of Treasury shares |
|
|
|
|
|
|
|
|
|
|
(3,538 |
) |
|
|
(1,348 |
) |
Increase in long-term loans |
|
|
|
|
|
|
5,523 |
|
|
|
3,483 |
|
|
|
|
|
Repayment of long-term loans |
|
|
|
|
|
|
|
|
|
|
(207 |
) |
|
|
|
|
Net (repayment of)/increase in short-term loans |
|
|
|
|
|
|
(3,059 |
) |
|
|
1,632 |
|
|
|
(739 |
) |
Net repayment of obligations under finance leases |
|
|
|
|
|
|
(48 |
) |
|
|
(39 |
) |
|
|
(34 |
) |
Interest paid |
|
|
|
|
|
|
(730 |
) |
|
|
(378 |
) |
|
|
(414 |
) |
Dividends paid to shareholders |
|
|
|
|
|
|
(2,929 |
) |
|
|
(2,793 |
) |
|
|
(2,598 |
) |
Dividends paid to minority interests |
|
|
|
|
|
|
(79 |
) |
|
|
(77 |
) |
|
|
(87 |
) |
Other financing cash flows |
|
|
|
|
|
|
68 |
|
|
|
(79 |
) |
|
|
16 |
|
|
Net cash outflow from financing activities |
|
|
|
|
|
|
(4,908 |
) |
|
|
(1,702 |
) |
|
|
(4,737 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/(decrease) in cash and bank overdrafts |
|
|
37 |
|
|
|
1,148 |
|
|
|
1,411 |
|
|
|
(1,956 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange adjustments |
|
|
|
|
|
|
1,103 |
|
|
|
48 |
|
|
|
(254 |
) |
Cash and bank overdrafts at beginning of year |
|
|
|
|
|
|
3,221 |
|
|
|
1,762 |
|
|
|
3,972 |
|
|
Cash and bank overdrafts at end of year |
|
|
|
|
|
|
5,472 |
|
|
|
3,221 |
|
|
|
1,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and bank overdrafts at end of year comprise: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
5,623 |
|
|
|
3,379 |
|
|
|
2,005 |
|
Overdrafts |
|
|
|
|
|
|
(151 |
) |
|
|
(158 |
) |
|
|
(243 |
) |
|
|
|
|
|
|
|
|
5,472 |
|
|
|
3,221 |
|
|
|
1,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Exchange movements on overseas net assets |
|
|
1,101 |
|
|
|
411 |
|
|
|
(359 |
) |
Tax on exchange movements |
|
|
15 |
|
|
|
21 |
|
|
|
(78 |
) |
Fair value movements on available-for-sale investments |
|
|
(81 |
) |
|
|
(99 |
) |
|
|
84 |
|
Deferred tax on fair value movements on available-for-sale investments |
|
|
8 |
|
|
|
19 |
|
|
|
(15 |
) |
Actuarial (losses)/gains on defined benefit plans |
|
|
(1,370 |
) |
|
|
671 |
|
|
|
429 |
|
Deferred tax on actuarial movements in defined benefit plans |
|
|
441 |
|
|
|
(195 |
) |
|
|
(161 |
) |
Fair value movements on cash flow hedges |
|
|
6 |
|
|
|
(6 |
) |
|
|
(5 |
) |
Deferred tax on fair value movements on cash flow hedges |
|
|
(3 |
) |
|
|
2 |
|
|
|
2 |
|
|
Net profits/(losses) recognised directly in equity |
|
|
117 |
|
|
|
824 |
|
|
|
(103 |
) |
Profit for the year |
|
|
4,712 |
|
|
|
5,310 |
|
|
|
5,498 |
|
|
Total recognised income and expense for the year |
|
|
4,829 |
|
|
|
6,134 |
|
|
|
5,395 |
|
|
|
Total recognised income and expense for the year attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders |
|
|
4,670 |
|
|
|
6,012 |
|
|
|
5,307 |
|
Minority interests |
|
|
159 |
|
|
|
122 |
|
|
|
88 |
|
|
|
|
|
4,829 |
|
|
|
6,134 |
|
|
|
5,395 |
|
|
Description of business
GlaxoSmithKline is a major global healthcare Group which is engaged
in the creation and discovery, development, manufacture and
marketing of pharmaceutical products including vaccines,
over-the-counter (OTC) medicines and health-related consumer
products. GSKs principal pharmaceutical products include medicines
in the following therapeutic areas: respiratory, central nervous
system, anti-virals, anti-bacterials, metabolic, vaccines,
cardiovascular and urogenital, oncology and emesis.
Compliance with applicable law and IFRS
The financial statements have been prepared in accordance with the
Companies Act 1985, Article 4 of the IAS Regulation and
International Accounting Standards (IAS) and International
Financial Reporting Standards (IFRS) and related interpretations,
as adopted by the European Union.
The financial statements are also in compliance with IFRS as issued
by the International Accounting Standards Board.
Composition of financial statements
The consolidated financial statements are drawn up in Sterling, the
functional currency of GlaxoSmithKline plc, and in accordance with
IFRS accounting presentation. The financial statements comprise:
|
|
Consolidated income statement |
|
|
|
Consolidated balance sheet |
|
|
|
Consolidated cash flow statement |
|
|
|
Consolidated statement of recognised income and expense |
|
|
|
Notes to the financial statements. |
Accounting convention
The financial statements have been prepared using the historical cost convention, as modified by
the revaluation of certain items, as stated in the accounting policies.
Financial period
These financial statements cover the financial year from 1st January to 31st December 2008, with
comparative figures for the financial years from 1st January to 31st December 2007 and, where
appropriate, from 1st January to 31st December 2006.
Composition of the Group
A list of the subsidiary and associated undertakings which, in the opinion of the Directors,
principally affected the amount of profit or the net assets of the
Group is given in Note 43, Principal Group companies.
Presentation of restructuring costs
In October 2007, the Board approved the implementation of a detailed formal plan for, and GSK
announced, a significant new Operational Excellence restructuring programme. A second formal plan,
representing a significant expansion of the Operational Excellence programme, was approved by the
Board and announced in February 2009. This restructuring programme, comprising these detailed
formal plans, covers all areas of GSKs business, including manufacturing, selling, R&D and
infrastructure.
With an estimated total cost of approximately £3.6 billion, the expanded programme is expected to
deliver annual pre-tax savings of approximately £1.7 billion by the time it is substantially
complete in 2011. Given the extent and cost of the Operational Excellence programme, management
believes it has a material impact on GSKs operating results and on the manner in which GSKs
business is conducted. GSK presents the restructuring costs incurred solely as a direct result of
the Operational Excellence programme in a separate column in the income statement titled Major
restructuring.
In addition to the restructuring costs of the Operational Excellence programme, the major
restructuring column in the income statement includes restructuring costs incurred solely as a
direct result of any restructuring programmes that follow, and relate to, material acquisitions
where the operations of the acquired business overlap extensively with GSKs existing operations.
The restructuring activities that follow, and relate to, such acquisitions are of the same nature
as those undertaken under the Operational Excellence programme and are also carried out following a
detailed formal plan. Management therefore considers it appropriate to present the costs of these
restructuring activities in the same manner. The $1.65 billion (£814 million) acquisition of
Reliant Pharmaceuticals in December 2007 is the only acquisition since October 2007 that meets the
criteria set out above and thus is the only acquisition where the costs incurred as a direct result
of a related restructuring programme have been included within the major restructuring column.
The Groups results before the costs of the Operational Excellence programme and
acquisition-related restructuring programmes meeting the criteria described above are also
presented in a separate column in the income statement and are described as Results before major
restructuring. This presentation, which GSK intends to apply consistently to future major
restructuring programmes that have a material impact on GSKs operating results and on the manner
in which GSKs business is conducted, has been adopted to show clearly the Groups results both
before and after the costs of these restructuring programmes. Management believes that this
presentation assists investors in gaining a clearer understanding of the Groups financial
performance and in making projections of future financial performance, as results that include such
costs, by virtue of their size and nature, have limited comparative value. This presentation is
also consistent with the way management assesses the Groups financial performance.
Any restructuring costs that do not arise solely as a direct result of the Operational Excellence
programme and restructuring programmes following, and relating to, acquisitions meeting the
criteria described above continue to be reported in operating expenses within results before major
restructuring.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 107
|
|
|
|
|
Financial
statements |
|
|
|
|
Notes to the financial statements
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting principles and policies
The preparation of the financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
The financial statements have been prepared in accordance with the Groups accounting policies
approved by the Board and described in Note 2, Accounting principles and policies. Information on
the application of these accounting policies, including areas of estimation and judgement is given
in Note 3, Key accounting judgements and estimates. Where appropriate, comparative figures are
reclassified to ensure a consistent presentation with current year information.
Restated comparative information
As a result of the review of the strategic direction of the Group, the regional reporting structure
within the Pharmaceuticals business has been realigned. Russia and a number of developing Eastern
European markets, previously reported within Europe are now included within the Emerging Markets
sector in the Rest of World. No change has been made to the reporting structure in the Consumer
Healthcare business where these markets are still reported within Europe.
The Group has also taken the opportunity to review the allocation of entities and expenses between
the Pharmaceuticals and Consumer Healthcare businesses. As a result, one entity in China has been
reclassified from Pharmaceuticals to Consumer Healthcare. Comparative information has been restated
onto a consistent basis.
These reallocations have no impact on Group turnover or Group
operating profit.
Consolidation
The consolidated financial statements include:
|
|
the assets and liabilities, and the results and cash flows, of the company and its subsidiaries,
including ESOP Trusts |
|
|
|
the Groups share of the results and net assets of associates and joint ventures. |
The financial statements of entities consolidated are made up to 31st December each year.
Entities over which the Group has the power to govern the financial and operating policies are
accounted for as subsidiaries. Where the Group has the ability to exercise joint control, the
entities are accounted for as joint ventures, and where the Group has the ability to exercise
significant influence, they are accounted for as associates. The results and assets and liabilities
of associates and joint ventures are incorporated into the consolidated financial statements using
the equity method of accounting.
Interests acquired in entities are consolidated from the date the Group acquires control and
interests sold are de-consolidated from the date control ceases.
Transactions and balances between subsidiaries are eliminated; no profit before tax is taken on
sales between subsidiaries or on sales to joint ventures and associates until the products are sold
to customers outside the Group. Deferred tax relief on unrealised intra-Group profit is accounted
for only to the extent that it is considered recoverable.
Goodwill arising on the acquisition of interests in subsidiaries, joint ventures and associates,
representing the excess of the acquisition cost over the Groups share of the fair values of the
identifiable assets, liabilities and contingent liabilities acquired, is capitalised as a separate
item in the case of subsidiaries and as part of the cost of investment in the case of joint
ventures and associates. Goodwill is denominated in the currency of the operation acquired. Where
the cost of acquisition is below the fair value of the net assets acquired, the difference is
recognised directly in the income statement.
Foreign currency translation
Foreign currency transactions are booked in the functional currency of the Group company at the
exchange rate ruling on the date of transaction. Foreign currency monetary assets and liabilities
are retranslated into the functional currency at rates of exchange ruling at the balance sheet
date. Exchange differences are included in the income statement.
On consolidation, assets and liabilities, including related goodwill, of overseas subsidiaries,
associates and joint ventures, are translated into Sterling at rates of exchange ruling at the
balance sheet date. The results and cash flows of overseas subsidiaries, associates and joint
ventures are translated into Sterling using average rates of exchange.
Exchange adjustments arising when the opening net assets and the profits for the year retained by
overseas subsidiaries, associates and joint ventures are translated into Sterling, less exchange
differences arising on related foreign currency borrowings which hedge the Groups net investment
in these operations, are taken to a separate component of equity.
|
|
|
|
|
|
|
|
|
|
|
|
108 GSK Annual Report 2008 |
|
|
|
|
Financial
statements |
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued |
|
|
|
|
|
|
|
|
|
|
|
|
2
Accounting principles and policies
continued
When translating into Sterling the assets, liabilities, results and cash flows of overseas
subsidiaries, associates and joint ventures which are reported in currencies of hyper-inflationary
economies, adjustments are made to reflect current price levels. Any loss on net monetary assets is
charged to the consolidated income statement.
Revenue
Revenue is recognised in the income statement when goods or services are supplied or made available
to external customers against orders received, title and risk of loss is passed to the customer,
and reliable estimates can be made of relevant deductions. Turnover represents net invoice value
after the deduction of discounts and allowances given and accruals for estimated future rebates and
returns. The methodology and assumptions used to estimate rebates and returns are monitored and
adjusted regularly in the light of contractual and legal obligations, historical trends, past
experience and projected market conditions. Market conditions are evaluated using wholesaler and
other third-party analyses, market research data and internally generated information. Turnover
also includes co-promotion income where the Group records its share of the revenue but no related
cost of sales. Value added tax and other sales taxes are excluded from revenue.
Royalty income is recognised in other operating income on an accruals basis in accordance with the
terms of the relevant licensing agreements.
Expenditure
Expenditure is recognised in respect of goods and services received when supplied in accordance
with contractual terms. Provision is made when an obligation exists for a future liability in
respect of a past event and where the amount of the obligation can be reliably estimated.
Manufacturing start-up costs between validation and the achievement of normal production are
expensed as incurred. Advertising and promotion expenditure is charged to the income statement as
incurred. Shipment costs on intercompany transfers are charged to cost of sales; distribution costs
on sales to customers are included in selling, general and administrative expenditure.
Restructuring costs are recognised and provided for, where appropriate, in respect of the direct
expenditure of a business reorganisation where the plans are sufficiently detailed and well
advanced, and where appropriate communication to those affected has been undertaken.
Research and development
Research and development expenditure is charged to the income statement in the period in which it
is incurred. Development expenditure is capitalised when the criteria for recognising an asset are
met, usually when a regulatory filing has been made in a major market and approval is considered
highly probable. Property, plant and equipment used for research and development is depreciated in
accordance with the Groups policy.
Environmental expenditure
Environmental expenditure related to existing conditions resulting from past or current operations
and from which no current or future benefit is discernible is charged to the income statement. The
Group recognises its liability on a site-by-site basis when it can be reliably estimated. This
liability includes the Groups portion of the total costs and also a portion of other potentially
responsible parties costs when it is probable that they will not be able to satisfy their
respective shares of the clean-up obligation. Recoveries of reimbursements are recorded as assets
when virtually certain.
Legal and other disputes
Provision is made for the anticipated settlement costs of legal or other disputes against the Group
where an outflow of resources is considered probable and a reasonable estimate can be made of the
likely outcome. In addition, provision is made for legal or other expenses arising from claims
received or other disputes. In respect of product liability claims related to products where there
is sufficient history of claims made and settlements, an incurred but not reported (IBNR) actuarial
technique is used to determine a reasonable estimate of the Groups exposure to unasserted claims
for those products and a provision is made on that basis.
No provision is made for other unasserted claims or where an obligation exists under a dispute but
it is not possible to make a reasonable estimate. Costs associated with claims made by the Group
against third parties are charged to the income statement as they are incurred.
Pensions and other post-employment benefits
The costs of providing pensions under defined benefit schemes are calculated using the projected
unit credit method and spread over the period during which benefit is expected to be derived from
the employees services, consistent with the advice of qualified actuaries. Pension obligations are
measured as the present value of estimated future cash flows discounted at rates reflecting the
yields of high quality corporate bonds.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 109
|
|
|
|
|
Financial
statements |
|
|
|
|
Notes
to the financial statements continued |
|
|
|
|
|
|
|
|
|
|
|
|
2
Accounting principles and policies
continued
Pension scheme assets are measured at fair value at the balance sheet date. Actuarial gains and
losses, differences between the expected and actual returns of assets and the effect of changes in
actuarial assumptions, are recognised in the statement of recognised income and expense in the year
in which they arise. The Groups contributions to defined contribution plans are charged to the
income statement as incurred. The costs of other post-employment liabilities are calculated in a
similar way to defined benefit pension schemes and spread over the period during which benefit is
expected to be derived from the employees services, in accordance with the advice of qualified
actuaries.
Employee share plans
Incentives in the form of shares are provided to employees under share option and share award
schemes.
The fair values of these options and awards are calculated at their grant dates using a
Black-Scholes option pricing model and charged to the income statement over the relevant vesting
periods.
The Group provides finance to ESOP Trusts to purchase company shares on the open market to
meet the obligation to provide shares when employees exercise their options or awards. Costs of
running the ESOP Trusts are charged to the income statement. Shares held by the ESOP Trusts are
deducted from other reserves. A transfer is made between other reserves and retained earnings over
the vesting periods of the related share options or awards to reflect the ultimate proceeds
receivable from employees on exercise.
Property, plant and equipment
Property, plant and equipment (PP&E) is stated at the cost of purchase or construction less
provisions for depreciation and impairment. Financing costs are not capitalised.
Depreciation is calculated to write off the cost less residual value of PP&E, excluding freehold
land, using the straight-line basis over the expected useful life. Residual values and lives are
reviewed, and where appropriate adjusted, annually. The normal expected useful lives of the major
categories of PP&E are:
|
|
|
Freehold buildings
|
|
20 to 50 years |
Leasehold land and
|
|
Lease term or 20 to 50 years |
buildings |
|
|
Plant and machinery
|
|
10 to 20 years |
Fixtures and equipment
|
|
3 to 10 years |
|
On disposal of PP&E, the cost and related accumulated depreciation and impairments are removed from
the financial statements and the net amount, less any proceeds, is taken to the income statement.
Leases
Leasing agreements which transfer to the Group substantially all the benefits and risks of
ownership of an asset are treated as finance leases, as if the asset had been purchased outright.
The assets are included in PP&E or computer software and the capital elements of the leasing
commitments are shown as obligations under finance leases. Assets held under finance leases are
depreciated on a basis consistent with similar owned assets or the lease term if shorter. The
interest element of the lease rental is included in the income statement. All other leases are
operating leases and the rental costs are charged to the income statement on a straight-line basis
over the lease term.
Goodwill
Goodwill is stated at cost less impairments. Goodwill is deemed to have an indefinite useful life
and is tested for impairment annually.
Where the fair value of the interest acquired in an entitys
assets, liabilities and contingent liabilities exceeds the consideration paid, this excess is
recognised immediately as a gain in the income statement.
Other intangible assets
Intangible assets are stated at cost less provisions for
amortisation and impairments.
Licences, patents, know-how and marketing rights separately acquired or acquired as part of a
business combination are amortised over their estimated useful lives, not exceeding 25 years, using
the straight-line basis, from the time they are available for use. The estimated useful lives for
determining the amortisation charge take into account patent lives, where applicable, as well as
the value obtained from periods of non-exclusivity. Asset lives are reviewed, and where appropriate
adjusted, annually. Contingent milestone payments are recognised at the point that the contingent
event becomes certain. Any development costs incurred by the Group and associated with acquired
licences, patents, know-how or marketing rights are written off to the income statement when
incurred, unless the criteria for recognition of an internally generated intangible asset are met,
usually when a regulatory filing has been made in a major market and approval is considered highly
probable.
Acquired brands are valued independently as part of the fair value of businesses acquired from
third parties where the brand has a value which is substantial and long-term and where the brands
either are contractual or legal in nature or can be sold separately from the rest of the businesses
acquired. Brands are amortised over their estimated useful lives, except where it is considered
that the useful economic life is indefinite.
The costs of acquiring and developing computer software for internal use and internet sites for
external use are capitalised as intangible fixed assets where the software or site supports a
significant business system and the expenditure leads to the creation of a durable asset. ERP
systems software is amortised over seven years and other computer software over three to five
years.
|
|
|
|
|
|
|
|
|
|
|
|
110
GSK Annual Report
2008 |
|
|
|
|
Financial
statements |
|
|
|
|
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
Accounting principles and policies continued
Impairment of non-current assets
The carrying values of all non-current assets are reviewed for impairment when there is an
indication that the assets might be impaired. Additionally, goodwill, intangible assets with
indefinite useful lives and intangible assets which are not yet available for use are tested for
impairment annually. Any provision for impairment is charged to the income statement in the year
concerned.
Impairments of goodwill are not reversed. Impairment losses on other non-current assets are only
reversed if there has been a change in estimates used to determine recoverable amounts and only to
the extent that the revised recoverable amounts do not exceed the carrying values that would have
existed, net of depreciation or amortisation, had no impairments been recognised.
Investments in associates and joint ventures
Investments in associates and joint ventures are carried in the consolidated balance sheet at the
Groups share of their net assets at date of acquisition and of their post-acquisition retained
profits or losses together with any goodwill arising on the acquisition.
Available-for-sale investments
Liquid investments and other investments are classified as available-for-sale investments and are
initially recorded at fair value plus transaction costs and then remeasured at subsequent reporting
dates to fair value. Unrealised gains and losses on available-for-sale investments are recognised
directly in equity. Impairments arising from the significant or prolonged decline in fair value of
an investment reduce the carrying amount of the asset directly and are charged to the income
statement. On disposal or impairment of the investments, any gains and losses that have been
deferred in equity are recycled into the income statement. Dividends on equity investments are
recognised in the income statement when the Groups right to receive payment is established. Equity
investments are recorded in non-current assets unless they are expected to be sold within one year.
Purchases and sales of equity investments are accounted for on the trade date and purchases and
sales of other available-for-sale investments are accounted for on settlement date.
Inventories
Inventories are included in the financial statements at the lower of cost (including raw materials,
direct labour, other direct costs and related production overheads) and net realisable value. Cost
is generally determined on a first in, first out basis. Pre-launch inventory is held as an asset
when there is a high probability of regulatory approval for the product. Before that point a
provision is made against the carrying value to its recoverable amount; the provision is then
reversed at the point when a high probability of regulatory approval is determined.
Trade receivables
Trade receivables are carried at original invoice amount less any provisions for doubtful debts.
Provisions are made where there is evidence of a risk of non-payment, taking into account ageing,
previous experience and general economic conditions. When a trade receivable is determined to be
uncollectable it is written off, firstly against any provision available and then to the income
statement.
Subsequent recoveries of amounts previously provided for are credited to the income statement.
Long-term receivables are discounted where the effect is material.
Trade payables
Trade payables are held at amortised cost which equates to nominal value. Long-term payables are
discounted where the effect is material.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, current balances with banks and similar
institutions and highly liquid investments with original maturities of three months or less. They
are readily convertible into known amounts of cash and have an insignificant risk of changes in
value.
Taxation
Current tax is provided at the amounts expected to be paid applying tax rates that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the temporary differences can be utilised. Deferred
tax is provided on temporary differences arising on investments in subsidiaries, associates and
joint ventures, except where the timing of the reversal of the temporary difference can be
controlled and it is probable that the temporary difference will not reverse in the foreseeable
future. Deferred tax is provided using rates of tax that have been enacted or substantively enacted
by the balance sheet date. Deferred tax liabilities and assets are not discounted.
Derivative financial instruments and hedging
Derivative financial instruments are used to manage exposure to market risks from treasury
operations. The principal derivative instruments used by GlaxoSmithKline are foreign currency
swaps, interest rate swaps and forward foreign exchange contracts. The Group does not hold or issue
derivative financial instruments for trading or speculative purposes.
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 111
|
|
|
|
|
Financial
statements |
|
|
|
|
Notes
to the financial statements continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
Accounting principles and policies continued
Derivative financial instruments are classified as held-for-trading and are carried in the balance
sheet at fair value. Derivatives designated as hedging instruments are classified on inception as
cash flow hedges, net investment hedges or fair value hedges.
Changes in the fair value of
derivatives designated as cash flow hedges are recognised in equity, to the extent that the hedges
are effective. Ineffective portions are recognised in profit or loss immediately. Amounts deferred
in equity are recycled to the income statement when the hedged item affects profit or loss.
Net
investment hedges are accounted for in a similar way to cash flow hedges.
Changes in the fair value of derivatives designated as fair value hedges are recorded in the income
statement, together with the changes in the fair value of the hedged asset or liability.
Changes in the fair value of any derivative instruments that do not qualify for hedge accounting
are recognised immediately in the income statement.
Discounting
Where the time effect of money is material, balances are discounted to current values using
appropriate rates of interest. The unwinding of the discounts is recorded in finance income/costs.
In preparing the financial statements, management is required to make estimates and assumptions
that affect the amounts of assets, liabilities, revenue and expenses reported in the financial
statements. Actual amounts and results could differ from those estimates. The following are
considered to be the key accounting judgements and estimates made.
Turnover
Revenue is
recognised when title and risk of loss is passed to the customer and reliable estimates
can be made of relevant deductions. Gross turnover is reduced by rebates, discounts, allowances and
product returns given or expected to be given, which vary by product arrangements and buying
groups. These arrangements with purchasing organisations are dependent upon the submission of
claims some time after the initial recognition of the sale. Accruals are made at the time of sale
for the estimated rebates, discounts or allowances payable or returns to be made, based on
available market information and historical experience.
Because the amounts are estimated they may
not fully reflect the final outcome, and the amounts are subject to change dependent upon, amongst
other things, the types of buying group and product sales mix.
The level of accrual is reviewed and adjusted regularly in the light of contractual and legal
obligations, historical trends, past experience and projected market conditions. Market conditions
are evaluated using wholesaler and other third-party analyses, market research data and internally
generated information. Future events could cause the assumptions on which the accruals are based to
change, which could affect the future results of the Group.
Where the Group co-promotes a product and the third party records the sale, the Group records its
share of revenue as co-promotion income within turnover. The nature of co-promotion activities is
such that the Group records no costs of sales.
Pharmaceutical turnover includes co-promotion revenue of £378 million (2007 £274 million, 2006 -
£182 million).
Taxation
Current tax is provided at the amounts expected to be paid, and deferred tax is provided on
temporary differences between the tax bases of assets and liabilities and their carrying amounts,
at the rates that have been enacted or substantively enacted by the balance sheet date.
The Group has open tax issues with a number of revenue authorities. GSK continues to believe that it has made adequate
provision for the liabilities likely to arise from open assessments. Where open issues exist the
ultimate liability for such matters may vary from the amounts provided and is dependent upon the
outcome of negotiations with the relevant tax authorities or, if necessary, litigation proceedings.
Legal and other disputes
GSK provides for anticipated settlement costs where an outflow of resources is considered probable
and a reasonable estimate may be made of the likely outcome of the dispute and legal and other
expenses arising from claims against the Group.
The companys Directors, having taken legal advice, have established provisions after taking into
account the relevant facts and circumstances of each matter and in accordance with accounting
requirements. Provisions for product liability claims on certain products have been made on an
incurred but not reported basis where sufficient history of claims made and settlements is
available. No provisions have been made for other unasserted claims or for claims for which no
reasonable estimate of the likely outcome can yet be made.
The ultimate liability for pending and unasserted claims may vary from the amounts provided, if
any, and is dependent upon the outcome of litigation proceedings, investigations and possible
settlement negotiations.
|
|
|
|
|
|
|
|
|
|
|
|
112
GSK Annual Report
2008 |
|
|
|
|
Financial
statements |
|
|
|
|
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3
Key accounting judgements and
estimates continued
Property, plant and equipment
The carrying values of property, plant and equipment are reviewed for impairment when there is an
indication that the values of the assets might be impaired. Impairment is determined by reference
to the higher of fair value less costs to sell and value in use, measured by assessing
risk-adjusted future cash flows discounted using appropriate interest rates. These future cash
flows are based on business forecasts and are therefore inherently judgemental. Future events could
cause the assumptions used in these impairment reviews to change with a consequent adverse effect
on the future results of the Group.
Goodwill
Goodwill arising on business combinations is capitalised and allocated to an appropriate cash
generating unit. It is deemed to have an indefinite life and so is not amortised. Annual impairment
tests of the relevant cash generating units are performed. Impairment tests are based on
established market multiples or risk-adjusted future cash flows discounted using appropriate
interest rates. These future cash flows are based on business forecasts and are therefore
inherently judgemental. Future events could cause the assumptions used in these impairment reviews
to change with a consequent adverse effect on the future results of the Group.
Other intangible assets
Where intangible assets are acquired by GSK from third parties the costs of acquisition are
capitalised. Licences to compounds in development are amortised from the point at which they are
available for use, over their estimated useful lives, which may include periods of non-exclusivity.
Estimated useful lives are reviewed annually and impairment tests are undertaken if events occur
which call into question the carrying values of the assets. Brands acquired with businesses are
capitalised independently where they are separable and have an expected life of more than one year.
Brands are amortised on a straight-line basis over their estimated useful lives, not exceeding 25
years, except where the end of the useful economic life cannot be foreseen. Where brands are not
amortised, they are subject to annual impairment tests. Impairment tests are based on established
market multiples or risk-adjusted future cash flows discounted using appropriate interest rates.
These future cash flows are based on business forecasts and are therefore inherently judgemental.
Future events could cause the assumptions used in these impairment reviews to change with a
consequent adverse effect on the future results of the Group.
Pensions and other post-employment benefits
The costs of providing pensions and other post-employment benefits are charged to the income
statement in accordance with IAS 19 over the period during which benefit is derived from the
employees services. The costs are assessed on the basis of assumptions selected by management.
These assumptions include future earnings and pension increases, discount rates, expected long term
rates of return on assets and mortality rates, and are disclosed in Note 28, Pensions and other
post-employment benefits.
The expected long term rates of return on bonds are determined based on the portfolio mix of
index-linked, government and corporate bonds. An equity risk premium is added to this for equities.
Discount rates are based on appropriate long-term indices, including the iBoxx over 15 year AA
index for the UK, and Moodys Aa index for the USA. Sensitivity analysis is provided in Note 28,
Pensions and other post-employment benefits, but a 0.25% reduction in the discount rate would
lead to an increase in the net pension deficit of approximately £349 million and an increase in the
annual pension cost of approximately £4 million. The selection of different assumptions could
affect the future results of the Group.
The following IFRS and IFRIC interpretations have been issued by the IASB and are likely to affect
future Annual Reports, although none is expected to have a material impact on the results or
financial position of the Group.
IFRS 8 Operating segments was issued in November 2006 and is
required to be implemented by GSK from 1st January 2009. This
standard replaces IAS 14 and aligns the segmental reporting
requirements with those of the equivalent US standard, whereby
segmental information is to be disclosed on the same basis as that
used for internal reporting purposes. GSK is assessing the impact
of this standard on the presentation of its segmental information.
IAS 23 (Revised) Borrowing costs was issued in March 2007 and will be implemented prospectively
from 1st January 2009. It requires borrowing costs attributable to the acquisition or construction
of certain assets to be capitalised. The option currently taken by GSK of expensing such costs as
incurred will no longer be available.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 113 |
|
|
|
|
Financial
statements |
|
|
|
|
Notes to the financial
statements continued
|
|
|
|
|
|
|
IAS 1 (Revised) Presentation of financial statements was issued in September 2007 and will be
effective from 1st January 2009. The amendments to the Standard mandate various presentation
formats and disclosures, many of which are already adopted by GSK. Movements in equity will be
presented in a Statement of changes in equity rather than as a note to the financial statements.
IFRS 2 (Revised) Share-based payment was issued in January 2008. The revised Standard will apply
retrospectively from 1st January 2009 and specifies that all cancellations of share-based payment
arrangements, including those by an employee or other counterparty, should receive the same
accounting treatment of requiring immediate recognition in the income statement of the charge that
would otherwise have been recognised over the remainder of the service period.
The IASBs annual improvements project was published in May 2008 and will be effective from 1st
January 2009. The project makes minor amendments to a number of Standards on topics including
investments in associates, intangible assets, borrowing costs and impairment of assets.
IFRS 3 (Revised) Business combinations was issued in January 2008 and will apply to business
combinations arising from 1st January 2010. Amongst other changes, the new Standard will require
recognition of subsequent changes in the fair value of contingent consideration in the income
statement rather than against goodwill, and transaction costs to be recognised immediately in the
income statement. Fair value gains or losses on existing investments in an acquired company will be
recognised in the income statement at the date of acquisition.
IAS 27 (Revised) Consolidated and separate financial statements was issued in January 2008 and
will be implemented at the same time as IFRS 3 (Revised). In respect of transactions with
non-controlling interests in Group entities that do not result in a change of control, the revised
Standard requires that the difference between the consideration paid or received and the recorded
non-controlling interest is recognised in equity. In the case of divestment of a subsidiary, any
retained interest will be remeasured to fair value and the difference between fair value and the
previous carrying value will be recognised immediately in the income statement.
IFRS 3 (Revised) and IAS 27 (Revised) will both be applied prospectively to transactions occurring
after the implementation date. It is therefore not possible to assess in advance their impact on
the financial statements of the Group.
The Group uses the average of exchange rates prevailing during the period to translate the results
and cash flows of overseas subsidiaries, joint ventures and associated undertakings into Sterling
and period end rates to translate the net assets of those undertakings. The currencies which most
influence these translations and the relevant exchange rates were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
Average rates: |
|
|
|
|
|
|
|
|
|
|
|
|
£/US$ |
|
|
1.85 |
|
|
|
2.00 |
|
|
|
1.85 |
|
£/Euro |
|
|
1.26 |
|
|
|
1.46 |
|
|
|
1.47 |
|
£/Yen |
|
|
192 |
|
|
|
235 |
|
|
|
215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period end rates: |
|
|
|
|
|
|
|
|
|
|
|
|
£/US$ |
|
|
1.44 |
|
|
|
1.99 |
|
|
|
1.96 |
|
£/Euro |
|
|
1.04 |
|
|
|
1.36 |
|
|
|
1.48 |
|
£/Yen |
|
|
131 |
|
|
|
222 |
|
|
|
233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114 GSK Annual Report 2008 |
|
|
|
|
Financial
statements |
|
|
|
|
Notes to the financial
statements continued
|
|
|
|
|
|
|
|
The Groups primary segment reporting is by business sector with geographical reporting being the
secondary format. The business sectors consist of Pharmaceuticals and Consumer Healthcare. The
geographical sectors of the USA, Europe and Rest of World reflect the Groups most significant
regional markets and are consistent with the Groups regional market management reporting
structure. Business sector data includes an allocation of corporate costs to each sector on an
appropriate basis. There are no sales between business sectors. The Groups activities are
organised on a global basis. The geographical sector figures are influenced by the location of the
Groups operating resources, in particular manufacturing and research, and by variations over time
in intra-Group trading and funding arrangements. Turnover is shown by business sector, by location
of customer and by location of subsidiary. Operating profit is shown by business sector and by
location of subsidiary. Other geographic information is given by location of subsidiary. Following
a review of the strategic direction of the Group during the year, several entities have been
reclassified from Europe to Rest of World. In addition, one entity in China has been reclassified
from Pharmaceuticals to Consumer Healthcare. Comparative information has been restated onto a
consistent basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
2008 |
|
|
(restated) |
|
|
(restated) |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover by business sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
20,381 |
|
|
|
19,163 |
|
|
|
20,013 |
|
Consumer Healthcare |
|
|
3,971 |
|
|
|
3,553 |
|
|
|
3,212 |
|
|
Turnover |
|
|
24,352 |
|
|
|
22,716 |
|
|
|
23,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit by business sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
6,331 |
|
|
|
6,877 |
|
|
|
7,108 |
|
Consumer Healthcare |
|
|
810 |
|
|
|
716 |
|
|
|
700 |
|
|
Operating profit |
|
|
7,141 |
|
|
|
7,593 |
|
|
|
7,808 |
|
Finance income |
|
|
313 |
|
|
|
262 |
|
|
|
287 |
|
Finance costs |
|
|
(843 |
) |
|
|
(453 |
) |
|
|
(352 |
) |
Share of after tax profits of associates and joint ventures: |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
48 |
|
|
|
50 |
|
|
|
56 |
|
Consumer Healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation |
|
|
6,659 |
|
|
|
7,452 |
|
|
|
7,799 |
|
Taxation |
|
|
(1,947 |
) |
|
|
(2,142 |
) |
|
|
(2,301 |
) |
|
Profit after taxation for the year |
|
|
4,712 |
|
|
|
5,310 |
|
|
|
5,498 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment and other intangible assets by business sector |
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
2,173 |
|
|
|
2,562 |
|
|
|
|
|
Consumer Healthcare |
|
|
138 |
|
|
|
327 |
|
|
|
|
|
|
Total additions |
|
|
2,311 |
|
|
|
2,889 |
|
|
|
|
|
|
Depreciation/amortisation |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
(1,175 |
) |
|
|
(931 |
) |
|
|
|
|
Consumer Healthcare |
|
|
(56 |
) |
|
|
(91 |
) |
|
|
|
|
|
Total depreciation/amortisation |
|
|
(1,231 |
) |
|
|
(1,022 |
) |
|
|
|
|
|
Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
(391 |
) |
|
|
(216 |
) |
|
|
|
|
Consumer Healthcare |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
Total impairment |
|
|
(391 |
) |
|
|
(218 |
) |
|
|
|
|
|
Impairment reversal |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
18 |
|
|
|
67 |
|
|
|
|
|
Consumer Healthcare |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Total impairment reversal |
|
|
20 |
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 115
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
6
Segment information continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
2008 |
|
|
(restated) |
|
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
Investments in associates and joint ventures by
business sector |
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
552 |
|
|
|
329 |
|
Consumer Healthcare |
|
|
|
|
|
|
|
|
|
Investment in associates and joint ventures |
|
|
552 |
|
|
|
329 |
|
|
|
|
|
|
|
|
|
|
|
Total assets by business sector |
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
25,060 |
|
|
|
20,221 |
|
Consumer Healthcare |
|
|
3,966 |
|
|
|
3,187 |
|
|
Total operating assets |
|
|
29,026 |
|
|
|
23,408 |
|
Investments in associates and joint ventures |
|
|
552 |
|
|
|
329 |
|
Liquid investments |
|
|
391 |
|
|
|
1,153 |
|
Derivative financial instruments |
|
|
963 |
|
|
|
476 |
|
Cash and cash equivalents |
|
|
5,623 |
|
|
|
3,379 |
|
Current and deferred taxation |
|
|
2,836 |
|
|
|
2,254 |
|
Assets held for sale |
|
|
2 |
|
|
|
4 |
|
|
Total assets |
|
|
39,393 |
|
|
|
31,003 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities by business sector |
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
(11,520 |
) |
|
|
(7,633 |
) |
Consumer Healthcare |
|
|
(1,120 |
) |
|
|
(906 |
) |
|
Total operating liabilities |
|
|
(12,640 |
) |
|
|
(8,539 |
) |
Short-term borrowings |
|
|
(956 |
) |
|
|
(3,504 |
) |
Long-term borrowings |
|
|
(15,231 |
) |
|
|
(7,067 |
) |
Derivative financial instruments |
|
|
(754 |
) |
|
|
(270 |
) |
Current and deferred taxation |
|
|
(1,494 |
) |
|
|
(1,713 |
) |
|
Total liabilities |
|
|
(31,075 |
) |
|
|
(21,093 |
) |
|
|
|
|
|
|
|
|
|
|
Net assets by business sector |
|
|
|
|
|
|
|
|
|
Pharmaceuticals |
|
|
13,540 |
|
|
|
12,588 |
|
Consumer Healthcare |
|
|
2,846 |
|
|
|
2,281 |
|
|
Net operating assets |
|
|
16,386 |
|
|
|
14,869 |
|
Net debt |
|
|
(10,173 |
) |
|
|
(6,039 |
) |
Investments in associates and joint ventures |
|
|
552 |
|
|
|
329 |
|
Derivative financial instruments |
|
|
209 |
|
|
|
206 |
|
Current and deferred taxation |
|
|
1,342 |
|
|
|
541 |
|
Assets held for sale |
|
|
2 |
|
|
|
4 |
|
|
Net assets |
|
|
8,318 |
|
|
|
9,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
6
Segment information continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2006 |
|
|
|
2008 |
|
|
(restated) |
|
|
(restated) |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover by location of customer |
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
9,746 |
|
|
|
10,168 |
|
|
|
11,102 |
|
Europe |
|
|
8,262 |
|
|
|
7,107 |
|
|
|
6,905 |
|
Rest of World |
|
|
6,344 |
|
|
|
5,441 |
|
|
|
5,218 |
|
|
Turnover |
|
|
24,352 |
|
|
|
22,716 |
|
|
|
23,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover by location of subsidiary undertaking |
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
10,209 |
|
|
|
10,400 |
|
|
|
11,362 |
|
Europe |
|
|
14,744 |
|
|
|
14,009 |
|
|
|
14,007 |
|
Rest of World |
|
|
8,782 |
|
|
|
10,911 |
|
|
|
9,349 |
|
|
Turnover including inter-segment turnover |
|
|
33,735 |
|
|
|
35,320 |
|
|
|
34,718 |
|
|
USA |
|
|
398 |
|
|
|
341 |
|
|
|
339 |
|
Europe |
|
|
5,671 |
|
|
|
6,042 |
|
|
|
6,337 |
|
Rest of World |
|
|
3,314 |
|
|
|
6,221 |
|
|
|
4,817 |
|
|
Inter-segment turnover |
|
|
9,383 |
|
|
|
12,604 |
|
|
|
11,493 |
|
|
USA |
|
|
9,811 |
|
|
|
10,059 |
|
|
|
11,023 |
|
Europe |
|
|
9,073 |
|
|
|
7,967 |
|
|
|
7,670 |
|
Rest of World |
|
|
5,468 |
|
|
|
4,690 |
|
|
|
4,532 |
|
|
External turnover |
|
|
24,352 |
|
|
|
22,716 |
|
|
|
23,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit by location of subsidiary undertaking |
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
1,951 |
|
|
|
2,849 |
|
|
|
2,495 |
|
Europe |
|
|
2,963 |
|
|
|
3,671 |
|
|
|
2,701 |
|
Rest of World |
|
|
2,227 |
|
|
|
1,073 |
|
|
|
2,612 |
|
|
Operating profit |
|
|
7,141 |
|
|
|
7,593 |
|
|
|
7,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment and other intangible
asset additions by location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
589 |
|
|
|
1,172 |
|
|
|
|
|
Europe |
|
|
1,512 |
|
|
|
1,456 |
|
|
|
|
|
Rest of World |
|
|
210 |
|
|
|
261 |
|
|
|
|
|
|
|
|
|
|
Total additions |
|
|
2,311 |
|
|
|
2,889 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets by location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
8,147 |
|
|
|
6,125 |
|
|
|
|
|
Europe |
|
|
15,584 |
|
|
|
12,812 |
|
|
|
|
|
Rest of World |
|
|
5,610 |
|
|
|
5,106 |
|
|
|
|
|
Inter-segment trading balances |
|
|
(315 |
) |
|
|
(635 |
) |
|
|
|
|
|
|
|
|
|
Total operating assets |
|
|
29,026 |
|
|
|
23,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 117
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
6
Segment information continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating assets by location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
2,245 |
|
|
|
2,385 |
|
|
|
|
|
Europe |
|
|
10,119 |
|
|
|
9,212 |
|
|
|
|
|
Rest of World |
|
|
4,022 |
|
|
|
3,272 |
|
|
|
|
|
|
|
|
|
|
Net operating assets |
|
|
16,386 |
|
|
|
14,869 |
|
|
|
|
|
|
|
|
|
|
UK segment
The UK is included in the Groups Europe market region.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Turnover by location of customer |
|
|
1,642 |
|
|
|
1,553 |
|
|
|
1,501 |
|
|
|
Turnover including inter-segment turnover |
|
|
5,181 |
|
|
|
4,977 |
|
|
|
4,890 |
|
Inter-segment turnover |
|
|
3,127 |
|
|
|
2,956 |
|
|
|
3,086 |
|
|
Turnover by location of subsidiary |
|
|
2,054 |
|
|
|
2,021 |
|
|
|
1,804 |
|
|
|
|
|
|
Non-current assets |
|
|
4,404 |
|
|
|
4,380 |
|
|
|
|
|
|
|
|
|
|
In October 2007, GSK announced a significant new Operational Excellence programme to improve the
effectiveness and productivity of its operations. A significant expansion of the Operational
Excellence programme was approved by the Board and announced in February 2009. Total costs for the
implementation of the expanded programme are expected to be approximately £3.6 billion, to be
incurred over the period from 2007 to 2011. Approximately 40% of these costs were incurred by 31st
December 2008, and approximately 35% are expected to be incurred in 2009, 20% in 2010 and the
balance mostly in 2011. In total, approximately 75% of these costs are expected to be cash
expenditures and 25% are expected to be accounting write-downs. Uncertainties exist over the exact
amount and timing of cash outflows as a result of potential future exchange rate fluctuations and
as many elements of the restructuring programme are subject to employee consultation procedures,
making it difficult to predict with precision when these procedures will be completed. However, the
majority of the remaining cash payments are expected to be made in 2009 and 2010. The programme is
expected to deliver total annual pre-tax savings of up to £1.7 billion by 2011, with savings
realised across the business. Costs of £1,084 million incurred in 2008 under the Operational
Excellence programme have arisen in the following areas:
|
|
the commencement of the closure of a number of manufacturing sites, including Dartford
and Crawley in the UK and Cidra in Puerto Rico, giving rise to asset write-downs, staff
reductions and a foreign exchange loss on the liquidation of a subsidiary; |
|
|
|
the adoption of more customised sales approaches, leading to staff reductions in a
number of sales forces, principally in the USA; |
|
|
|
cost saving projects in R&D, focused primarily on the simplification and streamlining
of support infrastructure, and |
|
|
|
projects to eliminate unnecessary processes and simplify continuing processes, leading
to staff reductions in administrative and support functions. |
In addition, costs of £34 million were incurred during the year under the restructuring programme
related to the integration of the Reliant Pharmaceuticals, Inc. business in the USA, following its
acquisition in December 2007.
|
|
|
|
|
|
|
|
|
|
|
|
118
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
7
Major restructuring programmes continued
The analysis of the costs incurred under these programmes in 2008 and 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset |
|
|
Staff |
|
|
Other |
|
|
|
|
2008 |
|
impairment |
|
|
reductions |
|
|
costs |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cost of sales |
|
|
(181 |
) |
|
|
(370 |
) |
|
|
(88 |
) |
|
|
(639 |
) |
Selling, general and
administration |
|
|
(2 |
) |
|
|
(177 |
) |
|
|
(125 |
) |
|
|
(304 |
) |
Research and development |
|
|
(14 |
) |
|
|
(143 |
) |
|
|
(18 |
) |
|
|
(175 |
) |
|
Effect on operating profit |
|
|
(197 |
) |
|
|
(690 |
) |
|
|
(231 |
) |
|
|
(1,118 |
) |
Net finance expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
Effect on profit before taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,123 |
) |
Effect on taxation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
284 |
|
|
Effect on earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(839 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset |
|
|
Staff |
|
|
|
|
2007 |
|
impairment |
|
|
reductions |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cost of sales |
|
|
(77 |
) |
|
|
(34 |
) |
|
|
(111 |
) |
Selling, general and administration |
|
|
(1 |
) |
|
|
(136 |
) |
|
|
(137 |
) |
Research and development |
|
|
(28 |
) |
|
|
(62 |
) |
|
|
(90 |
) |
|
Effect on profit before taxation |
|
|
(106 |
) |
|
|
(232 |
) |
|
|
(338 |
) |
Effect on taxation |
|
|
|
|
|
|
|
|
|
|
77 |
|
|
Effect on earnings |
|
|
|
|
|
|
|
|
|
|
(261 |
) |
|
Asset impairments of £197 million (2007 £106 million) and other costs totalling £137 million
(2007 £nil) are non-cash items. All other charges have been or will be settled in cash.
These restructuring costs are reported in the major restructuring column of the Income statement on
page 102. There were no costs related to major restructuring programmes in 2006. Other costs
related to minor restructuring activity initiated prior to October 2007 amounting to £20 million
(2007 £92 million) are reported within Results before major restructuring.
The costs of the major restructuring programmes have arisen as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Increase in provision for major restructuring programmes
(see Note 29) |
|
|
(740 |
) |
|
|
(220 |
) |
Amount of provision reversed unused (see Note 29) |
|
|
7 |
|
|
|
|
|
Impairments to property, plant and equipment (see Note 17) |
|
|
(197 |
) |
|
|
(106 |
) |
Foreign exchange loss recognised on liquidation of subsidiary |
|
|
(84 |
) |
|
|
|
|
Other non-cash charges |
|
|
(53 |
) |
|
|
|
|
Other cash costs |
|
|
(51 |
) |
|
|
(12 |
) |
Net finance expense |
|
|
(5 |
) |
|
|
|
|
|
Effect on profit before taxation |
|
|
(1,123 |
) |
|
|
(338 |
) |
|
Other non-cash charges are principally accelerated depreciation arising where asset lives have been
shortened as a result of the major restructuring programmes. Other cash costs include consultancy
and project management fees, the termination of leases and site closure costs.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 119
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Royalty and milestone income |
|
|
318 |
|
|
|
223 |
|
|
|
112 |
|
Impairment of equity investments |
|
|
(63 |
) |
|
|
(19 |
) |
|
|
(14 |
) |
Disposal of equity investments |
|
|
33 |
|
|
|
32 |
|
|
|
18 |
|
Disposal of other assets and legal settlements |
|
|
260 |
|
|
|
181 |
|
|
|
151 |
|
Fair value adjustments on derivative financial
instruments |
|
|
(10 |
) |
|
|
41 |
|
|
|
29 |
|
Other income |
|
|
3 |
|
|
|
17 |
|
|
|
11 |
|
|
|
|
|
541 |
|
|
|
475 |
|
|
|
307 |
|
|
Royalty and milestone income is principally a core of recurring income from the out-licensing of
intellectual property. Fair value adjustments on derivative financial instruments include movements
on the now expired Quest collar and Theravance put and call options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
The following items have been included in operating profit: |
|
£m |
|
|
£m |
|
|
£m |
|
|
Employee costs (Note 10) |
|
|
6,524 |
|
|
|
5,733 |
|
|
|
5,495 |
|
Advertising |
|
|
805 |
|
|
|
744 |
|
|
|
759 |
|
Distribution costs |
|
|
310 |
|
|
|
270 |
|
|
|
276 |
|
Depreciation of property, plant and equipment |
|
|
920 |
|
|
|
796 |
|
|
|
732 |
|
Amortisation of intangible assets |
|
|
311 |
|
|
|
226 |
|
|
|
226 |
|
Net foreign exchange (gains)/losses |
|
|
(145 |
) |
|
|
(1 |
) |
|
|
36 |
|
Inventories: |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of inventories included in cost of sales |
|
|
5,734 |
|
|
|
4,784 |
|
|
|
4,480 |
|
Write-down of inventories |
|
|
258 |
|
|
|
265 |
|
|
|
146 |
|
Reversal of prior year write-down of inventories |
|
|
(118 |
) |
|
|
(103 |
) |
|
|
(93 |
) |
Operating lease rentals: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum lease payments |
|
|
143 |
|
|
|
121 |
|
|
|
114 |
|
Contingent rents |
|
|
15 |
|
|
|
13 |
|
|
|
11 |
|
Sub-lease payments |
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
Fees payable to companys auditor for the audit of parent company and
consolidated financial statements |
|
|
1.6 |
|
|
|
1.8 |
|
|
|
1.7 |
|
Fees payable to the companys auditor and its associates for other
services |
|
|
17.6 |
|
|
|
14.5 |
|
|
|
15.9 |
|
|
The reversals of prior year write-downs of inventories principally arise from the reassessment of
usage or demand expectations prior to inventory expiration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
Fees payable to the companys auditor and its associates for other services |
|
£m |
|
|
£m |
|
|
£m |
|
|
Audit of accounts of the Groups UK and overseas subsidiaries and related
pension
schemes of the company, pursuant to legislation |
|
|
9.3 |
|
|
|
7.9 |
|
|
|
7.7 |
|
Other assurance services, pursuant to such legislation |
|
|
2.9 |
|
|
|
2.9 |
|
|
|
4.4 |
|
Other tax services |
|
|
2.5 |
|
|
|
2.5 |
|
|
|
1.9 |
|
All other services, including regulatory, compliance and treasury related
services |
|
|
2.9 |
|
|
|
1.2 |
|
|
|
1.9 |
|
|
|
|
|
17.6 |
|
|
|
14.5 |
|
|
|
15.9 |
|
|
At 31st December 2008, the amount due to PricewaterhouseCoopers LLP and its associates for fees yet
to be invoiced was £4.5 million, comprising statutory audit £4.0 million, taxation services £0.4
million and other services £0.1 million.
In 2008, fees payable to PricewaterhouseCoopers LLP and its associates increased by 10% in
CER terms.
Fees in respect of the GlaxoSmithKline pension schemes included above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Audit |
|
|
0.4 |
|
|
|
0.2 |
|
|
|
0.3 |
|
Other services |
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120
GSK Annual Report
2008 | |
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Wages and salaries |
|
|
4,640 |
|
|
|
4,444 |
|
|
|
4,363 |
|
Social security costs |
|
|
653 |
|
|
|
527 |
|
|
|
461 |
|
Pension and other post-employment costs, including augmentations (Note 28) |
|
|
505 |
|
|
|
313 |
|
|
|
377 |
|
Cost of share-based incentive plans |
|
|
241 |
|
|
|
237 |
|
|
|
226 |
|
Severance and other costs from integration and restructuring activities |
|
|
485 |
|
|
|
212 |
|
|
|
68 |
|
|
|
|
|
6,524 |
|
|
|
5,733 |
|
|
|
5,495 |
|
|
In 2008, wages and salaries declined by 4% in CER terms.
The Group provides benefits to employees, commensurate with local practice in individual countries,
including, in some markets, healthcare insurance, subsidised car schemes and personal life
assurance.
|
|
|
|
|
|
|
|
|
|
|
|
|
The average number of persons employed by the Group (including |
|
2008 |
|
|
2007 |
|
|
2006 |
|
Directors) during the year: |
|
Number |
|
|
Number |
|
|
Number |
|
|
Manufacturing |
|
|
33,372 |
|
|
|
33,975 |
|
|
|
32,403 |
|
Selling, general and administration |
|
|
52,115 |
|
|
|
53,707 |
|
|
|
53,665 |
|
Research and development |
|
|
15,646 |
|
|
|
15,719 |
|
|
|
15,734 |
|
|
|
|
|
101,133 |
|
|
|
103,401 |
|
|
|
101,802 |
|
|
The average number of Group employees excludes temporary and contract staff. The numbers of Group
employees at the end of each financial year are given in the Financial record on page 192. The
average number of persons employed by GlaxoSmithKline plc in 2008 was nil (2007 nil).
The compensation of the Directors and Senior Management (members of the CET) in aggregate, was as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Wages and salaries |
|
|
17 |
|
|
|
16 |
|
|
|
15 |
|
Social security costs |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
Pension and other post-employment costs |
|
|
3 |
|
|
|
3 |
|
|
|
3 |
|
Cost of share-based incentive plans |
|
|
12 |
|
|
|
15 |
|
|
|
14 |
|
|
|
|
|
33 |
|
|
|
35 |
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Interest income arising from: |
|
|
|
|
|
|
|
|
|
|
|
|
cash and cash equivalents |
|
|
107 |
|
|
|
98 |
|
|
|
168 |
|
available-for-sale investments |
|
|
31 |
|
|
|
49 |
|
|
|
35 |
|
derivatives at fair value through profit or loss |
|
|
159 |
|
|
|
79 |
|
|
|
59 |
|
loans and receivables |
|
|
22 |
|
|
|
27 |
|
|
|
21 |
|
Realised gains on liquid investments |
|
|
2 |
|
|
|
1 |
|
|
|
1 |
|
Fair value
adjustments on derivatives at fair value through profit or loss |
|
|
4 |
|
|
|
|
|
|
|
4 |
|
Net investment hedge ineffectiveness |
|
|
(13 |
) |
|
|
7 |
|
|
|
(2 |
) |
Unwinding of discounts on assets |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
|
|
313 |
|
|
|
262 |
|
|
|
287 |
|
|
All derivatives at fair value through profit or loss other than designated and effective hedging
instruments (see Note 41, Financial instruments and related disclosures) are classified as
held-for-trading financial instruments under IAS 39. Interest income arising from derivatives at
fair value through profit or loss relates to swap interest income.
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 121
|
|
|
|
|
Financial statements |
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Interest expense arising on: |
|
|
|
|
|
|
|
|
|
|
|
|
financial liabilities at amortised cost |
|
|
(664 |
) |
|
|
(313 |
) |
|
|
(241 |
) |
derivatives at fair value through profit or loss |
|
|
(165 |
) |
|
|
(121 |
) |
|
|
(73 |
) |
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
fair value adjustments on derivatives designated as hedging instruments |
|
|
92 |
|
|
|
10 |
|
|
|
(31 |
) |
fair value adjustments on hedged items |
|
|
(90 |
) |
|
|
(8 |
) |
|
|
28 |
|
Fair value adjustments on other derivatives at fair value through profit
or loss |
|
|
|
|
|
|
6 |
|
|
|
1 |
|
Unwinding of discounts on provisions |
|
|
(16 |
) |
|
|
(27 |
) |
|
|
(36 |
) |
|
|
|
|
(843 |
) |
|
|
(453 |
) |
|
|
(352 |
) |
|
All derivatives at fair value through profit or loss except designated and effective hedging
instruments are classified as held-for-trading financial instruments under IAS 39.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Associates: |
|
|
|
|
|
|
|
|
|
|
|
|
Share of after tax profits of Quest Diagnostics
Inc. |
|
|
47 |
|
|
|
48 |
|
|
|
59 |
|
Share of after tax losses of other associates |
|
|
(3 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
|
|
44 |
|
|
|
45 |
|
|
|
57 |
|
Share of after tax profits/(losses) of joint
ventures |
|
|
4 |
|
|
|
5 |
|
|
|
(1 |
) |
|
|
|
|
48 |
|
|
|
50 |
|
|
|
56 |
|
|
Share of turnover of joint ventures |
|
|
13 |
|
|
|
13 |
|
|
|
21 |
|
Sales to joint ventures and associates |
|
|
9 |
|
|
|
9 |
|
|
|
18 |
|
|
Summarised income statement information in respect of the Groups associates is
set out below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Total turnover: |
|
|
|
|
|
|
|
|
|
|
|
|
Quest Diagnostics Inc. |
|
|
3,919 |
|
|
|
3,352 |
|
|
|
3,389 |
|
Others |
|
|
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
3,922 |
|
|
|
3,352 |
|
|
|
3,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total profit: |
|
|
|
|
|
|
|
|
|
|
|
|
Quest Diagnostics Inc. |
|
|
314 |
|
|
|
170 |
|
|
|
317 |
|
Others |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
|
|
|
|
307 |
|
|
|
167 |
|
|
|
315 |
|
|
|
|
|
|
|
|
|
|
|
|
122
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation charge based on profits for the year |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
UK corporation tax at the UK statutory rate |
|
|
2,213 |
|
|
|
791 |
|
|
|
2,512 |
|
Less double taxation relief |
|
|
(1,924 |
) |
|
|
(339 |
) |
|
|
(2,112 |
) |
|
|
|
|
289 |
|
|
|
452 |
|
|
|
400 |
|
Overseas taxation |
|
|
1,589 |
|
|
|
1,962 |
|
|
|
2,310 |
|
|
Current taxation |
|
|
1,878 |
|
|
|
2,414 |
|
|
|
2,710 |
|
Deferred taxation |
|
|
69 |
|
|
|
(272 |
) |
|
|
(409 |
) |
|
|
|
|
1,947 |
|
|
|
2,142 |
|
|
|
2,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of the taxation rate on Group profits |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
% |
|
|
% |
|
|
% |
|
|
UK statutory rate of taxation |
|
|
28.5 |
|
|
|
30.0 |
|
|
|
30.0 |
|
Overseas taxes |
|
|
1.9 |
|
|
|
4.3 |
|
|
|
4.2 |
|
Benefit of special tax status |
|
|
(2.4 |
) |
|
|
(3.6 |
) |
|
|
(5.2 |
) |
R&D credits |
|
|
(1.3 |
) |
|
|
(1.5 |
) |
|
|
(1.3 |
) |
Intercompany stock profit |
|
|
2.1 |
|
|
|
(0.8 |
) |
|
|
(1.9 |
) |
Impact of share based payments |
|
|
0.7 |
|
|
|
0.6 |
|
|
|
0.5 |
|
Tax on profit of associates |
|
|
(0.4 |
) |
|
|
(0.3 |
) |
|
|
(0.4 |
) |
Other differences |
|
|
1.2 |
|
|
|
(0.3 |
) |
|
|
0.3 |
|
Prior year items |
|
|
(1.6 |
) |
|
|
0.1 |
|
|
|
3.3 |
|
Restructuring |
|
|
0.5 |
|
|
|
0.2 |
|
|
|
|
|
|
Tax rate |
|
|
29.2 |
|
|
|
28.7 |
|
|
|
29.5 |
|
|
Additional UK corporation tax and double taxation relief in 2008 arise from dividends received from
overseas subsidiaries.
The Group operates in countries where the tax rate differs from the UK tax rate. The impact of
these overseas taxes on the overall rate of tax is shown above. Profits arising from certain
operations in Singapore, Puerto Rico and Ireland are accorded special status and are taxed at
reduced rates compared with the normal rates of tax in these territories. The effect of this
reduction in the taxation charge increased earnings per share by 2.8p in 2008, 4.9p in 2007 and
7.2p in 2006. The Group is required under IFRS to create a deferred tax asset in respect of
unrealised intercompany profit arising on inventory held by the Group at the year-end by applying
the tax rate of the country in which the inventory is held (rather than the tax rate of the country
where the profit was originally made and the tax paid, which is the practice under UK and US GAAP).
As a result of this difference in accounting treatment the Group tax rate under IFRS increased by
2.1% in 2008 (2007 0.8% decrease, 2006 1.9% decrease) arising from changes in
work-in-progress and finished goods.
The integrated nature of the Groups worldwide operations, involving significant investment in
research and strategic manufacture at a limited number of locations, with consequential
cross-border supply routes into numerous end-markets, gives rise to complexity and delay in
negotiations with revenue authorities as to the profits on which individual Group companies are
liable to tax. Resolution of such issues is a continuing fact of life for GSK. The Groups main
open tax issues are in the USA, Canada and Japan.
In July, following discussions with HMRC, the Group settled substantially all outstanding UK tax
issues for all periods up to and including 31st December 2006.
Following its audit of the period 2001 to 2003, the IRS issued Statutory Notices of Deficiency to
GSK asserting income and withholding tax deficiencies, and associated penalties, arising from its
reclassification of an intercompany financing arrangement in those years from debt to equity, and
its consequent recharacterisation of the amounts paid as dividends subject to withholding tax under
the US UK treaty. All amounts due under the financing arrangement were paid on a timely basis,
with the final payment made in April 2008. The IRS commenced its audit of the period 2004 to 2006
in June 2008 and is examining the issue for these years. GSK disagrees with the IRS position and,
in August 2008, initiated actions in the United States Tax Court to contest the Statutory Notices
of Deficiency. GSK estimates that the IRS claim for tax, penalties, and interest at 31st December
2008, net of federal tax relief, for 2001 to 2003 is $864 million. GSK believes that this claim has
no merit and that no adjustment is warranted. If, contrary to GSKs
view, the IRS prevailed in its argument before a court in respect of the years 2001 to 2003, GSK
would expect to have an additional liability for the five year period 2004-2008 in the amount of
$1,059 million in tax, penalties, and interest at 31st December 2008, net of federal tax relief for
those years. In the event that the company is not able to resolve this issue with the IRS, a court
decision would not be expected before 2011.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 123
|
|
|
|
|
Financial statements |
|
|
Notes to the financial statements continued
|
|
|
|
|
|
14
Taxation continued
Lower courts in Japan have upheld claims by the tax authorities for Yen 39 billion (£177 million)
relating to Japanese CFC legislation. The company has paid and fully provided for the full tax but
is pursuing a claim for refund to the Japanese Supreme Court. In Canada a court decision in respect
of transfer pricing in the early 1990s was completed in May 2008. GSK filed an appeal in June and a
court date is awaited.
GSK continues to believe that it has made adequate provision for the liabilities likely to arise
from open assessments. The ultimate liability for such matters may vary from the amounts provided
and is dependent upon the outcome of litigation proceedings and negotiations with the relevant tax
authorities.
No provision has been made for taxation which would arise on the distribution of profits retained
by overseas subsidiary and associated undertakings, on the grounds that no remittance of profit
retained at 31st December 2008 is required in such a way that incremental tax will arise. The
aggregate amount of these unremitted profits at the balance sheet date was approximately £28
billion (2007 £31 billion).
|
|
|
|
|
|
|
|
|
|
|
|
|
Movement on current tax account |
|
Payable |
|
|
Recoverable |
|
|
Net |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January 2008 |
|
|
(826 |
) |
|
|
58 |
|
|
|
(768 |
) |
Exchange adjustments |
|
|
(109 |
) |
|
|
15 |
|
|
|
(94 |
) |
Charge for the year |
|
|
(1,687 |
) |
|
|
(191 |
) |
|
|
(1,878 |
) |
Cash paid |
|
|
1,663 |
|
|
|
187 |
|
|
|
1,850 |
|
Transfer to/from deferred tax |
|
|
138 |
|
|
|
|
|
|
|
138 |
|
Other movements |
|
|
41 |
|
|
|
7 |
|
|
|
48 |
|
|
At 31st December 2008 |
|
|
(780 |
) |
|
|
76 |
|
|
|
(704 |
) |
|
Movement in deferred tax assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions & |
|
|
|
|
|
|
|
|
|
|
Manu- |
|
|
|
|
|
|
Share |
|
|
Other |
|
|
|
|
|
|
|
Deferred taxation
asset/(liability) |
|
Accelerated |
|
|
|
|
|
|
Intra- |
|
|
other post |
|
|
|
|
|
|
Legal |
|
|
facturing |
|
|
Stock |
|
|
option |
|
|
net |
|
|
Offset |
|
|
|
|
|
capital |
|
|
|
|
|
|
group |
|
|
retirement |
|
|
Tax |
|
|
& other |
|
|
restruct- |
|
|
valuation |
|
|
and award |
|
|
temporary |
|
|
within |
|
|
|
|
|
allowances |
|
|
Intangibles |
|
|
profit |
|
|
benefits |
|
|
losses |
|
|
disputes |
|
|
uring |
|
|
adjustments |
|
|
schemes |
|
|
differences |
|
|
countries |
|
|
Total |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Deferred tax asset at
1st January 2008 |
|
|
4 |
|
|
|
94 |
|
|
|
1,140 |
|
|
|
458 |
|
|
|
137 |
|
|
|
170 |
|
|
|
108 |
|
|
|
18 |
|
|
|
101 |
|
|
|
640 |
|
|
|
(674 |
) |
|
|
2,196 |
|
Deferred tax liability at
1st January 2008 |
|
|
(596 |
) |
|
|
(782 |
) |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(127 |
) |
|
|
|
|
|
|
(54 |
) |
|
|
674 |
|
|
|
(887 |
) |
|
At 1st January 2008 |
|
|
(592 |
) |
|
|
(688 |
) |
|
|
1,140 |
|
|
|
456 |
|
|
|
137 |
|
|
|
170 |
|
|
|
108 |
|
|
|
(109 |
) |
|
|
101 |
|
|
|
586 |
|
|
|
|
|
|
|
1,309 |
|
Exchange adjustments |
|
|
(44 |
) |
|
|
(145 |
) |
|
|
250 |
|
|
|
182 |
|
|
|
52 |
|
|
|
72 |
|
|
|
17 |
|
|
|
(55 |
) |
|
|
|
|
|
|
196 |
|
|
|
|
|
|
|
525 |
|
(Charge)/credit to income
statement |
|
|
(69 |
) |
|
|
61 |
|
|
|
(156 |
) |
|
|
52 |
|
|
|
(41 |
) |
|
|
3 |
|
|
|
83 |
|
|
|
(68 |
) |
|
|
6 |
|
|
|
60 |
|
|
|
|
|
|
|
(69 |
) |
Credit/(charge) to equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
6 |
|
|
|
|
|
|
|
442 |
|
Transfer to/from current
tax |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
(69 |
) |
|
|
|
|
|
|
4 |
|
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
|
|
|
|
(138 |
) |
Acquisitions |
|
|
|
|
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
(23 |
) |
|
At 31st December 2008 |
|
|
(703 |
) |
|
|
(818 |
) |
|
|
1,234 |
|
|
|
1,062 |
|
|
|
173 |
|
|
|
249 |
|
|
|
162 |
|
|
|
(232 |
) |
|
|
102 |
|
|
|
817 |
|
|
|
|
|
|
|
2,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets at
31st December 2008 |
|
|
23 |
|
|
|
152 |
|
|
|
1,234 |
|
|
|
1,062 |
|
|
|
196 |
|
|
|
249 |
|
|
|
162 |
|
|
|
15 |
|
|
|
102 |
|
|
|
830 |
|
|
|
(1,265 |
) |
|
|
2,760 |
|
Deferred tax liability at
31st December 2008 |
|
|
(726 |
) |
|
|
(970 |
) |
|
|
|
|
|
|
|
|
|
|
(23 |
) |
|
|
|
|
|
|
|
|
|
|
(247 |
) |
|
|
|
|
|
|
(13 |
) |
|
|
1,265 |
|
|
|
(714 |
) |
|
|
|
|
(703 |
) |
|
|
(818 |
) |
|
|
1,234 |
|
|
|
1,062 |
|
|
|
173 |
|
|
|
249 |
|
|
|
162 |
|
|
|
(232 |
) |
|
|
102 |
|
|
|
817 |
|
|
|
|
|
|
|
2,046 |
|
|
The deferred tax charge to income relating to changes in tax rates is £18 million. All other
deferred tax movements arise from the origination and reversal of temporary differences. Other net
temporary differences include accrued expenses and other provisions.
|
|
|
|
|
|
|
|
|
|
124
GSK Annual Report
2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
14
Taxation continued
At 31st December 2008, the Group had recognised a deferred tax asset of £173 million (2007 £137
million) in respect of income tax losses of approximately £566 million (2007 £494 million). Of
these losses, £142 million (2007 £139 million) are due to expire between 20092019, £357
million (2007 £327 million) are due to expire between 20202028 and £67 million (2007 £28
million) are available indefinitely. At 31st December 2008, the Group had not recognised any
deferred tax asset in respect of income tax losses of approximately £4,526 million (2007 £3,688
million), of which £37 million (2007 £62 million) are due to expire between 20092019, £66
million (2007 £45 million) are due to expire between 20202028 and £4,423 million (2007
£3,581 million) which are available indefinitely. The Group had capital losses at 31st December
2008 of approximately £5 billion in respect of which no deferred tax asset has been recognised.
Deferred tax assets are recognised where it is probable that future taxable profit will be
available to utilise losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
pence |
|
|
pence |
|
|
pence |
|
|
Basic earnings per share |
|
|
88.6 |
|
|
|
94.4 |
|
|
|
95.5 |
|
Adjustment for major restructuring |
|
|
16.1 |
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
Results before major restructuring earnings
per share (basic) |
|
|
104.7 |
|
|
|
99.1 |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
88.1 |
|
|
|
93.7 |
|
|
|
94.5 |
|
Adjustment for major restructuring |
|
|
16.0 |
|
|
|
4.6 |
|
|
|
|
|
|
|
|
|
|
Results before major restructuring earnings
per share (diluted) |
|
|
104.1 |
|
|
|
98.3 |
|
|
|
|
|
|
|
|
|
|
Basic and adjusted earnings per share have been calculated by dividing the profit attributable to
shareholders by the weighted average number of shares in issue during the period after deducting
shares held by the ESOP Trusts and Treasury shares.
Adjusted earnings per share is calculated using results before major restructuring earnings. The
calculation of results before major restructuring is described in Note 1 Presentation of the
financial statements.
Diluted earnings per share have been calculated after adjusting the weighted average number of
shares used in the basic calculation to assume the conversion of all potentially dilutive shares. A
potentially dilutive share forms part of the employee share schemes where its exercise price is
below the average market price of GSK shares during the period and any performance conditions
attaching to the scheme have been met at the balance sheet date.
The numbers of shares used in calculating basic and diluted earnings per share are reconciled
below.
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares in issue |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
millions |
|
|
millions |
|
|
millions |
|
|
Basic |
|
|
5,195 |
|
|
|
5,524 |
|
|
|
5,643 |
|
Dilution for share options |
|
|
31 |
|
|
|
43 |
|
|
|
57 |
|
|
Diluted |
|
|
5,226 |
|
|
|
5,567 |
|
|
|
5,700 |
|
|
Shares held by the ESOP Trusts are excluded. The trustees have waived their rights to dividends on
the shares held by the ESOP Trusts.
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 125
|
|
|
|
|
Financial statements |
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First interim |
|
|
Second interim |
|
|
Third interim |
|
|
Fourth interim |
|
|
Total |
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividend (£m) |
|
|
683 |
|
|
|
679 |
|
|
|
730 |
|
|
|
860 |
|
|
|
2,952 |
|
Dividend per share
(pence) |
|
|
13 |
|
|
|
13 |
|
|
|
14 |
|
|
|
17 |
|
|
|
57 |
|
Paid/payable |
|
10th July 2008 |
|
|
9th October 2008 |
|
|
8th January 2009 |
|
|
9th April 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividend (£m) |
|
|
670 |
|
|
|
667 |
|
|
|
708 |
|
|
|
859 |
|
|
|
2,904 |
|
Dividend per share
(pence) |
|
|
12 |
|
|
|
12 |
|
|
|
13 |
|
|
|
16 |
|
|
|
53 |
|
Paid |
|
|
12th July 2007 |
|
|
|
11th October 2007 |
|
|
|
10th January 2008 |
|
|
|
10th April 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total dividend (£m) |
|
|
619 |
|
|
|
620 |
|
|
|
671 |
|
|
|
785 |
|
|
|
2,695 |
|
Dividend per share
(pence) |
|
|
11 |
|
|
|
11 |
|
|
|
12 |
|
|
|
14 |
|
|
|
48 |
|
Paid |
|
6th July 2006 |
|
|
5th October 2006 |
|
|
4th January 2007 |
|
|
12th April 2007 |
|
|
|
|
|
Under IFRS interim dividends are only recognised in the financial statements when paid and not when
declared. GSK normally pays a dividend two quarters after the quarter to which it relates and one
quarter after it is declared. The 2008 financial statements recognise those dividends paid in 2008,
namely the third and fourth interim dividends for 2007 and the first and second interim dividends
for 2008. The amounts recognised in each year are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Dividends to shareholders |
|
|
2,929 |
|
|
|
2,793 |
|
|
|
2,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, |
|
|
|
|
|
|
|
|
|
Land and |
|
|
equipment |
|
|
Assets in |
|
|
|
|
|
|
buildings |
|
|
and vehicles |
|
|
construction |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cost at 1st January 2007 |
|
|
4,244 |
|
|
|
7,776 |
|
|
|
1,423 |
|
|
|
13,443 |
|
Exchange adjustments |
|
|
143 |
|
|
|
229 |
|
|
|
61 |
|
|
|
433 |
|
Additions |
|
|
140 |
|
|
|
401 |
|
|
|
1,042 |
|
|
|
1,583 |
|
Additions
through business combinations |
|
|
1 |
|
|
|
7 |
|
|
|
|
|
|
|
8 |
|
Disposals and write-offs |
|
|
(20 |
) |
|
|
(309 |
) |
|
|
(16 |
) |
|
|
(345 |
) |
Reclassifications |
|
|
134 |
|
|
|
418 |
|
|
|
(552 |
) |
|
|
|
|
Transfer to assets held for sale |
|
|
(8 |
) |
|
|
(25 |
) |
|
|
(2 |
) |
|
|
(35 |
) |
|
Cost at 31st December 2007 |
|
|
4,634 |
|
|
|
8,497 |
|
|
|
1,956 |
|
|
|
15,087 |
|
Exchange adjustments |
|
|
1,046 |
|
|
|
1,471 |
|
|
|
442 |
|
|
|
2,959 |
|
Additions |
|
|
124 |
|
|
|
425 |
|
|
|
895 |
|
|
|
1,444 |
|
Additions through business
combinations |
|
|
13 |
|
|
|
7 |
|
|
|
|
|
|
|
20 |
|
Disposals and write-offs |
|
|
(128 |
) |
|
|
(356 |
) |
|
|
(27 |
) |
|
|
(511 |
) |
Reclassifications |
|
|
292 |
|
|
|
643 |
|
|
|
(944 |
) |
|
|
(9 |
) |
Transfer to assets held for sale |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(3 |
) |
|
Cost at 31st December 2008 |
|
|
5,979 |
|
|
|
10,686 |
|
|
|
2,322 |
|
|
|
18,987 |
|
|
|
|
|
|
|
|
|
|
|
|
126
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
17
Property, plant and equipment continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plant, |
|
|
|
|
|
|
|
|
|
Land and |
|
|
equipment |
|
|
Assets in |
|
|
|
|
|
|
buildings |
|
|
and vehicles |
|
|
construction |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Depreciation at 1st January 2007 |
|
|
(1,325 |
) |
|
|
(4,805 |
) |
|
|
|
|
|
|
(6,130 |
) |
Exchange adjustments |
|
|
(45 |
) |
|
|
(125 |
) |
|
|
|
|
|
|
(170 |
) |
Provision for the year |
|
|
(177 |
) |
|
|
(619 |
) |
|
|
|
|
|
|
(796 |
) |
Disposals and write-offs |
|
|
10 |
|
|
|
242 |
|
|
|
|
|
|
|
252 |
|
Transfer to assets held for sale |
|
|
3 |
|
|
|
17 |
|
|
|
|
|
|
|
20 |
|
|
|
Depreciation at 31st December 2007 |
|
|
(1,534 |
) |
|
|
(5,290 |
) |
|
|
|
|
|
|
(6,824 |
) |
Exchange adjustments |
|
|
(385 |
) |
|
|
(914 |
) |
|
|
|
|
|
|
(1,299 |
) |
Provision for the year |
|
|
(228 |
) |
|
|
(692 |
) |
|
|
|
|
|
|
(920 |
) |
Disposals and write-offs |
|
|
85 |
|
|
|
265 |
|
|
|
|
|
|
|
350 |
|
Transfer to assets held for sale |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
1 |
|
|
Depreciation at 31st December 2008 |
|
|
(2,062 |
) |
|
|
(6,630 |
) |
|
|
|
|
|
|
(8,692 |
) |
|
|
Impairment at 1st January 2007 |
|
|
(141 |
) |
|
|
(231 |
) |
|
|
(11 |
) |
|
|
(383 |
) |
Exchange adjustments |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(1 |
) |
|
|
(6 |
) |
Disposals and write-offs |
|
|
7 |
|
|
|
32 |
|
|
|
5 |
|
|
|
44 |
|
Impairment losses |
|
|
(29 |
) |
|
|
(53 |
) |
|
|
(82 |
) |
|
|
(164 |
) |
Reversal of impairments |
|
|
43 |
|
|
|
16 |
|
|
|
8 |
|
|
|
67 |
|
|
Impairment at 31st December 2007 |
|
|
(122 |
) |
|
|
(239 |
) |
|
|
(81 |
) |
|
|
(442 |
) |
|
|
Exchange adjustments |
|
|
(22 |
) |
|
|
(27 |
) |
|
|
(14 |
) |
|
|
(63 |
) |
Disposals and write-offs |
|
|
50 |
|
|
|
67 |
|
|
|
27 |
|
|
|
144 |
|
Impairment losses |
|
|
(70 |
) |
|
|
(176 |
) |
|
|
(20 |
) |
|
|
(266 |
) |
Reclassifications |
|
|
|
|
|
|
(44 |
) |
|
|
44 |
|
|
|
|
|
Reversal of impairments |
|
|
3 |
|
|
|
7 |
|
|
|
|
|
|
|
10 |
|
|
Impairment at 31st December 2008 |
|
|
(161 |
) |
|
|
(412 |
) |
|
|
(44 |
) |
|
|
(617 |
) |
|
|
Total depreciation and impairment
at 31st December 2007 |
|
|
(1,656 |
) |
|
|
(5,529 |
) |
|
|
(81 |
) |
|
|
(7,266 |
) |
|
Total depreciation and impairment
at 31st December 2008 |
|
|
(2,223 |
) |
|
|
(7,042 |
) |
|
|
(44 |
) |
|
|
(9,309 |
) |
|
|
Net book value at 1st January 2007 |
|
|
2,778 |
|
|
|
2,740 |
|
|
|
1,412 |
|
|
|
6,930 |
|
|
|
Net book value at 31st December 2007 |
|
|
2,978 |
|
|
|
2,968 |
|
|
|
1,875 |
|
|
|
7,821 |
|
|
|
Net book value at 31st December 2008 |
|
|
3,756 |
|
|
|
3,644 |
|
|
|
2,278 |
|
|
|
9,678 |
|
|
The net book value at 31st December 2008 of the Groups land and buildings comprises freehold
properties £3,510 million
(2007 £2,752 million), properties with leases of 50 years or more £185 million (2007 £168
million) and properties with leases of less than 50 years £61 million (2007 £58 million).
Included in land and buildings at 31st December 2008 are leased assets with a cost of £519 million
(2007 £424 million), accumulated depreciation of £263 million (2007 £198 million), impairment
of £8 million (2007 £nil) and a net book value of £248 million (2007 £226 million). Included
in plant, equipment and vehicles at 31st December 2008 are leased assets with a cost of £77 million
(2007 £180 million), accumulated depreciation of £36 million (2007 £81 million), and a net
book value of £41 million (at 1st January 2008 £99 million). Some lease agreements include
renewal or purchase options or escalation clauses.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 127
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
17
Property, plant and equipment
continued
The impairment losses principally arise from decisions to rationalise facilities and are calculated
based on either fair value less costs to sell or value in use. The value in use calculations
determine the net present value of the projected risk-adjusted, post-tax cash flows of the relevant
asset or cash generating unit, applying a discount rate of the Group post-tax weighted average cost
of capital (WACC) of 8%, adjusted where appropriate for country specific risks. Where an impairment
is indicated and a pre-tax cash flow calculation is expected to give a materially different result,
the test would be reperformed using pre-tax cash flows and a pre-tax discount rate. The Group WACC
is equivalent to a pre-tax discount rate of approximately 11%. The impairment losses have been
charged through cost of sales (£209 million), R&D (£47 million) and SG&A (£10 million), and include
£197 million (2007 £106 million) arising from the major restructuring programmes.
Reversals of impairment arise from subsequent reviews of the impaired assets where the conditions
which gave rise to the original impairments are deemed no longer to apply. All of the reversals
have been credited to cost of sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
£m |
|
|
£m |
|
|
Cost at 1st January |
|
|
|
|
|
|
1,370 |
|
|
|
758 |
|
Exchange adjustments |
|
|
|
|
|
|
437 |
|
|
|
81 |
|
Additions through business combinations |
|
|
|
|
|
|
294 |
|
|
|
533 |
|
Impairments |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Cost at 31st December |
|
|
|
|
|
|
2,101 |
|
|
|
1,370 |
|
|
|
Net book value at 1st January |
|
|
|
|
|
|
1,370 |
|
|
|
758 |
|
|
|
Net book value at 31st December |
|
|
|
|
|
|
2,101 |
|
|
|
1,370 |
|
|
The additions in the year, translated at acquisition exchange rates, comprise £242 million on the
acquisition of Sirtris Pharmaceuticals Inc. and £52 million on the acquisition of the BMS Egypt
business. See Note 38, Acquisitions and disposals for further details.
|
The carrying value of goodwill, translated at year-end exchange rates, is made up of balances
arising on acquisition of the following companies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Cash generating unit |
|
£m |
|
|
£m |
|
|
Reliant Pharmaceuticals, Inc. |
|
US Pharmaceuticals |
|
|
485 |
|
|
|
356 |
|
ID Biomedical Corporation |
|
Vaccines |
|
|
404 |
|
|
|
367 |
|
Sirtris Pharmaceuticals, Inc. |
|
Worldwide Pharmaceuticals |
|
|
329 |
|
|
|
|
|
GlaxoSmithKline K.K. |
|
Japan Pharmaceuticals |
|
|
238 |
|
|
|
140 |
|
Domantis Limited |
|
Worldwide Pharmaceuticals |
|
|
181 |
|
|
|
181 |
|
CNS, Inc. |
|
Consumer Healthcare |
|
|
153 |
|
|
|
111 |
|
Polfa Poznan S.A. |
|
Poland Pharmaceuticals |
|
|
128 |
|
|
|
111 |
|
BMS Egypt |
|
Emerging Markets Pharmaceuticals |
|
|
48 |
|
|
|
|
|
Corixa Corporation |
|
Vaccines |
|
|
33 |
|
|
|
24 |
|
Others |
|
|
|
|
|
|
102 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
2,101 |
|
|
|
1,370 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
18
Goodwill continued
Goodwill is allocated to cash generating units which are tested for impairment at least annually.
The valuations of the Worldwide Pharmaceuticals cash generating unit (for Sirtris Pharmaceuticals
and Domantis) and the US Pharmaceuticals cash generating unit (for Reliant Pharmaceuticals) have
both been prepared on a fair value less costs to sell basis, using turnover and earnings multiples
derived from observed market data. In each case the value of goodwill inherent in the cash
generating units is considerably in excess of the book values of the acquired goodwill.
The recoverable amounts of the other cash generating units are assessed using either a value in use
or a fair value less costs to sell model. Value in use is calculated as the net present value of
the projected risk-adjusted post-tax cash flows plus a terminal value of the cash generating unit
to which the goodwill is allocated. Initially a post-tax discount rate is applied to calculate the
net present value of the post-tax cash flows. The post-tax discount rate used is based on the Group
WACC of 8%, as most cash generating units have integrated operations across large parts of the
Group. The discount rate is increased where specific country risks are sufficiently significant to
have a material impact on the outcome of the impairment test. The Group WACC is equivalent to a
pre-tax discount rate of approximately 11%. Where the impairment test indicates that the
recoverable value of the unit is close to or below its carrying value, it is reperformed using a
pre-tax discount rate and pre-tax cash flows in order to determine if an impairment exists and to
establish its magnitude.
Fair value is calculated using a similar discounted cash flow approach based on the Groups
acquisition valuation model. A post-tax discount rate is applied to the projected risk-adjusted
post-tax cash flows and terminal value.
Details relating to the discounted cash flow models used in the impairment tests of the other
significant goodwill balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
Vaccines CGU |
|
Japan Pharmaceuticals CGU |
|
Consumer Healthcare CGU |
|
Poland Pharmaceuticals CGU |
|
|
for ID Biomedical |
|
for GlaxoSmithKline KK |
|
for CNS |
|
for Polfa Poznan |
|
Valuation basis |
|
Fair value less costs to sell |
|
Fair value less costs to sell |
|
Fair value less costs to sell |
|
Value in use |
|
Key assumptions |
|
Sales growth rates
Profit margins
Discount rate |
|
Sales growth rates
Profit margins
Discount rate |
|
Sales growth rates
Advertising and
promotion investment
Terminal growth rate |
|
Sales growth rates
Profit margins
Discount rate |
|
|
Determination of
assumptions |
|
Growth rates are internal
forecasts based on both
internal and external
market information.
Margins reflect past
experience, adjusted for
expected changes.
Discount rate based on
Group WACC. |
|
Growth rates are internal
forecasts based on both
internal and external
market information.
Margins reflect past
experience, adjusted for
expected changes.
Discount rate based on
Group WACC. |
|
Growth rates are internal
forecasts based on both
internal and external
market information.
Advertising and promotion
investment based on
historical levels adjusted
for managements view of
support needed for
innovation and expansion.
Terminal growth rate
based on managements
estimate of future long-
term average growth rates. |
|
Growth rates are internal
forecasts based on both
internal and external
market information.
Margins reflect past
experience, adjusted for
expected changes.
Discount rate based on
Group WACC. |
|
|
Period of specific projected cashflows |
|
5 years |
|
5 years |
|
4 years |
|
5 years |
|
Discount rate |
|
8% |
|
8% |
|
8% |
|
8% |
|
Terminal
growth rate |
|
2% p.a. |
|
2% p.a. |
|
3% p.a. |
|
13% p.a. decline. |
|
The terminal growth rates do not exceed the long-term projected growth rates for the relevant
markets. The terminal growth rate used in the value in use calculation for the Poland
Pharmaceuticals CGU reflects the impact of future generic competition and takes no account of new
product launches. The Consumer Healthcare cash generating unit comprises a collection of smaller
cash generating units including brands with indefinite lives with a carrying value of £1,794
million (2007 £1,332 million) as detailed in Note 19 Other intangible assets.
In each case the
valuations indicate sufficient headroom such that a reasonably possible change to key assumptions
is unlikely to result in an impairment of the related goodwill.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 129
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computer |
|
|
Licences, |
|
|
Amortised |
|
|
Indefinite life |
|
|
|
|
|
|
software |
|
|
patents, etc. |
|
|
brands |
|
|
brands |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cost at 1st January 2007 |
|
|
715 |
|
|
|
2,282 |
|
|
|
64 |
|
|
|
1,309 |
|
|
|
4,370 |
|
Exchange adjustments |
|
|
9 |
|
|
|
128 |
|
|
|
(1 |
) |
|
|
44 |
|
|
|
180 |
|
Capitalised internal development costs |
|
|
41 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
47 |
|
Additions through business combinations |
|
|
1 |
|
|
|
670 |
|
|
|
|
|
|
|
|
|
|
|
671 |
|
Other additions |
|
|
44 |
|
|
|
333 |
|
|
|
203 |
|
|
|
|
|
|
|
580 |
|
Disposals and asset write-offs |
|
|
(8 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
(34 |
) |
Transfer to assets held for sale |
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Cost at 31st December 2007 |
|
|
801 |
|
|
|
3,393 |
|
|
|
266 |
|
|
|
1,353 |
|
|
|
5,813 |
|
Exchange adjustments |
|
|
110 |
|
|
|
738 |
|
|
|
65 |
|
|
|
371 |
|
|
|
1,284 |
|
Capitalised internal development costs |
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
Additions through business combinations |
|
|
|
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
171 |
|
Other additions |
|
|
58 |
|
|
|
492 |
|
|
|
|
|
|
|
99 |
|
|
|
649 |
|
Disposals and asset write-offs |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
Reclassifications |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
Cost at 31st December 2008 |
|
|
1,003 |
|
|
|
4,794 |
|
|
|
331 |
|
|
|
1,823 |
|
|
|
7,951 |
|
|
Amortisation at 1st January 2007 |
|
|
(444 |
) |
|
|
(475 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(923 |
) |
Exchange adjustments |
|
|
(8 |
) |
|
|
(13 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(22 |
) |
Provision for the year |
|
|
(80 |
) |
|
|
(141 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
(226 |
) |
Disposals and asset write-offs |
|
|
1 |
|
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
Transfer to assets held for sale |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
Amortisation at 31st December 2007 |
|
|
(530 |
) |
|
|
(622 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
(1,162 |
) |
Exchange adjustments |
|
|
(75 |
) |
|
|
(168 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
(246 |
) |
Provision for the year |
|
|
(96 |
) |
|
|
(204 |
) |
|
|
(11 |
) |
|
|
|
|
|
|
(311 |
) |
Disposals and asset write-offs |
|
|
3 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
Amortisation at 31st December 2008 |
|
|
(698 |
) |
|
|
(995 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
(1,717 |
) |
|
Impairment at 1st January 2007 |
|
|
(24 |
) |
|
|
(109 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
(154 |
) |
Exchange adjustments |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
|
|
|
|
(6 |
) |
Impairment losses |
|
|
|
|
|
|
(54 |
) |
|
|
|
|
|
|
|
|
|
|
(54 |
) |
Disposals and asset write-offs |
|
|
|
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
19 |
|
|
Impairment at 31st December 2007 |
|
|
(24 |
) |
|
|
(150 |
) |
|
|
|
|
|
|
(21 |
) |
|
|
(195 |
) |
Exchange adjustments |
|
|
(1 |
) |
|
|
(46 |
) |
|
|
|
|
|
|
(8 |
) |
|
|
(55 |
) |
Impairment losses |
|
|
(7 |
) |
|
|
(118 |
) |
|
|
|
|
|
|
|
|
|
|
(125 |
) |
Impairment reversals |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
Impairment at 31st December 2008 |
|
|
(32 |
) |
|
|
(304 |
) |
|
|
|
|
|
|
(29 |
) |
|
|
(365 |
) |
|
Total amortisation and impairment at
31st December 2007 |
|
|
(554 |
) |
|
|
(772 |
) |
|
|
(10 |
) |
|
|
(21 |
) |
|
|
(1,357 |
) |
Total amortisation and impairment at
31st December 2008 |
|
|
(730 |
) |
|
|
(1,299 |
) |
|
|
(24 |
) |
|
|
(29 |
) |
|
|
(2,082 |
) |
|
Net book value at 1st January 2007 |
|
|
247 |
|
|
|
1,698 |
|
|
|
60 |
|
|
|
1,288 |
|
|
|
3,293 |
|
|
Net book value at 31st December 2007 |
|
|
247 |
|
|
|
2,621 |
|
|
|
256 |
|
|
|
1,332 |
|
|
|
4,456 |
|
|
Net book value at 31st December 2008 |
|
|
273 |
|
|
|
3,495 |
|
|
|
307 |
|
|
|
1,794 |
|
|
|
5,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
130 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
19
Other intangible assets continued
Amortisation and impairment losses, net of reversals, have been charged in the income statement as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation |
|
|
Net impairment losses |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cost of sales |
|
|
34 |
|
|
|
32 |
|
|
|
|
|
|
|
|
|
Selling, general and
administration |
|
|
181 |
|
|
|
123 |
|
|
|
25 |
|
|
|
3 |
|
Research and development |
|
|
96 |
|
|
|
71 |
|
|
|
90 |
|
|
|
51 |
|
|
|
|
|
311 |
|
|
|
226 |
|
|
|
115 |
|
|
|
54 |
|
|
The additions through business combinations in the year of £171 million comprise £106 million
acquired with the acquisition of Sirtris Pharmaceuticals and £65 million acquired with the
acquisition of BMS Egypt (see Note 38, Acquisitions and
disposals). At 31st December 2008, the net book value included £795 million arising from the acquisition of Reliant Pharmaceuticals Inc.
in 2007 and £654 million arising from the acquisition of ID Biomedical Corporation in 2005. It also
included £132 million (2007 £136 million) of internally generated costs of which £125 million
(2007 £130 million) related to computer software and £7 million (2007 £6 million) related to
compounds in development.
Amortised brands include OTC rights relating to alli, with a book value at 31st December 2008 of
£294 million (2007 £249 million).
Indefinite life brands comprise a portfolio of Consumer Healthcare products acquired with the
acquisitions of Sterling Winthrop, Inc. in 1994, Block Drug Company, Inc. in 2001 and CNS, Inc. in
2006. The book values of the major brands are as follows:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Panadol |
|
|
411 |
|
|
|
330 |
|
Sensodyne |
|
|
289 |
|
|
|
231 |
|
Breathe Right |
|
|
216 |
|
|
|
165 |
|
Polident |
|
|
123 |
|
|
|
98 |
|
Corega |
|
|
109 |
|
|
|
87 |
|
Biotene |
|
|
99 |
|
|
|
|
|
Poligrip |
|
|
75 |
|
|
|
60 |
|
Solpadeine |
|
|
60 |
|
|
|
57 |
|
Others |
|
|
412 |
|
|
|
304 |
|
|
|
|
|
1,794 |
|
|
|
1,332 |
|
|
Each of these brands is considered to have an indefinite life, given the strength and durability of
the brand and the level of marketing support. The brands are in relatively similar stable and
profitable market sectors, with similar risk profiles, and their size, diversification and market
shares mean that the risk of market-related factors causing a reduction in the lives of the brands
is considered to be relatively low. The Group is not aware of any material legal, regulatory,
contractual, competitive, economic or other factor which could limit their useful lives.
Accordingly, they are not amortised.
Each brand is tested annually for impairment applying a fair value less costs to sell methodology,
generally using four year post-tax cash flow forecasts with a terminal value calculation and a
discount rate equal to the Group post-tax weighted average cost of capital of 8%, adjusted where
appropriate for country-specific risks. The main assumptions include future sales price and volume
growth, product contribution and the future expenditure required to maintain the products
marketability and registration in the relevant jurisdictions. These assumptions are based on past
experience and are reviewed as part of managements budgeting and strategic planning cycle for
changes in market conditions and sales erosion through competition. The terminal growth rates
applied of between 2% and 3% are managements estimates of future long-term average growth rates of
the relevant markets. In each case the valuations indicate sufficient headroom such that a
reasonably possible change to key assumptions is unlikely to result in an impairment of these
brands.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 131
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint |
|
|
Associated |
|
|
2008 |
|
|
Joint |
|
|
Associated |
|
|
2007 |
|
|
|
ventures |
|
|
undertakings |
|
|
Total |
|
|
ventures |
|
|
undertakings |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January |
|
|
15 |
|
|
|
314 |
|
|
|
329 |
|
|
|
16 |
|
|
|
279 |
|
|
|
295 |
|
Exchange adjustments |
|
|
6 |
|
|
|
131 |
|
|
|
137 |
|
|
|
|
|
|
|
(4 |
) |
|
|
(4 |
) |
Additions |
|
|
6 |
|
|
|
3 |
|
|
|
9 |
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Transfer from other investments |
|
|
|
|
|
|
39 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment |
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Retained profit/(loss) for the
year |
|
|
1 |
|
|
|
34 |
|
|
|
35 |
|
|
|
(1 |
) |
|
|
37 |
|
|
|
36 |
|
|
At 31st December |
|
|
28 |
|
|
|
524 |
|
|
|
552 |
|
|
|
15 |
|
|
|
314 |
|
|
|
329 |
|
|
The principal associated undertaking is Quest Diagnostics Inc., a US clinical laboratory business
listed on the New York Stock Exchange. The investment had a book value at 31st December 2008 of
£463 million (2007 £299 million) and a market value of £1,316 million (2007 £970 million). At
31st December 2008, the Group owned 18.7% of Quest (2007 18.9%). Although the Group holds less
than 20% of the ownership interest and voting control in Quest, the Group has the ability to
exercise significant influence through both its significant shareholding and its nominated
directors active participation on the Quest Board of Directors and Board sub-committees.
The transfers from other investments relates to the Groups holding in Chemocentryx, previously
classified within Other investments, which increased during the year to 23.5%.
Summarised balance sheet information in respect of the Groups associates is set out below:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
|
Total assets: |
|
|
|
|
|
|
|
|
Quest Diagnostics Inc. |
|
|
5,836 |
|
|
|
4,305 |
|
Others |
|
|
115 |
|
|
|
37 |
|
|
|
|
|
5,951 |
|
|
|
4,342 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities: |
|
|
|
|
|
|
|
|
Quest Diagnostics Inc. |
|
|
(3,333 |
) |
|
|
(2,634 |
) |
Others |
|
|
(20 |
) |
|
|
|
|
|
|
|
|
(3,353 |
) |
|
|
(2,634 |
) |
|
Net assets |
|
|
2,598 |
|
|
|
1,708 |
|
|
|
Groups share of associates net assets |
|
|
524 |
|
|
|
314 |
|
|
In 2002, GSK hedged part of the equity value of its holding in Quest Diagnostics Inc. through a
series of variable sale forward contracts. The contracts (the equity collar) were renewed in 2006
and were structured in five series, each over two million Quest shares, and were due to mature
between 2010 and 2012. A second series of hedging contracts over an additional 10 million shares
was entered into on 15th February 2007. These contracts were also structured in five series, each
over two million Quest shares, and were due to mature between 2013 and 2015. During the year, these
contracts held with Lehman Brothers Finance S.A., with respect to a total of 20 million Quest
shares terminated with no material financial impact to GSK.
Investments in joint ventures comprise £36 million share of gross assets (2007 £21 million) and
£8 million share of gross liabilities (2007 £6 million). These principally arise from 50%
interests in two joint ventures, Shionogi-GlaxoSmithKline Holdings, L.P., which is developing
specified chemical compounds, and GlaxoSmithKline Shire Canada, which primarily co-markets
Combivir, Trizivir and Epivir in certain territories, together with a 29% interest in another joint
venture, Pharmaceutical Insurance Limited, which is a mutual insurance company covering
pharmaceutical property risk.
|
|
|
|
|
|
|
|
|
|
|
|
132 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
At 1st January |
|
|
517 |
|
|
|
441 |
|
Exchange adjustments |
|
|
129 |
|
|
|
12 |
|
Additions |
|
|
87 |
|
|
|
206 |
|
Net fair value movements |
|
|
(94 |
) |
|
|
(67 |
) |
Impairments |
|
|
(65 |
) |
|
|
(31 |
) |
Transfer to associates |
|
|
(39 |
) |
|
|
|
|
Disposals |
|
|
(57 |
) |
|
|
(44 |
) |
|
At 31st December |
|
|
478 |
|
|
|
517 |
|
|
Other investments comprise non-current equity investments which are available-for-sale investments
recorded at fair value at each balance sheet date. For investments traded in an active market, the
fair value is determined by reference to the relevant stock exchange quoted bid price. For other
investments, the fair value is estimated by reference to the current market value of similar
instruments or by reference to the discounted cash flows of the underlying net assets. Equity
investments are recorded as non-current assets unless they are expected to be sold within one year,
in which case they are recorded as current assets. The Group holds a number of equity investments
in entities where the Group has entered into research collaborations. Other investments include
listed investments of £319 million (2007 £413 million) that offer the Group the opportunity for
return through dividend income and fair value gains.
On disposal of investments, fair value movements are reclassified from reserves to the income
statement based on average cost for shares acquired at different times.
The impairment losses recorded in the tables above have been recognised in the income statement for
the year within other operating income, together with amounts recycled from the fair value reserve
on recognition of the impairments. These impairments initially result from prolonged or significant
declines in the fair value of the equity investments below acquisition cost, subsequent to which
any further declines in fair value are immediately taken to the income statement. At 31st December
2008 impaired assets with a fair value of £118 million (2007 £90 million) are included in other
investments.
The transfer to associates relates to the Groups holding in Chemocentryx which increased during
the year to 23.5%.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Amounts recoverable under insurance contracts |
|
|
293 |
|
|
|
271 |
|
Pension schemes in surplus |
|
|
39 |
|
|
|
255 |
|
Other receivables |
|
|
247 |
|
|
|
161 |
|
|
|
|
|
579 |
|
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Raw materials and consumables |
|
|
1,127 |
|
|
|
1,105 |
|
Work in progress |
|
|
1,295 |
|
|
|
771 |
|
Finished goods |
|
|
1,634 |
|
|
|
1,186 |
|
|
|
|
|
4,056 |
|
|
|
3,062 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 133
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Trade receivables |
|
|
5,333 |
|
|
|
4,649 |
|
Prepaid pension contributions |
|
|
1 |
|
|
|
1 |
|
Other prepayments and accrued income |
|
|
294 |
|
|
|
238 |
|
Interest receivable |
|
|
39 |
|
|
|
37 |
|
Employee loans and advances |
|
|
63 |
|
|
|
55 |
|
Other receivables |
|
|
535 |
|
|
|
515 |
|
|
|
|
|
6,265 |
|
|
|
5,495 |
|
|
Trade receivables include £14 million (2007 £8 million) due from associates
and joint ventures.
|
|
|
|
|
|
|
|
|
Bad and doubtful debt provision |
|
2008 £m |
|
|
2007 £m |
|
|
At 1st January |
|
|
98 |
|
|
|
104 |
|
Exchange adjustments |
|
|
29 |
|
|
|
6 |
|
Charge for the year |
|
|
21 |
|
|
|
18 |
|
Subsequent recoveries of amounts provided for |
|
|
(15 |
) |
|
|
(28 |
) |
Utilised |
|
|
(4 |
) |
|
|
(2 |
) |
|
At 31st December |
|
|
129 |
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Cash at bank and in hand |
|
|
652 |
|
|
|
627 |
|
Short-term deposits |
|
|
4,971 |
|
|
|
2,383 |
|
Commercial paper |
|
|
|
|
|
|
369 |
|
|
|
|
|
5,623 |
|
|
|
3,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Land and buildings |
|
|
2 |
|
|
|
3 |
|
Plant, equipment and vehicles |
|
|
|
|
|
|
1 |
|
|
|
|
|
2 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
134 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Trade payables |
|
|
1,153 |
|
|
|
931 |
|
Wages and salaries |
|
|
946 |
|
|
|
812 |
|
Social security |
|
|
148 |
|
|
|
116 |
|
Other payables |
|
|
233 |
|
|
|
214 |
|
Deferred income |
|
|
103 |
|
|
|
48 |
|
Customer return and rebate accruals |
|
|
1,337 |
|
|
|
973 |
|
Other accruals |
|
|
2,155 |
|
|
|
1,767 |
|
|
|
|
|
6,075 |
|
|
|
4,861 |
|
|
Customer return and rebate accruals are provided for by the Group at the point of sale in respect
of the estimated rebates, discounts or allowances payable to customers, principally in the USA.
Provisions are made at the time of sale but the actual amounts paid are based on claims made some
time after the initial recognition of the sale. As the amounts are estimated they may not fully
reflect the final outcome and the amounts are subject to change dependent upon, amongst other
things, the types of buying group and product sales mix. The level of provision is reviewed and
adjusted quarterly in the light of historical experience of actual rebates, discounts or allowances
given and returns made and any changes in arrangements. Future events could cause the assumptions
on which the provisions are based to change, which could affect the future results of the Group.
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and other post-employment costs |
|
2008 £m |
|
|
2007 £m |
|
|
2006 £m |
|
|
UK pension schemes |
|
|
236 |
|
|
|
108 |
|
|
|
159 |
|
US pension schemes |
|
|
60 |
|
|
|
24 |
|
|
|
35 |
|
Other overseas pensions schemes |
|
|
87 |
|
|
|
89 |
|
|
|
91 |
|
Unfunded post-retirement healthcare schemes |
|
|
118 |
|
|
|
90 |
|
|
|
91 |
|
Other post-employment costs |
|
|
4 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
505 |
|
|
|
313 |
|
|
|
377 |
|
|
Analysed as: |
|
|
|
|
|
|
|
|
|
|
|
|
Funded defined benefit/hybrid pension schemes |
|
|
318 |
|
|
|
171 |
|
|
|
237 |
|
Unfunded defined benefit pension schemes |
|
|
23 |
|
|
|
17 |
|
|
|
19 |
|
Unfunded post-retirement healthcare schemes |
|
|
118 |
|
|
|
90 |
|
|
|
91 |
|
|
Defined benefit schemes |
|
|
459 |
|
|
|
278 |
|
|
|
347 |
|
Defined contribution pension schemes |
|
|
42 |
|
|
|
33 |
|
|
|
29 |
|
Other post-employment costs |
|
|
4 |
|
|
|
2 |
|
|
|
1 |
|
|
|
|
|
505 |
|
|
|
313 |
|
|
|
377 |
|
|
The costs of the defined benefit pension and post-retirement healthcare schemes are charged in the
income statement as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
|
179 |
|
|
|
72 |
|
|
|
74 |
|
Selling, general and administration |
|
|
160 |
|
|
|
129 |
|
|
|
175 |
|
Research and development |
|
|
120 |
|
|
|
77 |
|
|
|
98 |
|
|
|
|
|
459 |
|
|
|
278 |
|
|
|
347 |
|
|
GSK entities operate pension arrangements which cover the Groups material obligations to provide
pensions to retired employees.
These arrangements have been developed in accordance with local practices in the countries
concerned. Pension benefits can be provided by state schemes; by defined contribution schemes,
whereby retirement benefits are determined by the value of funds arising from contributions paid in
respect of each employee; or by defined benefit schemes, whereby retirement benefits are based on
employee pensionable remuneration and length of service. Some hybrid defined benefit schemes also
include defined contribution sections.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 135
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
28 Pensions and other post-employment benefits continued
Pension costs of defined benefit schemes for accounting purposes have been calculated using the
projected unit method. In certain countries pension benefits are provided on an unfunded basis,
some administered by trustee companies. Formal, independent, actuarial valuations of the Groups
main plans are undertaken regularly, normally at least every three years.
Actuarial movements in the year are recognised through the statement of recognised income and
expense. The UK and US discount rates are derived from AA rated corporate bond yields and are
intended to reflect the term of the expected benefit payments. The expected rate of return on bonds
reflects the portfolio mix of index-linked, government and corporate bonds. An equity risk premium
of between 3% and 4% is added to longer term government bond yields to give the expected rate of
return on equities. Projected inflation rate and pension increases are long-term predictions based
on the yield gap between long-term index-linked and fixed interest Gilts. In the UK, mortality
rates are determined by adjusting the PA92 standard mortality tables to reflect recent scheme
experience. These rates are then projected to reflect improvements in life expectancy in line with
the medium cohort (i.e. improvements at recently observed higher levels which are assumed to
continue to 2020) with minimum improvements thereafter of 1% per year for males and 0.5% for
females. In the USA, mortality rates are calculated using the RP2000 fully generational table,
projected using scale AA, with the white collar adjustment.
The mortality assumptions for the UK
and US schemes were reviewed in 2007 and updated in 2008. GSK expects to review these again in
2009.
The average life expectancy assumed now for an individual at the age of 60 and projected to
apply in 2028 for an individual then at the age of 60 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
USA |
|
|
|
Male |
|
|
Female |
|
|
Male |
|
|
Female |
|
|
|
Years |
|
|
Years |
|
|
Years |
|
|
Years |
|
|
Current |
|
|
26.8 |
|
|
|
28.1 |
|
|
|
24.5 |
|
|
|
26.2 |
|
Projected for 2028 |
|
|
29.3 |
|
|
|
30.0 |
|
|
|
25.9 |
|
|
|
27.0 |
|
|
The assets of funded schemes are generally held in separately administered trusts or are insurance
contracts. Assets are invested in different classes in order to maintain a balance between risk and
return. Investments are diversified to limit the financial effect of the failure of any individual
investment. Following an asset liability study in 2007, the Group decided to adopt a strategy to
reduce gradually the allocation of investment in equities. In the UK it is proposed that the
strategy will be linked to the funding levels in the schemes and this will be considered further
with the trustees of the UK schemes in 2009. The target allocation of equities and property in the
US scheme was reduced from 80% of the total to 60% in 2008.
In the UK the defined benefit pension schemes operated for the benefit of former Glaxo Wellcome
employees and former SmithKline Beecham employees remain separate. These schemes were closed to new
entrants in 2001 and subsequent UK employees are entitled to join a defined contribution scheme. In
the USA the former Glaxo Wellcome and SmithKline Beecham defined benefit schemes were merged during
2001. In addition, the Group operates a number of post-retirement healthcare schemes, the principal
one of which is in the USA.
The Group has applied the following financial assumptions in assessing the defined benefit
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
% pa |
|
|
Rate of increase of future earnings |
|
|
3.90 |
|
|
|
4.25 |
|
|
|
4.25 |
|
|
|
4.50 |
|
|
|
5.00 |
|
|
|
5.00 |
|
|
|
3.10 |
|
|
|
3.25 |
|
|
|
3.25 |
|
Discount rate |
|
|
6.20 |
|
|
|
5.75 |
|
|
|
5.00 |
|
|
|
6.00 |
|
|
|
6.00 |
|
|
|
5.75 |
|
|
|
5.00 |
|
|
|
4.75 |
|
|
|
4.25 |
|
Expected pension increases |
|
|
2.90 |
|
|
|
3.25 |
|
|
|
3.00 |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
2.10 |
|
|
|
2.00 |
|
|
|
2.00 |
|
Cash balance credit/conversion rate |
|
|
n/a |
|
|
|
n/a |
|
|
|
n/a |
|
|
|
4.50 |
|
|
|
4.75 |
|
|
|
4.75 |
|
|
|
1.20 |
|
|
|
1.60 |
|
|
|
1.75 |
|
Inflation rate |
|
|
2.70 |
|
|
|
3.25 |
|
|
|
3.00 |
|
|
|
2.50 |
|
|
|
2.50 |
|
|
|
2.50 |
|
|
|
1.70 |
|
|
|
1.75 |
|
|
|
1.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
28
Pensions and other post-employment benefits
continued
The amounts recorded in the income statement and statement of recognised income and expense for the
three years ended 31st December 2008 in relation to the defined benefit pension and post-retirement
healthcare schemes were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
2008 |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Amounts charged to operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
126 |
|
|
|
61 |
|
|
|
59 |
|
|
|
246 |
|
|
|
30 |
|
Past service cost |
|
|
|
|
|
|
10 |
|
|
|
2 |
|
|
|
12 |
|
|
|
4 |
|
Expected return on pension scheme assets |
|
|
(442 |
) |
|
|
(144 |
) |
|
|
(47 |
) |
|
|
(633 |
) |
|
|
|
|
Interest on scheme liabilities |
|
|
377 |
|
|
|
121 |
|
|
|
53 |
|
|
|
551 |
|
|
|
62 |
|
Settlements and curtailments |
|
|
175 |
|
|
|
12 |
|
|
|
(22 |
) |
|
|
165 |
|
|
|
22 |
|
|
|
|
|
|
|
|
236 |
|
|
|
60 |
|
|
|
45 |
|
|
|
341 |
|
|
|
118 |
|
|
|
|
|
Actuarial (losses)/gains recorded in
the statement of
recognised income and expense |
|
|
(776 |
) |
|
|
(576 |
) |
|
|
(82 |
) |
|
|
(1,434 |
) |
|
|
64 |
|
|
|
|
|
The amounts included with settlements and curtailments include £208 million of
augmentation costs arising from major restructuring
programmes (see Note 29 Other provisions).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
2007 |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Amounts charged to operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
138 |
|
|
|
60 |
|
|
|
57 |
|
|
|
255 |
|
|
|
30 |
|
Past service cost |
|
|
|
|
|
|
(7 |
) |
|
|
1 |
|
|
|
(6 |
) |
|
|
|
|
Expected return on pension scheme assets |
|
|
(389 |
) |
|
|
(141 |
) |
|
|
(37 |
) |
|
|
(567 |
) |
|
|
|
|
Interest on scheme liabilities |
|
|
335 |
|
|
|
107 |
|
|
|
41 |
|
|
|
483 |
|
|
|
54 |
|
Settlements and curtailments |
|
|
24 |
|
|
|
5 |
|
|
|
(6 |
) |
|
|
23 |
|
|
|
6 |
|
|
|
|
|
|
|
|
108 |
|
|
|
24 |
|
|
|
56 |
|
|
|
188 |
|
|
|
90 |
|
|
|
|
|
Actuarial gains recorded in the
statement of
recognised income and expense |
|
|
523 |
|
|
|
66 |
|
|
|
43 |
|
|
|
632 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
2006 |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Amounts charged to operating profit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost |
|
|
135 |
|
|
|
66 |
|
|
|
56 |
|
|
|
257 |
|
|
|
48 |
|
Past service cost |
|
|
33 |
|
|
|
|
|
|
|
(2 |
) |
|
|
31 |
|
|
|
|
|
Expected return on pension scheme assets |
|
|
(333 |
) |
|
|
(142 |
) |
|
|
(30 |
) |
|
|
(505 |
) |
|
|
|
|
Interest on scheme liabilities |
|
|
307 |
|
|
|
113 |
|
|
|
42 |
|
|
|
462 |
|
|
|
57 |
|
Settlements and curtailments |
|
|
17 |
|
|
|
(2 |
) |
|
|
(4 |
) |
|
|
11 |
|
|
|
(14 |
) |
|
|
|
|
|
|
|
159 |
|
|
|
35 |
|
|
|
62 |
|
|
|
256 |
|
|
|
91 |
|
|
|
|
|
Actuarial gains recorded in the
statement of
recognised income and expense |
|
|
111 |
|
|
|
169 |
|
|
|
10 |
|
|
|
290 |
|
|
|
139 |
|
|
|
|
|
The total actuarial losses recorded in the statement of recognised income and
expense since 1st January 2003 amount to £1,388 million.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 137
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
28 Pensions and other post-employment benefits continued
The fair values of the assets and liabilities of the UK and US defined benefit pension schemes,
together with aggregated data for other defined benefit pension schemes in the Group are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
At 31st December 2008 |
|
Expected rate |
|
|
Fair |
|
|
Expected rate |
|
|
Fair |
|
|
expected rate |
|
|
Fair |
|
|
Fair |
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
value |
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
Equities |
|
|
7.75 |
|
|
|
3,334 |
|
|
|
8.25 |
|
|
|
838 |
|
|
|
7.00 |
|
|
|
211 |
|
|
|
4,383 |
|
Property |
|
|
6.75 |
|
|
|
331 |
|
|
|
7.25 |
|
|
|
259 |
|
|
|
6.75 |
|
|
|
22 |
|
|
|
612 |
|
Bonds |
|
|
4.75 |
|
|
|
2,430 |
|
|
|
5.25 |
|
|
|
893 |
|
|
|
3.25 |
|
|
|
598 |
|
|
|
3,921 |
|
Other assets |
|
|
2.75 |
|
|
|
40 |
|
|
|
1.50 |
|
|
|
26 |
|
|
|
4.25 |
|
|
|
306 |
|
|
|
372 |
|
|
|
|
|
|
|
|
|
Fair value of assets |
|
|
|
|
|
|
6,135 |
|
|
|
|
|
|
|
2,016 |
|
|
|
|
|
|
|
1,137 |
|
|
|
9,288 |
|
Present value of scheme obligations |
|
|
|
|
|
|
(6,885 |
) |
|
|
|
|
|
|
(2,738 |
) |
|
|
|
|
|
|
(1,357 |
) |
|
|
(10,980 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(750 |
) |
|
|
|
|
|
|
(722 |
) |
|
|
|
|
|
|
(220 |
) |
|
|
(1,692 |
) |
Unrecognised past service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
Restriction on surplus |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
|
|
|
|
|
|
Recognised on the balance sheet |
|
|
|
|
|
|
(750 |
) |
|
|
|
|
|
|
(722 |
) |
|
|
|
|
|
|
(225 |
) |
|
|
(1,697 |
) |
|
|
|
|
|
|
|
|
|
Included in other non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39 |
|
|
|
39 |
|
Included in pensions and other post-employment
benefits |
|
|
|
|
|
|
(750 |
) |
|
|
|
|
|
|
(722 |
) |
|
|
|
|
|
|
(264 |
) |
|
|
(1,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(750 |
) |
|
|
|
|
|
|
(722 |
) |
|
|
|
|
|
|
(225 |
) |
|
|
(1,697 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
|
|
|
|
(1,249 |
) |
|
|
|
|
|
|
(470 |
) |
|
|
|
|
|
|
(87 |
) |
|
|
(1,806 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
USA |
|
|
|
|
|
|
Rest of World |
|
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
At 31st December 2007 |
|
Expected rate |
|
|
Fair |
|
|
Expected rate |
|
|
Fair |
|
|
expected rate |
|
|
Fair |
|
|
Fair |
|
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
value |
|
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
Equities |
|
|
8.00 |
|
|
|
4,578 |
|
|
|
8.50 |
|
|
|
1,446 |
|
|
|
7.50 |
|
|
|
223 |
|
|
|
6,247 |
|
Property |
|
|
7.00 |
|
|
|
338 |
|
|
|
7.50 |
|
|
|
213 |
|
|
|
7.00 |
|
|
|
20 |
|
|
|
571 |
|
Bonds |
|
|
5.00 |
|
|
|
2,322 |
|
|
|
5.00 |
|
|
|
335 |
|
|
|
4.00 |
|
|
|
430 |
|
|
|
3,087 |
|
Other assets |
|
|
6.00 |
|
|
|
55 |
|
|
|
4.75 |
|
|
|
10 |
|
|
|
4.25 |
|
|
|
212 |
|
|
|
277 |
|
|
|
|
|
|
|
|
|
Fair value of assets |
|
|
|
|
|
|
7,293 |
|
|
|
|
|
|
|
2,004 |
|
|
|
|
|
|
|
885 |
|
|
|
10,182 |
|
Present value of scheme obligations |
|
|
|
|
|
|
(7,371 |
) |
|
|
|
|
|
|
(1,945 |
) |
|
|
|
|
|
|
(1,022 |
) |
|
|
(10,338 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
(137 |
) |
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other non-current assets |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
30 |
|
|
|
255 |
|
Included in pensions and other
post-employment
benefits |
|
|
|
|
|
|
(88 |
) |
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
|
(167 |
) |
|
|
(411 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78 |
) |
|
|
|
|
|
|
59 |
|
|
|
|
|
|
|
(137 |
) |
|
|
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
|
|
|
|
557 |
|
|
|
|
|
|
|
187 |
|
|
|
|
|
|
|
19 |
|
|
|
763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
138 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
28 Pensions and other post-employment benefits continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
|
|
|
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
At 31st December 2006 |
|
Expected rate |
|
|
Fair |
|
|
Expected rate |
|
|
Fair |
|
|
expected rate |
|
|
Fair |
|
|
Fair |
|
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
of return |
|
|
value |
|
|
value |
|
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
% |
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
Equities |
|
|
8.00 |
|
|
|
4,218 |
|
|
|
8.50 |
|
|
|
1,412 |
|
|
|
7.25 |
|
|
|
205 |
|
|
|
5,835 |
|
Property |
|
|
7.00 |
|
|
|
210 |
|
|
|
7.50 |
|
|
|
169 |
|
|
|
6.75 |
|
|
|
11 |
|
|
|
390 |
|
Bonds |
|
|
4.50 |
|
|
|
2,026 |
|
|
|
5.50 |
|
|
|
324 |
|
|
|
3.50 |
|
|
|
351 |
|
|
|
2,701 |
|
Other assets |
|
|
5.00 |
|
|
|
100 |
|
|
|
5.00 |
|
|
|
48 |
|
|
|
3.75 |
|
|
|
174 |
|
|
|
322 |
|
|
|
|
|
|
|
|
|
Fair value of assets |
|
|
|
|
|
|
6,554 |
|
|
|
|
|
|
|
1,953 |
|
|
|
|
|
|
|
741 |
|
|
|
9,248 |
|
Present value of scheme obligations |
|
|
|
|
|
|
(7,444 |
) |
|
|
|
|
|
|
(1,949 |
) |
|
|
|
|
|
|
(952 |
) |
|
|
(10,345 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(890 |
) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
(211 |
) |
|
|
(1,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other non-current assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
160 |
|
|
|
|
|
|
|
19 |
|
|
|
179 |
|
Included in pensions and other
post-employment
benefits |
|
|
|
|
|
|
(890 |
) |
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
|
(230 |
) |
|
|
(1,276 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(890 |
) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
(211 |
) |
|
|
(1,097 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual return on plan assets |
|
|
|
|
|
|
560 |
|
|
|
|
|
|
|
310 |
|
|
|
|
|
|
|
56 |
|
|
|
926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 139
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
28
Pensions and other post-employment
benefits continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
Movements in defined benefit obligations |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Obligations at 1st January 2006 |
|
|
(7,054 |
) |
|
|
(2,150 |
) |
|
|
(922 |
) |
|
|
(10,126 |
) |
|
|
(1,308 |
) |
Exchange adjustments |
|
|
|
|
|
|
267 |
|
|
|
30 |
|
|
|
297 |
|
|
|
151 |
|
Service cost |
|
|
(168 |
) |
|
|
(66 |
) |
|
|
(54 |
) |
|
|
(288 |
) |
|
|
(48 |
) |
Interest cost |
|
|
(307 |
) |
|
|
(113 |
) |
|
|
(42 |
) |
|
|
(462 |
) |
|
|
(57 |
) |
Settlements and curtailments |
|
|
(17 |
) |
|
|
2 |
|
|
|
12 |
|
|
|
(3 |
) |
|
|
14 |
|
Actuarial (losses)/gains |
|
|
(116 |
) |
|
|
1 |
|
|
|
(16 |
) |
|
|
(131 |
) |
|
|
139 |
|
Scheme participants contributions |
|
|
(11 |
) |
|
|
|
|
|
|
(3 |
) |
|
|
(14 |
) |
|
|
(8 |
) |
Benefits paid |
|
|
229 |
|
|
|
110 |
|
|
|
43 |
|
|
|
382 |
|
|
|
54 |
|
|
|
|
|
Obligations at 31st December 2006 |
|
|
(7,444 |
) |
|
|
(1,949 |
) |
|
|
(952 |
) |
|
|
(10,345 |
) |
|
|
(1,063 |
) |
|
|
|
|
Exchange adjustments |
|
|
|
|
|
|
34 |
|
|
|
(80 |
) |
|
|
(46 |
) |
|
|
9 |
|
Service cost |
|
|
(138 |
) |
|
|
(53 |
) |
|
|
(58 |
) |
|
|
(249 |
) |
|
|
(30 |
) |
Interest cost |
|
|
(335 |
) |
|
|
(107 |
) |
|
|
(41 |
) |
|
|
(483 |
) |
|
|
(54 |
) |
Settlements and curtailments |
|
|
(24 |
) |
|
|
(5 |
) |
|
|
4 |
|
|
|
(25 |
) |
|
|
(6 |
) |
Actuarial gains |
|
|
355 |
|
|
|
20 |
|
|
|
61 |
|
|
|
436 |
|
|
|
39 |
|
Scheme participants contributions |
|
|
(38 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(43 |
) |
|
|
-- |
|
Benefits paid |
|
|
253 |
|
|
|
115 |
|
|
|
49 |
|
|
|
417 |
|
|
|
44 |
|
Transfers to other provisions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89 |
|
|
|
|
|
Recognised on the balance sheet at 31st
December 2007 |
|
|
(7,371 |
) |
|
|
(1,945 |
) |
|
|
(1,022 |
) |
|
|
(10,338 |
) |
|
|
(972 |
) |
Unrecognised past service cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
Obligations at 31st December 2007 |
|
|
(7,371 |
) |
|
|
(1,945 |
) |
|
|
(1,022 |
) |
|
|
(10,338 |
) |
|
|
(1,019 |
) |
|
|
|
|
Exchange adjustments |
|
|
|
|
|
|
(753 |
) |
|
|
(353 |
) |
|
|
(1,106 |
) |
|
|
(351 |
) |
Service cost |
|
|
(126 |
) |
|
|
(71 |
) |
|
|
(61 |
) |
|
|
(258 |
) |
|
|
(28 |
) |
Interest cost |
|
|
(377 |
) |
|
|
(121 |
) |
|
|
(53 |
) |
|
|
(551 |
) |
|
|
(62 |
) |
Settlements and curtailments |
|
|
(175 |
) |
|
|
(12 |
) |
|
|
19 |
|
|
|
(168 |
) |
|
|
(16 |
) |
Actuarial gains |
|
|
915 |
|
|
|
38 |
|
|
|
58 |
|
|
|
1,011 |
|
|
|
64 |
|
Scheme participants contributions |
|
|
(33 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
(38 |
) |
|
|
(9 |
) |
Benefits paid |
|
|
282 |
|
|
|
126 |
|
|
|
60 |
|
|
|
468 |
|
|
|
53 |
|
Transfers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
Obligations at 31st December 2008 |
|
|
(6,885 |
) |
|
|
(2,738 |
) |
|
|
(1,357 |
) |
|
|
(10,980 |
) |
|
|
(1,354 |
) |
Unrecognised past service cost |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
1 |
|
|
|
51 |
|
|
|
|
|
Recognised on the balance sheet at 31st
December 2008 |
|
|
(6,885 |
) |
|
|
(2,738 |
) |
|
|
(1,356 |
) |
|
|
(10,979 |
) |
|
|
(1,303 |
) |
|
|
|
|
The UK defined benefit schemes include defined contribution sections with obligations totalling
£553 million at 31st December 2008 (2007 £693 million, 2006 £609 million).
The liability for the US post-retirement healthcare scheme has been assessed using the same
assumptions as for the US pension scheme, together with the assumption for future medical inflation
of 9.0% (2007 8.5%), reducing by 0.5% per year to 5% in 2017 and thereafter. During 2007, the US
post-retirement healthcare scheme was amended. The main change was an increase in the cap on
company costs. At 31st December 2008 the US plan obligation was £1,223 million (2007 £879
million; 2006 £927 million). However, in accordance with IAS 19 the unvested part of a benefit
improvement is not recognised immediately on the balance sheet but is recognised gradually through
the income statement. At 31st December 2008, the unrecognised amount of £51 million primarily
relates to the effect of this change in the US post-retirement scheme. At 31st December 2007, the
past service cost not recognised from this scheme amounted to £47 million.
|
|
|
|
|
|
|
|
|
|
|
|
140
GSK Annual Report 2008
|
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements
continued
|
|
|
|
|
|
|
|
28
Pensions and other post-employment
benefits continued
The defined
benefit pension obligation is analysed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Funded |
|
|
(10,662 |
) |
|
|
(10,079 |
) |
|
|
(10,099 |
) |
Unfunded |
|
|
(318 |
) |
|
|
(259 |
) |
|
|
(246 |
) |
|
|
|
|
(10,980 |
) |
|
|
(10,338 |
) |
|
|
(10,345 |
) |
|
Post-retirement benefits are unfunded.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
Movements in fair values of assets |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Assets at 1st January 2006 |
|
|
5,744 |
|
|
|
1,976 |
|
|
|
657 |
|
|
|
8,377 |
|
|
|
|
|
Exchange
adjustments |
|
|
|
|
|
|
(255 |
) |
|
|
(30 |
) |
|
|
(285 |
) |
|
|
|
|
Expected return on assets |
|
|
333 |
|
|
|
142 |
|
|
|
30 |
|
|
|
505 |
|
|
|
|
|
Settlements and curtailments |
|
|
|
|
|
|
|
|
|
|
(8 |
) |
|
|
(8 |
) |
|
|
|
|
Actuarial gains |
|
|
227 |
|
|
|
168 |
|
|
|
26 |
|
|
|
421 |
|
|
|
|
|
Employer contributions |
|
|
468 |
|
|
|
32 |
|
|
|
106 |
|
|
|
606 |
|
|
|
46 |
|
Scheme participants contributions |
|
|
11 |
|
|
|
|
|
|
|
3 |
|
|
|
14 |
|
|
|
8 |
|
Benefits paid |
|
|
(229 |
) |
|
|
(110 |
) |
|
|
(43 |
) |
|
|
(382 |
) |
|
|
(54 |
) |
|
|
|
|
Assets at 31st December 2006 |
|
|
6,554 |
|
|
|
1,953 |
|
|
|
741 |
|
|
|
9,248 |
|
|
|
|
|
|
|
|
|
Exchange adjustments |
|
|
|
|
|
|
(29 |
) |
|
|
68 |
|
|
|
39 |
|
|
|
|
|
Expected return on assets |
|
|
389 |
|
|
|
141 |
|
|
|
37 |
|
|
|
567 |
|
|
|
|
|
Settlements and curtailments |
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
|
|
|
Actuarial gains |
|
|
168 |
|
|
|
46 |
|
|
|
(18 |
) |
|
|
196 |
|
|
|
|
|
Employer contributions |
|
|
397 |
|
|
|
8 |
|
|
|
99 |
|
|
|
504 |
|
|
|
41 |
|
Scheme participants contributions |
|
|
38 |
|
|
|
|
|
|
|
5 |
|
|
|
43 |
|
|
|
3 |
|
Benefits paid |
|
|
(253 |
) |
|
|
(115 |
) |
|
|
(49 |
) |
|
|
(417 |
) |
|
|
(44 |
) |
|
|
|
|
Assets at 31st December 2007 |
|
|
7,293 |
|
|
|
2,004 |
|
|
|
885 |
|
|
|
10,182 |
|
|
|
|
|
|
|
|
|
Exchange adjustments |
|
|
|
|
|
|
598 |
|
|
|
298 |
|
|
|
896 |
|
|
|
|
|
Expected return on assets |
|
|
442 |
|
|
|
144 |
|
|
|
47 |
|
|
|
633 |
|
|
|
|
|
Settlements and curtailments |
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
Actuarial losses |
|
|
(1,691 |
) |
|
|
(614 |
) |
|
|
(134 |
) |
|
|
(2,439 |
) |
|
|
|
|
Employer contributions |
|
|
340 |
|
|
|
10 |
|
|
|
93 |
|
|
|
443 |
|
|
|
44 |
|
Scheme participants contributions |
|
|
33 |
|
|
|
|
|
|
|
5 |
|
|
|
38 |
|
|
|
9 |
|
Benefits paid |
|
|
(282 |
) |
|
|
(126 |
) |
|
|
(60 |
) |
|
|
(468 |
) |
|
|
(53 |
) |
|
|
|
|
Assets at 31st December 2008 |
|
|
6,135 |
|
|
|
2,016 |
|
|
|
1,137 |
|
|
|
9,288 |
|
|
|
|
|
|
|
|
|
The UK defined benefit schemes
include defined contribution sections with account balances
totalling £553 million at 31st December 2008 (2007
£693 million, 2006 £609 million).
During 2008, the Group made special funding contributions to the UK pension schemes totalling £200
million (2007 £285 million to the UK pension schemes) of which £166 million related to a
prepayment of any contributions that would be due in 2009. In 2006, GSK formalised an agreement
with the trustees of the UK defined benefit pension schemes to make additional contributions each
year in addition to the normal contributions, over a four-year period ending 31st December 2009 in
order to eliminate the then pension deficits in the funded schemes on an IAS 19 basis. GSK has also
committed to eliminate any future deficits that arise over a rolling five-year period. This
agreement will be reviewed during 2009.
Employer contributions for 2009, including special funding contributions, are estimated to be
approximately £900 million in respect of defined benefit pension schemes and £55 million in respect
of post-retirement benefits.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 141
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
28 Pensions
and other post-employment benefits continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post-retirement |
|
|
|
Pensions |
|
|
benefits |
|
|
|
|
|
UK |
|
|
USA |
|
|
Rest of World |
|
|
Group |
|
|
Group |
|
History of experience gains and losses |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience losses of scheme assets (£m) |
|
|
(1,691 |
) |
|
|
(614 |
) |
|
|
(134 |
) |
|
|
(2,439 |
) |
|
|
|
|
Percentage of scheme assets at 31st December 2008 |
|
|
28 |
% |
|
|
30 |
% |
|
|
12 |
% |
|
|
26 |
% |
|
|
|
|
|
|
|
|
|
Experience (losses)/gains of scheme liabilities (£m) |
|
|
(148 |
) |
|
|
2 |
|
|
|
1 |
|
|
|
(145 |
) |
|
|
(14 |
) |
Percentage
of scheme obligations at 31st December 2008 |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
1 |
% |
|
|
1 |
% |
|
|
|
|
|
Fair value of assets |
|
|
6,135 |
|
|
|
2,016 |
|
|
|
1,137 |
|
|
|
9,288 |
|
|
|
|
|
Present value of scheme obligations |
|
|
(6,885 |
) |
|
|
(2,738 |
) |
|
|
(1,357 |
) |
|
|
(10,980 |
) |
|
|
(1,354 |
) |
|
|
|
|
Deficits in the schemes |
|
|
(750 |
) |
|
|
(722 |
) |
|
|
(220 |
) |
|
|
(1,692 |
) |
|
|
(1,354 |
) |
|
|
|
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains/(losses) of scheme assets (£m) |
|
|
168 |
|
|
|
46 |
|
|
|
(18 |
) |
|
|
196 |
|
|
|
|
|
Percentage of scheme assets at 31st December 2007 |
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
Experience gains/(losses) of scheme liabilities (£m) |
|
|
33 |
|
|
|
(30 |
) |
|
|
6 |
|
|
|
9 |
|
|
|
|
|
Percentage
of scheme obligations at 31st December 2007 |
|
|
|
|
|
|
2 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets |
|
|
7,293 |
|
|
|
2,004 |
|
|
|
885 |
|
|
|
10,182 |
|
|
|
|
|
Present value of scheme obligations |
|
|
(7,371 |
) |
|
|
(1,945 |
) |
|
|
(1,022 |
) |
|
|
(10,338 |
) |
|
|
(1,019 |
) |
|
|
|
|
(Deficits)/surpluses in the schemes |
|
|
(78 |
) |
|
|
59 |
|
|
|
(137 |
) |
|
|
(156 |
) |
|
|
(1,019 |
) |
|
|
|
|
|
2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains of scheme assets (£m) |
|
|
227 |
|
|
|
168 |
|
|
|
26 |
|
|
|
421 |
|
|
|
|
|
Percentage of scheme assets at 31st December 2006 |
|
|
3 |
% |
|
|
9 |
% |
|
|
4 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Experience (losses)/gains of scheme liabilities (£m) |
|
|
(37 |
) |
|
|
(16 |
) |
|
|
(42 |
) |
|
|
(95 |
) |
|
|
17 |
|
Percentage
of scheme obligations at 31st December 2006 |
|
|
|
|
|
|
1 |
% |
|
|
4 |
% |
|
|
1 |
% |
|
|
2 |
% |
|
|
|
|
|
Fair value of assets |
|
|
6,554 |
|
|
|
1,953 |
|
|
|
741 |
|
|
|
9,248 |
|
|
|
|
|
Present value of scheme obligations |
|
|
(7,444 |
) |
|
|
(1,949 |
) |
|
|
(952 |
) |
|
|
(10,345 |
) |
|
|
(1,063 |
) |
|
|
|
|
(Deficits)/surpluses in the schemes |
|
|
(890 |
) |
|
|
4 |
|
|
|
(211 |
) |
|
|
(1,097 |
) |
|
|
(1,063 |
) |
|
|
|
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains of scheme assets (£m) |
|
|
647 |
|
|
|
3 |
|
|
|
35 |
|
|
|
685 |
|
|
|
|
|
Percentage of scheme assets at 31st December 2005 |
|
|
11 |
% |
|
|
|
|
|
|
5 |
% |
|
|
8 |
% |
|
|
|
|
|
|
|
|
Experience losses of scheme liabilities (£m) |
|
|
(94 |
) |
|
|
(10 |
) |
|
|
(35 |
) |
|
|
(139 |
) |
|
|
(4 |
) |
Percentage
of scheme obligations at 31st December 2005 |
|
|
1 |
% |
|
|
|
|
|
|
4 |
% |
|
|
1 |
% |
|
|
|
|
|
|
|
|
|
Fair value of assets |
|
|
5,744 |
|
|
|
1,976 |
|
|
|
657 |
|
|
|
8,377 |
|
|
|
|
|
Present value of scheme obligations |
|
|
(7,054 |
) |
|
|
(2,150 |
) |
|
|
(922 |
) |
|
|
(10,126 |
) |
|
|
(1,308 |
) |
|
|
|
|
Deficits in the schemes |
|
|
(1,310 |
) |
|
|
(174 |
) |
|
|
(265 |
) |
|
|
(1,749 |
) |
|
|
(1,308 |
) |
|
|
|
|
|
2004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Experience gains of scheme assets (£m) |
|
|
196 |
|
|
|
86 |
|
|
|
23 |
|
|
|
305 |
|
|
|
|
|
Percentage of scheme assets at 31st December 2004 |
|
|
4 |
% |
|
|
5 |
% |
|
|
4 |
% |
|
|
5 |
% |
|
|
|
|
|
|
|
|
|
Experience (losses)/gains of scheme liabilities (£m) |
|
|
(25 |
) |
|
|
(5 |
) |
|
|
(18 |
) |
|
|
(48 |
) |
|
|
47 |
|
Percentage
of scheme obligations at 31st December 2004 |
|
|
|
|
|
|
|
|
|
|
2 |
% |
|
|
1 |
% |
|
|
5 |
% |
|
|
|
|
|
Fair value of assets |
|
|
4,561 |
|
|
|
1,638 |
|
|
|
547 |
|
|
|
6,746 |
|
|
|
|
|
Present value of scheme obligations |
|
|
(5,735 |
) |
|
|
(1,750 |
) |
|
|
(761 |
) |
|
|
(8,246 |
) |
|
|
(1,005 |
) |
|
|
|
|
Deficits in the schemes |
|
|
(1,174 |
) |
|
|
(112 |
) |
|
|
(214 |
) |
|
|
(1,500 |
) |
|
|
(1,005 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the
financial statements
continued
|
|
|
|
|
|
|
|
28
Pensions and other post-employment
benefits continued
Sensitivity analysis
Effect of changes in assumptions used on the annual defined benefit pension and post-retirement
costs or the benefit obligations:
|
|
|
|
|
|
|
|
|
£m |
|
|
|
A 0.25% decrease in discount rate would have the following approximate effect: |
|
|
|
|
Increase in annual pension cost |
|
|
4 |
|
Increase in annual post-retirement benefits cost |
|
|
1 |
|
Increase in pension obligation |
|
|
349 |
|
Increase in post-retirement benefits obligation |
|
|
44 |
|
|
A one year increase in life expectancy would have the following approximate effect: |
|
|
|
|
Increase in annual pension cost |
|
|
18 |
|
Increase in annual post-retirement benefits cost |
|
|
4 |
|
Increase in pension obligation |
|
|
232 |
|
Increase in post-retirement benefits obligation |
|
|
51 |
|
|
A 0.25% decrease in expected rates of returns on assets would have the following
approximate effect: |
|
|
|
|
Increase in annual pension cost |
|
|
22 |
|
|
A 1% increase in the rate of future healthcare inflation would have the following
approximate effect: |
|
|
|
|
Increase in annual post-retirement benefits cost |
|
|
5 |
|
Increase in post-retirement benefits obligation |
|
|
43 |
|
|
A 0.25% increase in inflation would have the following approximate effect: |
|
|
|
|
Increase in annual pension cost |
|
|
22 |
|
Increase in pension obligation |
|
|
265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Integration |
|
|
|
|
|
|
|
|
|
Legal |
|
|
Major |
|
|
Employee |
|
|
and |
|
|
|
|
|
|
|
|
|
and other |
|
|
restructuring |
|
|
related |
|
|
manufacturing |
|
|
Other |
|
|
|
|
|
|
disputes |
|
|
programmes |
|
|
provisions |
|
|
re-organisation |
|
|
provisions |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January 2008 |
|
|
1,152 |
|
|
|
246 |
|
|
|
234 |
|
|
|
116 |
|
|
|
179 |
|
|
|
1,927 |
|
Exchange adjustments |
|
|
424 |
|
|
|
91 |
|
|
|
48 |
|
|
|
13 |
|
|
|
42 |
|
|
|
618 |
|
Charge for the year |
|
|
719 |
|
|
|
740 |
|
|
|
55 |
|
|
|
9 |
|
|
|
2 |
|
|
|
1,525 |
|
Reversed unused |
|
|
(149 |
) |
|
|
(7 |
) |
|
|
(16 |
) |
|
|
(14 |
) |
|
|
(30 |
) |
|
|
(216 |
) |
Unwinding of discount |
|
|
8 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
16 |
|
Utilised |
|
|
(251 |
) |
|
|
(215 |
) |
|
|
(67 |
) |
|
|
(34 |
) |
|
|
(14 |
) |
|
|
(581 |
) |
Transfer to pensions obligations |
|
|
|
|
|
|
(208 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(208 |
) |
Reclassifications and other
movements |
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
4 |
|
|
|
18 |
|
|
At 31st December 2008 |
|
|
1,903 |
|
|
|
652 |
|
|
|
268 |
|
|
|
90 |
|
|
|
186 |
|
|
|
3,099 |
|
|
To be settled within one year |
|
|
695 |
|
|
|
606 |
|
|
|
68 |
|
|
|
54 |
|
|
|
31 |
|
|
|
1,454 |
|
To be settled after one year |
|
|
1,208 |
|
|
|
46 |
|
|
|
200 |
|
|
|
36 |
|
|
|
155 |
|
|
|
1,645 |
|
|
At 31st December 2008 |
|
|
1,903 |
|
|
|
652 |
|
|
|
268 |
|
|
|
90 |
|
|
|
186 |
|
|
|
3,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 143
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
29
Other provisions continued
Legal and other disputes
GSK is involved in a number of legal and other disputes,
including notification of possible claims, as set out in
Note 44 Legal proceedings. Provisions for legal and
other disputes include amounts relating to US anti-trust,
product liability, contract terminations, self-insurance,
environmental clean-up and property rental. The companys
Directors, having taken legal and other specialist
advice, have established provisions after taking into
account insurance and other agreements and having regard
to the relevant facts and circumstances of each matter
and in accordance with accounting requirements.
The charge for the year included a charge of £278 million
announced in January 2009 related to the US investigation
into GSKs marketing and promotional practices which
originated in Colorado. The discount on these provisions
decreased by £61 million in 2008 (2007 £10 million
decreased) and was calculated using risk-adjusted
projected cash flows and risk-free rates of return. The
movement in 2008 includes a decrease of £64 million
arising from a change in the discount rate in the year. A
number of products have a history of claims made and
settlements which makes it possible to use an IBNR
(incurred but not reported) actuarial technique to
determine a reasonable estimate of the Groups exposure
for unasserted claims in relation to those products.
Apart from the IBNR provision, no provisions have been
made for unasserted claims. The ultimate liability for
such matters may vary from the amounts provided and is
dependent upon the outcome of litigation proceedings,
investigations and possible settlement negotiations.
It is in the nature of the Groups business that a number of
these matters, including those provided using the IBNR
actuarial technique, may be the subject of negotiation
and litigation over several years. The largest individual
amounts provided are expected to be settled within three
years.
At 31st December 2008, it is expected that £112 million
(2007 £89 million) of the provision made for legal and
other disputes will be reimbursed by third party
insurers. This amount is included within current and
non-current assets. For a discussion of legal issues,
refer to Note 44 Legal proceedings.
Major restructuring programmes
In October 2007 GSK announced a significant new
Operational Excellence programme to improve the
effectiveness and productivity of its operations (see
Note 7 Major restructuring programmes). A significant
expansion of the Operational Excellence programme was
approved by the Board and announced in February 2009.
Total costs for the implementation of the expanded
programme are now expected to be approximately £3.6
billion, to be incurred over the period from 2007 to
2011.
Provisions for staff severance payments are made when
management has made a formal decision to eliminate
certain positions and this has been communicated to
the groups of
employees affected. No provision is made for staff
severance payments that are made immediately.
Approximately 40% of the costs were incurred by 31st
December 2008, and approximately 35% are expected to be
incurred in 2009, 20% in 2010 and the balance mostly in
2011. In total, approximately 75% of these costs are
expected to be cash expenditures and 25% are expected to
be accounting write-downs. Uncertainties exist over the
exact amount and timing of cash outflows, as a result of
potential future exchange rate fluctuations and as many
elements of the restructuring programme are subject to
employee consultation procedures, making it difficult to
predict with precision when these procedures will be
completed. However, the majority of the remaining cash
payments are expected to be made in 2009 and 2010.
In addition, costs of £34 million were incurred during
the year under the restructuring programme related to
the integration of the Reliant Pharmaceuticals, Inc.
business in the USA, following its acquisition in
December 2007.
Pension augmentations arising from staff redundancies of
£208 million have been charged during the year and then
transferred to the pension obligations provision as
shown in Note 28 Pensions and other post-employment
benefits. Asset write-downs have been recognised as
impairments of property, plant and equipment in Note 17
Property, plant and equipment.
Employee related provisions
Employee related provisions includes the exchange offer
incentive programme which operated at the time of the
merger to encourage staff to convert Glaxo Wellcome or
SmithKline Beecham share options into GlaxoSmithKline
share options. The incentive is paid either when
employees exercise the relevant options, or when the
options lapse, up to 2010. There is no impact of
discounting on this provision in 2008 (2007 increased by
£7 million), which was calculated using risk-free rates
of return. The Group also provides certain medical
benefits to disabled employees and their spouses in the
USA. At 31st December 2008, the provision for these
benefits amounted to £115 million. Other employee
benefits reflect a variety of provisions for severance
costs, jubilee awards and other long-service benefits.
Integration and manufacturing re-organisation
The Group has recognised costs in previous years in
respect of plans for the integration of the Glaxo
Wellcome and SmithKline Beecham businesses.
Implementation of the integration following the merger is
substantially complete. Costs recognised in the remaining
merger integration provision in respect of identified
severances are expected to be settled in 2009. Other
smaller cost-saving initiatives since the merger are now
included within this category.
|
|
|
|
|
|
|
|
|
|
|
|
144
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Accruals and deferred income |
|
|
96 |
|
|
|
68 |
|
Other payables |
|
|
331 |
|
|
|
300 |
|
|
|
|
|
427 |
|
|
|
368 |
|
|
At 31st December 2008, contingent liabilities, comprising guarantees, discounted bills and other
items arising in the normal course of business, amounted to £134 million (2007 £92 million). At
31st December 2008, £12 million (2007 £7 million) of financial assets were pledged as collateral
for contingent liabilities. For discussions of tax and legal issues, refer to Note 14, Taxation
and Note 44, Legal proceedings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Listing exchange |
|
£m |
|
|
£m |
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
Liquid investments |
|
|
|
|
391 |
|
|
|
1,153 |
|
Cash and cash equivalents |
|
|
|
|
5,623 |
|
|
|
3,379 |
|
|
|
|
|
|
|
6,014 |
|
|
|
4,532 |
|
|
Short-term borrowings: |
|
|
|
|
|
|
|
|
|
|
3.25% European Medium Term Note 2009 |
|
London Stock Exchange |
|
|
(481 |
) |
|
|
|
|
3.375% European Medium Term Note 2008 |
|
London Stock Exchange |
|
|
|
|
|
|
(736 |
) |
4.875% £ European Medium Term Note 2008 |
|
London Stock Exchange |
|
|
|
|
|
|
(497 |
) |
Commercial paper |
|
|
|
|
|
|
|
|
(2,064 |
) |
Bank loans and overdrafts |
|
|
|
|
(426 |
) |
|
|
(161 |
) |
Other loans |
|
|
|
|
(1 |
) |
|
|
(6 |
) |
Obligations under finance leases |
|
|
|
|
(48 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
(956 |
) |
|
|
(3,504 |
) |
|
Long-term borrowings: |
|
|
|
|
|
|
|
|
|
|
3.25% European Medium Term Note 2009 |
|
London Stock Exchange |
|
|
|
|
|
|
(368 |
) |
US$ Floating rate Note 2010 |
|
New York Stock Exchange |
|
|
(694 |
) |
|
|
|
|
3.00% European Medium Term Note 2012 |
|
London Stock Exchange |
|
|
(718 |
) |
|
|
(548 |
) |
5.125% European Medium Term Note 2012 |
|
London Stock Exchange |
|
|
(2,154 |
) |
|
|
(1,645 |
) |
4.85% US$ US Medium Term Note 2013 |
|
New York Stock Exchange |
|
|
(1,728 |
) |
|
|
|
|
4.375% US $ US Medium Term Note 2014 |
|
London Stock Exchange |
|
|
(1,146 |
) |
|
|
(746 |
) |
5.625% European Medium Term Note 2017 |
|
London Stock Exchange |
|
|
(1,193 |
) |
|
|
(912 |
) |
5.65% US$ US Medium Term Note 2018 |
|
New York Stock Exchange |
|
|
(1,901 |
) |
|
|
|
|
4.00% European Medium Term Note 2025 |
|
London Stock Exchange |
|
|
(709 |
) |
|
|
(542 |
) |
5.25% £ European Medium Term Note 2033 |
|
London Stock Exchange |
|
|
(979 |
) |
|
|
(978 |
) |
5.375% US $ US Medium Term Note 2034 |
|
London Stock Exchange |
|
|
(344 |
) |
|
|
(249 |
) |
6.375% US $ US Medium Term Note 2038 |
|
New York Stock Exchange |
|
|
(1,888 |
) |
|
|
|
|
6.375% £ European Medium Term Note 2039 |
|
London Stock Exchange |
|
|
(693 |
) |
|
|
|
|
5.25% £ European Medium Term Note 2042 |
|
London Stock Exchange |
|
|
(984 |
) |
|
|
(984 |
) |
Loan stock |
|
|
|
|
(8 |
) |
|
|
(9 |
) |
Bank loans |
|
|
|
|
(1 |
) |
|
|
(1 |
) |
Other loans and private financing |
|
|
|
|
(3 |
) |
|
|
(2 |
) |
Obligations under finance leases |
|
|
|
|
(88 |
) |
|
|
(83 |
) |
|
|
|
|
|
|
(15,231 |
) |
|
|
(7,067 |
) |
|
Net debt |
|
|
|
|
(10,173 |
) |
|
|
(6,039 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 145
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
32
Net debt continued
Current assets
Liquid investments are classified as available-for-sale investments. At 31st December 2008, they
included government bonds and US Treasury notes. The effective interest rate on liquid investments
at 31st December 2008 was approximately 5.5% (2007 approximately 4.9%). Liquid investment
balances at 31st December 2008 earning interest at floating and fixed rates amount to £1 million
and £390 million, respectively (2007 £868 million and £285 million).
The effective interest rate on cash and cash equivalents at 31st December 2008 was approximately
1.8% (2007 approximately 5.0%). Cash and cash equivalents balances at 31st December 2008 earning
interest at floating and fixed rates amount to £5,520 million and £4 million, respectively (2007
£3,257 million and £36 million).
GSK has tightened its criteria for holding cash equivalents and liquid investments in response to
the credit crisis. GSKs policy regarding the credit quality of cash and cash equivalents is
referred to in Note 41, Financial instruments and related disclosures.
Short-term borrowings
Commercial paper comprises a US $10 billion programme, of which $nil (£nil) was in issue at 31st
December 2008
(2007 $4.1 billion (£2.1 billion)), backed up by committed facilities of 364 days
duration of $3.9 billion (£2.7 billion)
(2007 $5 billion (£2.5 billion)) renewable annually, and liquid investments, cash and cash
equivalents as shown in the table above.
The weighted average interest rate on current bank loans
and overdrafts at 31st December 2008 was 1.59% (2007 4.85%).
Long-term borrowings
At the year-end, GSK had long-term borrowings of £15.2 billion (2007 £7.1 billion) of which £9.8
billion (2007 £4.4 billion) falls due in more than five years.
Long-term borrowings repayable after five years carry interest at effective rates between 3.51% and
6.38%. The repayment dates range from 2014 to 2042. The average effective interest rate of all
notes at 31st December 2008 was approximately 5.0% (2007 approximately 4.7%).
Secured liabilities
GSK had no loans secured by charges on non-current and current assets in the year (2007 £nil).
The Group has pledged investments in US Treasury Notes with a par value of $198 million (2007
$220 million) as security against irrevocable letters of credit issued on the Groups behalf in
respect of the Groups self-insurance activity. Provisions in respect of self-insurance are
included within the provisions for legal and other disputes discussed in Note 29, Other
provisions.
|
|
|
|
|
|
|
|
|
Finance lease obligations |
|
2008 £m |
|
|
2007 £m |
|
|
Rental payments due within one year |
|
|
53 |
|
|
|
45 |
|
Rental payments due between one and two years |
|
|
39 |
|
|
|
40 |
|
Rental payments due between two and three years |
|
|
30 |
|
|
|
26 |
|
Rental payments due between three and four years |
|
|
17 |
|
|
|
11 |
|
Rental payments due between four and five years |
|
|
6 |
|
|
|
5 |
|
Rental payments due after five years |
|
|
9 |
|
|
|
10 |
|
|
Total future rental payments |
|
|
154 |
|
|
|
137 |
|
Future finance charges |
|
|
(18 |
) |
|
|
(14 |
) |
|
Total finance lease obligations |
|
|
136 |
|
|
|
123 |
|
|
Finance lease obligations at 31st December 2008 bearing interest at floating and fixed rates amount
to £98 million and £38 million, respectively (2007 £94 million and £29 million).
|
|
|
|
|
|
|
|
|
|
|
|
146
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share |
|
|
|
Ordinary Shares of 25p each |
|
|
premium |
|
|
|
Number |
|
|
£m |
|
|
£m |
|
|
Share capital authorised |
|
|
|
|
|
|
|
|
|
|
|
|
At 31st December 2006 |
|
|
10,000,000,000 |
|
|
|
2,500 |
|
|
|
|
|
At 31st December 2007 |
|
|
10,000,000,000 |
|
|
|
2,500 |
|
|
|
|
|
At 31st December 2008 |
|
|
10,000,000,000 |
|
|
|
2,500 |
|
|
|
|
|
|
Share capital issued and fully
paid |
|
|
|
|
|
|
|
|
|
|
|
|
At 1st December 2006 |
|
|
5,962,851,256 |
|
|
|
1,491 |
|
|
|
549 |
|
Issued under share option schemes |
|
|
28,750,592 |
|
|
|
7 |
|
|
|
309 |
|
|
At 31st December 2006 |
|
|
5,991,601,848 |
|
|
|
1,498 |
|
|
|
858 |
|
Issued under share option schemes |
|
|
37,307,678 |
|
|
|
9 |
|
|
|
408 |
|
Share capital purchased and
cancelled |
|
|
(16,322,500 |
) |
|
|
(4 |
) |
|
|
|
|
|
At 31st December 2007 |
|
|
6,012,587,026 |
|
|
|
1,503 |
|
|
|
1,266 |
|
Issued under share option schemes |
|
|
5,640,119 |
|
|
|
2 |
|
|
|
60 |
|
Share capital purchased and
cancelled |
|
|
(356,910,908 |
) |
|
|
(90 |
) |
|
|
|
|
|
At 31st December 2008 |
|
|
5,661,316,237 |
|
|
|
1,415 |
|
|
|
1,326 |
|
|
|
|
|
|
|
|
|
|
|
|
|
31st December |
|
|
31st December |
|
|
|
2008 |
|
|
2007 |
|
|
Number (000) of shares issuable under
outstanding options (Note 42) |
|
|
220,459 |
|
|
|
218,182 |
|
|
Number (000) of unissued shares not under option |
|
|
4,118,225 |
|
|
|
3,769,231 |
|
|
At 31st December 2008, of the issued share capital, 128,969,260 shares were held in the ESOP Trust,
474,194,158 shares were held as Treasury shares and 5,058,152,819 shares were in free issue. All
issued shares are fully paid. The nominal, carrying and market values of the shares held in the
ESOP Trust are disclosed in Note 42, Employee share schemes. Share capital purchased and
cancelled in 2008 includes the cancellation of 30 million of previously acquired Treasury shares.
A total of £15.3 billion has been spent by the company between 1st January 2001 and 31st December
2008 on buying its own shares for cancellation or to be held as Treasury shares.
£3.7 billion was spent on repurchases in 2008 and a total of £6.2 billion has been repurchased
under the current £12 billion share buy-back programme. There have been no purchases since 31st
December 2008 under this programme and GSK does not expect to make significant share repurchases in
2009.
The table below sets out the monthly purchases under the share buy-back programme:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average share price excluding |
|
|
|
Number of shares |
|
|
commission and stamp duty |
|
Month |
|
000 |
|
|
£ |
|
|
January 2008 |
|
|
|
|
|
|
|
|
February 2008 |
|
|
41,199 |
|
|
|
11.16 |
|
March 2008 |
|
|
49,745 |
|
|
|
10.49 |
|
April 2008 |
|
|
42,180 |
|
|
|
11.02 |
|
May 2008 |
|
|
40,685 |
|
|
|
11.30 |
|
June 2008 |
|
|
50,356 |
|
|
|
11.02 |
|
July 2008 |
|
|
48,024 |
|
|
|
11.86 |
|
August 2008 |
|
|
7,337 |
|
|
|
12.55 |
|
September 2008 |
|
|
16,150 |
|
|
|
12.31 |
|
October 2008 |
|
|
2,195 |
|
|
|
11.60 |
|
November 2008 |
|
|
17,418 |
|
|
|
11.61 |
|
December 2008 |
|
|
11,622 |
|
|
|
11.84 |
|
|
Total |
|
|
326,911 |
|
|
|
11.28 |
|
|
All of the shares purchased in 2008 have been cancelled. For details of substantial shareholdings
refer to Substantial shareholdings on page 187.
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 147
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
|
|
|
|
|
|
|
Share |
|
|
Share |
|
|
Retained |
|
|
Other |
|
|
|
|
|
|
Minority |
|
|
Total |
|
|
|
capital |
|
|
premium |
|
|
earnings |
|
|
reserves |
|
|
Total |
|
|
interests |
|
|
equity |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January 2006 |
|
|
1,491 |
|
|
|
549 |
|
|
|
5,579 |
|
|
|
(308 |
) |
|
|
7,311 |
|
|
|
259 |
|
|
|
7,570 |
|
Recognised income and expense for the year |
|
|
|
|
|
|
|
|
|
|
5,248 |
|
|
|
59 |
|
|
|
5,307 |
|
|
|
88 |
|
|
|
5,395 |
|
Changes in minority shareholdings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
2 |
|
Distributions to minority shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87 |
) |
|
|
(87 |
) |
Dividends to shareholders |
|
|
|
|
|
|
|
|
|
|
(2,598 |
) |
|
|
|
|
|
|
(2,598 |
) |
|
|
|
|
|
|
(2,598 |
) |
Ordinary Shares issued |
|
|
7 |
|
|
|
309 |
|
|
|
|
|
|
|
|
|
|
|
316 |
|
|
|
|
|
|
|
316 |
|
Ordinary Shares purchased and held as Treasury shares |
|
|
|
|
|
|
|
|
(1,348 |
) |
|
|
|
|
|
|
(1,348 |
) |
|
|
|
|
|
|
(1,348 |
) |
Ordinary Shares transferred by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151 |
|
|
|
151 |
|
|
|
|
|
|
|
151 |
|
Write-down of shares held by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
(163 |
) |
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based incentive plans |
|
|
|
|
|
|
|
|
|
|
226 |
|
|
|
|
|
|
|
226 |
|
|
|
|
|
|
|
226 |
|
Tax on share based incentive plans |
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
21 |
|
|
At 31st December 2006 |
|
|
1,498 |
|
|
|
858 |
|
|
|
6,965 |
|
|
|
65 |
|
|
|
9,386 |
|
|
|
262 |
|
|
|
9,648 |
|
Recognised income and expense for the year |
|
|
|
|
|
|
|
|
|
|
6,104 |
|
|
|
(92 |
) |
|
|
6,012 |
|
|
|
122 |
|
|
|
6,134 |
|
Distributions to minority shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77 |
) |
|
|
(77 |
) |
Dividends to shareholders |
|
|
|
|
|
|
|
|
|
|
(2,793 |
) |
|
|
|
|
|
|
(2,793 |
) |
|
|
|
|
|
|
(2,793 |
) |
Ordinary Shares issued |
|
|
9 |
|
|
|
408 |
|
|
|
|
|
|
|
|
|
|
|
417 |
|
|
|
|
|
|
|
417 |
|
Ordinary Shares purchased and cancelled |
|
|
(4 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
4 |
|
|
|
(213 |
) |
|
|
|
|
|
|
(213 |
) |
Ordinary Shares purchased and held as Treasury shares |
|
|
|
|
|
|
|
|
(3,537 |
) |
|
|
|
|
|
|
(3,537 |
) |
|
|
|
|
|
|
(3,537 |
) |
Ordinary Shares acquired by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
|
|
(26 |
) |
|
|
|
|
|
|
(26 |
) |
Ordinary Shares transferred by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
|
|
116 |
|
|
|
|
|
|
|
116 |
|
Write-down of shares held by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
(292 |
) |
|
|
292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based incentive plans |
|
|
|
|
|
|
|
|
|
|
237 |
|
|
|
|
|
|
|
237 |
|
|
|
|
|
|
|
237 |
|
Tax on share-based incentive plans |
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
4 |
|
|
At 31st December 2007 |
|
|
1,503 |
|
|
|
1,266 |
|
|
|
6,475 |
|
|
|
359 |
|
|
|
9,603 |
|
|
|
307 |
|
|
|
9,910 |
|
Recognised income and expense for the year |
|
|
|
|
|
|
|
|
|
|
4,723 |
|
|
|
(53 |
) |
|
|
4,670 |
|
|
|
159 |
|
|
|
4,829 |
|
Distributions to minority shareholders |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(79 |
) |
|
|
(79 |
) |
Dividends to shareholders |
|
|
|
|
|
|
|
|
|
|
(2,929 |
) |
|
|
|
|
|
|
(2,929 |
) |
|
|
|
|
|
|
(2,929 |
) |
Ordinary Shares issued |
|
|
2 |
|
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
62 |
|
|
|
|
|
|
|
62 |
|
Ordinary Shares purchased and cancelled |
|
|
(90 |
) |
|
|
|
|
|
|
(3,706 |
) |
|
|
90 |
|
|
|
(3,706 |
) |
|
|
|
|
|
|
(3,706 |
) |
Ordinary Shares acquired by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
(19 |
) |
Ordinary Shares transferred by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
10 |
|
|
|
|
|
|
|
10 |
|
Write-down of shares held by ESOP Trusts |
|
|
|
|
|
|
|
|
|
|
(181 |
) |
|
|
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based incentive plans |
|
|
|
|
|
|
|
|
|
|
241 |
|
|
|
|
|
|
|
241 |
|
|
|
|
|
|
|
241 |
|
Tax on share-based incentive plans |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
At 31st December 2008 |
|
|
1,415 |
|
|
|
1,326 |
|
|
|
4,622 |
|
|
|
568 |
|
|
|
7,931 |
|
|
|
387 |
|
|
|
8,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
34
Movements in equity continued
Retained earnings and other reserves amounted to £5,190 million at 31st December 2008 (2007
£6,834 million, 2006 £7,030 million) of which £391 million (2007 £218 million, 2006 £185
million) relates to joint ventures and associated undertakings. The cumulative translation exchange
in equity is shown below in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net translation exchange included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
Fair value |
|
|
Retained |
|
|
Minority |
|
|
translation |
|
|
|
|
|
|
|
reserve |
|
|
earnings |
|
|
interest |
|
|
exchange |
|
|
|
|
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January 2006 |
|
|
|
|
|
|
14 |
|
|
|
272 |
|
|
|
(69 |
) |
|
|
217 |
|
Exchange movements on overseas net assets |
|
|
|
|
|
|
(5 |
) |
|
|
(331 |
) |
|
|
(23 |
) |
|
|
(359 |
) |
|
At 31st December 2006 |
|
|
|
|
|
|
9 |
|
|
|
(59 |
) |
|
|
(92 |
) |
|
|
(142 |
) |
Exchange movements on overseas net assets |
|
|
|
|
|
|
|
|
|
|
394 |
|
|
|
17 |
|
|
|
411 |
|
|
At 31st December 2007 |
|
|
|
|
|
|
9 |
|
|
|
335 |
|
|
|
(75 |
) |
|
|
269 |
|
Exchange movements on overseas net assets |
|
|
|
|
|
|
1 |
|
|
|
952 |
|
|
|
64 |
|
|
|
1,017 |
|
Recycling of exchange on liquidation of
overseas subsidiary |
|
|
|
|
|
|
|
|
|
|
84 |
|
|
|
|
|
|
|
84 |
|
|
At 31st December 2008 |
|
|
|
|
|
|
10 |
|
|
|
1,371 |
|
|
|
(11 |
) |
|
|
1,370 |
|
|
The analysis of other reserves is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ESOP Trust |
|
|
Fair value |
|
|
Cash flow |
|
|
Other |
|
|
|
|
|
|
shares |
|
|
reserve |
|
|
hedge reserve |
|
|
reserves |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
At 1st January 2006 |
|
|
(2,313 |
) |
|
|
76 |
|
|
|
(1 |
) |
|
|
1,930 |
|
|
|
(308 |
) |
Transferred to income and expense in the year on disposals |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
(19 |
) |
Transferred to income and expense in the year on
impairment |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
Net fair value movement in the year |
|
|
|
|
|
|
82 |
|
|
|
(2 |
) |
|
|
|
|
|
|
80 |
|
Ordinary Shares transferred by ESOP Trusts |
|
|
151 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
151 |
|
Write-down of shares held by ESOP Trusts |
|
|
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
163 |
|
|
At 31st December 2006 |
|
|
(1,999 |
) |
|
|
137 |
|
|
|
(3 |
) |
|
|
1,930 |
|
|
|
65 |
|
Transferred to income and expense in the year on disposals |
|
|
|
|
|
|
(34 |
) |
|
|
|
|
|
|
|
|
|
|
(34 |
) |
Transferred to income and expense in the year on
impairment |
|
|
|
|
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
(12 |
) |
Net fair value movement in the year |
|
|
|
|
|
|
(42 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
(46 |
) |
Ordinary Shares purchased and cancelled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
Ordinary Shares acquired by ESOP Trusts |
|
|
(26 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26 |
) |
Ordinary Shares transferred by ESOP Trusts |
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116 |
|
Write-down of shares held by ESOP Trusts |
|
|
292 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
292 |
|
|
At 31st December 2007 |
|
|
(1,617 |
) |
|
|
49 |
|
|
|
(7 |
) |
|
|
1,934 |
|
|
|
359 |
|
Transferred to income and expense in the year on disposals |
|
|
|
|
|
|
(32 |
) |
|
|
|
|
|
|
|
|
|
|
(32 |
) |
Transferred to income and expense in the year on
impairment |
|
|
|
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
Net fair value movement in the year |
|
|
|
|
|
|
(23 |
) |
|
|
4 |
|
|
|
|
|
|
|
(19 |
) |
Ordinary Shares purchased and cancelled |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90 |
|
|
|
90 |
|
Ordinary Shares acquired by ESOP Trusts |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
Ordinary Shares transferred by ESOP Trusts |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10 |
|
Write-down of shares held by ESOP Trusts |
|
|
181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
181 |
|
|
At 31st December 2008 |
|
|
(1,445 |
) |
|
|
(8 |
) |
|
|
(3 |
) |
|
|
2,024 |
|
|
|
568 |
|
|
Other reserves consist of various non-distributable merger and pre-merger reserves amounting to
£1,849 million at 31st December 2008 (2007 £1,849 million; 2006 £1,849 million). Other
reserves also include the capital redemption reserve created as a result of the share buy-back
programme amounting to £175 million at 31st December 2008 (2007 £85 million, 2006 £81
million).
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 149
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
GSK held an 18.7% interest in Quest Diagnostics Inc. at 31st December 2008 (2007 18.9%). The
Group and Quest Diagnostics are parties to a long-term contractual relationship under which Quest
Diagnostics is the primary provider of clinical laboratory testing to support the Groups clinical
trials testing requirements worldwide. During 2008, Quest Diagnostics provided services of £42
million (2007 £38 million) to the Group. At 31st December 2008, the balance payable by GSK to
Quest Diagnostics was £nil (2007 £5 million).
In 2008, both the Group and Shionogi & Co. Ltd. entered into transactions with their 50/50 US joint
venture company in support of the research and development activities conducted by that joint
venture company. During 2008, GSK provided services to the joint venture of £7 million (2007 £2
million). At 31st December 2008, the balance due to GSK from the joint venture was £5 million (2007
£2 million).
Dr Shapiro, a former Non-Executive Director of GlaxoSmithKline plc, received fees
of $85,000 (2007 $85,000) of which $30,000 (2007 $30,000) was in the form of ADS, from a
subsidiary of the company, for her membership of the Groups Scientific Advisory Board. These fees
are included within Annual remuneration in the Remuneration Report on page 90.
The aggregate compensation of the Directors, CET and Company Secretary is given in Note 10,
Employee Costs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Profit after tax |
|
|
4,712 |
|
|
|
5,310 |
|
|
|
5,498 |
|
Tax on profits |
|
|
1,947 |
|
|
|
2,142 |
|
|
|
2,301 |
|
Share of after tax profits of associates and joint
ventures |
|
|
(48 |
) |
|
|
(50 |
) |
|
|
(56 |
) |
Finance income/costs |
|
|
530 |
|
|
|
191 |
|
|
|
65 |
|
Depreciation |
|
|
920 |
|
|
|
796 |
|
|
|
732 |
|
Amortisation of intangible assets |
|
|
311 |
|
|
|
226 |
|
|
|
226 |
|
Impairment and assets written off |
|
|
436 |
|
|
|
206 |
|
|
|
208 |
|
Profit on sale of intangible assets |
|
|
(170 |
) |
|
|
(5 |
) |
|
|
(158 |
) |
Profit on sale of equity investments |
|
|
(33 |
) |
|
|
(32 |
) |
|
|
(18 |
) |
Changes in working capital: |
|
|
|
|
|
|
|
|
|
|
|
|
Increase in inventories |
|
|
(411 |
) |
|
|
(457 |
) |
|
|
(298 |
) |
Decrease/(increase) in trade receivables |
|
|
519 |
|
|
|
(77 |
) |
|
|
(255 |
) |
Decrease/(increase) in other receivables |
|
|
22 |
|
|
|
(2 |
) |
|
|
(274 |
) |
(Decrease)/increase in trade payables |
|
|
(39 |
) |
|
|
9 |
|
|
|
82 |
|
(Decrease)/increase in other payables |
|
|
(162 |
) |
|
|
(196 |
) |
|
|
272 |
|
Increase/(decrease) in pension and other provisions |
|
|
548 |
|
|
|
(123 |
) |
|
|
(270 |
) |
Share-based incentive plans |
|
|
241 |
|
|
|
237 |
|
|
|
226 |
|
Other |
|
|
(268 |
) |
|
|
(95 |
) |
|
|
(78 |
) |
|
Cash generated from operations |
|
|
9,055 |
|
|
|
8,080 |
|
|
|
8,203 |
|
|
As a result of two reclassifications, the cash generated from operations of £9,055 million is £106
million lower than that given in GSKs unaudited Preliminary Results Announcement issued on 5th
February 2009. In addition the decrease in liquid investments for the year has been reclassified
from financing activities to investing activities. Comparative amounts have also been reclassified.
|
|
|
|
|
|
|
|
|
|
|
|
150
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net debt at beginning of year |
|
|
(6,039 |
) |
|
|
(2,450 |
) |
|
|
(1,237 |
) |
Increase/(decrease) in cash and bank overdrafts |
|
|
1,148 |
|
|
|
1,411 |
|
|
|
(1,956 |
) |
Cash (inflow)/outflow from liquid investments |
|
|
(905 |
) |
|
|
39 |
|
|
|
55 |
|
Net increase in long-term loans |
|
|
(5,523 |
) |
|
|
(3,276 |
) |
|
|
|
|
Net repayment of/(increase in) short-term loans |
|
|
3,059 |
|
|
|
(1,632 |
) |
|
|
739 |
|
Net repayment of obligations under finance
leases |
|
|
48 |
|
|
|
39 |
|
|
|
34 |
|
Exchange adjustments |
|
|
(1,918 |
) |
|
|
(88 |
) |
|
|
(9 |
) |
Other non-cash movements |
|
|
(43 |
) |
|
|
(82 |
) |
|
|
(76 |
) |
|
Movement in net debt |
|
|
(4,134 |
) |
|
|
(3,589 |
) |
|
|
(1,213 |
) |
|
Net debt at end of year |
|
|
(10,173 |
) |
|
|
(6,039 |
) |
|
|
(2,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysis of changes in net debt |
|
At 31.12.07 |
|
|
Exchange |
|
|
Other |
|
|
Acquisitions |
|
|
Cash flow |
|
|
At 31.12.08 |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Liquid investments |
|
|
1,153 |
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
(905 |
) |
|
|
391 |
|
|
|
Cash and cash equivalents |
|
|
3,379 |
|
|
|
1,227 |
|
|
|
|
|
|
|
52 |
|
|
|
965 |
|
|
|
5,623 |
|
Overdrafts |
|
|
(158 |
) |
|
|
(124 |
) |
|
|
|
|
|
|
|
|
|
|
131 |
|
|
|
(151 |
) |
|
|
|
|
3,221 |
|
|
|
1,103 |
|
|
|
|
|
|
|
52 |
|
|
|
1,096 |
|
|
|
5,472 |
|
|
|
Debt due within one year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
|
(2,064 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,064 |
|
|
|
|
|
Eurobonds and Medium-Term Notes |
|
|
(1,233 |
) |
|
|
(175 |
) |
|
|
(337 |
) |
|
|
|
|
|
|
1,264 |
|
|
|
(481 |
) |
Other |
|
|
(49 |
) |
|
|
(10 |
) |
|
|
4 |
|
|
|
|
|
|
|
(269 |
) |
|
|
(324 |
) |
|
|
|
|
(3,346 |
) |
|
|
(185 |
) |
|
|
(333 |
) |
|
|
|
|
|
|
3,059 |
|
|
|
(805 |
) |
|
|
Debt due after one year: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eurobonds, Medium-Term Notes
and
private financing |
|
|
(6,972 |
) |
|
|
(2,963 |
) |
|
|
327 |
|
|
|
|
|
|
|
(5,523 |
) |
|
|
(15,131 |
) |
Other |
|
|
(95 |
) |
|
|
(16 |
) |
|
|
(37 |
) |
|
|
|
|
|
|
48 |
|
|
|
(100 |
) |
|
|
|
|
(7,067 |
) |
|
|
(2,979 |
) |
|
|
290 |
|
|
|
|
|
|
|
(5,475 |
) |
|
|
(15,231 |
) |
|
Net debt |
|
|
(6,039 |
) |
|
|
(1,918 |
) |
|
|
(43 |
) |
|
|
52 |
|
|
|
(2,225 |
) |
|
|
(10,173 |
) |
|
For further information on significant changes in net debt see Note 32 Net debt.
Details of the acquisition and disposal of subsidiary and associated undertakings, joint ventures
and other businesses are given below:
2008
Acquisitions
Sirtris Pharmaceuticals Inc.
On 5th June 2008, the Group acquired 100% of the issued share capital of Sirtris Pharmaceuticals
Inc., a biopharmaceutical company based in Massachusetts, USA for a cash consideration of £376
million. The company is focused on discovering and developing proprietary, orally available, small
molecule drugs with the potential to treat diseases associated with ageing, including metabolic
diseases such as Type 2 diabetes. Sirtris drug candidates are designed to mimic certain beneficial
health effects of calorie restriction by activation of sirtuins, a recently discovered class of
enzymes that Sirtris believes control the ageing process. This transaction has been accounted for
by the purchase method of accounting. The goodwill arising on the acquisition reflects the
potential for enabling GSK to enhance its metabolic, neurology, and immuno-inflammation research
efforts by establishing a world-leading presence in the sirtuin field, aided by the existence in
the company of a highly experienced development team that encompasses all aspects of sirtuin
biology. Sirtris Pharmaceuticals Inc. had a turnover of £nil and a loss after tax of £25 million
for
the year, of which £nil of turnover and £14 million of loss after tax related to the period since
acquisition and are included in the Group accounts.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 151
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
38
Acquisitions and disposals continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
106 |
|
|
|
106 |
|
Property, plant and equipment |
|
|
2 |
|
|
|
|
|
|
|
2 |
|
Other assets including cash and cash
equivalents |
|
|
86 |
|
|
|
|
|
|
|
86 |
|
Deferred tax provision |
|
|
|
|
|
|
(21 |
) |
|
|
(21 |
) |
Other liabilities |
|
|
(39 |
) |
|
|
|
|
|
|
(39 |
) |
|
|
|
|
49 |
|
|
|
85 |
|
|
|
134 |
|
Goodwill |
|
|
|
|
|
|
242 |
|
|
|
242 |
|
|
Total consideration |
|
|
49 |
|
|
|
327 |
|
|
|
376 |
|
|
Bristol Myers Squibb (Egypt)
On 14th October 2008, the Group acquired the Egyptian mature products business of Bristol Myers
Squibb (BMS) for a cash consideration of £140 million of this amount £10 million is deferred with
payment being made when alternative supply arrangements are established. The Group acquired 20
branded products that occupy leading market positions in four therapeutic disease areas in Egypt,
including Duricef (antibiotic); Capozide and Capoten (ACE inhibitors); Theragran-H (iron
supplement) and Kenacomb (topical steroid). Total sales of this combined mature products
pharmaceuticals business in 2007 were $48.5 million. The Group will also take ownership of BMSs
high quality manufacturing facility in Giza (Greater Cairo) that will continue to supply the
acquired products. The Group will have the ability to export generic versions of the acquired
products to markets outside of Egypt, thereby creating a further opportunity to drive sales growth
in the Middle East and North Africa region and this fact is reflected in the goodwill arising on
the acquisition. The business had a turnover of £25 million and a profit after tax of £4 million
for the year, of which £4 million of turnover and £0.2 million of profit after tax are related to
the period since acquisition and are included in the Group accounts. The fair values set out below
are based on provisional valuations and may be subject to change in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
65 |
|
|
|
65 |
|
Property, plant and equipment |
|
|
9 |
|
|
|
9 |
|
|
|
18 |
|
Inventory |
|
|
5 |
|
|
|
|
|
|
|
5 |
|
|
|
|
|
14 |
|
|
|
74 |
|
|
|
88 |
|
Goodwill |
|
|
|
|
|
|
52 |
|
|
|
52 |
|
|
Total consideration |
|
|
14 |
|
|
|
126 |
|
|
|
140 |
|
|
If Sirtris and BMS (Egypt) had been acquired at the beginning of the year, combined Group turnover
for the year would have been £24,373 million and combined Group profit for the year would have been
£4,705 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shionogi- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euclid SR |
|
|
GlaxoSmithKline |
|
|
|
|
|
|
|
Cash flows |
|
Sirtris |
|
|
BMS (Egypt) |
|
|
Partners LP |
|
|
Holdings Ltd |
|
|
Other |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash consideration |
|
|
376 |
|
|
|
130 |
|
|
|
2 |
|
|
|
6 |
|
|
|
1 |
|
|
|
515 |
|
Cash and cash equivalents
acquired |
|
|
(52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(52 |
) |
|
Net cash payment on acquisitions |
|
|
324 |
|
|
|
130 |
|
|
|
2 |
|
|
|
6 |
|
|
|
1 |
|
|
|
463 |
|
|
Euclid SR Partners, LP
During 2008, an additional £2 million was invested in Euclid SR Partners, LP, an associate in which
the Group has a 38.6% share.
Shionogi-GlaxoSmithKline Holdings Ltd
During 2008, an additional £6 million was invested in Shionogi-GlaxoSmithKline Holdings Ltd, a
joint venture in which the Group has a 50% share.
|
|
|
|
|
|
|
|
|
|
|
|
152 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
38 Acquisitions and disposals continued
2007
Acquisitions
Reliant Pharmaceuticals Inc.
On 18th December 2007, the Group acquired 100% of the issued share capital of Reliant
Pharmaceuticals Inc., a pharmaceutical company based in the USA for a cash consideration of £814
million. The company specialises in the development and marketing of speciality medicines to combat
heart disease which includes the US rights to Lovaza, a treatment for adult patients with very high
levels of triglycerides. This transaction has been accounted for by the purchase method of
accounting. The goodwill arising on the acquisition reflects the potential for product growth
throughout the USA and Puerto Rico and the expected synergies for the Group. Reliant
Pharmaceuticals Inc. had a turnover of £276 million and a profit after tax of £8 million for the
year, of which £8 million of turnover and £1 million of profit after tax related to the period
since acquisition and are included in the Group accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
13 |
|
|
|
600 |
|
|
|
613 |
|
Property, plant and equipment |
|
|
2 |
|
|
|
4 |
|
|
|
6 |
|
Other assets including cash and cash
equivalents |
|
|
80 |
|
|
|
16 |
|
|
|
96 |
|
Deferred tax provision |
|
|
|
|
|
|
(175 |
) |
|
|
(175 |
) |
Other liabilities |
|
|
(75 |
) |
|
|
(1 |
) |
|
|
(76 |
) |
|
|
|
|
20 |
|
|
|
444 |
|
|
|
464 |
|
Goodwill |
|
|
|
|
|
|
350 |
|
|
|
350 |
|
|
Total consideration |
|
|
20 |
|
|
|
794 |
|
|
|
814 |
|
|
Domantis Limited
On 5th January 2007, the Group acquired 100% of the issued share capital of Domantis Limited, a
drug discovery company based in the UK for a cash consideration of £234 million. The company is
developing the next generation of antibody therapies. This transaction has been accounted for by
the purchase method of accounting. The goodwill arising on the acquisition reflects the potential
for combining the world-leading technology of Domantis with the development programme already in
place within GSK to put the Group at the forefront of biotechnology. Domantis Limited had a
turnover of £nil and a loss after tax of £10 million for the year, of which £nil of turnover and £9
million of loss after tax related to the period since acquisition and are included in the Group
accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
51 |
|
|
|
51 |
|
Property, plant and equipment |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Other assets including cash and cash
equivalents |
|
|
19 |
|
|
|
|
|
|
|
19 |
|
Deferred tax provision |
|
|
|
|
|
|
(14 |
) |
|
|
(14 |
) |
Other liabilities |
|
|
(4 |
) |
|
|
|
|
|
|
(4 |
) |
|
|
|
|
16 |
|
|
|
37 |
|
|
|
53 |
|
Goodwill |
|
|
|
|
|
|
181 |
|
|
|
181 |
|
|
Total consideration |
|
|
16 |
|
|
|
218 |
|
|
|
234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 153
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
38
Acquisitions and disposals continued
Praecis Pharmaceuticals Inc.
On 16th February 2007, the Group acquired 100% of the issued share capital of Praecis
Pharmaceuticals, Inc., a biopharmaceutical company based in the USA, for a cash consideration of
£39 million. The company has developed a more efficient method of identifying drug leads targeting
human disease using proprietary technology. This transaction has been accounted for by the purchase
method of accounting. Praecis Pharmaceuticals Inc. had a turnover of £nil and a loss after tax of
£11 million for the year, of which £nil of turnover and £9 million of loss after tax related to the
period since acquisition and are included in the Group accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
|
|
|
|
7 |
|
|
|
7 |
|
Property, plant and equipment |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Other assets including cash and cash
equivalents |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
Deferred tax asset |
|
|
|
|
|
|
10 |
|
|
|
10 |
|
Other liabilities |
|
|
(6 |
) |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
20 |
|
|
|
17 |
|
|
|
37 |
|
Goodwill |
|
|
|
|
|
|
2 |
|
|
|
2 |
|
|
Total consideration |
|
|
20 |
|
|
|
19 |
|
|
|
39 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reliant |
|
|
Domantis |
|
|
Praecis |
|
|
Other |
|
|
Total |
|
Cash flows |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash consideration |
|
|
814 |
|
|
|
234 |
|
|
|
39 |
|
|
|
1 |
|
|
|
1,088 |
|
Cash and cash equivalents
acquired |
|
|
(20 |
) |
|
|
(16 |
) |
|
|
(24 |
) |
|
|
|
|
|
|
(60 |
) |
|
Net cash payment on acquisitions |
|
|
794 |
|
|
|
218 |
|
|
|
15 |
|
|
|
1 |
|
|
|
1,028 |
|
|
If Reliant, Domantis and Praecis had been acquired at the beginning of the year, combined Group
turnover for the year would have been £22,984 million and combined Group profit for the year would
have been £5,314 million.
2006
Acquisitions
CNS, Inc.
On 19th December 2006, the Group acquired 100% of the issued share capital of CNS, Inc., a consumer
healthcare company based in the USA for a cash consideration of £280 million. The company markets
Breathe Right nasal dilator strips and FiberChoice dietary fibre supplements. These are the key
intangible assets acquired and have been valued using a discounted cash flow calculation. This
transaction has been accounted for by the purchase method of accounting. The goodwill arising on
the acquisition reflects the potential for expansion of the brands into other overseas markets and
the expected synergies for the Group. CNS, Inc. had a turnover of £71 million (2005 £60 million)
and a profit of £11 million (2005 profit £9 million) for 2006 of which £2 million of turnover
and £nil of profit related to the period since acquisition and are included in the Group accounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book |
|
|
Fair value |
|
|
Fair |
|
|
|
value |
|
|
adjustment |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Net assets acquired |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
4 |
|
|
|
203 |
|
|
|
207 |
|
Property, plant and equipment |
|
|
1 |
|
|
|
|
|
|
|
1 |
|
Other assets including cash and cash
equivalents |
|
|
44 |
|
|
|
|
|
|
|
44 |
|
Deferred tax provision |
|
|
|
|
|
|
(77 |
) |
|
|
(77 |
) |
Other liabilities |
|
|
(7 |
) |
|
|
|
|
|
|
(7 |
) |
|
|
|
|
42 |
|
|
|
126 |
|
|
|
168 |
|
Goodwill |
|
|
|
|
|
|
112 |
|
|
|
112 |
|
|
Total consideration |
|
|
42 |
|
|
|
238 |
|
|
|
280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
38
Acquisitions and disposals continued
Euclid SR Partners, LP
During 2006, an additional £5 million was invested in Euclid SR Partners, LP, an associate in which
the Group has a 38.7% share.
Shionogi-GlaxoSmithKline Holdings Ltd
During 2006, an additional £8 million was invested in Shionogi GlaxoSmithKline Holdings Ltd, a
joint venture in which the Group has a 50% share.
Pliva Research Institute Ltd.
In May 2006, the Group purchased the entire share capital of the Pliva Research Institute Ltd. for
a cash consideration of £26 million, of this amount £8 million is deferred, with payment being made
when phase I clinical trials are initiated.
GlaxoSmithKline K.K.
In August 2006, a Japanese subsidiary of the Group made a cash payment of £150 million to complete
the purchase of the remaining 15% of the share capital held by the minority shareholder. This
payment was preceded in the year by a dividend to the minority shareholders of £7 million
representing additional consideration.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shionogi |
|
|
Pliva |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euclid SR |
|
|
GlaxoSmithKline |
|
|
Research |
|
|
GlaxoSmith- |
|
|
|
|
|
|
|
|
|
CNS |
|
|
Partners, LP |
|
|
Holdings, Ltd |
|
|
Institute |
|
|
Kline K.K. |
|
|
Other |
|
|
Total |
|
Cash
flows |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash consideration |
|
|
280 |
|
|
|
5 |
|
|
|
8 |
|
|
|
18 |
|
|
|
157 |
|
|
|
|
|
|
|
468 |
|
Cash and cash equivalents
acquired |
(24 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(25 |
) |
|
Net cash payment on acquisitions |
256 |
|
|
|
5 |
|
|
|
8 |
|
|
|
17 |
|
|
|
157 |
|
|
|
|
|
|
|
443 |
|
|
Net cash proceeds from disposals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Contractual obligations and commitments |
|
£m |
|
|
£m |
|
|
Contracted for but not provided in the financial
statements: |
|
|
|
|
|
|
|
|
Intangible assets |
|
|
13,048 |
|
|
|
5,730 |
|
Property, planty and equipment |
|
|
489 |
|
|
|
597 |
|
Investments |
|
|
56 |
|
|
|
65 |
|
Purchase commitments |
|
|
145 |
|
|
|
159 |
|
Business combinations |
|
|
227 |
|
|
|
|
|
Pensions |
|
|
597 |
|
|
|
650 |
|
Other commitments |
|
|
46 |
|
|
|
32 |
|
Interest on loans |
|
|
11,868 |
|
|
|
5,170 |
|
Finance lease charges |
|
|
18 |
|
|
|
14 |
|
|
|
|
|
26,494 |
|
|
|
12,417 |
|
|
The commitments related to intangible assets include milestone payments, which are dependent on
successful clinical development or on meeting specified sales targets, and which represent the
maximum that would be paid if all milestones, however unlikely, are achieved. The amounts are not
risk-adjusted or discounted. As the majority of the intangible commitments are denominated in US
dollars, the significant strengthening of foreign currencies during the year has led to an increase
in the commitments reported above. A number of commitments were made in 2008 under licensing and
other agreements, including arrangements with Actelion Pharmaceuticals Limited, Archemix
Corporation, Dynavax Technologies Corporation, and Mpex Pharmaceuticals, Inc.
The commitments relating to business combinations reflect agreements to acquire the issued share
capital of Genelabs Technologies, Inc., Bristol Myers Squibb Pakistan (Private) Limited and AZ Tika
SNC, the latter being subject to clearance by the Swedish Competition Authority.
In 2006, GSK formalised an agreement with the trustees of the UK pension schemes to make additional
contributions in addition to the normal contributions, over a four-year period ending 31st December
2009 in order to eliminate the then funded pension deficits on an IAS 19 basis by that point. The
table above shows this commitment, net of £166 million of additional contributions made in 2008,
but excludes the normal ongoing annual funding requirement of approximately £150 million. GSK has
also committed to eliminate any future deficits that may arise over a rolling five-year period.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 155
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
39 Commitments continued
The Group also has other commitments which principally relate to revenue payments to be made under
licences and other alliances.
Commitments in respect of future interest payable on loans are
disclosed after taking into account the effect of interest rate swaps.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Commitments under non-cancellable operating leases |
|
£m |
|
|
£m |
|
|
Rental payments due within one year |
|
|
140 |
|
|
|
101 |
|
Rental payments due between one and two years |
|
|
109 |
|
|
|
76 |
|
Rental payments due between two and three years |
|
|
76 |
|
|
|
58 |
|
Rental payments due between three and four years |
|
|
54 |
|
|
|
41 |
|
Rental payments due between four and five years |
|
|
22 |
|
|
|
33 |
|
Rental payments due after five years |
|
|
47 |
|
|
|
51 |
|
|
Total commitments under non-cancellable operating leases |
|
|
448 |
|
|
|
360 |
|
|
On 23rd January 2009, GSK acquired UCBs marketed product portfolio across certain territories in
Africa, the Middle East, Asia Pacific and Latin America, for £483 million.
On 26th February 2009, Synta Pharmaceuticals Corp. announced that, following the identification of
safety concerns, it had stopped a Phase III study on elesclomol, a compound it was developing
jointly with GSK. GSKs intangible assets include £83 million relating to milestones paid to Synta
Pharmaceuticals in relation to this compound, which are now likely to be impaired. It is not yet
possible to determine the final amount of any impairment, pending the completion of full analyses
of the data.
Subsequent to the year-end, GSK has also completed business and product acquisitions with Genelabs
and BMS Pakistan and collaboration agreements with Archemix and Idenix.
|
|
|
|
|
|
|
|
|
|
|
|
156
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
GlaxoSmithKline plc reports in Sterling and pays
dividends out of Sterling profits. The role of
Corporate Treasury is to manage and monitor our
external and internal funding requirements and
financial risks in support of our corporate
objectives. Treasury activities are governed by
policies and procedures approved by the Board of
Directors, most recently on 25th September 2008.
A Treasury Management Group (TMG) chaired by our Chief
Financial Officer, meets on a monthly basis to review
treasury activities. Its members receive management
information relating to treasury activities. Our
internal auditors review the Treasury internal control
environment regularly.
GSK uses a variety of financial instruments, including
derivatives, to finance its operations and to manage
market risks from those operations. Derivatives,
principally comprising forward foreign currency
contracts, interest rate and currency swaps, are used
to swap borrowings and liquid assets into currencies
required for Group purposes and to manage exposure to
funding risks from changes in foreign exchange rates
and interest rates.
GSK does not hold or issue derivative financial
instruments for speculative purposes and our Treasury
policies specifically prohibit such activity. All
transactions in financial instruments are undertaken
to manage the risks arising from underlying business
activities, not for speculation.
Capital management
We manage our capital to ensure that entities in the
Group are able to operate as going concerns and to
optimise return to shareholders through an
appropriate balance of debt and equity. The Board
reviews the Groups dividend policy and funding
requirements annually.
The capital structure of the Group consists of net
debt (see Note 32, Net debt) and shareholders
equity (see Note 34, Movements in equity).
With recent changes in financial markets we now expect
more investment opportunities to arise that will allow
the Group to invest in support of its strategic
priorities. To ensure we have sufficient flexibility to
take advantage of these opportunities we do not
currently expect to make significant share repurchases
in 2009. Investment opportunities will continue to be
assessed against strict financial criteria.
Our operations are global, primarily through
subsidiary companies established in the markets in
which we trade. With significant levels of patent
protection our pharmaceutical products compete largely
on product efficacy rather than on price.
Selling margins are sufficient to cover normal
operating costs and our operations are cash
generative.
Operating cash flow is used to fund investment in
research and development of new products. It is also
used to make the routine outflows of capital
expenditure, tax, dividends and repayment of maturing
debt and, to the extent determined by the Board, share repurchases.
Our policy is to
borrow centrally, using a variety of capital market
issues and borrowing facilities, to meet anticipated
funding requirements.
These borrowings, together with cash generated
from operations, are on-lent and used to fund
our ongoing operations and our acquisition
strategy.
The total capital for the Group has increased from
£15,949 million in 2007 to £18,491 million in 2008.
This has resulted primarily from an increase in net
debt partially off set by a decrease in total equity.
The decrease in total equity principally arises from
actuarial losses on defined benefit pension plans in
the year and further share repurchases, partially
offset by retained earnings. Net debt has primarily
increased with the issuance of $9 billion of debt under
the US shelf registration statement and £700 million
under the EMTN programme of primarily long term debt.
Part of the proceeds were used to repay maturing
short-term debt, resulting in an overall increase in
the cash position at the 31st December 2008.
Liquidity risk
We manage our net borrowing requirements through a
portfolio of long-term borrowings, including bonds,
together with short-term finance under the US$10
billion commercial paper programme.
During the year, our committed undrawn bank facilities
reduced from $5 billion to $3.9 billion as a
consequence of the acquisition of ABN AMRO and the
collapse of Lehman Brothers. The facilities were
renewed in October 2008. We consider this level of
committed facilities to be adequate given our current
cash holdings.
We have a European Medium Term Note programme of £10
billion. At 31st December 2008 we had £7.9 billion of
notes in issue under this programme. We also have a US
shelf registration statement. At 31st December 2008 we had $11.1
billion (£7.7 billion) of notes in issue under this
programme. The TMG monitors the cash flow forecast on a
monthly basis.
The long-term borrowings mature at dates between 2010
and 2042. Our long-term debt ratings have remained
stable since February 2008. Currently we are rated A+
stable outlook by Standard and Poors and A1 negative
outlook by Moodys.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 157
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41 Financial
instruments and related disclosures continued
Our short-term debt ratings are A-1 and P-1 with
Standard and Poors and Moodys respectively. As well
as our committed facilities we also had substantial
cash and liquid investments, which amounted to £6
billion at 31st December 2008. We also benefit from
strong positive cash flow from operating units.
Market risk
Interest rate risk management
The policy on interest rate risk management requires
the minimum amount of net borrowings at fixed rates to
increase with the ratio of forecast interest payable to
trading profit. The fixed to floating ratio is reviewed
monthly by the TMG.
We use an interest rate swap to redenominate one of
our external borrowings into the interest rate coupon
required by GSK. The duration of this swap matches the
duration of the principal instrument. Interest rate
derivative instruments are accounted for as fair value
or cash flow hedges of the relevant assets or
liabilities.
Foreign exchange risk management
Foreign currency transaction exposure arising on
internal and external trade flows is not hedged. The
exposure of overseas operating subsidiaries to
transaction risk is minimised by matching local
currency income with local currency costs. For this
purpose, our internal trading transactions are matched
centrally and we manage intercompany payment terms to
reduce risk. Exceptional foreign currency cash flows
are hedged selectively under the management of
Corporate Treasury.
We manage the short-term cash surpluses or borrowing
requirements of subsidiary companies centrally using
forward contracts to hedge future repayments back into
the originating currency.
We seek to denominate borrowings in the currencies of
our principal assets and cash flows. These are
primarily denominated in US dollars, Euros and
Sterling. Certain borrowings are swapped into other
currencies as required.
Borrowings denominated in, or
swapped into, foreign currencies that match
investments in overseas Group assets are treated as a
hedge against the relevant assets. Forward contracts
are also used in major currencies to reduce our
exposure to our investment in overseas Group assets
(see Net Investment Hedges section of this note for
further details). The TMG review the ratio of
borrowings to assets for major currencies monthly.
Credit risk
The Group considers its maximum credit risk to be
£13,265 million (2007 £10,594 million) which is
the total of the Groups financial assets with the
exception of Other investments which do not bear
credit risk.
GSKs greatest concentration of credit risk is £1.9 billion
(2007 £1.7 billion) invested in US Treasuries and
Treasury-Repo only money market funds which bear credit
exposure to the US government. See page 159 for details
on the Groups total financial assets.
Treasury-related credit risk
In 2008, credit risk increased during the global credit
crisis. A report on relationship banks and their credit
ratings is presented annually to the TMG for approval.
The aggregate credit risk in respect of financial
instruments the Group may have with one counterparty is
limited by reference to the long-term credit ratings
assigned for that counterparty by Moodys and Standard
and Poors. The table below sets out the credit ratings
of counterparties for liquid investments, cash and cash
equivalents and derivatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Rating of Counterparty |
|
|
|
|
|
2008 |
|
Aaa/AAA |
|
|
Aa1/AA+ |
|
|
Aa2/AA |
|
|
Aa3/AA- |
|
|
A1/A+ |
|
|
A2/A |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Bank balances &
deposits |
|
|
64 |
|
|
|
|
|
|
|
1,019 |
|
|
|
642 |
|
|
|
2,035 |
|
|
|
18 |
|
|
|
3,778 |
|
US Treasury &
Treasury repo
only money
market funds |
|
|
1,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852 |
|
Corporate debt
instruments |
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75 |
|
Government
securities |
|
|
260 |
|
|
|
|
|
|
|
49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309 |
|
3rd party
financial
derivatives |
|
|
|
|
|
|
|
|
|
|
160 |
|
|
|
210 |
|
|
|
540 |
|
|
|
|
|
|
|
910 |
|
|
Total |
|
|
2,251 |
|
|
|
|
|
|
|
1,228 |
|
|
|
852 |
|
|
|
2,575 |
|
|
|
18 |
|
|
|
6,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit Rating of Counterparty |
|
|
|
|
|
2007 |
|
Aaa/AAA |
|
|
Aa1/AA+ |
|
|
Aa2/AA |
|
|
Aa3/AA- |
|
|
A1/A+ |
|
|
A2/A |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Bank balances &
deposits |
|
|
123 |
|
|
|
477 |
|
|
|
217 |
|
|
|
552 |
|
|
|
62 |
|
|
|
|
|
|
|
1,431 |
|
US Treasury &
Treasury repo
only money
market funds |
|
|
1,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,713 |
|
Corporate debt
instruments |
|
|
64 |
|
|
|
|
|
|
|
245 |
|
|
|
861 |
|
|
|
|
|
|
|
|
|
|
|
1,170 |
|
Government
securities |
|
|
180 |
|
|
|
|
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
218 |
|
3rd party
financial
derivatives |
|
|
|
|
|
|
43 |
|
|
|
355 |
|
|
|
17 |
|
|
|
51 |
|
|
|
|
|
|
|
466 |
|
|
Total |
|
|
2,080 |
|
|
|
520 |
|
|
|
855 |
|
|
|
1,430 |
|
|
|
113 |
|
|
|
|
|
|
|
4,998 |
|
|
The credit ratings in the above tables are as assigned by
Moodys Investor Services and Standard and Poors
respectively (and their global associates). Where the
opinion of the two rating
agencies differ, GSK assigns the lower rating of the
two to the counterparty.
|
|
|
|
|
|
|
|
|
|
|
|
158 GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41
Financial instruments and related
disclosures continued
Our centrally managed cash reserves amounted to £4.3
billion at 31st December 2008, all available within 3
months. The Group invests centrally managed liquid
assets in bank deposits, Treasury-only money market
funds with a credit rating of AAA/ Aaa (Standard and
Poors/Moodys Investors Services), short term
corporate debt instruments with a minimum short-term
credit rating of A-1/P1 and bank deposits.
Global counterparty limits are assigned to each of GSKs
banking and investment counterparties based on long-term
credit ratings from Moodys and Standard and Poors.
Corporate Treasurys usage of these limits is monitored
daily by a Corporate Compliance Officer (CCO)
independent of Corporate Treasury. Any breach of these
limits would be reported to the CFO immediately. The CCO
also monitors the credit rating of these counterparties
and, when changes in ratings occur, notifies Corporate
Treasury so that the appropriate amendment can be made
to limits.
Wholesale and retail credit risk
In the USA, in line with other pharmaceutical
companies, the Group sells its products through a small
number of wholesalers in addition to hospitals,
pharmacies, physicians and other groups. Sales to the
three largest wholesalers amount to approximately 84%
of the Groups US pharmaceutical sales. At 31st
December 2008, the Group had trade receivables due from
these three wholesalers totalling £1,067 million (2007
£915 million). The Group is exposed to a
concentration of credit risk in respect of these
wholesalers such that, if one or more of them
encounters financial difficulty, it could materially
and adversely affect the Groups financial results.
The Groups credit risk monitoring activities relating
to these wholesalers includes review of their
quarterly financial information and Standard & Poors
credit ratings, development of GSK internal risk
ratings, and establishment and periodic review of
credit limits. However, the Group believes there is no
further credit risk provision required in excess of
the normal provision for bad and doubtful debts (see
Note 24, Trade and other receivables). Outside the
USA no customers account for more than 5% of the trade
receivables balance.
Fair value of financial assets and liabilities
The table on page 159 presents the carrying amounts
and the fair values of the Groups financial assets
and liabilities at 31st December 2008 and 31st
December 2007.
The fair values of the financial assets and liabilities
are included at the amount at which the instrument
could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation
sale. The following methods and assumptions were used
to estimate the fair values:
|
|
Cash and cash equivalents approximates to the carrying amount |
|
|
|
Liquid investments based on quoted market prices in the case of marketable securities;
based on principal amounts in the case of non-marketable securities because of their short
repricing periods |
|
|
|
Other investments investments traded in an active market determined by reference to the
relevant stock exchange quoted bid price; other investments determined by reference to the
current market value of similar instruments or by reference to the discounted cash flows of
the underlying net assets |
|
|
|
Short-term loans and overdrafts approximates to the carrying amount because of the short
maturity of these instruments |
|
|
|
Long-term loans based on quoted market prices in the case of the Eurobonds and other
fixed rate borrowings; approximates to the carrying amount in the case of floating rate bank
loans and other loans |
|
|
|
Forward exchange contracts based on market data and exchange rates at the balance sheet
date |
|
|
|
Currency swaps based on market data at the balance sheet date |
|
|
|
Interest rate swaps based on the net present value of discounted cash flows |
|
|
|
Receivables and payables approximates to the carrying amount |
|
|
|
Lease obligations approximates to the carrying amount. |
Fair value of investments in GSK shares
At 31st December 2008, the ESOP Trusts held GSK shares
with a carrying value of £1,445 million (2007 £1,617
million) with a fair value of £1,657 million (2007
£1,721 million) based on quoted market price. The
shares represent purchases by the ESOP Trusts to
satisfy future exercises of options and awards under
employee incentive schemes. The carrying value, which
is the lower of cost or expected proceeds, of these
shares has been recognised as a deduction from other
reserves. At 31st December 2008, GSK held Treasury
shares at a cost of £6,286 million (2007 £6,683
million) which has been deducted from retained
earnings.
Committed facilities
The Group has committed facilities to back up the
commercial paper programme of $3.9 billion (£2.7
billion) (2007 $5 billion (£2.5 billion)) of 364 days
duration, renewable annually. At 31st December 2008,
undrawn committed facilities totalled $3.9 billion (£2.7
billion) (2007 $5 billion (£2.5 billion)).
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 159
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41
Financial instruments and related disclosures continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Carrying |
|
|
Fair |
|
|
Carrying |
|
|
Fair |
|
|
|
value |
|
|
value |
|
|
value |
|
|
value |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash and cash equivalents |
|
|
5,623 |
|
|
|
5,623 |
|
|
|
3,379 |
|
|
|
3,379 |
|
Available-for-sale investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquid investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
redeemable shares |
|
|
|
|
|
|
|
|
|
|
736 |
|
|
|
736 |
|
government bonds |
|
|
299 |
|
|
|
299 |
|
|
|
205 |
|
|
|
205 |
|
other |
|
|
92 |
|
|
|
92 |
|
|
|
212 |
|
|
|
212 |
|
|
Total liquid investments |
|
|
391 |
|
|
|
391 |
|
|
|
1,153 |
|
|
|
1,153 |
|
Other investments |
|
|
478 |
|
|
|
478 |
|
|
|
517 |
|
|
|
517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and receivables: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables and Other
non-current
assets in scope of IAS 39 |
|
|
6,288 |
|
|
|
6,288 |
|
|
|
5,586 |
|
|
|
5,586 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-for-trading financial assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as accounting hedges |
|
|
111 |
|
|
|
111 |
|
|
|
175 |
|
|
|
175 |
|
Other derivatives |
|
|
852 |
|
|
|
852 |
|
|
|
301 |
|
|
|
301 |
|
|
Total financial assets |
|
|
13,743 |
|
|
|
13,743 |
|
|
|
11,111 |
|
|
|
11,111 |
|
|
Financial liabilities measured at amortised cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
bonds in a designated hedging relationship |
|
|
(5,693 |
) |
|
|
(5,813 |
) |
|
|
(5,452 |
) |
|
|
(5,433 |
) |
other bonds |
|
|
(9,919 |
) |
|
|
(10,214 |
) |
|
|
(2,753 |
) |
|
|
(2,599 |
) |
commercial paper |
|
|
|
|
|
|
|
|
|
|
(2,064 |
) |
|
|
(2,064 |
) |
bank loans and overdrafts |
|
|
(427 |
) |
|
|
(427 |
) |
|
|
(171 |
) |
|
|
(171 |
) |
other loans and private financing |
|
|
(12 |
) |
|
|
(12 |
) |
|
|
(8 |
) |
|
|
(8 |
) |
obligations under finance leases |
|
|
(136 |
) |
|
|
(136 |
) |
|
|
(123 |
) |
|
|
(123 |
) |
|
Total borrowings |
|
|
(16,187 |
) |
|
|
(16,602 |
) |
|
|
(10,571 |
) |
|
|
(10,398 |
) |
Trade and other payables and Other non-current
liabilities in scope of IAS 39 |
|
|
(5,452 |
) |
|
|
(5,452 |
) |
|
|
(4,450 |
) |
|
|
(4,450 |
) |
|
Held-for-trading financial liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives designated as accounting hedges |
|
|
(638 |
) |
|
|
(638 |
) |
|
|
(226 |
) |
|
|
(226 |
) |
Other derivatives |
|
|
(116 |
) |
|
|
(116 |
) |
|
|
(44 |
) |
|
|
(44 |
) |
|
Total financial liabilities |
|
|
(22,393 |
) |
|
|
(22,808 |
) |
|
|
(15,291 |
) |
|
|
(15,118 |
) |
|
Net financial assets and financial liabilities |
|
|
(8,650 |
) |
|
|
(9,065 |
) |
|
|
(4,180 |
) |
|
|
(4,007 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
160
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41
Financial instruments and related disclosures
continued
Trade and other receivables and other non-current assets in scope of IAS 39
The following table reconciles trade and other receivables and other non-current assets which fall
within the scope of IAS 39 to the relevant balance sheet amounts. Other assets include tax
receivables, pension surplus balances and prepayments, which are outside the scope of IAS 39. The
financial assets are predominantly non-interest earning.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Trade and other receivables (Note 24) |
|
|
6,265 |
|
|
|
5,495 |
|
Other non-current assets (Note 22) |
|
|
579 |
|
|
|
687 |
|
|
|
|
|
6,844 |
|
|
|
6,182 |
|
|
|
|
|
|
|
|
|
|
|
Analysed as: |
|
|
|
|
|
|
|
|
Financial assets in scope of IAS 39 |
|
|
6,288 |
|
|
|
5,586 |
|
Other assets |
|
|
556 |
|
|
|
596 |
|
|
|
|
|
6,844 |
|
|
|
6,182 |
|
|
The following table shows the age of such financial assets which are past due and for which no
provision for bad or doubtful debts has been raised:
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Past due by 130 days |
|
|
310 |
|
|
|
288 |
|
Past due by 3190 days |
|
|
154 |
|
|
|
101 |
|
Past due by 91180 days |
|
|
115 |
|
|
|
97 |
|
Past due by 181365 days |
|
|
89 |
|
|
|
108 |
|
Past due by more than 365 days |
|
|
117 |
|
|
|
214 |
|
|
|
|
|
785 |
|
|
|
808 |
|
|
Amounts past due by greater than 90 days total £321 million (2007 £419 million). Of this balance
£227 million (2007 £315 million) relates to receivables due from state hospital authorities in
certain European countries. Given the profile of our customers, including large wholesalers and
government backed agencies, no further credit risk has been identified with the trade receivables
not past due other than those balances for which an allowance has been made.
Trade and other payables and other non-current liabilities in scope of IAS 39
The following table reconciles trade and other payables and other non-current liabilities which
fall within the scope of IAS 39 to the relevant balance sheet amounts. Other liabilities include
payments on account and tax and social security payables, which are outside the scope of IAS 39.
The financial liabilities are predominantly non-interest bearing.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
Trade and other payables (Note 27) |
|
|
(6,075 |
) |
|
|
(4,861 |
) |
Other non-current liabilities (Note 30) |
|
|
(427 |
) |
|
|
(368 |
) |
|
|
|
|
(6,502 |
) |
|
|
(5,229 |
) |
|
|
|
|
|
|
|
|
|
|
Analysed as: |
|
|
|
|
|
|
|
|
Financial liabilities in scope of IAS 39 |
|
|
(5,452 |
) |
|
|
(4,450 |
) |
Other liabilities |
|
|
(1,050 |
) |
|
|
(779 |
) |
|
|
|
|
(6,502 |
) |
|
|
(5,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 161
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41
Financial instruments and related
disclosures continued
Debt interest rate repricing table
The following table sets out the exposure of the Group to interest rates on debt before and after
the effect of interest rate swaps. The maturity analysis of fixed rate debt is stated by
contractual maturity and of floating rate debt by interest rate repricing dates. For the purpose of
this table, debt is defined as all classes of borrowings other than obligations under finance
leases.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
Effect of |
|
|
|
|
|
|
|
|
|
|
interest |
|
|
|
|
|
|
|
|
|
|
interest |
|
|
|
|
|
|
Debt |
|
|
rate swaps |
|
|
Total |
|
|
Debt |
|
|
rate swaps |
|
|
Total |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Floating and fixed rate
debt less than one year |
|
(901 |
) |
|
|
(1,146 |
) |
|
|
(2,047 |
) |
|
|
(3,455 |
) |
|
|
(746 |
) |
|
|
(4,201 |
) |
Between one and two years |
|
|
(703 |
) |
|
|
|
|
|
|
(703 |
) |
|
|
(369 |
) |
|
|
|
|
|
|
(369 |
) |
Between two and three years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Between three and four years |
|
|
(2,872 |
) |
|
|
|
|
|
|
(2,872 |
) |
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
Between four and five years |
|
|
(1,728 |
) |
|
|
|
|
|
|
(1,728 |
) |
|
|
(2,194 |
) |
|
|
|
|
|
|
(2,194 |
) |
Between five and ten years |
|
|
(4,240 |
) |
|
|
1,146 |
|
|
|
(3,094 |
) |
|
|
(4,409 |
) |
|
|
746 |
|
|
|
(3,663 |
) |
Greater than ten years |
|
|
(5,597 |
) |
|
|
|
|
|
|
(5,597 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(16,041 |
) |
|
|
|
|
|
|
(16,041 |
) |
|
|
(10,429 |
) |
|
|
|
|
|
|
(10,429 |
) |
|
Original issuance profile: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate interest |
|
|
(14,922 |
) |
|
|
1,146 |
|
|
|
(13,776 |
) |
|
|
(8,204 |
) |
|
|
1,979 |
|
|
|
(6,225 |
) |
Floating rate interest |
|
|
(1,119 |
) |
|
|
(1,146 |
) |
|
|
(2,265 |
) |
|
|
(2,225 |
) |
|
|
(1,979 |
) |
|
|
(4,204 |
) |
|
Total interest bearing |
|
|
(16,041 |
) |
|
|
|
|
|
|
(16,041 |
) |
|
|
(10,429 |
) |
|
|
|
|
|
|
(10,429 |
) |
Non-interest bearing |
|
|
(10 |
) |
|
|
|
|
|
|
(10 |
) |
|
|
(19 |
) |
|
|
|
|
|
|
(19 |
) |
|
|
|
|
(16,051 |
) |
|
|
|
|
|
|
(16,051 |
) |
|
|
(10,448 |
) |
|
|
|
|
|
|
(10,448 |
) |
|
Sensitivity analysis
The sensitivity analysis has been prepared on the assumption that the amount of net debt, the ratio
of fixed to floating interest rates of the debt and derivatives portfolio and the proportion of
financial instruments in foreign currencies are all constant and on the basis of the hedge
designations in place at 31st December.
Financial instruments affected by market risk include borrowings, deposits and derivative financial
instruments. The following analyses are intended to illustrate the sensitivity of such financial
instruments to changes in relevant foreign exchange and interest rates.
Foreign exchange sensitivity
The table below shows the Groups sensitivity to foreign exchange rates on its US dollar, Euro and
Yen financial instruments excluding obligations under finance leases and certain non-derivative
financial instruments not in net debt and which do not present a material exposure. These three
currencies are the major currencies in which GSKs financial instruments are denominated. GSK has
considered movements in these currencies over the last three years and has concluded that a 20%
movement in rates is a reasonable benchmark. In this table, financial instruments are only
considered sensitive to foreign exchange rates where they are not in the functional currency of the
entity that holds them. Intercompany loans which are fully hedged to maturity with a currency swap
have been excluded from this analysis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Increase/(decrease) |
|
|
Reduction |
|
|
Increase/(decrease) |
|
|
Reduction |
|
|
|
in income |
|
|
in equity |
|
|
in income |
|
|
in equity |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
20% appreciation (2007 10% appreciation) of the US
dollar |
|
|
210 |
|
|
|
991 |
|
|
|
38 |
|
|
|
580 |
|
20% appreciation (2007 10% appreciation) of the Euro |
|
|
(20 |
) |
|
|
1,760 |
|
|
|
(10 |
) |
|
|
709 |
|
20% appreciation (2007 10% appreciation) of the Yen |
|
|
1 |
|
|
|
52 |
|
|
|
|
|
|
|
15 |
|
|
A 20% (2007 10%) depreciation of the stated currencies would have an equal and opposite effect.
The movements in the income statement relate primarily to hedging instruments for US dollar legal
provisions, trade payables and trade receivables. Whilst these are economic hedges, the provisions
are not financial instruments and therefore are not included in the table above. The sensitivity of
these hedging instruments would be insignificant if the provisions were included. The movements in
equity relate to foreign exchange positions used to hedge Group assets denominated in US dollar,
Euro and Yen. Therefore, a depreciation on the currency swap would give rise to a corresponding
appreciation on the Group asset. Foreign exchange sensitivity on Group assets other than financial
instruments is not included above.
|
|
|
|
|
|
|
|
|
|
|
|
162
GSK Annual Report 2008 |
|
|
|
|
Financial statements
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
41
Financial instruments and related
disclosures continued
Interest rate sensitivity
The table below shows the Groups sensitivity to interest rates on its floating rate Sterling, US
dollar and Euro financial instruments, being the currencies in which GSK has historically issued
debt and held investments. GSK has considered movements in these interest rates over the last three
years and has concluded that a 2% increase is a reasonable benchmark. Debt with a maturity of less
than one year is floating rate for this calculation. A 2% movement in interest rates is not deemed
to have a material effect on equity.
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Increase/(decrease) |
|
|
Increase/(decrease) |
|
|
|
in income |
|
|
in income |
|
|
|
£m |
|
|
£m |
|
|
2% increase (2007 1% increase) in Sterling interest rates |
|
|
16 |
|
|
|
1 |
|
2% increase (2007 1% increase) in US dollar interest rates |
|
|
13 |
|
|
|
(16 |
) |
2% increase (2007 1% increase) in Euro interest rates |
|
|
4 |
|
|
|
3 |
|
|
A 2% (2007 1%) decrease in these interest rates would have an equal and opposite effect, with
the exception of US dollar, where interest rates could not be decreased by 2% as they are currently
less than 0.5%. The maximum decrease in income would therefore be limited to £1 million. Interest
rate movements on obligations under finance leases, foreign currency and interest rate derivatives,
trade payables, trade receivables and other financial instruments not in net debt do not present a
material exposure to the Groups balance sheet based on a 2% increase or decrease in these interest
rates.
Contractual cash flows for non-derivative financial liabilities and derivative instruments
The following is an analysis of the anticipated contractual cash flows including interest payable
for the Groups non-derivative financial liabilities on an undiscounted basis. For the purpose of
this table, debt is defined as all classes of borrowings except for obligations under finance
leases. Interest is calculated based on debt held at 31st December without taking account of future
issuance. Floating rate interest is estimated using the prevailing interest rate at the balance
sheet date. Cash flows in foreign currencies are translated using spot rates at 31st December.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance charge |
|
|
Trade and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations |
|
|
on obligations |
|
|
other |
|
|
|
|
|
|
|
|
|
|
Interest on |
|
|
under finance |
|
|
under finance |
|
|
payables not |
|
|
|
|
|
|
Debt |
|
|
debt |
|
|
leases |
|
|
leases |
|
|
in net debt |
|
|
Total |
|
At 31st December 2008 |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Due less than one year |
|
|
(907 |
) |
|
|
(790 |
) |
|
|
(48 |
) |
|
|
(5 |
) |
|
|
(5,246 |
) |
|
|
(6,996 |
) |
Between one and two years |
|
|
(704 |
) |
|
|
(767 |
) |
|
|
(35 |
) |
|
|
(4 |
) |
|
|
(68 |
) |
|
|
(1,578 |
) |
Between two and three years |
|
|
|
|
|
|
(757 |
) |
|
|
(27 |
) |
|
|
(3 |
) |
|
|
(25 |
) |
|
|
(812 |
) |
Between three and four years |
|
|
(2,885 |
) |
|
|
(757 |
) |
|
|
(14 |
) |
|
|
(2 |
) |
|
|
(32 |
) |
|
|
(3,690 |
) |
Between four and five years |
|
|
(1,736 |
) |
|
|
(582 |
) |
|
|
(4 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(2,329 |
) |
Between five and ten years |
|
|
(4,156 |
) |
|
|
(2,373 |
) |
|
|
(8 |
) |
|
|
(2 |
) |
|
|
(76 |
) |
|
|
(6,615 |
) |
Greater than ten years |
|
|
(5,678 |
) |
|
|
(5,850 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,528 |
) |
|
Gross contractual cash flows |
|
|
(16,066 |
) |
|
|
(11,876 |
) |
|
|
(136 |
) |
|
|
(18 |
) |
|
|
(5,452 |
) |
|
|
(33,548 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance charge |
|
|
Trade and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations |
|
|
on obligations |
|
|
other |
|
|
|
|
|
|
|
|
|
|
Interest on |
|
|
under finance |
|
|
under finance |
|
|
payables not |
|
|
|
|
|
|
Debt |
|
|
debt |
|
|
leases |
|
|
leases |
|
|
in net debt |
|
|
Total |
|
At 31st December 2007 |
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Due less than one year |
|
|
(3,466 |
) |
|
|
(412 |
) |
|
|
(40 |
) |
|
|
(5 |
) |
|
|
(4,330 |
) |
|
|
(8,253 |
) |
Between one and two years |
|
|
(368 |
) |
|
|
(339 |
) |
|
|
(37 |
) |
|
|
(3 |
) |
|
|
(75 |
) |
|
|
(822 |
) |
Between two and three years |
|
|
(10 |
) |
|
|
(327 |
) |
|
|
(24 |
) |
|
|
(2 |
) |
|
|
(15 |
) |
|
|
(378 |
) |
Between three and four
years |
|
|
|
|
|
|
(327 |
) |
|
|
(9 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
|
(341 |
) |
Between four and five years |
|
|
(2,206 |
) |
|
|
(327 |
) |
|
|
(4 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(2,539 |
) |
Between five and ten years |
|
|
(1,657 |
) |
|
|
(856 |
) |
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(26 |
) |
|
|
(2,549 |
) |
Greater than ten years |
|
|
(2,821 |
) |
|
|
(2,707 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,528 |
) |
|
Gross contractual cash
flows |
|
|
(10,528 |
) |
|
|
(5,295 |
) |
|
|
(123 |
) |
|
|
(14 |
) |
|
|
(4,450 |
) |
|
|
(20,410 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 163
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41
Financial instruments and related
disclosures continued
The following table provides an analysis of the anticipated contractual cash flows for the Groups
derivative instruments, excluding embedded derivatives and equity options, using undiscounted cash
flows. Cash flows in foreign currencies are translated using spot rates at 31st December.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Receivables |
|
|
Payables |
|
|
Receivables |
|
|
Payables |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Less than one year |
|
|
36,105 |
|
|
|
(37,738 |
) |
|
|
23,784 |
|
|
|
(23,630 |
) |
Between one and two years |
|
|
184 |
|
|
|
(204 |
) |
|
|
389 |
|
|
|
(323 |
) |
Between two and three years |
|
|
110 |
|
|
|
(120 |
) |
|
|
10 |
|
|
|
(14 |
) |
Between three and four
years |
|
|
521 |
|
|
|
(532 |
) |
|
|
34 |
|
|
|
(39 |
) |
Between four and five years |
|
|
35 |
|
|
|
(46 |
) |
|
|
216 |
|
|
|
(246 |
) |
Greater than five years |
|
|
|
|
|
|
(6 |
) |
|
|
|
|
|
|
(5 |
) |
|
Gross contractual cash
flows |
|
|
36,955 |
|
|
|
(38,646 |
) |
|
|
24,433 |
|
|
|
(24,257 |
) |
|
Derivative financial instruments and hedging programmes
The following table sets out the principal amounts and fair values of derivatives held by GSK.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
|
Fair value |
|
|
Fair value |
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
|
|
|
|
|
|
amount |
|
|
Assets |
|
|
Liabilities |
|
|
amount |
|
|
Assets |
|
|
Liabilities |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swaps |
|
|
481 |
|
|
|
|
|
|
|
(37 |
) |
|
|
368 |
|
|
|
57 |
|
|
|
|
|
|
Fair value hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
1,042 |
|
|
|
107 |
|
|
|
|
|
|
|
1,989 |
|
|
|
7 |
|
|
|
(6 |
) |
|
Net investment hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
(12,848 |
) |
|
|
4 |
|
|
|
(601 |
) |
|
|
(9,553 |
) |
|
|
|
|
|
|
(220 |
) |
Cross currency swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388 |
|
|
|
111 |
|
|
|
|
|
|
|
Derivatives designated as
accounting hedges |
|
|
(11,325 |
) |
|
|
111 |
|
|
|
(638 |
) |
|
|
(6,808 |
) |
|
|
175 |
|
|
|
(226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange contracts |
|
|
12,093 |
|
|
|
837 |
|
|
|
(108 |
) |
|
|
10,156 |
|
|
|
287 |
|
|
|
(40 |
) |
|
Equity related instruments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options and warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
Equity collar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
532 |
|
|
|
7 |
|
|
|
(2 |
) |
|
Embedded derivatives |
|
|
73 |
|
|
|
15 |
|
|
|
(8 |
) |
|
|
92 |
|
|
|
3 |
|
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other derivatives |
|
|
12,166 |
|
|
|
852 |
|
|
|
(116 |
) |
|
|
10,784 |
|
|
|
301 |
|
|
|
(44 |
) |
|
Total derivative instruments |
|
|
841 |
|
|
|
963 |
|
|
|
(754 |
) |
|
|
3,976 |
|
|
|
476 |
|
|
|
(270 |
) |
|
|
Analysed as: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
|
|
|
|
856 |
|
|
|
(752 |
) |
|
|
|
|
|
|
475 |
|
|
|
(262 |
) |
Non-current |
|
|
|
|
|
|
107 |
|
|
|
(2 |
) |
|
|
|
|
|
|
1 |
|
|
|
(8 |
) |
|
Total |
|
|
|
|
|
|
963 |
|
|
|
(754 |
) |
|
|
|
|
|
|
476 |
|
|
|
(270 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
164 GSK Annual Report 2008
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
41 Financial instruments and related disclosures continued
Derivative financial instruments
The principal amount on foreign exchange contracts is calculated based on outstanding positions at
the balance sheet date, calculated net by currency and buy/sell side position. The majority of
contracts are for periods of 12 months or less.
At 31st December 2008, the Group held outstanding foreign exchange contracts consisting primarily
of currency swaps with a total fair value of £729 million (2007 £247 million) which represent
hedges of inter-company loans and deposits, but are not designated as accounting hedges. Changes in
fair value are taken to profit and loss in the period to offset the exchange gains and losses on
the related inter-company lending and borrowing.
Cash flow hedges
The Group has entered into a cross currency swap and designated it a cash flow hedge converting
fixed Euro interest on Euro debt within the Groups Japanese subsidiary, payable annually, to fixed
Yen payments. The bond matures in 2009. The risk being hedged is the variability of cash flows
arising from currency fluctuations. No ineffectiveness is assumed on the hedge. All cash flows
relating to the hedge are expected to occur within the next year. The amounts recognised in equity
are recycled to the income statement to offset the exchange gains or losses in the same period on
the underlying bond as a result of revaluation at the balance sheet date.
The amount recognised in equity in 2008 for cross currency interest rate swaps was £88 million
debit (2007 £10 million credit). The amount recycled from equity to the income statement in 2008
for cross currency interest rate swaps to offset the exchange gain on the underlying bond
recognised in the income statement was £101 million (2007 £14 million). The net fair value
movements on cash flow hedges are disclosed in the Consolidated statement of recognised income and
expense.
Fair value hedges
The Group has designated an interest rate swap as a fair value hedge. The risk being hedged is the
variability of the fair value of the bond arising from interest rate fluctuations. Gains and losses
on fair value hedges are disclosed in Note 12, Finance costs.
Net investment hedges
Foreign exchange contracts have been designated as net investment hedges in respect of the foreign
currency translation risk principally arising on consolidation of the Groups net investment in its
US dollar, Euro and Yen foreign operations. In addition, Euro loan capital issued during 2007 of
3.5 billion, and 750 million from previous years, has been designated as a non-monetary net
investment hedge in respect of the foreign currency translation risk principally arising on
consolidation of the Groups net investment in its Euro operations. Net investment hedge
ineffectiveness is disclosed in Note 11, Finance income.
The Group operates share option schemes, whereby options are granted to employees to acquire shares
or ADS in GlaxoSmithKline plc at the grant price, savings-related share option schemes and share
award schemes, whereby awards are granted to employees to acquire shares or ADS in GlaxoSmithKline
plc at no cost, subject to the achievement by the Group of specified performance targets.
The Group also operates a share award scheme, the Share Value Plan, whereby awards are granted to
employees to acquire shares or ADS in GlaxoSmithKline plc at no cost after a three year vesting
period. The granting of restricted share awards has replaced the granting of options to certain
employees as the cost of the scheme more readily equates to the potential gain to be made by the
employee.
Grants under share option schemes are normally exercisable between three and ten years from the
date of grant. Grants of restricted shares and share awards are normally exercisable at the end of
the three year vesting/performance period. Grants under savings-related share option schemes are
normally exercisable after three years saving. Options under the share option schemes are granted
at the market price ruling at the date of grant. In accordance with UK practice, the majority of
options under the savings-related share option schemes are granted at a price 20% below the market
price ruling at the date of grant. Share options awarded to the Directors and, with effect from the
2004 grant, the CET are subject to performance criteria.
|
|
|
|
|
|
|
|
|
|
|
|
GSK
Annual Report 2008 165
|
|
|
|
|
Financial statements |
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
42 Employee share schemes continued
Option pricing
For the purposes of valuing options to arrive at the stock-based compensation charge, the
Black-Scholes option pricing model has been used. The assumptions used in the model for 2006, 2007
and 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2007 |
|
2006 |
|
|
Risk-free interest rate |
|
|
1.3% 4.8 |
% |
|
|
4.7% 5.3 |
% |
|
|
4.2% 5.0% |
|
Dividend yield |
|
|
4.8 |
% |
|
|
4.0 |
% |
|
|
3.3% |
|
Volatility |
|
|
19% 24 |
% |
|
|
17% 25 |
% |
|
|
18% 29% |
|
Expected lives of options granted under: |
|
|
|
|
|
|
|
|
|
|
|
|
Share option schemes |
|
5 years |
|
5 years |
|
5 years |
|
Savings-related share option and share award schemes |
|
3 years |
|
3 years |
|
3 years |
|
Weighted average share price for grants in the year: |
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares |
|
|
£11.59 |
|
|
£14.41 |
|
|
£14.64 |
|
ADS |
|
|
$45.02 |
|
|
$57.59 |
|
|
$51.40 |
|
|
Volatility is determined based on the three and five year share price history where appropriate.
The fair value of performance share plan grants take into account market conditions. Expected lives
of options were determined based on weighted average historic exercises of options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
|
Share option |
|
|
Share option |
|
|
Savings-related |
|
|
schemes - shares |
|
|
schemes - ADS |
|
|
share option schemes |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
Number |
|
|
exercise |
|
|
fair |
|
|
Number |
|
|
exercise |
|
|
fair |
|
|
Number |
|
|
exercise |
|
|
fair |
|
|
|
000 |
|
|
price |
|
|
value |
|
|
000 |
|
|
price |
|
|
value |
|
|
000 |
|
|
price |
|
|
value |
|
|
At 1st January 2006 |
|
|
166,926 |
|
|
|
£14.97 |
|
|
|
|
|
|
|
95,592 |
|
|
|
$46.86 |
|
|
|
|
|
|
|
8,766 |
|
|
|
£10.66 |
|
|
|
|
|
Options granted |
|
|
9,776 |
|
|
|
£14.78 |
|
|
|
£3.53 |
|
|
|
7,940 |
|
|
|
$51.36 |
|
|
|
$11.59 |
|
|
|
2,069 |
|
|
|
£11.40 |
|
|
|
£3.41 |
|
Options exercised |
|
|
(13,244 |
) |
|
|
£11.66 |
|
|
|
|
|
|
|
(13,310 |
) |
|
|
$41.78 |
|
|
|
|
|
|
|
(2,009 |
) |
|
|
£9.48 |
|
|
|
|
|
Options lapsed |
|
|
(6,755 |
) |
|
|
£15.35 |
|
|
|
|
|
|
|
(1,791 |
) |
|
|
$46.88 |
|
|
|
|
|
|
|
(653 |
) |
|
|
£10.97 |
|
|
|
|
|
|
At 31st December 2006 |
|
|
156,703 |
|
|
|
£15.22 |
|
|
|
|
|
|
|
88,431 |
|
|
|
$48.02 |
|
|
|
|
|
|
|
8,173 |
|
|
|
£11.11 |
|
|
|
|
|
Options granted |
|
|
10,587 |
|
|
|
£14.82 |
|
|
|
£3.07 |
|
|
|
8,624 |
|
|
|
$57.58 |
|
|
|
$10.93 |
|
|
|
3,212 |
|
|
|
£10.50 |
|
|
|
£2.87 |
|
Options exercised |
|
|
(9,863 |
) |
|
|
£12.10 |
|
|
|
|
|
|
|
(18,149 |
) |
|
|
$44.27 |
|
|
|
|
|
|
|
(1,140 |
) |
|
|
£9.74 |
|
|
|
|
|
Options lapsed |
|
|
(8,386 |
) |
|
|
£15.64 |
|
|
|
|
|
|
|
(1,632 |
) |
|
|
$50.90 |
|
|
|
|
|
|
|
(1,707 |
) |
|
|
£11.33 |
|
|
|
|
|
|
At 31st December 2007 |
|
|
149,041 |
|
|
|
£15,38 |
|
|
|
|
|
|
|
77,274 |
|
|
|
$49.91 |
|
|
|
|
|
|
|
8,538 |
|
|
|
£11.02 |
|
|
|
|
|
Options granted |
|
|
11,314 |
|
|
|
£11.50 |
|
|
|
£1.32 |
|
|
|
7,690 |
|
|
|
$44.89 |
|
|
|
$3.84 |
|
|
|
5,570 |
|
|
|
£9.51 |
|
|
|
£2.56 |
|
Options exercised |
|
|
(2,198 |
) |
|
|
£11.84 |
|
|
|
|
|
|
|
(1,989 |
) |
|
|
$42.18 |
|
|
|
|
|
|
|
(453 |
) |
|
|
£10.26 |
|
|
|
|
|
Options lapsed |
|
|
(21,602 |
) |
|
|
£16.52 |
|
|
|
|
|
|
|
(7,497 |
) |
|
|
$53.13 |
|
|
|
|
|
|
|
(2,401 |
) |
|
|
£10.67 |
|
|
|
|
|
|
At 31st December 2008 |
|
|
136,555 |
|
|
|
£14.93 |
|
|
|
|
|
|
|
75,478 |
|
|
|
$49.29 |
|
|
|
|
|
|
|
11,254 |
|
|
|
£10.38 |
|
|
|
|
|
|
Range of exercise prices |
|
|
£10.76 |
|
|
|
£19.77 |
|
|
|
|
|
|
|
$37.09 |
|
|
|
$61.35 |
|
|
|
|
|
|
|
£9.52 |
|
|
|
£11.45 |
|
|
|
|
|
|
Weighted average remaining
contractual life |
|
|
|
4.16 years |
|
|
|
|
|
|
|
|
|
|
4.88 years |
|
|
|
|
|
|
|
|
|
|
2.1 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166 GSK Annual Report 2008
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial statements continued
|
|
|
|
|
|
|
|
42 Employee share schemes continued
In order to encourage employees to convert options, excluding savings-related share options, held
over Glaxo Wellcome or SmithKline Beecham shares or ADS, into those over GlaxoSmithKline shares or
ADS, a programme was established to give an additional cash benefit of 10% of the exercise price of
the original option provided that the employee did not voluntarily leave the Group for two years
from the date of the merger and did not exercise the option before the earlier of six months from
the expiry date of the original option and two years from the date of the merger. The cash benefit
will also be paid if the options expire unexercised if the market price is below the exercise price
on the date of expiry.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at 31st December 2008 |
|
Share option |
|
|
Share option |
|
|
Savings-related |
|
|
schemes - shares |
|
|
schemes - ADS |
|
|
share option schemes |
|
|
|
|
|
|
Weighted |
|
|
Latest |
|
|
|
|
|
|
Weighted |
|
|
Latest |
|
|
|
|
|
|
Weighted |
|
|
Latest |
|
|
|
Number |
|
|
exercise |
|
|
exercise |
|
|
Number |
|
|
exercise |
|
|
exercise |
|
|
Number |
|
|
Exercise |
|
|
exercise |
|
Year of grant |
|
000 |
|
|
price |
|
|
date |
|
|
000 |
|
|
price |
|
|
date |
|
|
000 |
|
|
price |
|
|
date |
|
|
1999 |
|
|
13,540 |
|
|
|
£18.19 |
|
|
|
30.11.09 |
|
|
|
6,021 |
|
|
|
$60.14 |
|
|
|
23.11.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2000 |
|
|
13,163 |
|
|
|
£14.89 |
|
|
|
29.10.10 |
|
|
|
288 |
|
|
|
$58.88 |
|
|
|
15.03.10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 |
|
|
36,566 |
|
|
|
£18.12 |
|
|
|
25.11.11 |
|
|
|
22,215 |
|
|
|
$51.84 |
|
|
|
25.11.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2002 |
|
|
15,324 |
|
|
|
£11.96 |
|
|
|
30.11.12 |
|
|
|
6,040 |
|
|
|
$37.67 |
|
|
|
30.11.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
|
20,496 |
|
|
|
£12.67 |
|
|
|
13.12.13 |
|
|
|
11,028 |
|
|
|
$43.55 |
|
|
|
13.12.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
|
|
7,260 |
|
|
|
£11.23 |
|
|
|
02.12.14 |
|
|
|
6,612 |
|
|
|
$43.17 |
|
|
|
01.12.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
|
|
190 |
|
|
|
£13.05 |
|
|
|
30.10.15 |
|
|
|
428 |
|
|
|
$47.33 |
|
|
|
31.12.15 |
|
|
|
3,248 |
|
|
|
£11.45 |
|
|
|
26.04.09 |
|
2006 |
|
|
8,879 |
|
|
|
£14.69 |
|
|
|
28.11.16 |
|
|
|
7,202 |
|
|
|
$51.27 |
|
|
|
28.07.16 |
|
|
|
967 |
|
|
|
£11.40 |
|
|
|
25.04.10 |
|
2007 |
|
|
10,012 |
|
|
|
£14.81 |
|
|
|
18.08.17 |
|
|
|
8,184 |
|
|
|
$57.59 |
|
|
|
25.07.17 |
|
|
|
1,651 |
|
|
|
£10.50 |
|
|
|
24.04.11 |
|
2008 |
|
|
11,125 |
|
|
|
£11.50 |
|
|
|
20.07.18 |
|
|
|
7,460 |
|
|
|
$44.91 |
|
|
|
02.11.18 |
|
|
|
5,388 |
|
|
|
£9.51 |
|
|
|
22.04.12 |
|
|
Total |
|
|
136,555 |
|
|
|
£14.93 |
|
|
|
|
|
|
|
75,478 |
|
|
|
$49.29 |
|
|
|
|
|
|
|
11,254 |
|
|
|
£10.38 |
|
|
|
|
|
|
Options normally become exercisable from three years from the date of grant but may, under certain
circumstances, vest earlier as set out within the various scheme rules.
There has been no change in the effective exercise price of any outstanding options during the
year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at 31st December 2008 |
|
Share option |
|
|
Share option |
|
|
Savings-related |
|
|
schemes - shares |
|
|
schemes - ADS |
|
|
share option schemes |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
Number |
|
|
exercise |
|
|
Number |
|
|
exercise |
|
|
Number |
|
|
exercise |
|
|
|
000 |
|
|
price |
|
|
000 |
|
|
price |
|
|
000 |
|
|
price |
|
|
At 31st December 2006 |
|
|
137,983 |
|
|
|
£15.51 |
|
|
|
71,238 |
|
|
|
$48.32 |
|
|
|
179 |
|
|
|
£10.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31st December 2007 |
|
|
129,209 |
|
|
|
£15.47 |
|
|
|
60,927 |
|
|
|
$48.70 |
|
|
|
307 |
|
|
|
£9.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31st December 2008 |
|
|
109,207 |
|
|
|
£15.29 |
|
|
|
55,384 |
|
|
|
$48.57 |
|
|
|
3,248 |
|
|
|
£11.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 167
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes to the financial
statements
continued
|
|
|
|
|
|
|
|
42 Employee share schemes continued
GlaxoSmithKline share award schemes
Performance Share Plan
The Group operates a Performance Share Plan whereby awards are granted to Directors and senior
executives at no cost. The percentage of each award that vests is based upon the performance of the
Group over a three year measurement period. The performance conditions consist of two parts, each
of which applies to 50% of the award. The first part of the condition compares GSKs TSR over the
period with the TSR of 13 pharmaceutical companies in the comparator group over the same period.
The second part of the performance condition compares GSKs earnings per share growth to the
increase in the UK Retail Prices Index over the three year performance period. Awards granted to
Directors and members of the CET are subject to a single performance condition which compares GSKs
TSR over the period with the TSR of companies in the comparator group over the same period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares and ADS issuable |
|
Shares |
|
|
Weighted |
|
|
ADS |
|
|
Weighted |
|
|
Number (000) |
|
|
fair value |
|
|
Number (000) |
|
|
fair value |
|
|
At 1st January 2006 |
|
|
3,627 |
|
|
|
|
|
|
|
3,007 |
|
|
|
|
|
Awards granted |
|
|
2,068 |
|
|
|
£10.06 |
|
|
|
1,452 |
|
|
|
$35.13 |
|
Awards exercised |
|
|
(438 |
) |
|
|
|
|
|
|
(187 |
) |
|
|
|
|
Awards cancelled |
|
|
(501 |
) |
|
|
|
|
|
|
(238 |
) |
|
|
|
|
|
At 31st December 2006 |
|
|
4,756 |
|
|
|
|
|
|
|
4,034 |
|
|
|
|
|
Awards granted |
|
|
2,071 |
|
|
|
£10.26 |
|
|
|
1,501 |
|
|
|
$34.87 |
|
Awards exercised |
|
|
(147 |
) |
|
|
|
|
|
|
(77 |
) |
|
|
|
|
Awards cancelled |
|
|
(949 |
) |
|
|
|
|
|
|
(1,131 |
) |
|
|
|
|
|
At 31st December 2007 |
|
|
5,731 |
|
|
|
|
|
|
|
4,327 |
|
|
|
|
|
Awards granted |
|
|
2,834 |
|
|
|
£7.77 |
|
|
|
1,467 |
|
|
|
$27.99 |
|
Awards exercised |
|
|
(1,519 |
) |
|
|
|
|
|
|
(1,516 |
) |
|
|
|
|
Awards cancelled |
|
|
(511 |
) |
|
|
|
|
|
|
(420 |
) |
|
|
|
|
|
At 31st December 2008 |
|
|
6,535 |
|
|
|
|
|
|
|
3,858 |
|
|
|
|
|
|
Share Value Plan
The Group operates a Share Value Plan whereby awards are granted, in the form of shares, to certain
employees at no cost. The awards vest after three years. There are no performance criteria
attached.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares and ADS issuable |
|
Shares |
|
|
Weighted |
|
|
ADS |
|
|
Weighted |
|
|
Number (000) |
|
|
fair value |
|
|
Number (000) |
|
|
fair value |
|
|
At 1st January 2006 |
|
|
4,514 |
|
|
|
|
|
|
|
3,849 |
|
|
|
|
|
Awards granted |
|
|
4,759 |
|
|
|
£13.45 |
|
|
|
4,126 |
|
|
|
$52.53 |
|
Awards exercised |
|
|
(131 |
) |
|
|
|
|
|
|
(66 |
) |
|
|
|
|
Awards cancelled |
|
|
(348 |
) |
|
|
|
|
|
|
(280 |
) |
|
|
|
|
|
At 31st December 2006 |
|
|
8,794 |
|
|
|
|
|
|
|
7,629 |
|
|
|
|
|
Awards granted |
|
|
5,155 |
|
|
|
£13.22 |
|
|
|
4,231 |
|
|
|
$52.08 |
|
Awards exercised |
|
|
(3,643 |
) |
|
|
|
|
|
|
(3,038 |
) |
|
|
|
|
Awards cancelled |
|
|
(672 |
) |
|
|
|
|
|
|
(539 |
) |
|
|
|
|
|
At 31st December 2007 |
|
|
9,634 |
|
|
|
|
|
|
|
8,283 |
|
|
|
|
|
Awards granted |
|
|
5,572 |
|
|
|
£9.85 |
|
|
|
4,640 |
|
|
|
$36.46 |
|
Awards exercised |
|
|
(926 |
) |
|
|
|
|
|
|
(931 |
) |
|
|
|
|
Awards cancelled |
|
|
(592 |
) |
|
|
|
|
|
|
(630 |
) |
|
|
|
|
|
At 31st December 2008 |
|
|
13,688 |
|
|
|
|
|
|
|
11,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168 GSK Annual Report 2008
|
|
|
|
|
Financial statements |
|
|
|
|
|
|
|
|
|
Notes
to the financial statements
continued
|
|
|
|
|
|
|
|
42 Employee share schemes continued
Deferred Investment Award Plan
The Group operates a Deferred Investment Award Plan whereby awards are granted, in the form of
notional shares, to certain senior executives at no cost. Awards typically vest over a three-year
period commencing on the fourth anniversary from date of grant with 50% of the award initially
vesting and then 25% in each of the subsequent two years. There are no performance criteria
attached.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares and ADS issuable |
|
Shares |
|
|
Weighted |
|
|
ADS |
|
|
Weighted |
|
|
Number (000) |
|
|
fair value |
|
|
Number (000) |
|
|
fair value |
|
|
At 1st January 2006 |
|
|
40 |
|
|
|
|
|
|
|
55 |
|
|
|
|
|
Awards granted |
|
|
106 |
|
|
|
£13.90 |
|
|
|
15 |
|
|
|
$53.60 |
|
Awards exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards cancelled |
|
|
(13 |
) |
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
At 31st December 2006 |
|
|
133 |
|
|
|
|
|
|
|
65 |
|
|
|
|
|
Awards granted |
|
|
95 |
|
|
|
£13.20 |
|
|
|
40 |
|
|
|
$53.40 |
|
Awards exercised |
|
|
|
|
|
|
|
|
|
|
(9 |
) |
|
|
|
|
Awards cancelled |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31st December 2007 |
|
|
224 |
|
|
|
|
|
|
|
96 |
|
|
|
|
|
Awards granted |
|
|
334 |
|
|
|
£11.70 |
|
|
|
70 |
|
|
|
$43.80 |
|
Awards exercised |
|
|
(20 |
) |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
Awards cancelled |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
|
|
|
At 31st December 2008 |
|
|
538 |
|
|
|
|
|
|
|
119 |
|
|
|
|
|
|
Employee Share Ownership Plan Trusts
The Group sponsors Employee Share Ownership Plan (ESOP) Trusts to acquire and hold shares in
GlaxoSmithKline plc to satisfy awards made under employee incentive plans and options granted under
employee share option schemes. The trustees of the ESOP Trusts purchase shares on the open market
with finance provided by the Group by way of loans or contributions. Costs of running the ESOP
Trusts are charged to the income statement. Shares held by the ESOP Trusts are deducted from other
reserves and held at the value of proceeds receivable from employees on exercise. If there is
deemed to be a permanent diminution in value this is reflected by a transfer to retained earnings.
The Trusts also acquire and hold shares to meet notional dividends re-invested on deferred awards
under the SmithKline Beecham Mid-Term Incentive Plan. The trustees have waived their rights to
dividends on the shares held by the ESOP Trusts.
|
|
|
|
|
|
|
|
|
|
Shares held for share award schemes |
|
2008 |
|
|
2007 |
|
|
Number of shares (000) |
|
|
53,147 |
|
|
|
45,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
£m |
|
|
Nominal value |
|
|
13 |
|
|
|
11 |
|
Carrying value |
|
|
234 |
|
|
|
242 |
|
Market value |
|
|
683 |
|
|
|
579 |
|
|
|
|
|
|
|
|
|
|
|
Shares held for
share option schemes |
|
2008 |
|
|
2007 |
|
|
Number of shares (000) |
|
|
75,822 |
|
|
|
89,283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
£m |
|
|
|
£m |
|
|
Nominal value |
|
|
19 |
|
|
|
22 |
|
Carrying value |
|
|
1,211 |
|
|
|
1,375 |
|
Market value |
|
|
974 |
|
|
|
1,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 169 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
The following represent the principal subsidiary and associated undertakings of the GlaxoSmithKline
Group at 31st December 2008. Details are given of the principal country of operation, the location
of the headquarters, the business segment and the business activities. The equity share capital of
these undertakings is wholly owned by the Group except where its percentage interest is shown
otherwise. All companies are incorporated in their principal country of operation except where
stated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
Location |
|
Subsidiary |
|
|
Segment |
|
Activity |
|
|
% |
|
|
England |
|
Brentford |
|
+GlaxoSmithKline Holdings Limited |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
+GlaxoSmithKline Holdings (One) Limited |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
+GlaxoSmithKline Services Unlimited |
|
Ph,CH |
|
|
s |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline Finance plc |
|
Ph,CH |
|
|
f |
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline Capital plc |
|
Ph |
|
|
f |
|
|
|
|
|
|
|
Brentford |
|
SmithKline Beecham p.l.c. |
|
Ph,CH |
|
|
d e h m p r |
|
|
|
|
|
|
|
Brentford |
|
Wellcome Limited |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Greenford |
|
Glaxo Group Limited |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Greenford |
|
Glaxo Operations UK Limited |
|
Ph |
|
|
p |
|
|
|
|
|
|
|
Brentford |
|
Glaxo Wellcome International B.V. (i) |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
Glaxo Wellcome Investments B.V. (i) |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline Export Limited |
|
Ph |
|
|
e |
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline Research & Development Limited |
|
Ph |
|
|
d r |
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline UK Limited |
|
Ph |
|
|
m p |
|
|
|
|
|
|
|
Brentford |
|
SmithKline Beecham (Investments) Limited |
|
Ph,CH |
|
|
f |
|
|
|
|
|
|
|
Brentford |
|
Setfirst Limited |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
Setfirst (No.2) Limited |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Greenford |
|
The Wellcome Foundation Limited |
|
Ph |
|
|
p |
|
|
|
|
|
|
|
Cambridge |
|
Domantis Limited |
|
Ph |
|
|
d r |
|
|
|
|
|
|
|
Brentford |
|
SmithKline Beecham Overseas Limited |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
SmithKline Beecham Holdings (UK) Limited |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Brentford |
|
GlaxoSmithKline (Netherlands) B.V. (i) |
|
Ph |
|
|
h |
|
|
|
|
|
|
Austria |
|
Vienna |
|
GlaxoSmithKline Pharma GmbH |
|
Ph |
|
|
m |
|
|
|
|
|
|
Belgium |
|
Genval |
|
GlaxoSmithKline S.A. |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
Rixensart |
|
GlaxoSmithKline Biologicals S.A. |
|
Ph |
|
|
d e m p r |
|
|
|
|
|
|
Czech Republic |
|
Prague |
|
GlaxoSmithKline s.r.o. |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
Denmark |
|
Orestadt |
|
GlaxoSmithKline Consumer Healthcare A/S |
|
CH |
|
|
m |
|
|
|
|
|
|
|
Brøndby |
|
GlaxoSmithKline Pharma A/S |
|
Ph |
|
|
m |
|
|
|
|
|
|
Finland |
|
Espoo |
|
GlaxoSmithKline Oy |
|
Ph |
|
|
m |
|
|
|
|
|
|
France |
|
Marly le Roi |
|
Groupe GlaxoSmithKline S.A.S. |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Marly le Roi |
|
Laboratoire GlaxoSmithKline S.A.S. |
|
Ph |
|
|
m r d |
|
|
|
|
|
|
|
Marly le Roi |
|
Glaxo Wellcome Production S.A.S. |
|
Ph |
|
|
p |
|
|
|
|
|
|
|
Marly le Roi |
|
GlaxoSmithKline Sante Grand Public S.A.S. |
|
CH |
|
|
m |
|
|
|
|
|
|
|
St. Amand Les Eaux |
|
GlaxoSmithKline Biologicals S.A.S |
|
Ph |
|
|
p |
|
|
|
|
|
|
Germany |
|
Buehl |
|
GlaxoSmithKline Consumer Healthcare GmbH & Co. KG |
|
CH |
|
|
d h m p r s |
|
|
|
|
|
|
|
Munich |
|
GlaxoSmithKline GmbH & Co. KG |
|
Ph |
|
|
d h m p r s |
|
|
|
|
|
|
Greece |
|
Athens |
|
GlaxoSmithKline A.E.B.E |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
Hungary |
|
Budapest |
|
GlaxoSmithKline Medicine and Healthcare Products Limited |
|
Ph,CH |
|
|
e m |
|
|
|
|
|
|
Italy |
|
Verona |
|
GlaxoSmithKline S.p.A. |
|
Ph |
|
|
d h m r |
|
|
|
|
|
|
|
Milan |
|
GlaxoSmithKline Consumer Healthcare S.p.A. |
|
CH |
|
|
h m |
|
|
|
|
|
|
|
Verona |
|
GlaxoSmithKline Manufacturing S.p.A. |
|
Ph |
|
|
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170 GSK Annual Report 2008 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial statements continued |
|
|
|
|
|
|
|
43 Principal Group companies continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe |
|
Location |
|
Subsidiary |
|
|
Segment |
|
Activity |
|
|
% |
|
|
Luxembourg |
|
Mamer |
|
GlaxoSmithKline International (Luxembourg) S.A. |
|
Ph,CH |
|
|
f h |
|
|
|
|
|
|
Netherlands |
|
Zeist |
|
GlaxoSmithKline B.V. |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
Utrecht |
|
GlaxoSmithKline Consumer Healthcare B.V. |
|
CH |
|
|
m |
|
|
|
|
|
|
Norway |
|
Oslo |
|
GlaxoSmithKline AS |
|
Ph |
|
|
m |
|
|
|
|
|
|
Poland |
|
Poznan |
|
GlaxoSmithKline Pharmaceuticals S.A. |
|
Ph |
|
|
p |
|
|
|
97 |
|
|
|
Poznan |
|
GSK Services Sp.z o.o. |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
Warsaw |
|
GlaxoSmithKline Consumer Healthcare Sp.z o.o. |
|
CH |
|
|
m e |
|
|
|
|
|
|
Portugal |
|
Alges |
|
GlaxoSmithKline-Produtos Farmaceuticos, Limitada |
|
Ph |
|
|
m |
|
|
|
|
|
|
Republic of |
|
Carrigaline |
|
SmithKline Beecham (Cork) Limited (ii) |
|
Ph |
|
|
d p r |
|
|
|
|
|
Ireland |
|
Cork |
|
GlaxoSmithKline Trading Services Limited (ii) |
|
Ph |
|
|
e |
|
|
|
|
|
|
|
Dublin |
|
GlaxoSmithKline Consumer Healthcare (Ireland) Limited (ii) |
|
CH |
|
|
m |
|
|
|
|
|
|
|
Dublin |
|
GlaxoSmithKline (Ireland) Limited |
|
Ph |
|
|
m |
|
|
|
|
|
|
Russian |
|
Moscow |
|
GlaxoSmithKline Trading ZAO |
|
Ph |
|
|
m |
|
|
|
|
|
Federation |
|
Moscow |
|
GlaxoSmithKline Healthcare ZAO |
|
CH |
|
|
m |
|
|
|
|
|
|
Spain |
|
Madrid |
|
GlaxoSmithKline S.A. |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
Madrid |
|
GlaxoSmithKline Consumer Healthcare S.A. |
|
CH |
|
|
m |
|
|
|
|
|
|
|
Aranda de Duero |
|
Glaxo Wellcome S.A. |
|
Ph |
|
|
p |
|
|
|
|
|
|
Sweden |
|
Solna |
|
GlaxoSmithKline AB |
|
Ph |
|
|
m |
|
|
|
|
|
|
Switzerland |
|
Muenchenbuchsee |
|
GlaxoSmithKline AG |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
Hamilton |
|
Corixa Corporation |
|
Ph |
|
|
m p |
|
|
|
|
|
|
|
Philadelphia |
|
SmithKline Beecham Corporation |
|
Ph,CH |
|
|
d e h m p r s |
|
|
|
|
|
|
|
Pittsburgh |
|
CNS, Inc. |
|
CH |
|
|
m |
|
|
|
|
|
|
|
Pittsburgh |
|
GlaxoSmithKline Consumer Healthcare, L.P. |
|
CH |
|
|
m p |
|
|
|
88 |
|
|
|
Pittsburgh |
|
Block Drug Company, Inc. |
|
CH |
|
|
h m |
|
|
|
|
|
|
|
Liberty Corner |
|
Reliant Pharmaceuticals, Inc. |
|
Ph |
|
|
m r |
|
|
|
|
|
|
|
Wilmington |
|
GlaxoSmithKline Holdings (Americas) Inc. |
|
Ph,CH |
|
|
h |
|
|
|
|
|
|
|
Wilmington |
|
GlaxoSmithKline Capital Inc. |
|
Ph |
|
|
f |
|
|
|
|
|
|
|
Wilmington |
|
Sirtris Pharmaceuticals Inc. |
|
Ph |
|
|
r |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bermuda |
|
Hamilton |
|
GlaxoSmithKline Insurance Ltd |
|
Ph,CH |
|
|
i |
|
|
|
|
|
|
Canada |
|
Mississauga |
|
GlaxoSmithKline Inc. |
|
Ph |
|
|
m p r |
|
|
|
|
|
|
|
Oakville |
|
GlaxoSmithKline Consumer Healthcare Inc. |
|
CH |
|
|
m |
|
|
|
|
|
|
|
Laval |
|
ID Biomedical Corporation |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Laval |
|
ID Biomedical Corporation of Quebec |
|
Ph |
|
|
d m p r |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Australia |
|
Boronia |
|
GlaxoSmithKline Australia Pty Ltd |
|
Ph,CH |
|
|
d e m p r |
|
|
|
|
|
|
China |
|
Beijing |
|
GlaxoSmithKline (China) Investment Co. Ltd |
|
Ph,CH |
|
|
d h m |
|
|
|
|
|
|
|
Hong Kong |
|
GlaxoSmithKline Limited |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
|
Tianjin |
|
Sino-American Tianjin Smith Kline & French Laboratories Ltd |
|
Ph,CH |
|
|
d m p r |
|
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 171
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes
to the financial statements
continued |
|
|
|
|
|
|
|
43
Principal Group companiescontinued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
Location |
|
Subsidiary |
|
|
Segment |
|
Activity |
|
|
% |
|
|
India |
|
Mumbai |
|
GlaxoSmithKline Pharmaceuticals Limited |
|
Ph |
|
|
m p |
|
|
|
51 |
|
|
|
Nabha |
|
GlaxoSmithKline Consumer Healthcare Limited (iii) |
|
CH |
|
|
m p |
|
|
|
43 |
|
|
Malaysia |
|
Petaling Jaya |
|
GlaxoSmithKline Pharmaceutical Sdn Bhd |
|
Ph |
|
|
m |
|
|
|
|
|
|
|
Selangor |
|
GlaxoSmithKline Consumer Healthcare Sdn Bhd |
|
CH |
|
|
m |
|
|
|
|
|
|
New Zealand |
|
Auckland |
|
GlaxoSmithKline NZ Limited |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
Pakistan |
|
Karachi |
|
GlaxoSmithKline Pakistan Limited |
|
Ph,CH |
|
|
m p e |
|
|
|
79 |
|
|
Philippines |
|
Makati |
|
GlaxoSmithKline Philippines Inc |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
Singapore |
|
Singapore |
|
Glaxochem Pte Ltd |
|
Ph |
|
|
h |
|
|
|
|
|
|
|
Singapore |
|
Glaxo Wellcome Manufacturing Pte Ltd |
|
Ph |
|
|
d h p r |
|
|
|
|
|
|
|
Singapore |
|
GlaxoSmithKline Pte Ltd |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
South Korea |
|
Seoul |
|
GlaxoSmithKline Korea Limited |
|
Ph ,CH |
|
|
m p |
|
|
|
|
|
|
Thailand |
|
Bangkok |
|
GlaxoSmithKline (Thailand) Limited |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan |
|
Tokyo |
|
GlaxoSmithKline K.K. |
|
Ph,CH |
|
|
d m p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Latin America |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Argentina |
|
Buenos Aires |
|
GlaxoSmithKline Argentina S.A. |
|
Ph,CH |
|
|
e m p |
|
|
|
|
|
|
Brazil |
|
Rio de Janeiro |
|
GlaxoSmithKline Brasil Limitada |
|
Ph,CH |
|
|
e m p |
|
|
|
|
|
|
Colombia |
|
Bogota |
|
GlaxoSmithKline Colombia S.A. |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
Mexico |
|
Delegacion Tlalpan |
|
GlaxoSmithKline Mexico S.A. de C.V. |
|
Ph,CH |
|
|
e m p s |
|
|
|
|
|
|
Puerto Rico |
|
Guaynabo |
|
GlaxoSmithKline Puerto Rico Inc. |
|
Ph |
|
|
m |
|
|
|
|
|
|
Venezuela |
|
Caracas |
|
GlaxoSmithKline Venezuela C.A. |
|
Ph,CH |
|
|
m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Middle East & Africa |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Egypt |
|
Cairo |
|
GlaxoSmithKline S.A.E |
|
Ph |
|
|
m p |
|
|
|
91 |
|
|
South Africa |
|
Bryanston |
|
GlaxoSmithKline South Africa (Pty) Limited |
|
Ph,CH |
|
|
m p |
|
|
|
|
|
|
Turkey |
|
Istanbul |
|
GlaxoSmithKline Ilaclari Sanayi ve Ticaret A.S. |
|
Ph |
|
|
m p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USA |
|
Madison |
|
Quest Diagnostics Incorporated (iv) |
|
Clinical testing |
|
|
|
|
|
|
19 |
|
|
|
|
|
i) |
|
Incorporated in the Netherlands. |
|
ii) |
|
Exempt from the provisions of Section 7 of the Companies (Amendment) Act 1986 (Ireland). |
|
iii) |
|
Consolidated as a subsidiary undertaking in accordance with Section 258 (4)(a) of the Companies Act 1985 on the grounds of dominant
influence. |
|
iv) |
|
Equity accounted on the grounds of significant influence. |
|
+ |
|
Directly held wholly owned subsidiary of GlaxoSmithKline plc. |
Key
|
|
|
Business segment:
|
|
Ph Pharmaceuticals, CH Consumer Healthcare |
Business activity:
|
|
d development, e exporting, f
finance, h holding company, i insurance, m
marketing, p production, r research, s service |
Full details of all Group subsidiary and associated
undertakings will be attached to the companys Annual Return to be filed with the Registrar of
Companies. Each of GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc is a wholly-owned
finance subsidiary of the company, and the company has fully and unconditionally guaranteed the
securities issued by each of GlaxoSmithKline Capital Inc. and GlaxoSmithKline Capital plc.
|
|
|
|
|
|
|
|
|
|
|
|
172 GSK Annual Report 2008
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to
the financial statements continued |
|
|
|
|
|
|
|
The Group is involved in significant legal and administrative proceedings, principally product
liability, intellectual property, tax, antitrust and governmental investigations, as well as
related private litigation. The Group makes provision for these proceedings on a regular basis as
summarised in Note 2, Accounting principles and policies and Note 29, Other provisions. The
Group may make additional significant provisions for such legal proceedings as required in the
event of further developments in these matters, consistent with generally accepted accounting
principles. Litigation, particularly in the USA, is inherently
unpredictable. Excessive awards may occur even if they may not be justified by the evidence. The Group could in
the future incur judgements or enter into settlements of claims that could result in payments that
exceed its current provisions by an amount that would have a material adverse effect on the Groups
financial condition, results of operations and/or cash flows. Intellectual property claims include
challenges to the validity and enforceability of the Groups patents on various products or
processes as well as assertions of non-infringement of those patents. A loss in any of these cases
could result in loss of patent protection for the product at issue. The consequences of any such
loss could be a significant decrease in sales of that product and could materially affect future
results of operations for the Group.
Legal expenses incurred and provisions related to legal claims are charged to selling, general and
administration costs. Provisions are made, after taking appropriate legal and other specialist
advice, when a reasonable estimate can be made of the likely outcome of the dispute. The Group has
established an actuarially determined provision for product liability claims incurred, but not yet
reported as described in Note 29, Other provisions. At 31st December 2008, the Groups aggregate
provision for legal and other disputes (not including tax matters described in Note 14, Taxation)
was £1.9 billion. The ultimate liability for legal claims may vary from the amounts provided and
depends upon the outcome of litigation proceedings, investigations and possible settlement
negotiations.
The most significant of those matters are described below.
Intellectual property
Advair/Seretide
In September 2004, the Group applied to the US Patent and Trademark Office (USPTO) for re-issue of
its combination patent for Advair, an inhaled combination of salmeterol and fluticasone propionate,
which expires in September 2010. The USPTO reissued the patent in February 2008. The re-issued
patent has the same September 2010 expiration date as the original combination patent and is listed
in the register of pharmaceutical patents maintained by the US FDA, the Orange Book.
In October 2007, the Group filed a complaint with the Patent Dispute Chamber of the Regional Court
in Düsseldorf, Germany against Neolab (UK) for infringement of its German patent claiming
compositions containing the combination of salmeterol and fluticasone propionate used in Seretide
(known as Viani in Germany). The complaint was based on Neolabs stated intention by letter to
market a salmeterol/fluticasone combination product in Germany in 2008 (which event did not occur).
A trial took place in the Patent Dispute Chamber of the Regional Court in Düsseldorf in January
2009 at which Neolab argued that a letter stating a proposed intent to sell in the future does not
constitute a basis for an infringement decision. A decision is expected in March 2009. In January
2009, Neolab filed an action to invalidate the combination patent in the Federal Court of Germany.
Revocation actions against the combination patent in Germany have also been filed by Mylan Dura
GmbH (March 2008) and Hexal AG (December 2008). No trial date has been set for these actions. The
basic patent covering the combination product in Seretide expires in September 2010 but is subject
to a Supplementary Protection Certificate, which extends protection until September 2013.
In March 2008, the Group initiated an infringement action in the Federal Court of The Hague against
a number of internet pharmacy organisations together with Cipla Limited, for infringement of the
Groups Dutch combination patent relating to Seretide. The action was heard on 24th October 2008.
In a decision dated 26th November 2008, the Court did not find infringement but indicated that they
saw no evidence that brought patent validity into question. In particular, the Court noted that a
prior UK revocation decision of 2004 on the corresponding UK patent was out-dated because it was
reached using an interpretation of the law relating to inventive step that was no longer followed.
A revocation action against the basic patent covering the Seretide combination in Ireland was filed
in the High Court in Dublin on behalf of Ivax in July 2008. The trial is scheduled to begin in
March 2009.
Argatroban
In December 2007, Encysive Pharmaceuticals Inc., Mitsubishi Kasei Corporation and the Group filed
an action in the US District Court for the Southern District of New York against Barr Laboratories,
Inc. for infringement of Mitsubishis pharmaceutical composition patent covering Argatroban.
Pursuant to a license from Mitsubishi, Encysive has developed Argatroban for the treatment of
heparin-induced thrombocytopenia and holds the New Drug Application approved by the US FDA.
Encysive has licensed the US marketing rights to Argatroban to the Group. The Mitsubishi patent
expires in June 2014. Barr had filed an Abbreviated New Drug Application (ANDA) with the FDA with a
certification of invalidity, unenforceability and non-infringement of the Mitsubishi patent. FDA
approval of that ANDA is stayed until the earlier of May 2010 or resolution of the patent
infringement action. The case is in the discovery phase.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008
173 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
Avodart
In January 2008, the Group received notice that Barr Laboratories filed an ANDA with the FDA with
an allegation of invalidity of the three patents listed in the Orange Book with cover the active
ingredient in Avodart, and its use to treat benign prostatic hyperplasia (BPH). In February 2008,
SmithKline Beecham filed an action in the US District Court for the District of Delaware against
Barr for infringement of these patents. The basic compound patent expires in 2015. The other two
patents expire in 2013. FDA approval of Barrs ANDA is stayed until the earlier of July 2010, or
resolution of the patent infringement action. The case is in the discovery phase.
Boniva
The Group participates in the marketing of Boniva pursuant to a co-promotion agreement with Roche.
In September 2007, Roche Laboratories commenced actions in the US District Court for the District
of New Jersey against eight generic drug manufacturers. In each case, Roche alleged infringement of
Roche patents relating to Boniva tablets. Each of the defendants had filed an ANDA with the FDA
with a certification of invalidity, unenforceability or non-infringement of at least one of the
Roche patents. Two manufacturers have challenged the basic compound patent, which expires in 2012.
Final FDA approval of those ANDAs is stayed until the earlier of November 2010 or resolution of the
relevant patent infringement action. In August 2008, Roche obtained a new patent on the monthly
dosing regimen for Boniva and brought suit against all ANDA filers that were challenging its
patents. The new patent expires in 2023. The cases are ongoing.
Combivir
Patents listed in the Orange Book for Combivir include composition of matter (3TC/lamivudine),
combination (lamivudine and AZT) and lamivudine crystal form patents that expire in 2010, 2012 and
2016, respectively. In September 2007, the Group received notice that Teva filed an ANDA with the
FDA alleging that the combination patent is invalid.
In November 2007, the Group filed an action in the District Court for the District of Delaware
against Teva Pharmaceuticals for infringement of the combination patent. FDA approval of Tevas
ANDA is stayed until the earlier of March 2010 or resolution of the patent infringement action
favourable to Teva. The case is in the discovery phase. In October 2008, Teva filed a certification
that the Groups patent covering the crystal form of lamivudine is invalid or not infringed. The
Group did not file suit under this patent.
In July 2008, we received notice that Lupin Pharmaceuticals filed a certification with the FDA
alleging that the combination patent is invalid or not infringed by its product. Lupin also filed a
certification that the Groups patent covering the crystal form of lamivudine is invalid or not
infringed.
In August 2008, the Group filed suit against Lupin in the
District Court for the District of Delaware for infringement of its combination patent. The Group
did not file suit against Lupin under the crystal form patent. FDA approval of Lupins ANDA is
stayed until the earlier of January 2011 or resolution of the patent infringement action favourable
to Lupin. Neither Teva nor Lupin has challenged the compound patent that claims lamivudine, one of
the active ingredients in Combivir. That patent expires in 2010.
Coreg CR
In December 2007, the Group received notice that United Research Laboratories Inc./Mutual
Pharmaceuticals Company, Inc. filed an ANDA with the FDA with a certification of invalidity,
unenforceability or non-infringement of the patents covering the crystalline salt form and delayed
release technology used for manufacturing that product, which expire in 2023 and 2016,
respectively. In February 2008, the Group filed suit under the crystal form patent and, in the
alternative, requested the court to dismiss Mutuals certification as ineffective because its ANDA
had not been accepted for filing by the FDA when it sent its certification. In April 2008, the
court dismissed the case on summary judgement. Mutual appealed to the Court of Appeals for the
Federal Circuit. The appeal was dismissed in November 2008.
In March 2008, the FDA accepted Mutuals ANDA, and Mutual filed a second certification for Coreg CR
alleging that the Groups patents for Coreg CR were invalid, unenforceable or not infringed. The
Group filed suit in April 2008 in the District Court for the Eastern District of Pennsylvania under
the crystal form patent and a patent covering the use of Coreg CR in treating congestive heart
failure. In October 2008, the Group filed a motion to dismiss the action and gave Mutual a covenant
not-to-sue under the patents. Mutual has opposed the dismissal of the case. The parties await a
decision on the motion to dismiss. Coreg CR has been granted data exclusivity by the FDA that
precludes approval of a generic until April 2010.
Paxil/Seroxat
In the USA a number of manufacturers or distributors of generic Paxil filed applications with the
FDA to market their generic versions prior to the expiration in 2007 of the Groups patent on
paroxetine hyrdrochloride hemihydrate. Of these actions, only one remains pending namely, an action
against Apotex in the District Court for the Eastern District of Pennsylvania on patents with
composition of matter and process of manufacture claims. The case is in the discovery phase. An
anti-trust counterclaim has been asserted by Apotex, as discussed below. In Europe, generic
products containing paroxetine hydrochloride are now on the market in most European countries.
Litigation with Synthon BV was recently settled, litigation with FAL is ongoing and counterclaims
for unfair competition have been asserted against the Group. Following the litigation in Canada
with Apotex over several patents related to paroxetine, Apotex launched its generic product in
Canada in October 2003.
|
|
|
|
|
|
|
|
|
|
|
|
174 GSK Annual Report 2008
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
Apotex has now alleged that as a result of that litigation it had been enjoined from launching that
product after receipt of regulatory approval. An action by Apotex to recover damages related to the
delay occasioned by those injunctions is ongoing.
Paxil CR
A US patent covering a delayed and controlled release formulation of paroxetine hydrochloride
(Paxil CR) was issued to the Group in June 2007 and listed in the FDA Orange Book. Thereafter the
Group filed an action in the US District Court for the District of New Jersey against Mylan for
infringement of that newly issued patent. Subsequently, the parties reached a settlement. Mylan
entered the market in May 2008 under the terms of the settlement agreement.
Requip XL
In January 2009, the
Group received letters from Impax Laboratories, Inc. and Actavis South Atlantic LLC indicating that their ANDAs for Requip XL had
been accepted by the FDA. The letters included an allegation that the patent licensed by the Group
from SkyePharma covering the extended release formulation is not infringed by their products. The
Group did not bring suits against these companies.
Treximet
In October 2008, the
Group received a letter from Par Pharmaceuticals that the FDA had accepted its ANDA for Treximet, which included a certification
that patents owned by Pozen, Inc. relating to Treximet were invalid, unenforceable and/or not
infringed. Pozens patents are licensed to the Group. In November 2008, Pozen filed suit against
Par under three of its patents in the District Court for the Eastern District of Texas. In November
2008, the Group received a letter from Alphapharm and its designated agent, Mylan Pharmaceuticals,
that the FDA had accepted its ANDA for Treximet, which included a certification that Pozens
patents relating to Treximet were invalid, unenforceable and/or not infringed. Pozen filed suit
against Alphapharm and Mylan in January 2009 for infringement of two of these patents in the
District Court for the Eastern District of Texas and Delaware. Treximet has data exclusivity that
precludes approval of a generic product until April 2011. The Group is not a party to any of the
lawsuits brought by Pozen.
Valtrex
In May 2003, the Group commenced an action in the US District Court for the District of New Jersey
against Ranbaxy Laboratories, alleging infringement of the Groups compound patent for
valacyclovir, the active ingredient in Valtrex. That patent expires in December 2009. Ranbaxy had
filed an ANDA with the FDA with a certification that the Groups compound patent is invalid,
unenforceable or not infringed. The case has been settled on terms that permit Ranbaxy to enter the
market in late 2009 (taking into account expected paediatric exclusivity with respect to the
Groups compound patent).
Wellbutrin XL
In December 2004, Biovail commenced actions in the US District Court for the Central District of
California against Anchen Pharmaceuticals and in the US District Court for the Southern District of
Florida against Abrika Pharmaceuticals, in each case, alleging infringement of Biovail
formulation patents for Wellbutrin XL. In April 2005, Biovail filed an action in the US District
Court for the Eastern District of Pennsylvania against Impax Laboratories for infringement of the
same patents. Those patents expire in 2018. Each of Anchen, Abrika and Impax had filed an ANDA with
the FDA with a certification of invalidity or non-infringement of the Biovail patents. The Group is
the licensee under those patents. In August 2006, the judge granted Anchens motion and ruled that
Anchens ANDA product did not infringe Biovails patent. Biovail has appealed that decision to the
CAFC, and the case remains on appeal. The Group is not a party to any of those actions. In September
2005, Biovail commenced actions in the US District Court for the Southern District of New York
against Watson Laboratories alleging infringement of the Biovail formulation patents. Watsons
third party counterclaim against the Group based on listing activities associated with the FDA
Orange Book was dismissed in October 2006. The 300mg generic product was launched in the USA in
December 2006.
In March 2007, Biovail announced a comprehensive settlement with Anchen, Impax, Watson and Teva
following a voluntary review by the US Federal Trade Commission. Certain aspects of the settlement
remain confidential; however, the parties did disclose that with defined exceptions the generic
companies would not market the 150mg strength of Wellbutrin XL until 2008. The generic version of
the 150mg tablet was launched in the USA in May 2008.
USPTO Action
In October 2007, the Group filed an action against the US Patent and Trademark Office in the US
District Court for the Eastern District of Virginia to enjoin permanently Final Regulations
published by the US Patent and Trademark Office which would limit the number of continuation patent
applications and patent claims that a patent applicant could prosecute before the Office. Those
regulations were due to become effective on 1st November 2007.
In October 2007, the court issued an order preliminarily enjoining implementation of the rules
until a full hearing and decision on the parties cross-motions for summary judgement. Following a
hearing in February 2008, the court issued a permanent injunction against implementation of the
USPTOs proposed rules in April 2008. The USPTO appealed the ruling to the US Court of Appeals for
the Federal Circuit (CAFC). The appeal was heard by the CAFC in December 2008. The parties await a
decision.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 175 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
Product liability
Pre-clinical and clinical trials are conducted during the development of potential products to
determine the safety and efficacy of products for use by humans following approval by regulatory
bodies. Notwithstanding these efforts, when drugs and vaccines are introduced into the marketplace,
unanticipated safety issues may become evident. The Group is currently a defendant in a number of
product liability lawsuits related to the Groups pharmaceutical products. The most significant of
those matters are described below.
Avandia
In May 2007, the New England Journal of Medicine (NEJM) published an article on Avandia in which
the author, based on a meta-analysis of 42 clinical trials, raised concerns that use of the drug
rosiglitazone (Avandia) may be associated with an increased risk of heart attack and cardiovascular
death in comparison to the use of a placebo or other anti-diabetic therapies. Following publication
of the NEJM article, the Group has been named in product liability lawsuits on behalf of
individuals and purported class action cases asserting consumer fraud and/or personal injury claims
on behalf of purchasers and users of Avandia. The federal cases are part of a multi-district
litigation (MDL) proceeding pending in the US District Court for the Eastern District of
Pennsylvania. Cases have also been filed in state courts. Cases filed in Philadelphia have been
coordinated in the Mass Tort Program. These matters are in the discovery phase. Additionally, a
purported nationwide class action suit was filed in February 2009 in the US District Court for the
Eastern District of Pennsylvania on behalf of all third party payers seeking economic damages under
various state unfair trade practices and consumer protection laws. The Group is in the process of
evaluating the complaint.
Finally, one purported class action has been filed in Israel, and briefing of whether to certify
the class action is underway. Seven class actions are pending in Canada, and are at an early stage.
Baycol
In August 2001, Bayer AG withdrew Baycol (cerivastatin sodium) worldwide in light of reports of
adverse events, including deaths, involving rhabdomyolysis. The Group had participated in the
marketing of Baycol in the USA pursuant to a co-promotion agreement with Bayer which was the
licence holder and manufacturer of the product. Following the withdrawal, Bayer and the Group were
named as defendants in thousands of lawsuits filed in state and federal courts in the USA on behalf
of both individuals and putative classes of former Baycol users. A number of the suits allege that
the plaintiffs have suffered personal injuries, including rhabdomyolsis, from the use of Baycol.
Others claim that persons who took Baycol, although not injured, may be at risk of future injury or
may have suffered economic damages from purchasing and using Baycol. Plaintiffs seek remedies
including compensatory, punitive and statutory damages and creation of funds for medical
monitoring.
The Group and Bayer Corporation, the principal US subsidiary of Bayer AG, have signed an allocation
agreement under which Bayer Corporation has agreed to pay 95% of all settlements and compensatory
damages judgements, with each party retaining responsibility for its own attorneys fees and any
punitive damages. The federal cases have been consolidated in an MDL proceeding in the US District
Court for the District of Minnesota. To date two statewide class actions have been certified a
medical monitoring case in Pennsylvania and a Consumer Fraud and Deceptive Business Practices Act
case in Illinois. The medical monitoring action was dismissed by the court on summary judgement.
The certification of the consumer fraud case is currently on appeal in the Illinois appellate
courts.
A
nationwide class of third-party payers was certified by a Pennsylvania state court. That case
settled before trial. Another class action, in which GSK was not named as a defendant, had been
certified in Oklahoma. That case has been decertified, and the deadline for appealing the
decertification order has passed. More than 3,100 claims for death or serious injury have been
settled. Thousands of others alleging muscle aches and pains have been voluntarily or involuntarily
dismissed.
Paxil and Paxil CR
The Group has received lawsuits and claims alleging that use of Paxil (paroxetine) during pregnancy
resulted in the birth of a child with birth defects or health issues. Separately, the Group has
received lawsuits and claims that patients who took Paxil committed or attempted to commit suicide
and/or acts of violence. The Group also has received lawsuits and claims filed on behalf of
patients alleging that they suffered symptoms on discontinuing treatment with Paxil. The cases
filed in Philadelphia have been coordinated in the Mass Tort Program. In September 2005, the US
label for Paxil was updated to reflect new information that suggested an increased risk of
congenital malformations (particularly cardiovascular malformations) in infants born to mothers who
took Paxil during the first trimester of pregnancy. In December 2005, the Paxil US label was
further updated to include new data and to strengthen the pregnancy warning from category C to
category D. This category indicates there is evidence of risk to the foetus, but the potential
benefits from the use of the drug in pregnant women may outweigh the risk.
|
|
|
|
|
|
|
|
|
|
|
|
176 GSK Annual Report 2008
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
In May 2006, the Paxil US label was again updated to include a class warning concerning persistent
pulmonary hypertension of the newborn arising in mothers who took selective serotonin reuptake
inhibitor (SSRI) antidepressants after the 20th week of pregnancy. The Group has also received
purported class action litigation in Canada.
The Group has received numerous claims and lawsuits alleging that treatment with Paxil has caused
homicidal or suicidal behaviour exhibited by users of the product. Class certification was denied
in January 2007 in a purported personal injury class action lawsuit. Cases remain pending in
federal and state courts. The cases filed in Philadelphia have been coordinated in the Mass Tort
Program. In January 2005, the FDA approved both a boxed warning that antidepressants increased the
risk of suicidal thoughts or behaviour in paediatric patients and other strengthened warnings for
SSRI products, including Paxil, as a class. In May 2006, the Paxil US label was updated to warn
that young adults, especially those with Major Depressive Disorder, may be at increased risk for
suicidal behaviour during treatment with paroxetine.
In August 2007, FDA required updated US labels for antidepressants, as a class, to state in the
boxed warning that antidepressants increased the risk of suicidal thinking and behaviour in
children, adolescents and young adults; that no increase was shown beyond age 24; that there was a
reduction in risk in adults aged 65 and older; and that depression and other psychiatric disorders
are themselves associated with increased risk.
The Group received lawsuits filed in state and federal courts in the USA and Canada on behalf of
thousands of plaintiffs, including purported class actions, alleging that paroxetine (the active
ingredient in Paxil) is addictive and causes dependency and withdrawal reactions. The US federal
cases were consolidated in an MDL proceeding. In January 2006, a conditional settlement agreement
became effective. The Group did not admit liability with respect to the allegations in the
lawsuits. Virtually all the US actions have now been resolved. A California court of appeals
reversed dismissal of the class claims in a purported class action consumer fraud lawsuit, focused
on discontinuation symptom. That case is proceeding with no decision yet on class certification.
There is purported class action litigation in Canada. The Group is also defending litigation which
has commenced in the UK on behalf of hundreds of plaintiffs who allege that paroxetine has caused
them to suffer from withdrawal reactions and dependency.
Thimerosal
The Group, along with a number of other pharmaceutical companies, has been named as a defendant in
numerous individual personal injury lawsuits in state and federal district courts in the USA
alleging that thimerosal, a preservative used in the manufacture of vaccines, causes
neurodevelopmental disorders and other injuries, including autism.
Two of the cases are purported class actions, although there has been no determination whether any
of those cases will be permitted to proceed as a class action. A number of purported class actions
in other jurisdictions have been withdrawn or dismissed. Plaintiffs seek remedies including
compensatory, punitive and statutory damages as well as the cost of a fund for medical monitoring
and research.
As of the date of this report, in the limited number of cases that have approached trial dates,
vaccine manufacturers and manufacturers of other thimerosal containing medicinal products have been
successful in excluding testimony of plaintiffs expert witnesses on causation, specifically on
grounds that plaintiffs have failed to establish that the hypothesized link between thimerosal and
neurodevelopmental disorders is generally accepted as reliable within the relevant scientific
community. Additionally, in February 2009, the Office of Special Masters of the United States Court
of Federal Claims rejected the first three of approximately 4,900 autism claims filed under the
National Vaccine Injury Compensation Program (NVCIP) on the grounds that claimants failed to
produce reliable scientific evidence linking their vaccinations to their medical conditions,
including autism.
The Group was not a party to these proceedings. The findings from them cannot be used as evidence
in the pending lawsuits against the Group. The three NVICP claimants now have the option of
appealing the decisions or rejecting them and, instead, pursuing personal injury lawsuits against
the manufacturers of the vaccines administered to them. The remaining approximately 4,900 NVCIP
claimants also will ultimately have the option of pursuing personal injury lawsuits against the
vaccine manufacturers, including the Group. It is too early to determine whether the announcement
of the NVCIP decisions is likely to lead to an increase in the number of civil cases filed against
the Group. As of the date of this report, there are no cases scheduled for trial in 2009 in which
the Group is a defendant.
Sales and marketing and regulation
Marketing and promotion
In February 2004, the Group received a subpoena from the US Attorneys office in Colorado regarding
the Groups sales and promotional practices relating to nine of its largest selling products, for
the period from January 1997 to 2004. In particular, the government has inquired about alleged
promotion of these drugs for off-label uses, as well as Group-sponsored continuing medical
education programmes, other speaker events, special issue boards, advisory boards, speaker training
programmes, clinical studies and related grants, fees, travel and entertainment. Although the
original subpoena was issued from the US Attorneys office in Colorado, the scope of the inquiry is
nationwide.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 177 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
The government is also inquiring about the Groups response to an October 2002 letter from the
FDAs Division of Drug Marketing, Advertising and Communication requesting information on the
Groups alleged promotion of Wellbutrin SR for off-label use. The Group is co-operating with the
investigation and providing the requested information.
In February 2003, the Verona Public Prosecutor commenced a criminal investigation into the Groups
sales and marketing practices in Italy. Specific areas of investigation include medical education
programmes, clinical studies and congresses as well as the interaction between the Groups
representatives and physicians.
The Public Prosecutor proposed that a number of physicians and
representatives of the Group face criminal charges.
However, at a hearing in January 2009, with the Public Prosecutors agreement, the Verona Court
dismissed the charges against all the remaining defendants which closes the case. The US Securities
and Exchange Commission (SEC) staff had initiated an investigation into the allegations. The Group
co-operated with this investigation, but has not received any further requests for information from
the SEC.
Following a United Nations report alleging that bribes had been paid to Iraqi government
officials in connection with the UN Oil for Food Programme, the Group received a subpoena from the
SEC in February 2006 in respect of the Groups participation in that programme. The US Department
of Justice also initiated an investigation. In December 2007, the UK Serious Fraud Office issued a
formal notice to the Group requiring production of documents related to the Groups participation
in the programme. The Group is co-operating with the investigations and has provided documents
responsive to the subpoena and the notice, and is now responding to follow up questions and
requests.
Average wholesale price
The United States Department
of Justice, a number of states and putative classes of private payers
have for several years now been investigating and/or bringing civil litigation regarding
allegations that numerous pharmaceutical companies, including GSK, have violated federal or state
fraud and abuse laws as a result of the way average wholesale price (AWP) and wholesale
acquisition cost (WAC) have been determined and reported for various drugs reimbursed under the
Medicare, Medicaid and other insurance programmes. In 2005 the Group reached a $149 million civil
settlement with the federal government to resolve allegations relating to the pricing and marketing
of Zofran and Kytril. The Group also amended its existing corporate integrity agreement as a
requirement of the settlement. In 2007, the Group received final approval of a $70 million
nationwide private payer class action settlement relating to the Groups price reporting in an MDL
proceeding in the US District Court for the District of Massachusetts.
A number of states, through their respective attorneys general, and most of the counties in New
York state have filed civil lawsuits in state and federal courts against GSK and many other drug
companies claiming damages and restitution due to AWP and/or WAC price reporting for pharmaceutical
products covered by the states Medicaid programmes. The states seek recovery on behalf of the
states as payers and, in some cases, on behalf of in-state patients as consumers.
The Group has separately resolved AWP claims by state Medicaid programmes in more than two-thirds
of the states through the DOJ Settlement or separate negotiations. Litigation concerning AWP issues
is continuing with eleven states, as well as with New York counties. In July 2008, an Alabama state
court jury returned an $81 million verdict against the Group in one such case filed by the State of
Alabama. The Group is seeking to have this decision reversed on appeal by the Alabama Supreme
Court.
Nominal pricing
The Group responded to two letter requests from the US Senate Committee on Finance, dated April
2004 and February 2005, for documents and information relating to the nominal price exception to
the best price reporting requirements under the Medicaid Drug Rebate Programme. In January 2007,
the committee released its findings that some pharmaceutical manufacturers inappropriately used the
nominal price exception contrary to the committees interpretation of Congressional intent. In May
2004, the Group was advised by the US Department of Justice that it is investigating certain of the
Groups nominal pricing and bundled sales arrangements to determine whether those arrangements
qualify under the exception to the best price reporting requirements or violate civil statutes or
laws. In March 2008, the Group received a broad letter request from the US Department of Justice
seeking a range of documents relating to all of the Groups nominal pricing arrangements since 1994
and any possible bundled sales. The Group is continuing to co-operate in the investigation and
produce documents. The Group has also received subpoenas and requests for documents and information
from Delaware and Michigan related to the Groups nominal price arrangements. The Group is
cooperating in those investigations and producing responsive documents. In addition to these
governmental investigations, allegations concerning the nominal pricing have been made by certain
government payers as part of the AWP litigation. The group has not entered into any nominal price
arrangements since December 2003.
|
|
|
|
|
|
|
|
|
|
|
|
178 GSK Annual Report 2008 |
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to the financial
statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
340B Programme
The Group is defending an action filed in federal court in the US District Court for the Northern
District of California by the County of Santa Clara and two other counties, which seek to represent
a putative class of hospitals, clinics and other entities in California that are eligible to
receive discounted ceiling prices on pharmaceuticals under a federal programme known as the 340B
Programme. Plaintiffs allege that the Group and numerous other pharmaceutical manufacturers have
been setting ceiling prices higher than allowed by law and, under the contract that governs the
programme, and have therefore overcharged the entities in California that are eligible to
participate in the 340B Programme. The lawsuit was dismissed in 2006. It was reinstated in August
2008 following an appeal. It is now being actively litigated at the trial court level.
Paxil/Seroxat
Following the Groups settlement of a lawsuit filed by the New York State Attorney Generals office
alleging failure to disclose data on the use of Paxil in children and adolescents, similar cases,
some of which purported to be class actions, were filed by private plaintiffs seeking to recover
amounts paid for Paxil purchased for use by patients under age 18. In 2008, a Minnesota court
approved a $40 million class settlement of ensuing lawsuits seeking recovery on behalf of insurance
companies and other third-party payers for payments for prescriptions of Paxil to children and
adolescents. The Group denied liability. In January 2009, a similar purported class action was
filed in Canada seeking economic damages on behalf of individuals, third party payers and
governmental entities that purchased Paxil for use by patients under age 18. The Group likewise
denied liability.
The UK Medicines and Healthcare Products Regulatory Agency (MHRA) has completed its investigation
into the Groups pharmacovigilance reporting obligations relating to clinical data for
Seroxat/Paxil in children with no further action being taken. The matter has thus been concluded.
Cidra, Puerto Rico manufacturing site
Following FDA inspections in October 2003 and November 2004, which resulted in observations of
possible deficiencies in manufacturing practices at the Groups manufacturing facility in Cidra,
Puerto Rico, in March 2005 the FDA seized certain lots of Paxil CR and Avandamet due to
manufacturing issues. The FDA observations related to certain aspects of production controls,
process validation and laboratory investigations. In April 2005, the Group reached agreement with
the FDA on a Consent Decree. The Consent Decree provides for an independent expert to review
manufacturing processes at the site for compliance with FDA Good Manufacturing Practice (GMP)
requirements. As provided in the Consent Decree, in September 2005, the Group provided a report to
the FDA on the deficiencies identified in this review, setting out a corrective plan and timetable
for completion.
In October 2007, the Group announced plans to cease operations at the Cidra site. GSK expects to continue production of Paxil CR at the site until that production can be transferred
to another facility. The Group currently expects that to take place in 2009. Production of all
other products at the site was discontinued by the end of 2007.
In April 2008, the FDA completed a general GMP inspection which resulted in one inspectional
observation. The Group has responded to the observation and has completed the corrective action
commitment.
In April 2008, the Group advised FDA that the site had completed the corrective action plan that
the Group had submitted to FDA in September 2005. The Group continues to provide FDA with quarterly
reports on the activities associated with closure of the facility. In July 2008, the Group
successfully completed the final of three annual inspections of the site by its independent third
party expert, as required by the Consent Decree.
In October 2003, the US federal government executed a search warrant at the Cidra facility and
seized records relating to the manufacturing operations at the site.
In April 2005, the Group received a subpoena from the US Attorneys Office in Boston requesting
production of records regarding manufacturing at the Cidra site, covering information that is
similar to that seized by the US government in Puerto Rico in 2003. Subsequently, the Group
received additional subpoenas from the government related to the Cidra facility. The Group is
co-operating with the US Attorneys Office and producing the records responsive to the subpoenas.
In addition, in July 2007, the Group learned that the US District Court for the District of
Massachusetts had unsealed a complaint brought by a former employee under the federal False Claims
Act claiming monetary damages as a result of the alleged failure of the Cidra facility to comply
with GMPs in the manufacture of various products.
The Group is also named in two purported consumer fraud class action lawsuits one filed in
California state court and the other in the US District Court for the
District of Puerto Rico alleging that Paxil products were not manufactured according to GMP. Plaintiffs sought economic,
statutory and punitive damages, along with a request for injunctive relief. In the summer of 2008,
the Group reached a tentative agreement to settle these matters, subject to court approval. The
settlement covers nationwide classes of Paxil CR consumer
purchasers and third party payers. It
provides a claims procedure for class members to receive payment only for split/defective Paxil CR
tablets.
In January 2009, the Group learned of a writ of summons filed in the Philadelphia Court of Common
Pleas by a group of third party payers. On information and belief, the action is related to alleged
Paxil CR manufacturing issues at Cidra. The Group is currently gaining more information on this
filing and its relation to the above class litigation.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 179
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes
to the financial statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
Anti-trust
Paxil/Seroxat
In the paroxetine patent infringement actions brought by the Group as described under Intellectual
property above, Apotex and certain other companies filed anti-trust and unfair competition
counterclaims against the Group in the US District Court for the Eastern District of Pennsylvania.
These were based on allegations that the Group monopolised a market for Paxil by bringing
allegedly sham patent litigation and allegedly abusing the regulatory procedures for the listing of
patents in the FDA Orange Book. Whilst the Apotex matter remains in the discovery stage, the
matters with the other companies have been resolved.
In November 2000, the FTC staff advised the Group that they were conducting a non-public
investigation to determine if the Group was violating Section 5 of the Federal Trade Commission Act
by monopolising or attempting to monopolise the market for paroxetine hydrochloride by
preventing generic competition to Paxil and requested the Group to submit certain information in
connection with that investigation. In October 2003, the FTC closed its investigation on the basis
of its findings that no further action was warranted. Following public reference to the FTC
investigation regarding Paxil, a number of governmental and private civil actions and claims were
initiated in the USA. All US matters with the exception of the above-referenced Apotex matter have
been resolved.
In October 2005, the Competition Directorate of the European Commission initiated an inspection
concerning allegations that the Group has abused a dominant position in the marketplace concerning
enforcement of its intellectual property rights, litigation surrounding regulatory approvals and
marketing of Seroxat in Europe. In October 2006, the Commission made a formal request for further
information. The Group responded to this request by the end of 2006.
In January 2008, the European Commission announced an inquiry into certain aspects of competition
in the pharmaceutical sector and initiated inspections at the premises of a number of innovator and
generic pharmaceutical companies, including the Group. The Commission published a preliminary
report in November 2008 based on information provided to it by innovator and generic pharmaceutical
companies. The report suggests that defensive patenting strategies may lead to obstacles to
innovation and that innovator companies employ measures to hinder generics coming onto the market.
It is anticipated that the final report will be issued in the second quarter of 2009. The Group
continues to co-operate with the Commission in its investigation.
Wellbutrin SR
In December 2004, January 2005 and February 2005, lawsuits, several of which purported to be class
actions, were filed in the US District Court for the Eastern District of Pennsylvania against the
Group on behalf of direct and indirect purchasers of Wellbutrin SR. The complaints allege
violations of US anti-trust laws through sham litigation and fraud on the patent office by the
Group in obtaining and enforcing patents covering Wellbutrin SR. The complaints follow the
introduction of generic competition to Wellbutrin SR in April 2004, after district and appellate
court rulings that a generic manufacturer did not infringe the Groups patents. The parties are
involved in discovery and the Group has filed a motion for summary judgement, which remains
pending.
Secondary wholesaler
In July 2006, RxUSA Wholesale, Inc., a secondary wholesaler, filed suit against the Group and
many other pharmaceutical manufacturers and wholesalers in the US District Court for the Eastern
District of New York. The complaint alleges that the defendants engaged in a conspiracy to refuse
to supply pharmaceutical products to RxUSA in violation of federal and state anti-trust laws. The
Groups motion to dismiss the complaint remains pending.
Wellbutrin XL
As an outgrowth of those intellectual property matters discussed above with respect to Wellbutrin
XL, actions have been filed against Biovail and GSK by purported classes of direct and indirect
purchasers who allege unlawful monopolization and other antitrust violations related to the
enforcement of Biovails Wellbutrin XL patents and the filing, by Biovail, of citizen petitions.
The Group has filed a motion to dismiss, which remains pending.
Flonase
Purported direct and indirect purchaser class actions have been filed in the US District Court for
the Eastern District of Pennsylvania alleging the Group illegally maintained monopoly power in the
market for Flonase and charged plaintiffs supra-competitive prices. The predicate for these
allegations was the filing by the Group of allegedly sham citizen petitions and subsequent
litigation. The Group has filed a motion to dismiss the complaints of the purported classes of
direct and indirect purchasers. Discovery is also underway.
|
|
|
|
|
|
|
|
|
|
|
|
180 GSK Annual Report 2008
|
|
|
|
|
Financial
statements
|
|
|
|
|
Notes to
the financial statements continued |
|
|
|
|
|
|
|
44 Legal proceedings continued
Commercial and corporate
Securities class actions
In September 2005, attorneys representing a purported class of purchasers of GlaxoSmithKline shares
and American Depositary Shares (ADS) filed a second amended securities class action complaint
against the Group in the US District Court for the Southern District of New York, alleging that the
Group violated US securities laws through failure to disclose unfavourable clinical data from
studies on Paxil, misrepresentation of the remaining patent protection for Paxil and Augmentin and
violation of the Federal False Claims Act on the basis of the Groups recent AWP settlement with
the government. In October 2006, the judge entered an order dismissing the complaint, which was
upheld by the US Court of Appeals for the Second Circuit in March 2008. This matter has now
concluded.
In November 2007, attorneys purporting to represent a class of purchasers of GlaxoSmithKline shares
and ADS filed an amended consolidated complaint against the Group and senior officers in the US
District Court for the Southern District of New York. It alleged that the Group and the individual
defendants violated US securities laws and artificially inflated the price of GlaxoSmithKlines
stock by misleading investors about the safety of Avandia. The amended consolidated complaint also
alleges that several current and former senior officers and members of the Group engaged in insider
trading. A motion to dismiss the complaint has been filed on behalf of the Group and the individual
defendants. In May 2008, the District Court entered an order dismissing the case as to all
defendants. Plaintiffs filed an appeal with the US Court of Appeals for the Second Circuit. That
appeal remains pending.
Relenza
In May 2004, Biota Holdings Limited filed a complaint in the Victorian Supreme Court in Australia
alleging that the Group had failed to fulfil its development, promotion and production obligations
for zanamivir (Relenza) under the terms of the licence agreement between the Group and Biota. Biota
sought substantial damages. At a mediation ordered by the Court in July 2008 the dispute was
settled without any admission of liability. GSK continues to sell Relenza pursuant to the licence
agreement.
Wage and hour claims
In December 2006, two purported class actions were filed against the Group on behalf of the entire
Groups US pharmaceutical sales representatives. These actions, which were filed in or transferred
to the US District Court for the Central District of California, initially alleged that those
representatives are not exempt employees under California law and/or the US Fair Labor Standards
Act and are consequently entitled to overtime pay, among other things.
Plaintiffs subsequently amended their complaints to assert a class action, limited solely to
pharmaceutical sales representatives working in California, and only asserting claims under
Californias wage and hour laws.
The suits seek a variety of compensatory, punitive and statutory damages. The Group moved for
summary judgement dismissing the claims of the putative class representatives on the ground that
they were exempt employees. The Court held that there are appeals pending in the United States
Court of Appeals for the Ninth Circuit in cases involving other manufacturers with virtually the
same factual and legal arguments. It therefore deferred ruling on the summary judgement motion and
stayed any further activity in the case until the appellate court rules in at least one of the
other companies pending cases.
A third case, filed in the US District Court for the District of Arizona in November 2008, seeks to
establish a nationwide collective action on behalf of the entire Groups US pharmaceutical sales
representatives on the ground that those representatives were not exempt employees under the US
Fair Labor Standards Act. Plaintiffs seek double damages for all overtime allegedly worked by the
Groups pharmaceutical sales representatives over a three year period.
Environmental matters
GSK has been notified of its potential responsibility relating to past operations and its past
waste disposal practices at certain sites, primarily in the USA. Some of these matters are the
subject of litigation, including proceedings initiated by the US federal or state governments for
waste disposal, site remediation costs and tort actions brought by private parties.
GSK has been advised that it may be a responsible party at approximately 29 sites, of which 14
appear on the National Priority List created by the Comprehensive Environmental Response
Compensation and Liability Act (Superfund). These proceedings seek to require the operators of
hazardous waste facilities, transporters of waste to the sites and generators of hazardous waste
disposed of at the sites to clean up the sites or to reimburse the government for cleanup costs. In
most instances, GSK is involved as an alleged generator of hazardous waste. Although there are a
few sites where GSK is involved as a current or former operator of the facility. Although Superfund
provides that the defendants are jointly and severally liable for cleanup costs, these proceedings
are frequently resolved on the basis of the nature and quantity of waste disposed of by the
generator at the site. GSKs proportionate liability for cleanup costs has been substantially
determined for about 20 of the sites referred to above.
GSKs potential liability varies greatly from site to site. While the cost of investigation, study
and remediation at such sites could, over time, be substantial, GSK routinely accrues amounts
related to its share of the liability for such matters.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 181
|
|
|
|
|
|
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
The shareholder information section includes the financial record presenting historical information
prepared in accordance with IFRS as adopted by the European Union,
and also with IFRS as issued by the IASB, and the full product development
pipeline. The section also discusses shareholder return in the form of dividends and share price
movements and provides other information for shareholders.
The share price movements and dividends are shown by the graphs below. Details of the price
movements and dividends are pages 197 to 198.
|
|
|
|
|
Financial record |
|
|
182 |
|
Quarterly trend |
|
|
182 |
|
Five year record |
|
|
190 |
|
Product development pipeline |
|
|
193 |
|
|
|
|
|
|
Shareholder information |
|
|
197 |
|
Share price and dividends |
|
|
197 |
|
Nature of trading market |
|
|
198 |
|
Annual General Meeting |
|
|
198 |
|
Investor relations and Registrar |
|
|
199 |
|
Taxation information for shareholders |
|
|
200 |
|
|
|
|
|
|
Glossary of terms |
|
|
201 |
|
Analysis of shareholdings at 31st December 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
% of total |
|
|
% of total |
|
|
Number of |
|
|
|
accounts |
|
|
accounts |
|
|
shares |
|
|
shares |
|
|
Holding of shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Up to 1,000 |
|
|
120,998 |
|
|
|
71 |
|
|
|
1 |
|
|
|
43,520,230 |
|
1,001 to 5,000 |
|
|
38,292 |
|
|
|
23 |
|
|
|
1 |
|
|
|
81,859,238 |
|
5,001 to 100,000 |
|
|
9,005 |
|
|
|
5 |
|
|
|
2 |
|
|
|
131,297,666 |
|
100,001 to 1,000,000 |
|
|
931 |
|
|
|
1 |
|
|
|
6 |
|
|
|
333,033,484 |
|
Over 1,000,000 |
|
|
414 |
|
|
|
|
|
|
|
90 |
|
|
|
5,071,605,619 |
|
|
Totals |
|
|
169,640 |
|
|
|
100 |
|
|
|
100 |
|
|
|
5,661,316,237 |
|
|
Held by |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominee companies |
|
|
29,807 |
|
|
|
18 |
|
|
|
72 |
|
|
|
4,056,441,061 |
|
Investment and trust companies |
|
|
54 |
|
|
|
|
|
|
|
|
|
|
|
10,572,576 |
|
Insurance companies |
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
26,265 |
|
Individuals and other corporate bodies |
|
|
139,765 |
|
|
|
82 |
|
|
|
6 |
|
|
|
329,462,391 |
|
BNY (Nominees) Limited |
|
|
1 |
|
|
|
|
|
|
|
14 |
|
|
|
790,619,786 |
|
Held as Treasury shares by GlaxoSmithKline |
|
|
1 |
|
|
|
|
|
|
|
8 |
|
|
|
474,194,158 |
|
|
Totals |
|
|
169,640 |
|
|
|
100 |
|
|
|
100 |
|
|
|
5,661,316,237 |
|
|
The Bank of New York Mellons holding held through BNY (Nominees) Limited represents the companys
ADR programme, whereby each ADS represents two Ordinary Shares of 25p nominal value. At 24th
February 2009, BNY (Nominees) Limited held 784,505,385 Ordinary Shares representing 15.12% of the
issued share capital at that date.
At 24th February 2009, the number of holders of shares in the USA was 1,103 with holdings of
1,336,503 shares, and the number of registered holders of the ADR was 35,412 with holdings of
392,252,669 ADR. Certain of these shares and ADR were held by brokers or other nominees. As a
result the number of holders of record or registered holders in the USA is not representative of
the number of beneficial holders or of the residence of beneficial holders.
|
|
|
|
|
|
|
|
|
|
|
|
182 GSK Annual Report 2008
|
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial
record |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
An unaudited analysis of the Group results and pharmaceutical sales by therapeutic area is provided
by quarter in Sterling for the financial year 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement total |
|
12 months 2008 |
|
|
Q4 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Turnover Pharmaceuticals |
|
|
20,381 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
5,803 |
|
|
|
(4 |
) |
|
|
15 |
|
Consumer Healthcare |
|
|
3,971 |
|
|
|
3 |
|
|
|
12 |
|
|
|
1,107 |
|
|
|
2 |
|
|
|
17 |
|
|
Total turnover |
|
|
24,352 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
6,910 |
|
|
|
(3 |
) |
|
|
16 |
|
Cost of sales |
|
|
(6,415 |
) |
|
|
13 |
|
|
|
21 |
|
|
|
(1,953 |
) |
|
|
10 |
|
|
|
19 |
|
Selling, general and administrative |
|
|
(7,656 |
) |
|
|
2 |
|
|
|
10 |
|
|
|
(2,296 |
) |
|
|
9 |
|
|
|
26 |
|
Research and development |
|
|
(3,681 |
) |
|
|
4 |
|
|
|
11 |
|
|
|
(1,212 |
) |
|
|
4 |
|
|
|
16 |
|
Other operating income |
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
7,141 |
|
|
|
(20 |
) |
|
|
(6 |
) |
|
|
1,582 |
|
|
|
(35 |
) |
|
|
|
|
|
Finance income |
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
(843 |
) |
|
|
|
|
|
|
|
|
|
|
(241 |
) |
|
|
|
|
|
|
|
|
Share of after tax profits of associates and joint ventures |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
Profit before taxation |
|
|
6,659 |
|
|
|
(24 |
) |
|
|
(11 |
) |
|
|
1,396 |
|
|
|
(44 |
) |
|
|
(9 |
) |
Taxation |
|
|
(1,947 |
) |
|
|
|
|
|
|
|
|
|
|
(379 |
) |
|
|
|
|
|
|
|
|
Tax rate % |
|
|
29.2 |
% |
|
|
|
|
|
|
|
|
|
|
27.1 |
% |
|
|
|
|
|
|
|
|
|
Profit after taxation for the period |
|
|
4,712 |
|
|
|
(25 |
) |
|
|
(11 |
) |
|
|
1,017 |
|
|
|
(42 |
) |
|
|
(5 |
) |
|
Profit attributable to minority interests |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders |
|
|
4,602 |
|
|
|
|
|
|
|
|
|
|
|
982 |
|
|
|
|
|
|
|
|
|
|
Basic earnings per share (pence) |
|
|
88.6 |
p |
|
|
(21 |
) |
|
|
(6 |
) |
|
|
19.3 |
p |
|
|
(40 |
) |
|
|
(2 |
) |
|
Diluted earnings per share (pence) |
|
|
88.1 |
p |
|
|
|
|
|
|
|
|
|
|
19.2 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
statement results before major restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover Pharmaceuticals |
|
|
20,381 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
5,803 |
|
|
|
(4 |
) |
|
|
15 |
|
Consumer Healthcare |
|
|
3,971 |
|
|
|
3 |
|
|
|
12 |
|
|
|
1,107 |
|
|
|
2 |
|
|
|
17 |
|
|
Total turnover |
|
|
24,352 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
6,910 |
|
|
|
(3 |
) |
|
|
16 |
|
Cost of sales |
|
|
(5,776 |
) |
|
|
4 |
|
|
|
11 |
|
|
|
(1,642 |
) |
|
|
(2 |
) |
|
|
7 |
|
Selling, general and administrative |
|
|
(7,352 |
) |
|
|
|
|
|
|
8 |
|
|
|
(2,205 |
) |
|
|
(14 |
) |
|
|
31 |
|
Research and development |
|
|
(3,506 |
) |
|
|
2 |
|
|
|
8 |
|
|
|
(1,090 |
) |
|
|
(1 |
) |
|
|
14 |
|
Other operating income |
|
|
541 |
|
|
|
|
|
|
|
|
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
8,259 |
|
|
|
(10 |
) |
|
|
4 |
|
|
|
2,106 |
|
|
|
(21 |
) |
|
|
9 |
|
|
Finance income |
|
|
313 |
|
|
|
|
|
|
|
|
|
|
|
37 |
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
(838 |
) |
|
|
|
|
|
|
|
|
|
|
(238 |
) |
|
|
|
|
|
|
|
|
Share of after tax profits of associates and joint ventures |
|
|
48 |
|
|
|
|
|
|
|
|
|
|
|
18 |
|
|
|
|
|
|
|
|
|
|
Profit before taxation |
|
|
7,782 |
|
|
|
(14 |
) |
|
|
|
|
|
|
1,923 |
|
|
|
(28 |
) |
|
|
3 |
|
Taxation |
|
|
(2,231 |
) |
|
|
|
|
|
|
|
|
|
|
(532 |
) |
|
|
|
|
|
|
|
|
Tax rate % |
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
27.7 |
% |
|
|
|
|
|
|
|
|
|
Profit after taxation for the period |
|
|
5,551 |
|
|
|
(14 |
) |
|
|
|
|
|
|
1,391 |
|
|
|
(27 |
) |
|
|
4 |
|
|
Profit attributable to minority interests |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
35 |
|
|
|
|
|
|
|
|
|
Profit attributable to shareholders |
|
|
5,441 |
|
|
|
|
|
|
|
|
|
|
|
1,356 |
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share (pence) |
|
|
104.7 |
p |
|
|
(9 |
) |
|
|
6 |
|
|
|
26.7 |
p |
|
|
(23 |
) |
|
|
9 |
|
|
Diluted earnings per share (pence) |
|
|
104.1 |
p |
|
|
|
|
|
|
|
|
|
|
26.6 |
p |
|
|
|
|
|
|
|
|
|
The calculation of results before major restructuring is described in Note 1 to the financial
statements, Presentation of the financial statements.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 183 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial record
continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
|
|
|
|
|
4,888 |
|
|
|
(4 |
) |
|
|
6 |
|
|
|
4,923 |
|
|
|
(2 |
) |
|
|
3 |
|
|
|
4,767 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
994 |
|
|
|
3 |
|
|
|
12 |
|
|
|
951 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
919 |
|
|
|
8 |
|
|
|
14 |
|
|
|
|
|
|
|
5,882 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
5,874 |
|
|
|
(2 |
) |
|
|
4 |
|
|
|
5,686 |
|
|
|
(3 |
) |
|
|
2 |
|
|
|
|
(1,590 |
) |
|
|
20 |
|
|
|
29 |
|
|
|
(1,513 |
) |
|
|
19 |
|
|
|
25 |
|
|
|
(1,359 |
) |
|
|
6 |
|
|
|
10 |
|
|
|
|
(1,819 |
) |
|
|
4 |
|
|
|
12 |
|
|
|
(1,796 |
) |
|
|
(7 |
) |
|
|
(2 |
) |
|
|
(1,745 |
) |
|
|
|
|
|
|
4 |
|
|
|
|
(869 |
) |
|
|
6 |
|
|
|
13 |
|
|
|
(820 |
) |
|
|
1 |
|
|
|
4 |
|
|
|
(780 |
) |
|
|
5 |
|
|
|
7 |
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,657 |
|
|
|
(26 |
) |
|
|
(13 |
) |
|
|
1,939 |
|
|
|
(7 |
) |
|
|
1 |
|
|
|
1,963 |
|
|
|
(13 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
(218 |
) |
|
|
|
|
|
|
|
|
|
|
(214 |
) |
|
|
|
|
|
|
|
|
|
|
(170 |
) |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,553 |
|
|
|
(31 |
) |
|
|
(17 |
) |
|
|
1,836 |
|
|
|
(11 |
) |
|
|
(3 |
) |
|
|
1,874 |
|
|
|
(17 |
) |
|
|
(13 |
) |
|
|
|
(497 |
) |
|
|
|
|
|
|
|
|
|
|
(529 |
) |
|
|
|
|
|
|
|
|
|
|
(542 |
) |
|
|
|
|
|
|
|
|
|
|
|
32.0 |
% |
|
|
|
|
|
|
|
|
|
|
28.8 |
% |
|
|
|
|
|
|
|
|
|
|
28.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,056 |
|
|
|
(35 |
) |
|
|
(22 |
) |
|
|
1,307 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
1,332 |
|
|
|
(17 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
1,027 |
|
|
|
|
|
|
|
|
|
|
|
1,286 |
|
|
|
|
|
|
|
|
|
|
|
1,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20.1 |
p |
|
|
(30 |
) |
|
|
(15 |
) |
|
|
24.6 |
p |
|
|
(6 |
) |
|
|
3 |
|
|
|
24.4 |
p |
|
|
(14 |
) |
|
|
(10 |
) |
|
|
|
|
|
|
20.0 |
p |
|
|
|
|
|
|
|
|
|
|
24.4 |
p |
|
|
|
|
|
|
|
|
|
|
24.2 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,888 |
|
|
|
(4 |
) |
|
|
6 |
|
|
|
4,923 |
|
|
|
(2 |
) |
|
|
3 |
|
|
|
4,767 |
|
|
|
(4 |
) |
|
|
|
|
|
|
|
994 |
|
|
|
3 |
|
|
|
12 |
|
|
|
951 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
919 |
|
|
|
8 |
|
|
|
14 |
|
|
|
|
|
|
|
5,882 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
5,874 |
|
|
|
(2 |
) |
|
|
4 |
|
|
|
5,686 |
|
|
|
(3 |
) |
|
|
2 |
|
|
|
|
(1,460 |
) |
|
|
10 |
|
|
|
19 |
|
|
|
(1,375 |
) |
|
|
8 |
|
|
|
13 |
|
|
|
(1,299 |
) |
|
|
1 |
|
|
|
5 |
|
|
|
|
(1,662 |
) |
|
|
(5 |
) |
|
|
3 |
|
|
|
(1,765 |
) |
|
|
(8 |
) |
|
|
(4 |
) |
|
|
(1,720 |
) |
|
|
(2 |
) |
|
|
3 |
|
|
|
|
(834 |
) |
|
|
2 |
|
|
|
8 |
|
|
|
(802 |
) |
|
|
(1 |
) |
|
|
2 |
|
|
|
(780 |
) |
|
|
5 |
|
|
|
7 |
|
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
194 |
|
|
|
|
|
|
|
|
|
|
|
161 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,979 |
|
|
|
(10 |
) |
|
|
4 |
|
|
|
2,126 |
|
|
|
2 |
|
|
|
10 |
|
|
|
2,048 |
|
|
|
(9 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
|
|
82 |
|
|
|
|
|
|
|
|
|
|
|
|
(218 |
) |
|
|
|
|
|
|
|
|
|
|
(214 |
) |
|
|
|
|
|
|
|
|
|
|
(168 |
) |
|
|
|
|
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,875 |
|
|
|
(14 |
) |
|
|
0 |
|
|
|
2,023 |
|
|
|
(2 |
) |
|
|
7 |
|
|
|
1,961 |
|
|
|
(13 |
) |
|
|
(8 |
) |
|
|
|
(559 |
) |
|
|
|
|
|
|
|
|
|
|
(577 |
) |
|
|
|
|
|
|
|
|
|
|
(563 |
) |
|
|
|
|
|
|
|
|
|
|
|
29.8 |
% |
|
|
|
|
|
|
|
|
|
|
28.5 |
% |
|
|
|
|
|
|
|
|
|
|
28.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,316 |
|
|
|
(16 |
) |
|
|
(2 |
) |
|
|
1,446 |
|
|
|
(2 |
) |
|
|
7 |
|
|
|
1,398 |
|
|
|
(13 |
) |
|
|
(9 |
) |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
1,287 |
|
|
|
|
|
|
|
|
|
|
|
1,425 |
|
|
|
|
|
|
|
|
|
|
|
1,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25.2 |
p |
|
|
(9 |
) |
|
|
6 |
|
|
|
27.2 |
p |
|
|
5 |
|
|
|
13 |
|
|
|
25.6 |
p |
|
|
(9 |
) |
|
|
(5 |
) |
|
|
|
|
|
|
25.0 |
p |
|
|
|
|
|
|
|
|
|
|
27.0 |
p |
|
|
|
|
|
|
|
|
|
|
25.5 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
184
GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial
record continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical turnover total Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Respiratory |
|
|
1,731 |
|
|
|
7 |
|
|
|
27 |
|
|
|
1,348 |
|
|
|
3 |
|
|
|
14 |
|
|
|
1,383 |
|
|
|
4 |
|
|
|
10 |
|
|
|
1,355 |
|
|
|
6 |
|
|
|
11 |
|
Seretide/Advair |
|
|
1,237 |
|
|
|
8 |
|
|
|
29 |
|
|
|
982 |
|
|
|
7 |
|
|
|
18 |
|
|
|
964 |
|
|
|
6 |
|
|
|
11 |
|
|
|
954 |
|
|
|
10 |
|
|
|
14 |
|
Flixotide/Flovent |
|
|
208 |
|
|
|
(1 |
) |
|
|
19 |
|
|
|
149 |
|
|
|
(4 |
) |
|
|
6 |
|
|
|
158 |
|
|
|
(3 |
) |
|
|
5 |
|
|
|
162 |
|
|
|
(1 |
) |
|
|
5 |
|
Serevent |
|
|
70 |
|
|
|
(18 |
) |
|
|
(1 |
) |
|
|
60 |
|
|
|
(14 |
) |
|
|
(5 |
) |
|
|
66 |
|
|
|
(11 |
) |
|
|
(6 |
) |
|
|
67 |
|
|
|
(5 |
) |
|
|
3 |
|
Veramyst |
|
|
25 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
17 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
17 |
|
|
|
89 |
|
|
|
89 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
Flixonase/Flonase |
|
|
42 |
|
|
|
9 |
|
|
|
31 |
|
|
|
33 |
|
|
|
(39 |
) |
|
|
(33 |
) |
|
|
65 |
|
|
|
13 |
|
|
|
18 |
|
|
|
46 |
|
|
|
(33 |
) |
|
|
(27 |
) |
|
Anti-virals |
|
|
924 |
|
|
|
(4 |
) |
|
|
17 |
|
|
|
792 |
|
|
|
1 |
|
|
|
11 |
|
|
|
751 |
|
|
|
(5 |
) |
|
|
|
|
|
|
739 |
|
|
|
(8 |
) |
|
|
(4 |
) |
HIV |
|
|
417 |
|
|
|
(3 |
) |
|
|
16 |
|
|
|
377 |
|
|
|
(5 |
) |
|
|
5 |
|
|
|
361 |
|
|
|
(6 |
) |
|
|
(1 |
) |
|
|
358 |
|
|
|
(5 |
) |
|
|
|
|
Epzicom/Kivexa |
|
|
129 |
|
|
|
20 |
|
|
|
43 |
|
|
|
110 |
|
|
|
24 |
|
|
|
38 |
|
|
|
104 |
|
|
|
24 |
|
|
|
32 |
|
|
|
99 |
|
|
|
25 |
|
|
|
32 |
|
Combivir |
|
|
114 |
|
|
|
(13 |
) |
|
|
6 |
|
|
|
110 |
|
|
|
(13 |
) |
|
|
(4 |
) |
|
|
104 |
|
|
|
(15 |
) |
|
|
(11 |
) |
|
|
105 |
|
|
|
(13 |
) |
|
|
(9 |
) |
Trizivir |
|
|
59 |
|
|
|
(14 |
) |
|
|
5 |
|
|
|
49 |
|
|
|
(20 |
) |
|
|
(11 |
) |
|
|
50 |
|
|
|
(23 |
) |
|
|
(17 |
) |
|
|
54 |
|
|
|
(16 |
) |
|
|
(13 |
) |
Agenerase, Lexiva |
|
|
47 |
|
|
|
6 |
|
|
|
31 |
|
|
|
40 |
|
|
|
(3 |
) |
|
|
8 |
|
|
|
38 |
|
|
|
9 |
|
|
|
15 |
|
|
|
35 |
|
|
|
(3 |
) |
|
|
|
|
Epivir |
|
|
36 |
|
|
|
(22 |
) |
|
|
(3 |
) |
|
|
35 |
|
|
|
(16 |
) |
|
|
(8 |
) |
|
|
34 |
|
|
|
(20 |
) |
|
|
(15 |
) |
|
|
34 |
|
|
|
(22 |
) |
|
|
(17 |
) |
Ziagen |
|
|
28 |
|
|
|
(18 |
) |
|
|
|
|
|
|
27 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
26 |
|
|
|
(7 |
) |
|
|
(4 |
) |
|
|
25 |
|
|
|
(8 |
) |
|
|
(4 |
) |
Valtrex |
|
|
366 |
|
|
|
16 |
|
|
|
44 |
|
|
|
303 |
|
|
|
21 |
|
|
|
32 |
|
|
|
277 |
|
|
|
19 |
|
|
|
23 |
|
|
|
249 |
|
|
|
9 |
|
|
|
11 |
|
Zeffix |
|
|
53 |
|
|
|
2 |
|
|
|
26 |
|
|
|
42 |
|
|
|
(10 |
) |
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
7 |
|
|
|
46 |
|
|
|
8 |
|
|
|
15 |
|
Relenza |
|
|
13 |
|
|
|
(85 |
) |
|
|
(83 |
) |
|
|
12 |
|
|
|
(57 |
) |
|
|
(57 |
) |
|
|
3 |
|
|
|
(97 |
) |
|
|
(96 |
) |
|
|
29 |
|
|
|
(71 |
) |
|
|
(68 |
) |
|
Central nervous system |
|
|
665 |
|
|
|
(43 |
) |
|
|
(26 |
) |
|
|
585 |
|
|
|
(38 |
) |
|
|
(29 |
) |
|
|
818 |
|
|
|
(4 |
) |
|
|
(1 |
) |
|
|
829 |
|
|
|
3 |
|
|
|
4 |
|
Lamictal |
|
|
177 |
|
|
|
(57 |
) |
|
|
(41 |
) |
|
|
136 |
|
|
|
(59 |
) |
|
|
(51 |
) |
|
|
323 |
|
|
|
18 |
|
|
|
19 |
|
|
|
290 |
|
|
|
16 |
|
|
|
16 |
|
Imigran/Imitrex |
|
|
161 |
|
|
|
(34 |
) |
|
|
(14 |
) |
|
|
188 |
|
|
|
5 |
|
|
|
14 |
|
|
|
173 |
|
|
|
2 |
|
|
|
4 |
|
|
|
165 |
|
|
|
(1 |
) |
|
|
(1 |
) |
Seroxat/Paxil |
|
|
154 |
|
|
|
(21 |
) |
|
|
2 |
|
|
|
112 |
|
|
|
(23 |
) |
|
|
(13 |
) |
|
|
127 |
|
|
|
(18 |
) |
|
|
(9 |
) |
|
|
121 |
|
|
|
(15 |
) |
|
|
(10 |
) |
Wellbutrin |
|
|
66 |
|
|
|
(63 |
) |
|
|
(49 |
) |
|
|
53 |
|
|
|
(67 |
) |
|
|
(61 |
) |
|
|
97 |
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
126 |
|
|
|
(3 |
) |
|
|
(5 |
) |
Requip |
|
|
58 |
|
|
|
(53 |
) |
|
|
(39 |
) |
|
|
56 |
|
|
|
(43 |
) |
|
|
(36 |
) |
|
|
58 |
|
|
|
(37 |
) |
|
|
(31 |
) |
|
|
94 |
|
|
|
15 |
|
|
|
18 |
|
Treximet |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular and urogenital |
|
|
548 |
|
|
|
51 |
|
|
|
84 |
|
|
|
466 |
|
|
|
12 |
|
|
|
23 |
|
|
|
435 |
|
|
|
(5 |
) |
|
|
(1 |
) |
|
|
398 |
|
|
|
(12 |
) |
|
|
(9 |
) |
Avodart |
|
|
120 |
|
|
|
19 |
|
|
|
45 |
|
|
|
102 |
|
|
|
29 |
|
|
|
42 |
|
|
|
92 |
|
|
|
33 |
|
|
|
37 |
|
|
|
85 |
|
|
|
30 |
|
|
|
35 |
|
Lovaza |
|
|
98 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
67 |
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
Coreg |
|
|
61 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
50 |
|
|
|
(69 |
) |
|
|
(66 |
) |
|
|
44 |
|
|
|
(78 |
) |
|
|
(78 |
) |
|
|
48 |
|
|
|
(77 |
) |
|
|
(78 |
) |
Coreg CR |
|
|
50 |
|
|
|
21 |
|
|
|
52 |
|
|
|
41 |
|
|
|
19 |
|
|
|
32 |
|
|
|
39 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
35 |
|
|
|
>100 |
|
|
|
>100 |
|
Coreg IR |
|
|
11 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
9 |
|
|
|
(93 |
) |
|
|
(92 |
) |
|
|
5 |
|
|
|
(97 |
) |
|
|
(97 |
) |
|
|
13 |
|
|
|
(94 |
) |
|
|
(94 |
) |
Fraxiparine |
|
|
58 |
|
|
|
(2 |
) |
|
|
14 |
|
|
|
59 |
|
|
|
22 |
|
|
|
44 |
|
|
|
58 |
|
|
|
13 |
|
|
|
29 |
|
|
|
51 |
|
|
|
(4 |
) |
|
|
9 |
|
Arixtra |
|
|
55 |
|
|
|
59 |
|
|
|
90 |
|
|
|
44 |
|
|
|
56 |
|
|
|
76 |
|
|
|
36 |
|
|
|
31 |
|
|
|
38 |
|
|
|
35 |
|
|
|
70 |
|
|
|
75 |
|
Vesicare |
|
|
23 |
|
|
|
36 |
|
|
|
64 |
|
|
|
18 |
|
|
|
31 |
|
|
|
38 |
|
|
|
16 |
|
|
|
25 |
|
|
|
33 |
|
|
|
14 |
|
|
|
36 |
|
|
|
27 |
|
Levitra |
|
|
17 |
|
|
|
18 |
|
|
|
55 |
|
|
|
16 |
|
|
|
15 |
|
|
|
23 |
|
|
|
13 |
|
|
|
18 |
|
|
|
18 |
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
Metabolic |
|
|
345 |
|
|
|
(11 |
) |
|
|
8 |
|
|
|
289 |
|
|
|
(11 |
) |
|
|
(2 |
) |
|
|
285 |
|
|
|
(35 |
) |
|
|
(32 |
) |
|
|
272 |
|
|
|
(45 |
) |
|
|
(43 |
) |
Avandia products |
|
|
229 |
|
|
|
(17 |
) |
|
|
(1 |
) |
|
|
191 |
|
|
|
(23 |
) |
|
|
(15 |
) |
|
|
194 |
|
|
|
(46 |
) |
|
|
(44 |
) |
|
|
191 |
|
|
|
(56 |
) |
|
|
(54 |
) |
Avandia |
|
|
147 |
|
|
|
(24 |
) |
|
|
(8 |
) |
|
|
118 |
|
|
|
(29 |
) |
|
|
(23 |
) |
|
|
125 |
|
|
|
(51 |
) |
|
|
(50 |
) |
|
|
122 |
|
|
|
(62 |
) |
|
|
(61 |
) |
Avandamet |
|
|
70 |
|
|
|
(8 |
) |
|
|
9 |
|
|
|
63 |
|
|
|
(7 |
) |
|
|
5 |
|
|
|
61 |
|
|
|
(33 |
) |
|
|
(28 |
) |
|
|
62 |
|
|
|
(29 |
) |
|
|
(25 |
) |
Bonviva/Boniva |
|
|
76 |
|
|
|
23 |
|
|
|
46 |
|
|
|
56 |
|
|
|
24 |
|
|
|
37 |
|
|
|
56 |
|
|
|
47 |
|
|
|
56 |
|
|
|
49 |
|
|
|
50 |
|
|
|
53 |
|
|
Anti-bacterials |
|
|
397 |
|
|
|
(7 |
) |
|
|
8 |
|
|
|
340 |
|
|
|
3 |
|
|
|
13 |
|
|
|
329 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
363 |
|
|
|
(2 |
) |
|
|
5 |
|
Augmentin |
|
|
159 |
|
|
|
(5 |
) |
|
|
9 |
|
|
|
143 |
|
|
|
10 |
|
|
|
22 |
|
|
|
129 |
|
|
|
(1 |
) |
|
|
8 |
|
|
|
156 |
|
|
|
(1 |
) |
|
|
6 |
|
Altabax |
|
|
5 |
|
|
|
|
|
|
|
25 |
|
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
4 |
|
|
|
(20 |
) |
|
|
(20 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
138 |
|
|
|
12 |
|
|
|
38 |
|
|
|
128 |
|
|
|
12 |
|
|
|
23 |
|
|
|
117 |
|
|
|
(11 |
) |
|
|
(7 |
) |
|
|
113 |
|
|
|
(27 |
) |
|
|
(23 |
) |
Hycamtin |
|
|
41 |
|
|
|
10 |
|
|
|
32 |
|
|
|
34 |
|
|
|
3 |
|
|
|
13 |
|
|
|
35 |
|
|
|
18 |
|
|
|
25 |
|
|
|
30 |
|
|
|
(3 |
) |
|
|
|
|
Zofran |
|
|
17 |
|
|
|
(41 |
) |
|
|
(23 |
) |
|
|
33 |
|
|
|
(9 |
) |
|
|
3 |
|
|
|
31 |
|
|
|
(49 |
) |
|
|
(44 |
) |
|
|
29 |
|
|
|
(69 |
) |
|
|
(67 |
) |
Tykerb |
|
|
35 |
|
|
|
58 |
|
|
|
84 |
|
|
|
26 |
|
|
|
44 |
|
|
|
63 |
|
|
|
22 |
|
|
|
75 |
|
|
|
83 |
|
|
|
19 |
|
|
|
>100 |
|
|
|
>100 |
|
|
Vaccines |
|
|
796 |
|
|
|
8 |
|
|
|
26 |
|
|
|
730 |
|
|
|
12 |
|
|
|
23 |
|
|
|
577 |
|
|
|
34 |
|
|
|
45 |
|
|
|
436 |
|
|
|
10 |
|
|
|
18 |
|
Hepatitis |
|
|
185 |
|
|
|
5 |
|
|
|
26 |
|
|
|
174 |
|
|
|
11 |
|
|
|
23 |
|
|
|
167 |
|
|
|
23 |
|
|
|
30 |
|
|
|
139 |
|
|
|
16 |
|
|
|
23 |
|
Infanrix/Pediarix |
|
|
194 |
|
|
|
19 |
|
|
|
42 |
|
|
|
168 |
|
|
|
9 |
|
|
|
23 |
|
|
|
167 |
|
|
|
13 |
|
|
|
24 |
|
|
|
153 |
|
|
|
6 |
|
|
|
14 |
|
Fluarix, FluLaval |
|
|
66 |
|
|
|
12 |
|
|
|
35 |
|
|
|
144 |
|
|
|
11 |
|
|
|
20 |
|
|
|
5 |
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Flu-prepandemic |
|
|
17 |
|
|
|
(86 |
) |
|
|
(86 |
) |
|
|
10 |
|
|
|
(52 |
) |
|
|
(52 |
) |
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
55 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
43 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
12 |
|
|
|
|
|
|
|
|
|
Rotarix |
|
|
66 |
|
|
|
59 |
|
|
|
69 |
|
|
|
39 |
|
|
|
57 |
|
|
|
70 |
|
|
|
35 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
27 |
|
|
|
79 |
|
|
|
93 |
|
Boostrix |
|
|
17 |
|
|
|
|
|
|
|
31 |
|
|
|
22 |
|
|
|
(19 |
) |
|
|
(15 |
) |
|
|
18 |
|
|
|
21 |
|
|
|
29 |
|
|
|
13 |
|
|
|
(8 |
) |
|
|
|
|
|
|
Other |
|
|
259 |
|
|
|
(11 |
) |
|
|
2 |
|
|
|
210 |
|
|
|
(3 |
) |
|
|
7 |
|
|
|
228 |
|
|
|
(6 |
) |
|
|
1 |
|
|
|
262 |
|
|
|
12 |
|
|
|
17 |
|
|
|
|
|
|
5,803 |
|
|
|
(4 |
) |
|
|
15 |
|
|
|
4,888 |
|
|
|
(4 |
) |
|
|
6 |
|
|
|
4,923 |
|
|
|
(2 |
) |
|
|
3 |
|
|
|
4,767 |
|
|
|
(4 |
) |
|
|
|
|
|
Pharmaceutical turnover includes co-promotion income.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008
185 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial record
continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical turnover USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Respiratory |
|
|
852 |
|
|
|
9 |
|
|
|
35 |
|
|
|
636 |
|
|
|
3 |
|
|
|
12 |
|
|
|
616 |
|
|
|
4 |
|
|
|
4 |
|
|
|
616 |
|
|
|
8 |
|
|
|
6 |
|
Seretide/Advair |
|
|
674 |
|
|
|
6 |
|
|
|
31 |
|
|
|
515 |
|
|
|
5 |
|
|
|
14 |
|
|
|
473 |
|
|
|
2 |
|
|
|
1 |
|
|
|
499 |
|
|
|
10 |
|
|
|
9 |
|
Flixotide/Flovent |
|
|
103 |
|
|
|
2 |
|
|
|
27 |
|
|
|
71 |
|
|
|
(1 |
) |
|
|
6 |
|
|
|
68 |
|
|
|
5 |
|
|
|
5 |
|
|
|
75 |
|
|
|
7 |
|
|
|
6 |
|
Serevent |
|
|
22 |
|
|
|
(5 |
) |
|
|
16 |
|
|
|
17 |
|
|
|
(11 |
) |
|
|
(6 |
) |
|
|
16 |
|
|
|
(11 |
) |
|
|
(11 |
) |
|
|
17 |
|
|
|
(11 |
) |
|
|
(11 |
) |
Veramyst |
|
|
18 |
|
|
|
75 |
|
|
|
>100 |
|
|
|
12 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
14 |
|
|
|
56 |
|
|
|
56 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
Flixonase/Flonase |
|
|
8 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
7 |
|
|
|
(67 |
) |
|
|
(67 |
) |
|
|
33 |
|
|
|
32 |
|
|
|
32 |
|
|
|
4 |
|
|
|
(84 |
) |
|
|
(84 |
) |
|
Anti-virals |
|
|
500 |
|
|
|
3 |
|
|
|
28 |
|
|
|
398 |
|
|
|
5 |
|
|
|
13 |
|
|
|
355 |
|
|
|
(2 |
) |
|
|
(3 |
) |
|
|
347 |
|
|
|
(9 |
) |
|
|
(10 |
) |
HIV |
|
|
193 |
|
|
|
(1 |
) |
|
|
25 |
|
|
|
153 |
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
142 |
|
|
|
(10 |
) |
|
|
(11 |
) |
|
|
152 |
|
|
|
(6 |
) |
|
|
(7 |
) |
Epzicom/Kivexa |
|
|
55 |
|
|
|
19 |
|
|
|
49 |
|
|
|
44 |
|
|
|
21 |
|
|
|
29 |
|
|
|
39 |
|
|
|
6 |
|
|
|
8 |
|
|
|
40 |
|
|
|
17 |
|
|
|
14 |
|
Combivir |
|
|
53 |
|
|
|
(4 |
) |
|
|
18 |
|
|
|
41 |
|
|
|
(26 |
) |
|
|
(18 |
) |
|
|
41 |
|
|
|
(18 |
) |
|
|
(18 |
) |
|
|
45 |
|
|
|
(8 |
) |
|
|
(10 |
) |
Trizivir |
|
|
32 |
|
|
|
(11 |
) |
|
|
14 |
|
|
|
24 |
|
|
|
(21 |
) |
|
|
(14 |
) |
|
|
23 |
|
|
|
(25 |
) |
|
|
(28 |
) |
|
|
27 |
|
|
|
(16 |
) |
|
|
(16 |
) |
Agenerase, Lexiva |
|
|
26 |
|
|
|
11 |
|
|
|
37 |
|
|
|
21 |
|
|
|
(5 |
) |
|
|
5 |
|
|
|
18 |
|
|
|
|
|
|
|
(5 |
) |
|
|
18 |
|
|
|
(10 |
) |
|
|
(10 |
) |
Epivir |
|
|
14 |
|
|
|
(15 |
) |
|
|
8 |
|
|
|
11 |
|
|
|
(29 |
) |
|
|
(21 |
) |
|
|
11 |
|
|
|
(8 |
) |
|
|
(8 |
) |
|
|
11 |
|
|
|
(21 |
) |
|
|
(21 |
) |
Ziagen |
|
|
14 |
|
|
|
(9 |
) |
|
|
27 |
|
|
|
10 |
|
|
|
(17 |
) |
|
|
(17 |
) |
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
(9 |
) |
|
|
(9 |
) |
Valtrex |
|
|
279 |
|
|
|
24 |
|
|
|
54 |
|
|
|
223 |
|
|
|
28 |
|
|
|
38 |
|
|
|
195 |
|
|
|
22 |
|
|
|
21 |
|
|
|
173 |
|
|
|
7 |
|
|
|
5 |
|
Zeffix |
|
|
4 |
|
|
|
33 |
|
|
|
33 |
|
|
|
4 |
|
|
|
(25 |
) |
|
|
|
|
|
|
4 |
|
|
|
33 |
|
|
|
33 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
Relenza |
|
|
5 |
|
|
|
(93 |
) |
|
|
(88 |
) |
|
|
5 |
|
|
|
(58 |
) |
|
|
(58 |
) |
|
|
2 |
|
|
|
(94 |
) |
|
|
(94 |
) |
|
|
8 |
|
|
|
(82 |
) |
|
|
(82 |
) |
|
Central nervous system |
|
|
353 |
|
|
|
(61 |
) |
|
|
(45 |
) |
|
|
321 |
|
|
|
(52 |
) |
|
|
(46 |
) |
|
|
547 |
|
|
|
(6 |
) |
|
|
(7 |
) |
|
|
594 |
|
|
|
7 |
|
|
|
5 |
|
Lamictal |
|
|
119 |
|
|
|
(68 |
) |
|
|
(52 |
) |
|
|
84 |
|
|
|
(71 |
) |
|
|
(63 |
) |
|
|
268 |
|
|
|
22 |
|
|
|
21 |
|
|
|
240 |
|
|
|
22 |
|
|
|
20 |
|
Imigran/Imitrex |
|
|
123 |
|
|
|
(40 |
) |
|
|
(20 |
) |
|
|
154 |
|
|
|
8 |
|
|
|
16 |
|
|
|
139 |
|
|
|
2 |
|
|
|
2 |
|
|
|
134 |
|
|
|
|
|
|
|
(1 |
) |
Seroxat/Paxil |
|
|
19 |
|
|
|
(67 |
) |
|
|
(51 |
) |
|
|
13 |
|
|
|
(67 |
) |
|
|
(61 |
) |
|
|
16 |
|
|
|
(47 |
) |
|
|
(53 |
) |
|
|
31 |
|
|
|
(16 |
) |
|
|
(16 |
) |
Wellbutrin |
|
|
56 |
|
|
|
(69 |
) |
|
|
(55 |
) |
|
|
44 |
|
|
|
(72 |
) |
|
|
(66 |
) |
|
|
89 |
|
|
|
(30 |
) |
|
|
(30 |
) |
|
|
121 |
|
|
|
(4 |
) |
|
|
(5 |
) |
Requip |
|
|
11 |
|
|
|
(92 |
) |
|
|
(83 |
) |
|
|
13 |
|
|
|
(81 |
) |
|
|
(78 |
) |
|
|
18 |
|
|
|
(69 |
) |
|
|
(69 |
) |
|
|
60 |
|
|
|
9 |
|
|
|
7 |
|
Treximet |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular and urogenital |
|
|
344 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
280 |
|
|
|
9 |
|
|
|
17 |
|
|
|
251 |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
232 |
|
|
|
(22 |
) |
|
|
(23 |
) |
Avodart |
|
|
75 |
|
|
|
22 |
|
|
|
53 |
|
|
|
63 |
|
|
|
29 |
|
|
|
40 |
|
|
|
55 |
|
|
|
38 |
|
|
|
38 |
|
|
|
49 |
|
|
|
22 |
|
|
|
20 |
|
Lovaza |
|
|
98 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
75 |
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
|
|
|
|
50 |
|
|
|
|
|
|
|
|
|
Coreg |
|
|
60 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
49 |
|
|
|
(69 |
) |
|
|
(66 |
) |
|
|
43 |
|
|
|
(78 |
) |
|
|
(78 |
) |
|
|
48 |
|
|
|
(78 |
) |
|
|
(78 |
) |
Coreg CR |
|
|
49 |
|
|
|
18 |
|
|
|
44 |
|
|
|
41 |
|
|
|
19 |
|
|
|
32 |
|
|
|
38 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
35 |
|
|
|
>100 |
|
|
|
>100 |
|
Coreg IR |
|
|
11 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
8 |
|
|
|
(93 |
) |
|
|
(93 |
) |
|
|
5 |
|
|
|
(97 |
) |
|
|
(97 |
) |
|
|
13 |
|
|
|
(94 |
) |
|
|
(94 |
) |
Fraxiparine |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arixtra |
|
|
31 |
|
|
|
63 |
|
|
|
94 |
|
|
|
22 |
|
|
|
43 |
|
|
|
57 |
|
|
|
16 |
|
|
|
21 |
|
|
|
14 |
|
|
|
19 |
|
|
|
73 |
|
|
|
73 |
|
Vesicare |
|
|
23 |
|
|
|
36 |
|
|
|
64 |
|
|
|
18 |
|
|
|
31 |
|
|
|
38 |
|
|
|
16 |
|
|
|
25 |
|
|
|
33 |
|
|
|
14 |
|
|
|
36 |
|
|
|
27 |
|
Levitra |
|
|
16 |
|
|
|
9 |
|
|
|
45 |
|
|
|
15 |
|
|
|
17 |
|
|
|
25 |
|
|
|
13 |
|
|
|
18 |
|
|
|
18 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Metabolic |
|
|
182 |
|
|
|
(13 |
) |
|
|
10 |
|
|
|
136 |
|
|
|
(22 |
) |
|
|
(15 |
) |
|
|
139 |
|
|
|
(44 |
) |
|
|
(45 |
) |
|
|
133 |
|
|
|
(57 |
) |
|
|
(58 |
) |
Avandia products |
|
|
132 |
|
|
|
(21 |
) |
|
|
2 |
|
|
|
99 |
|
|
|
(28 |
) |
|
|
(24 |
) |
|
|
104 |
|
|
|
(54 |
) |
|
|
(54 |
) |
|
|
99 |
|
|
|
(66 |
) |
|
|
(66 |
) |
Avandia |
|
|
89 |
|
|
|
(29 |
) |
|
|
(10 |
) |
|
|
67 |
|
|
|
(33 |
) |
|
|
(27 |
) |
|
|
72 |
|
|
|
(57 |
) |
|
|
(57 |
) |
|
|
71 |
|
|
|
(69 |
) |
|
|
(69 |
) |
Avandamet |
|
|
34 |
|
|
|
|
|
|
|
31 |
|
|
|
26 |
|
|
|
(14 |
) |
|
|
(10 |
) |
|
|
25 |
|
|
|
(44 |
) |
|
|
(44 |
) |
|
|
24 |
|
|
|
(49 |
) |
|
|
(49 |
) |
Bonviva/Boniva |
|
|
51 |
|
|
|
8 |
|
|
|
34 |
|
|
|
36 |
|
|
|
18 |
|
|
|
29 |
|
|
|
36 |
|
|
|
38 |
|
|
|
38 |
|
|
|
33 |
|
|
|
48 |
|
|
|
43 |
|
|
Anti-bacterials |
|
|
50 |
|
|
|
(23 |
) |
|
|
(4 |
) |
|
|
40 |
|
|
|
(10 |
) |
|
|
(2 |
) |
|
|
39 |
|
|
|
(20 |
) |
|
|
(20 |
) |
|
|
45 |
|
|
|
(13 |
) |
|
|
(15 |
) |
Augmentin |
|
|
15 |
|
|
|
(13 |
) |
|
|
|
|
|
|
9 |
|
|
|
(36 |
) |
|
|
(18 |
) |
|
|
8 |
|
|
|
(47 |
) |
|
|
(53 |
) |
|
|
17 |
|
|
|
(29 |
) |
|
|
(29 |
) |
Altabax |
|
|
5 |
|
|
|
|
|
|
|
25 |
|
|
|
4 |
|
|
|
100 |
|
|
|
100 |
|
|
|
4 |
|
|
|
(20 |
) |
|
|
(20 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
64 |
|
|
|
11 |
|
|
|
42 |
|
|
|
64 |
|
|
|
13 |
|
|
|
23 |
|
|
|
57 |
|
|
|
(24 |
) |
|
|
(24 |
) |
|
|
58 |
|
|
|
(41 |
) |
|
|
(42 |
) |
Hycamtin |
|
|
25 |
|
|
|
18 |
|
|
|
47 |
|
|
|
20 |
|
|
|
|
|
|
|
11 |
|
|
|
19 |
|
|
|
19 |
|
|
|
19 |
|
|
|
17 |
|
|
|
(5 |
) |
|
|
(11 |
) |
Zofran |
|
|
(10 |
) |
|
|
(57 |
) |
|
|
(43 |
) |
|
|
6 |
|
|
|
50 |
|
|
|
50 |
|
|
|
4 |
|
|
|
(84 |
) |
|
|
(84 |
) |
|
|
3 |
|
|
|
(95 |
) |
|
|
(95 |
) |
Tykerb |
|
|
14 |
|
|
|
(8 |
) |
|
|
17 |
|
|
|
12 |
|
|
|
|
|
|
|
9 |
|
|
|
11 |
|
|
|
20 |
|
|
|
10 |
|
|
|
10 |
|
|
|
>100 |
|
|
|
>100 |
|
|
Vaccines |
|
|
178 |
|
|
|
(31 |
) |
|
|
(13 |
) |
|
|
218 |
|
|
|
(13 |
) |
|
|
(8 |
) |
|
|
124 |
|
|
|
19 |
|
|
|
18 |
|
|
|
109 |
|
|
|
34 |
|
|
|
33 |
|
Hepatitis |
|
|
74 |
|
|
|
6 |
|
|
|
37 |
|
|
|
82 |
|
|
|
17 |
|
|
|
24 |
|
|
|
66 |
|
|
|
43 |
|
|
|
40 |
|
|
|
53 |
|
|
|
66 |
|
|
|
66 |
|
Infanrix/Pediarix |
|
|
56 |
|
|
|
|
|
|
|
27 |
|
|
|
56 |
|
|
|
(10 |
) |
|
|
(3 |
) |
|
|
49 |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
51 |
|
|
|
21 |
|
|
|
19 |
|
Fluarix, FluLaval |
|
|
22 |
|
|
|
(27 |
) |
|
|
|
|
|
|
63 |
|
|
|
(19 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flu-prepandemic |
|
|
1 |
|
|
|
(99 |
) |
|
|
(99 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rotarix |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Boostrix |
|
|
8 |
|
|
|
|
|
|
|
33 |
|
|
|
13 |
|
|
|
(40 |
) |
|
|
(35 |
) |
|
|
9 |
|
|
|
29 |
|
|
|
29 |
|
|
|
5 |
|
|
|
(29 |
) |
|
|
(29 |
) |
|
|
|
|
|
|
Other |
|
|
3 |
|
|
|
(94 |
) |
|
|
(91 |
) |
|
|
8 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
1 |
|
|
|
(67 |
) |
|
|
(89 |
) |
|
|
4 |
|
|
|
(91 |
) |
|
|
(88 |
) |
|
|
|
|
|
2,526 |
|
|
|
(13 |
) |
|
|
10 |
|
|
|
2,101 |
|
|
|
(13 |
) |
|
|
(6 |
) |
|
|
2,129 |
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
2,138 |
|
|
|
(10 |
) |
|
|
(12 |
) |
|
Pharmaceutical turnover includes co-promotion income.
|
|
|
|
|
|
|
|
|
|
|
|
186
GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial
record continued |
|
|
|
|
|
|
|
|
|
Quarterly
trend |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical
turnover Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Respiratory |
|
|
550 |
|
|
|
3 |
|
|
|
18 |
|
|
|
449 |
|
|
|
|
|
|
|
12 |
|
|
|
497 |
|
|
|
|
|
|
|
12 |
|
|
|
486 |
|
|
|
4 |
|
|
|
14 |
|
Seretide/Advair |
|
|
392 |
|
|
|
5 |
|
|
|
19 |
|
|
|
324 |
|
|
|
1 |
|
|
|
13 |
|
|
|
355 |
|
|
|
4 |
|
|
|
15 |
|
|
|
345 |
|
|
|
9 |
|
|
|
19 |
|
Flixotide/Flovent |
|
|
50 |
|
|
|
2 |
|
|
|
16 |
|
|
|
38 |
|
|
|
(3 |
) |
|
|
15 |
|
|
|
43 |
|
|
|
(7 |
) |
|
|
5 |
|
|
|
44 |
|
|
|
(7 |
) |
|
|
7 |
|
Serevent |
|
|
33 |
|
|
|
(17 |
) |
|
|
(6 |
) |
|
|
32 |
|
|
|
(13 |
) |
|
|
|
|
|
|
34 |
|
|
|
(11 |
) |
|
|
(3 |
) |
|
|
37 |
|
|
|
6 |
|
|
|
16 |
|
Veramyst |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Flixonase/Flonase |
|
|
12 |
|
|
|
(17 |
) |
|
|
|
|
|
|
11 |
|
|
|
11 |
|
|
|
22 |
|
|
|
16 |
|
|
|
(13 |
) |
|
|
7 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
Anti-virals |
|
|
224 |
|
|
|
(6 |
) |
|
|
9 |
|
|
|
199 |
|
|
|
(12 |
) |
|
|
1 |
|
|
|
218 |
|
|
|
(12 |
) |
|
|
(1 |
) |
|
|
209 |
|
|
|
(17 |
) |
|
|
(7 |
) |
HIV |
|
|
165 |
|
|
|
(10 |
) |
|
|
6 |
|
|
|
150 |
|
|
|
(6 |
) |
|
|
7 |
|
|
|
164 |
|
|
|
(2 |
) |
|
|
11 |
|
|
|
157 |
|
|
|
(7 |
) |
|
|
4 |
|
Epzicom/Kivexa |
|
|
57 |
|
|
|
16 |
|
|
|
33 |
|
|
|
50 |
|
|
|
19 |
|
|
|
35 |
|
|
|
54 |
|
|
|
33 |
|
|
|
50 |
|
|
|
48 |
|
|
|
33 |
|
|
|
45 |
|
Combivir |
|
|
42 |
|
|
|
(18 |
) |
|
|
(5 |
) |
|
|
38 |
|
|
|
(19 |
) |
|
|
(10 |
) |
|
|
44 |
|
|
|
(19 |
) |
|
|
(6 |
) |
|
|
42 |
|
|
|
(21 |
) |
|
|
(13 |
) |
Trizivir |
|
|
22 |
|
|
|
(24 |
) |
|
|
(12 |
) |
|
|
22 |
|
|
|
(17 |
) |
|
|
(4 |
) |
|
|
24 |
|
|
|
(13 |
) |
|
|
4 |
|
|
|
24 |
|
|
|
(19 |
) |
|
|
(11 |
) |
Agenerase, Lexiva |
|
|
15 |
|
|
|
(7 |
) |
|
|
7 |
|
|
|
15 |
|
|
|
(8 |
) |
|
|
15 |
|
|
|
16 |
|
|
|
8 |
|
|
|
23 |
|
|
|
15 |
|
|
|
8 |
|
|
|
15 |
|
Epivir |
|
|
15 |
|
|
|
(20 |
) |
|
|
|
|
|
|
13 |
|
|
|
(27 |
) |
|
|
(13 |
) |
|
|
15 |
|
|
|
(19 |
) |
|
|
(6 |
) |
|
|
15 |
|
|
|
(22 |
) |
|
|
(17 |
) |
Ziagen |
|
|
9 |
|
|
|
(11 |
) |
|
|
|
|
|
|
8 |
|
|
|
(22 |
) |
|
|
(11 |
) |
|
|
10 |
|
|
|
|
|
|
|
11 |
|
|
|
9 |
|
|
|
(11 |
) |
|
|
|
|
Valtrex |
|
|
38 |
|
|
|
3 |
|
|
|
23 |
|
|
|
35 |
|
|
|
7 |
|
|
|
25 |
|
|
|
36 |
|
|
|
10 |
|
|
|
24 |
|
|
|
35 |
|
|
|
15 |
|
|
|
30 |
|
Zeffix |
|
|
7 |
|
|
|
(17 |
) |
|
|
17 |
|
|
|
7 |
|
|
|
|
|
|
|
17 |
|
|
|
6 |
|
|
|
20 |
|
|
|
20 |
|
|
|
7 |
|
|
|
|
|
|
|
17 |
|
Relenza |
|
|
5 |
|
|
|
25 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
(96 |
) |
|
|
(96 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Central nervous system |
|
|
151 |
|
|
|
|
|
|
|
15 |
|
|
|
142 |
|
|
|
4 |
|
|
|
17 |
|
|
|
143 |
|
|
|
1 |
|
|
|
13 |
|
|
|
129 |
|
|
|
(8 |
) |
|
|
2 |
|
Lamictal |
|
|
39 |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
37 |
|
|
|
(9 |
) |
|
|
6 |
|
|
|
38 |
|
|
|
(3 |
) |
|
|
9 |
|
|
|
33 |
|
|
|
(14 |
) |
|
|
(6 |
) |
Imigran/Imitrex |
|
|
25 |
|
|
|
(4 |
) |
|
|
4 |
|
|
|
24 |
|
|
|
(5 |
) |
|
|
9 |
|
|
|
24 |
|
|
|
|
|
|
|
9 |
|
|
|
23 |
|
|
|
(5 |
) |
|
|
10 |
|
Seroxat/Paxil |
|
|
29 |
|
|
|
(10 |
) |
|
|
|
|
|
|
27 |
|
|
|
(8 |
) |
|
|
4 |
|
|
|
31 |
|
|
|
(13 |
) |
|
|
|
|
|
|
28 |
|
|
|
(24 |
) |
|
|
(18 |
) |
Wellbutrin |
|
|
6 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
6 |
|
|
|
100 |
|
|
|
>100 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
>100 |
|
|
|
>100 |
|
Requip |
|
|
38 |
|
|
|
28 |
|
|
|
52 |
|
|
|
35 |
|
|
|
35 |
|
|
|
52 |
|
|
|
31 |
|
|
|
27 |
|
|
|
41 |
|
|
|
29 |
|
|
|
24 |
|
|
|
38 |
|
Treximet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular and urogenital |
|
|
137 |
|
|
|
5 |
|
|
|
25 |
|
|
|
130 |
|
|
|
17 |
|
|
|
38 |
|
|
|
129 |
|
|
|
12 |
|
|
|
29 |
|
|
|
116 |
|
|
|
6 |
|
|
|
20 |
|
Avodart |
|
|
33 |
|
|
|
12 |
|
|
|
32 |
|
|
|
29 |
|
|
|
19 |
|
|
|
38 |
|
|
|
28 |
|
|
|
19 |
|
|
|
33 |
|
|
|
28 |
|
|
|
39 |
|
|
|
56 |
|
Lovaza |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg CR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg IR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fraxiparine |
|
|
44 |
|
|
|
(10 |
) |
|
|
7 |
|
|
|
47 |
|
|
|
18 |
|
|
|
42 |
|
|
|
46 |
|
|
|
3 |
|
|
|
21 |
|
|
|
41 |
|
|
|
(8 |
) |
|
|
5 |
|
Arixtra |
|
|
21 |
|
|
|
64 |
|
|
|
91 |
|
|
|
19 |
|
|
|
78 |
|
|
|
>100 |
|
|
|
17 |
|
|
|
50 |
|
|
|
70 |
|
|
|
14 |
|
|
|
33 |
|
|
|
56 |
|
Vesicare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levitra |
|
|
1 |
|
|
|
(100 |
) |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Metabolic |
|
|
76 |
|
|
|
(16 |
) |
|
|
(1 |
) |
|
|
72 |
|
|
|
(2 |
) |
|
|
13 |
|
|
|
73 |
|
|
|
(19 |
) |
|
|
(8 |
) |
|
|
73 |
|
|
|
(6 |
) |
|
|
4 |
|
Avandia products |
|
|
47 |
|
|
|
(27 |
) |
|
|
(16 |
) |
|
|
48 |
|
|
|
(16 |
) |
|
|
(4 |
) |
|
|
49 |
|
|
|
(31 |
) |
|
|
(21 |
) |
|
|
54 |
|
|
|
(14 |
) |
|
|
(5 |
) |
Avandia |
|
|
20 |
|
|
|
(25 |
) |
|
|
(17 |
) |
|
|
20 |
|
|
|
(31 |
) |
|
|
(23 |
) |
|
|
20 |
|
|
|
(40 |
) |
|
|
(33 |
) |
|
|
22 |
|
|
|
(35 |
) |
|
|
(29 |
) |
Avandamet |
|
|
26 |
|
|
|
(29 |
) |
|
|
(16 |
) |
|
|
26 |
|
|
|
|
|
|
|
13 |
|
|
|
28 |
|
|
|
(23 |
) |
|
|
(10 |
) |
|
|
31 |
|
|
|
8 |
|
|
|
19 |
|
Bonviva/Boniva |
|
|
23 |
|
|
|
33 |
|
|
|
53 |
|
|
|
18 |
|
|
|
60 |
|
|
|
80 |
|
|
|
18 |
|
|
|
60 |
|
|
|
80 |
|
|
|
15 |
|
|
|
44 |
|
|
|
67 |
|
|
Anti-bacterials |
|
|
179 |
|
|
|
(9 |
) |
|
|
6 |
|
|
|
141 |
|
|
|
(1 |
) |
|
|
15 |
|
|
|
140 |
|
|
|
(2 |
) |
|
|
11 |
|
|
|
175 |
|
|
|
(8 |
) |
|
|
3 |
|
Augmentin |
|
|
74 |
|
|
|
(6 |
) |
|
|
10 |
|
|
|
62 |
|
|
|
6 |
|
|
|
22 |
|
|
|
57 |
|
|
|
|
|
|
|
14 |
|
|
|
79 |
|
|
|
|
|
|
|
13 |
|
Altabax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
50 |
|
|
|
16 |
|
|
|
35 |
|
|
|
41 |
|
|
|
6 |
|
|
|
24 |
|
|
|
41 |
|
|
|
6 |
|
|
|
21 |
|
|
|
37 |
|
|
|
6 |
|
|
|
19 |
|
Hycamtin |
|
|
14 |
|
|
|
|
|
|
|
27 |
|
|
|
12 |
|
|
|
10 |
|
|
|
20 |
|
|
|
12 |
|
|
|
|
|
|
|
20 |
|
|
|
11 |
|
|
|
11 |
|
|
|
22 |
|
Zofran |
|
|
16 |
|
|
|
(18 |
) |
|
|
(6 |
) |
|
|
15 |
|
|
|
(24 |
) |
|
|
(12 |
) |
|
|
16 |
|
|
|
(13 |
) |
|
|
|
|
|
|
16 |
|
|
|
(30 |
) |
|
|
(20 |
) |
Tykerb |
|
|
17 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
10 |
|
|
|
80 |
|
|
|
100 |
|
|
|
8 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
7 |
|
|
|
>100 |
|
|
|
>100 |
|
|
Vaccines |
|
|
356 |
|
|
|
23 |
|
|
|
40 |
|
|
|
323 |
|
|
|
40 |
|
|
|
59 |
|
|
|
276 |
|
|
|
41 |
|
|
|
59 |
|
|
|
200 |
|
|
|
5 |
|
|
|
18 |
|
Hepatitis |
|
|
74 |
|
|
|
|
|
|
|
17 |
|
|
|
61 |
|
|
|
2 |
|
|
|
13 |
|
|
|
72 |
|
|
|
3 |
|
|
|
24 |
|
|
|
56 |
|
|
|
(4 |
) |
|
|
2 |
|
Infanrix/Pediarix |
|
|
113 |
|
|
|
36 |
|
|
|
55 |
|
|
|
89 |
|
|
|
23 |
|
|
|
46 |
|
|
|
94 |
|
|
|
26 |
|
|
|
45 |
|
|
|
81 |
|
|
|
(1 |
) |
|
|
13 |
|
Fluarix, FluLaval |
|
|
21 |
|
|
|
89 |
|
|
|
>100 |
|
|
|
58 |
|
|
|
55 |
|
|
|
76 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flu-prepandemic |
|
|
15 |
|
|
|
(68 |
) |
|
|
(68 |
) |
|
|
10 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
45 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
Rotarix |
|
|
13 |
|
|
|
57 |
|
|
|
86 |
|
|
|
11 |
|
|
|
67 |
|
|
|
83 |
|
|
|
10 |
|
|
|
33 |
|
|
|
67 |
|
|
|
9 |
|
|
|
100 |
|
|
|
>100 |
|
Boostrix |
|
|
7 |
|
|
|
20 |
|
|
|
40 |
|
|
|
7 |
|
|
|
40 |
|
|
|
40 |
|
|
|
7 |
|
|
|
20 |
|
|
|
40 |
|
|
|
5 |
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
Other |
|
|
103 |
|
|
|
23 |
|
|
|
37 |
|
|
|
66 |
|
|
|
(6 |
) |
|
|
5 |
|
|
|
81 |
|
|
|
19 |
|
|
|
31 |
|
|
|
71 |
|
|
|
20 |
|
|
|
31 |
|
|
|
|
|
|
1,826 |
|
|
|
4 |
|
|
|
20 |
|
|
|
1,563 |
|
|
|
6 |
|
|
|
20 |
|
|
|
1,598 |
|
|
|
4 |
|
|
|
17 |
|
|
|
1,496 |
|
|
|
(2 |
) |
|
|
9 |
|
|
Pharmaceutical turnover includes co-promotion income.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 187
|
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial record continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical
turnover Rest of World
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
£% |
|
|
Respiratory |
|
|
329 |
|
|
|
7 |
|
|
|
25 |
|
|
|
263 |
|
|
|
11 |
|
|
|
23 |
|
|
|
270 |
|
|
|
12 |
|
|
|
22 |
|
|
|
253 |
|
|
|
6 |
|
|
|
17 |
|
Seretide/Advair |
|
|
171 |
|
|
|
30 |
|
|
|
47 |
|
|
|
143 |
|
|
|
35 |
|
|
|
47 |
|
|
|
136 |
|
|
|
31 |
|
|
|
43 |
|
|
|
110 |
|
|
|
19 |
|
|
|
29 |
|
Flixotide/Flovent |
|
|
55 |
|
|
|
(10 |
) |
|
|
8 |
|
|
|
40 |
|
|
|
(10 |
) |
|
|
|
|
|
|
47 |
|
|
|
(9 |
) |
|
|
4 |
|
|
|
43 |
|
|
|
(7 |
) |
|
|
|
|
Serevent |
|
|
15 |
|
|
|
(35 |
) |
|
|
(12 |
) |
|
|
11 |
|
|
|
(23 |
) |
|
|
(15 |
) |
|
|
16 |
|
|
|
(12 |
) |
|
|
(6 |
) |
|
|
13 |
|
|
|
(21 |
) |
|
|
(7 |
) |
Veramyst |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
100 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flixonase/Flonase |
|
|
22 |
|
|
|
(5 |
) |
|
|
16 |
|
|
|
15 |
|
|
|
(32 |
) |
|
|
(21 |
) |
|
|
16 |
|
|
|
7 |
|
|
|
7 |
|
|
|
29 |
|
|
|
|
|
|
|
16 |
|
|
Anti-virals |
|
|
200 |
|
|
|
(14 |
) |
|
|
3 |
|
|
|
195 |
|
|
|
7 |
|
|
|
17 |
|
|
|
178 |
|
|
|
(2 |
) |
|
|
6 |
|
|
|
183 |
|
|
|
8 |
|
|
|
15 |
|
HIV |
|
|
59 |
|
|
|
8 |
|
|
|
23 |
|
|
|
74 |
|
|
|
11 |
|
|
|
21 |
|
|
|
55 |
|
|
|
(7 |
) |
|
|
(4 |
) |
|
|
49 |
|
|
|
5 |
|
|
|
11 |
|
Epzicom/Kivexa |
|
|
17 |
|
|
|
40 |
|
|
|
70 |
|
|
|
16 |
|
|
|
56 |
|
|
|
78 |
|
|
|
11 |
|
|
|
71 |
|
|
|
57 |
|
|
|
11 |
|
|
|
29 |
|
|
|
57 |
|
Combivir |
|
|
19 |
|
|
|
(21 |
) |
|
|
|
|
|
|
31 |
|
|
|
26 |
|
|
|
35 |
|
|
|
19 |
|
|
|
|
|
|
|
(5 |
) |
|
|
18 |
|
|
|
(6 |
) |
|
|
6 |
|
Trizivir |
|
|
5 |
|
|
|
33 |
|
|
|
67 |
|
|
|
3 |
|
|
|
(25 |
) |
|
|
(25 |
) |
|
|
3 |
|
|
|
(60 |
) |
|
|
(40 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
Agenerase, Lexiva |
|
|
6 |
|
|
|
33 |
|
|
|
100 |
|
|
|
4 |
|
|
|
25 |
|
|
|
|
|
|
|
4 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Epivir |
|
|
7 |
|
|
|
(33 |
) |
|
|
(22 |
) |
|
|
11 |
|
|
|
22 |
|
|
|
22 |
|
|
|
8 |
|
|
|
(33 |
) |
|
|
(33 |
) |
|
|
8 |
|
|
|
(22 |
) |
|
|
(11 |
) |
Ziagen |
|
|
5 |
|
|
|
(38 |
) |
|
|
(38 |
) |
|
|
9 |
|
|
|
14 |
|
|
|
29 |
|
|
|
5 |
|
|
|
(29 |
) |
|
|
(29 |
) |
|
|
6 |
|
|
|
|
|
|
|
|
|
Valtrex |
|
|
49 |
|
|
|
(9 |
) |
|
|
14 |
|
|
|
45 |
|
|
|
3 |
|
|
|
15 |
|
|
|
46 |
|
|
|
14 |
|
|
|
28 |
|
|
|
41 |
|
|
|
12 |
|
|
|
24 |
|
Zeffix |
|
|
42 |
|
|
|
3 |
|
|
|
27 |
|
|
|
31 |
|
|
|
(9 |
) |
|
|
(3 |
) |
|
|
37 |
|
|
|
(6 |
) |
|
|
3 |
|
|
|
36 |
|
|
|
10 |
|
|
|
16 |
|
Relenza |
|
|
3 |
|
|
|
(90 |
) |
|
|
(90 |
) |
|
|
7 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21 |
|
|
|
19 |
|
|
|
31 |
|
|
Central nervous system |
|
|
161 |
|
|
|
(2 |
) |
|
|
23 |
|
|
|
122 |
|
|
|
(5 |
) |
|
|
6 |
|
|
|
128 |
|
|
|
1 |
|
|
|
10 |
|
|
|
106 |
|
|
|
(7 |
) |
|
|
2 |
|
Lamictal |
|
|
19 |
|
|
|
|
|
|
|
19 |
|
|
|
15 |
|
|
|
|
|
|
|
(6 |
) |
|
|
17 |
|
|
|
|
|
|
|
13 |
|
|
|
17 |
|
|
|
7 |
|
|
|
13 |
|
Imigran/Imitrex |
|
|
13 |
|
|
|
(20 |
) |
|
|
30 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
11 |
|
|
|
8 |
|
|
|
(11 |
) |
|
|
(11 |
) |
Seroxat/Paxil |
|
|
106 |
|
|
|
(2 |
) |
|
|
28 |
|
|
|
72 |
|
|
|
(9 |
) |
|
|
4 |
|
|
|
80 |
|
|
|
(7 |
) |
|
|
7 |
|
|
|
62 |
|
|
|
(10 |
) |
|
|
(2 |
) |
Wellbutrin |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
100 |
|
|
|
50 |
|
|
|
5 |
|
|
|
|
|
|
|
25 |
|
|
|
2 |
|
|
|
(33 |
) |
|
|
(33 |
) |
Requip |
|
|
9 |
|
|
|
33 |
|
|
|
50 |
|
|
|
8 |
|
|
|
60 |
|
|
|
60 |
|
|
|
9 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
5 |
|
|
|
67 |
|
|
|
67 |
|
Treximet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular and urogenital |
|
|
67 |
|
|
|
15 |
|
|
|
29 |
|
|
|
56 |
|
|
|
13 |
|
|
|
24 |
|
|
|
55 |
|
|
|
15 |
|
|
|
17 |
|
|
|
50 |
|
|
|
18 |
|
|
|
28 |
|
Avodart |
|
|
12 |
|
|
|
22 |
|
|
|
33 |
|
|
|
10 |
|
|
|
67 |
|
|
|
67 |
|
|
|
9 |
|
|
|
50 |
|
|
|
50 |
|
|
|
8 |
|
|
|
75 |
|
|
|
100 |
|
Lovaza |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
(100 |
) |
|
|
|
|
|
|
1 |
|
|
|
(100 |
) |
|
|
(67 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Coreg CR |
|
|
1 |
|
|
|
100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coreg IR |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fraxiparine |
|
|
14 |
|
|
|
30 |
|
|
|
40 |
|
|
|
12 |
|
|
|
38 |
|
|
|
50 |
|
|
|
12 |
|
|
|
71 |
|
|
|
71 |
|
|
|
10 |
|
|
|
13 |
|
|
|
25 |
|
Arixtra |
|
|
3 |
|
|
|
|
|
|
|
50 |
|
|
|
3 |
|
|
|
50 |
|
|
|
50 |
|
|
|
3 |
|
|
|
|
|
|
|
50 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Vesicare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Levitra |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Metabolic |
|
|
87 |
|
|
|
(3 |
) |
|
|
13 |
|
|
|
81 |
|
|
|
4 |
|
|
|
14 |
|
|
|
73 |
|
|
|
(23 |
) |
|
|
(17 |
) |
|
|
66 |
|
|
|
(30 |
) |
|
|
(24 |
) |
Avandia products |
|
|
50 |
|
|
|
4 |
|
|
|
11 |
|
|
|
44 |
|
|
|
(16 |
) |
|
|
(2 |
) |
|
|
41 |
|
|
|
(33 |
) |
|
|
(33 |
) |
|
|
38 |
|
|
|
(44 |
) |
|
|
(40 |
) |
Avandia |
|
|
38 |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
31 |
|
|
|
(20 |
) |
|
|
(11 |
) |
|
|
33 |
|
|
|
(36 |
) |
|
|
(34 |
) |
|
|
29 |
|
|
|
(48 |
) |
|
|
(44 |
) |
Avandamet |
|
|
10 |
|
|
|
57 |
|
|
|
43 |
|
|
|
11 |
|
|
|
|
|
|
|
38 |
|
|
|
8 |
|
|
|
(11 |
) |
|
|
(11 |
) |
|
|
7 |
|
|
|
(30 |
) |
|
|
(30 |
) |
Bonviva/Boniva |
|
|
2 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
2 |
|
|
|
(33 |
) |
|
|
(33 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Anti-bacterials |
|
|
168 |
|
|
|
1 |
|
|
|
14 |
|
|
|
159 |
|
|
|
10 |
|
|
|
17 |
|
|
|
150 |
|
|
|
7 |
|
|
|
12 |
|
|
|
143 |
|
|
|
11 |
|
|
|
16 |
|
Augmentin |
|
|
70 |
|
|
|
(2 |
) |
|
|
9 |
|
|
|
72 |
|
|
|
24 |
|
|
|
31 |
|
|
|
64 |
|
|
|
13 |
|
|
|
21 |
|
|
|
60 |
|
|
|
9 |
|
|
|
13 |
|
Altabax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oncology and emesis |
|
|
24 |
|
|
|
6 |
|
|
|
33 |
|
|
|
23 |
|
|
|
16 |
|
|
|
21 |
|
|
|
19 |
|
|
|
12 |
|
|
|
12 |
|
|
|
18 |
|
|
|
|
|
|
|
13 |
|
Hycamtin |
|
|
2 |
|
|
|
|
|
|
|
(33 |
) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
100 |
|
|
|
100 |
|
|
|
2 |
|
|
|
(50 |
) |
|
|
|
|
Zofran |
|
|
11 |
|
|
|
(17 |
) |
|
|
(8 |
) |
|
|
12 |
|
|
|
(9 |
) |
|
|
9 |
|
|
|
11 |
|
|
|
(29 |
) |
|
|
(21 |
) |
|
|
10 |
|
|
|
(9 |
) |
|
|
(9 |
) |
Tykerb |
|
|
4 |
|
|
|
>100 |
|
|
|
100 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
Vaccines |
|
|
262 |
|
|
|
32 |
|
|
|
49 |
|
|
|
189 |
|
|
|
12 |
|
|
|
24 |
|
|
|
177 |
|
|
|
37 |
|
|
|
48 |
|
|
|
127 |
|
|
|
2 |
|
|
|
9 |
|
Hepatitis |
|
|
37 |
|
|
|
17 |
|
|
|
23 |
|
|
|
31 |
|
|
|
19 |
|
|
|
48 |
|
|
|
29 |
|
|
|
35 |
|
|
|
26 |
|
|
|
30 |
|
|
|
(4 |
) |
|
|
15 |
|
Infanrix/Pediarix |
|
|
25 |
|
|
|
|
|
|
|
25 |
|
|
|
23 |
|
|
|
28 |
|
|
|
28 |
|
|
|
24 |
|
|
|
16 |
|
|
|
26 |
|
|
|
21 |
|
|
|
|
|
|
|
11 |
|
Fluarix, FluLaval |
|
|
23 |
|
|
|
22 |
|
|
|
28 |
|
|
|
23 |
|
|
|
100 |
|
|
|
>100 |
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flu-prepandemic |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
Cervarix |
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
Rotarix |
|
|
36 |
|
|
|
9 |
|
|
|
13 |
|
|
|
24 |
|
|
|
29 |
|
|
|
41 |
|
|
|
25 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
18 |
|
|
|
70 |
|
|
|
80 |
|
Boostrix |
|
|
2 |
|
|
|
(50 |
) |
|
|
|
|
|
|
2 |
|
|
|
100 |
|
|
|
100 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
50 |
|
|
|
50 |
|
|
|
|
|
|
|
Other |
|
|
153 |
|
|
|
(10 |
) |
|
|
5 |
|
|
|
136 |
|
|
|
(12 |
) |
|
|
(5 |
) |
|
|
146 |
|
|
|
(12 |
) |
|
|
(5 |
) |
|
|
187 |
|
|
|
32 |
|
|
|
36 |
|
|
|
|
|
|
1,451 |
|
|
|
3 |
|
|
|
21 |
|
|
|
1,244 |
|
|
|
5 |
|
|
|
15 |
|
|
|
1,196 |
|
|
|
4 |
|
|
|
12 |
|
|
|
1,133 |
|
|
|
6 |
|
|
|
14 |
|
|
Pharmaceutical turnover includes co-promotion income.
|
|
|
|
|
|
|
|
|
|
|
|
188
GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial
record continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Healthcare turnover total Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
579 |
|
|
|
(1 |
) |
|
|
16 |
|
|
|
476 |
|
|
|
(1 |
) |
|
|
10 |
|
|
|
443 |
|
|
|
(9 |
) |
|
|
(4 |
) |
|
|
437 |
|
|
|
5 |
|
|
|
11 |
|
Panadol franchise |
|
|
84 |
|
|
|
10 |
|
|
|
25 |
|
|
|
82 |
|
|
|
9 |
|
|
|
21 |
|
|
|
78 |
|
|
|
11 |
|
|
|
18 |
|
|
|
80 |
|
|
|
19 |
|
|
|
29 |
|
Smoking cessation |
|
|
93 |
|
|
|
(10 |
) |
|
|
8 |
|
|
|
83 |
|
|
|
3 |
|
|
|
11 |
|
|
|
65 |
|
|
|
(15 |
) |
|
|
(13 |
) |
|
|
58 |
|
|
|
(27 |
) |
|
|
(26 |
) |
Tums |
|
|
27 |
|
|
|
|
|
|
|
23 |
|
|
|
21 |
|
|
|
(17 |
) |
|
|
(9 |
) |
|
|
22 |
|
|
|
5 |
|
|
|
5 |
|
|
|
21 |
|
|
|
(5 |
) |
|
|
(5 |
) |
Cold sore franchise |
|
|
28 |
|
|
|
(8 |
) |
|
|
8 |
|
|
|
22 |
|
|
|
|
|
|
|
10 |
|
|
|
19 |
|
|
|
20 |
|
|
|
27 |
|
|
|
20 |
|
|
|
6 |
|
|
|
11 |
|
Breathe Right |
|
|
27 |
|
|
|
28 |
|
|
|
50 |
|
|
|
19 |
|
|
|
(5 |
) |
|
|
|
|
|
|
18 |
|
|
|
42 |
|
|
|
50 |
|
|
|
17 |
|
|
|
14 |
|
|
|
21 |
|
alli |
|
|
30 |
|
|
|
(35 |
) |
|
|
(25 |
) |
|
|
18 |
|
|
|
(50 |
) |
|
|
(47 |
) |
|
|
18 |
|
|
|
(76 |
) |
|
|
(76 |
) |
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Oral healthcare |
|
|
343 |
|
|
|
7 |
|
|
|
25 |
|
|
|
310 |
|
|
|
7 |
|
|
|
19 |
|
|
|
298 |
|
|
|
3 |
|
|
|
12 |
|
|
|
289 |
|
|
|
8 |
|
|
|
17 |
|
Aquafresh franchise |
|
|
122 |
|
|
|
2 |
|
|
|
16 |
|
|
|
116 |
|
|
|
5 |
|
|
|
18 |
|
|
|
107 |
|
|
|
(3 |
) |
|
|
6 |
|
|
|
107 |
|
|
|
6 |
|
|
|
14 |
|
Sensodyne franchise |
|
|
100 |
|
|
|
13 |
|
|
|
30 |
|
|
|
90 |
|
|
|
8 |
|
|
|
20 |
|
|
|
87 |
|
|
|
9 |
|
|
|
18 |
|
|
|
86 |
|
|
|
19 |
|
|
|
28 |
|
Dental care |
|
|
77 |
|
|
|
9 |
|
|
|
33 |
|
|
|
68 |
|
|
|
9 |
|
|
|
21 |
|
|
|
66 |
|
|
|
7 |
|
|
|
20 |
|
|
|
60 |
|
|
|
6 |
|
|
|
13 |
|
|
Nutritional healthcare |
|
|
185 |
|
|
|
1 |
|
|
|
8 |
|
|
|
208 |
|
|
|
5 |
|
|
|
7 |
|
|
|
210 |
|
|
|
11 |
|
|
|
12 |
|
|
|
193 |
|
|
|
14 |
|
|
|
18 |
|
Lucozade |
|
|
89 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
100 |
|
|
|
2 |
|
|
|
5 |
|
|
|
107 |
|
|
|
11 |
|
|
|
14 |
|
|
|
86 |
|
|
|
18 |
|
|
|
19 |
|
Horlicks |
|
|
47 |
|
|
|
10 |
|
|
|
18 |
|
|
|
53 |
|
|
|
10 |
|
|
|
10 |
|
|
|
48 |
|
|
|
14 |
|
|
|
14 |
|
|
|
56 |
|
|
|
18 |
|
|
|
27 |
|
Ribena |
|
|
37 |
|
|
|
(3 |
) |
|
|
3 |
|
|
|
44 |
|
|
|
2 |
|
|
|
7 |
|
|
|
43 |
|
|
|
5 |
|
|
|
5 |
|
|
|
37 |
|
|
|
(5 |
) |
|
|
(3 |
) |
|
|
|
|
1,107 |
|
|
|
2 |
|
|
|
17 |
|
|
|
994 |
|
|
|
3 |
|
|
|
12 |
|
|
|
951 |
|
|
|
(1 |
) |
|
|
4 |
|
|
|
919 |
|
|
|
8 |
|
|
|
14 |
|
|
Consumer Healthcare turnover USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
207 |
|
|
|
(16 |
) |
|
|
5 |
|
|
|
155 |
|
|
|
(16 |
) |
|
|
(9 |
) |
|
|
143 |
|
|
|
(30 |
) |
|
|
(31 |
) |
|
|
125 |
|
|
|
(6 |
) |
|
|
(7 |
) |
Panadol franchise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smoking cessation |
|
|
68 |
|
|
|
(13 |
) |
|
|
8 |
|
|
|
60 |
|
|
|
2 |
|
|
|
7 |
|
|
|
47 |
|
|
|
(8 |
) |
|
|
(8 |
) |
|
|
38 |
|
|
|
(25 |
) |
|
|
(25 |
) |
Tums |
|
|
23 |
|
|
|
(5 |
) |
|
|
21 |
|
|
|
18 |
|
|
|
(16 |
) |
|
|
(5 |
) |
|
|
19 |
|
|
|
5 |
|
|
|
|
|
|
|
18 |
|
|
|
(10 |
) |
|
|
(10 |
) |
Cold sore franchise |
|
|
15 |
|
|
|
(8 |
) |
|
|
15 |
|
|
|
10 |
|
|
|
(9 |
) |
|
|
(9 |
) |
|
|
9 |
|
|
|
50 |
|
|
|
50 |
|
|
|
7 |
|
|
|
(13 |
) |
|
|
(13 |
) |
Breathe Right |
|
|
16 |
|
|
|
8 |
|
|
|
23 |
|
|
|
13 |
|
|
|
(8 |
) |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
(25 |
) |
|
|
(25 |
) |
alli |
|
|
28 |
|
|
|
(44 |
) |
|
|
(35 |
) |
|
|
18 |
|
|
|
(52 |
) |
|
|
(45 |
) |
|
|
17 |
|
|
|
(76 |
) |
|
|
(78 |
) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Oral healthcare |
|
|
68 |
|
|
|
8 |
|
|
|
33 |
|
|
|
54 |
|
|
|
4 |
|
|
|
13 |
|
|
|
50 |
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
50 |
|
|
|
4 |
|
|
|
2 |
|
Aquafresh franchise |
|
|
26 |
|
|
|
|
|
|
|
30 |
|
|
|
20 |
|
|
|
6 |
|
|
|
18 |
|
|
|
18 |
|
|
|
(21 |
) |
|
|
(25 |
) |
|
|
20 |
|
|
|
11 |
|
|
|
11 |
|
Sensodyne franchise |
|
|
21 |
|
|
|
13 |
|
|
|
40 |
|
|
|
17 |
|
|
|
14 |
|
|
|
21 |
|
|
|
15 |
|
|
|
7 |
|
|
|
7 |
|
|
|
15 |
|
|
|
15 |
|
|
|
15 |
|
Dental care |
|
|
19 |
|
|
|
7 |
|
|
|
36 |
|
|
|
15 |
|
|
|
|
|
|
|
7 |
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
14 |
|
|
|
(7 |
) |
|
|
(7 |
) |
|
Nutritional healthcare |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lucozade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Horlicks |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ribena |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
275 |
|
|
|
(11 |
) |
|
|
10 |
|
|
|
209 |
|
|
|
(11 |
) |
|
|
(5 |
) |
|
|
193 |
|
|
|
(25 |
) |
|
|
(26 |
) |
|
|
175 |
|
|
|
(3 |
) |
|
|
(4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual
Report 2008 189 |
|
|
|
|
Shareholder information |
|
|
| |
| |
|
|
|
Financial
record continued |
|
|
|
|
|
|
|
|
|
Quarterly trend |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Healthcare turnover Europe
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
187 |
|
|
|
4 |
|
|
|
17 |
|
|
|
142 |
|
|
|
4 |
|
|
|
19 |
|
|
|
134 |
|
|
|
4 |
|
|
|
17 |
|
|
|
144 |
|
|
|
5 |
|
|
|
15 |
|
Panadol franchise |
|
|
23 |
|
|
|
5 |
|
|
|
21 |
|
|
|
20 |
|
|
|
(6 |
) |
|
|
18 |
|
|
|
17 |
|
|
|
14 |
|
|
|
21 |
|
|
|
19 |
|
|
|
13 |
|
|
|
27 |
|
Smoking cessation |
|
|
18 |
|
|
|
(6 |
) |
|
|
6 |
|
|
|
13 |
|
|
|
(8 |
) |
|
|
|
|
|
|
13 |
|
|
|
(33 |
) |
|
|
(28 |
) |
|
|
16 |
|
|
|
(35 |
) |
|
|
(30 |
) |
Tums |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cold sore franchise |
|
|
11 |
|
|
|
|
|
|
|
10 |
|
|
|
8 |
|
|
|
|
|
|
|
14 |
|
|
|
9 |
|
|
|
14 |
|
|
|
29 |
|
|
|
10 |
|
|
|
13 |
|
|
|
25 |
|
Breathe Right |
|
|
6 |
|
|
|
33 |
|
|
|
100 |
|
|
|
4 |
|
|
|
100 |
|
|
|
100 |
|
|
|
5 |
|
|
|
100 |
|
|
|
>100 |
|
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
alli |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oral healthcare |
|
|
189 |
|
|
|
4 |
|
|
|
20 |
|
|
|
174 |
|
|
|
7 |
|
|
|
22 |
|
|
|
169 |
|
|
|
5 |
|
|
|
17 |
|
|
|
159 |
|
|
|
7 |
|
|
|
19 |
|
Aquafresh franchise |
|
|
73 |
|
|
|
|
|
|
|
12 |
|
|
|
72 |
|
|
|
2 |
|
|
|
18 |
|
|
|
66 |
|
|
|
4 |
|
|
|
16 |
|
|
|
64 |
|
|
|
2 |
|
|
|
14 |
|
Sensodyne franchise |
|
|
48 |
|
|
|
8 |
|
|
|
23 |
|
|
|
43 |
|
|
|
9 |
|
|
|
23 |
|
|
|
43 |
|
|
|
8 |
|
|
|
19 |
|
|
|
41 |
|
|
|
23 |
|
|
|
32 |
|
Dental care |
|
|
32 |
|
|
|
17 |
|
|
|
33 |
|
|
|
27 |
|
|
|
15 |
|
|
|
35 |
|
|
|
27 |
|
|
|
9 |
|
|
|
23 |
|
|
|
24 |
|
|
|
11 |
|
|
|
26 |
|
|
Nutritional healthcare |
|
|
110 |
|
|
|
(5 |
) |
|
|
(3 |
) |
|
|
127 |
|
|
|
1 |
|
|
|
2 |
|
|
|
134 |
|
|
|
6 |
|
|
|
7 |
|
|
|
110 |
|
|
|
8 |
|
|
|
10 |
|
Lucozade |
|
|
76 |
|
|
|
(4 |
) |
|
|
(1 |
) |
|
|
89 |
|
|
|
|
|
|
|
2 |
|
|
|
95 |
|
|
|
9 |
|
|
|
10 |
|
|
|
76 |
|
|
|
16 |
|
|
|
19 |
|
Horlicks |
|
|
6 |
|
|
|
(14 |
) |
|
|
(14 |
) |
|
|
5 |
|
|
|
(17 |
) |
|
|
(17 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
(14 |
) |
|
|
(14 |
) |
Ribena |
|
|
27 |
|
|
|
(4 |
) |
|
|
(4 |
) |
|
|
33 |
|
|
|
(3 |
) |
|
|
|
|
|
|
34 |
|
|
|
3 |
|
|
|
3 |
|
|
|
27 |
|
|
|
(7 |
) |
|
|
(7 |
) |
|
|
|
|
486 |
|
|
|
2 |
|
|
|
13 |
|
|
|
443 |
|
|
|
4 |
|
|
|
15 |
|
|
|
437 |
|
|
|
5 |
|
|
|
14 |
|
|
|
413 |
|
|
|
7 |
|
|
|
15 |
|
|
Consumer Healthcare turnover Rest of World
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q4 2008 |
|
|
Q3 2008 |
|
|
Q2 2008 |
|
|
Q1 2008 |
|
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
£m |
|
|
CER% |
|
|
£% |
|
|
Over-the-counter medicines |
|
|
185 |
|
|
|
14 |
|
|
|
30 |
|
|
|
179 |
|
|
|
13 |
|
|
|
27 |
|
|
|
166 |
|
|
|
11 |
|
|
|
19 |
|
|
|
168 |
|
|
|
16 |
|
|
|
24 |
|
Panadol franchise |
|
|
61 |
|
|
|
13 |
|
|
|
27 |
|
|
|
62 |
|
|
|
14 |
|
|
|
22 |
|
|
|
61 |
|
|
|
10 |
|
|
|
17 |
|
|
|
61 |
|
|
|
21 |
|
|
|
30 |
|
Smoking cessation |
|
|
7 |
|
|
|
|
|
|
|
17 |
|
|
|
10 |
|
|
|
33 |
|
|
|
67 |
|
|
|
5 |
|
|
|
(17 |
) |
|
|
(17 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
Tums |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
50 |
|
|
|
3 |
|
|
|
50 |
|
|
|
50 |
|
Cold sore franchise |
|
|
2 |
|
|
|
(33 |
) |
|
|
(33 |
) |
|
|
4 |
|
|
|
50 |
|
|
|
100 |
|
|
|
1 |
|
|
|
(50 |
) |
|
|
(50 |
) |
|
|
3 |
|
|
|
50 |
|
|
|
50 |
|
Breathe Right |
|
|
5 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
2 |
|
|
|
(50 |
) |
|
|
(50 |
) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
3 |
|
|
|
100 |
|
|
|
>100 |
|
alli |
|
|
2 |
|
|
|
>100 |
|
|
|
>100 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Oral healthcare |
|
|
86 |
|
|
|
10 |
|
|
|
28 |
|
|
|
82 |
|
|
|
9 |
|
|
|
19 |
|
|
|
79 |
|
|
|
7 |
|
|
|
16 |
|
|
|
80 |
|
|
|
14 |
|
|
|
23 |
|
Aquafresh franchise |
|
|
23 |
|
|
|
10 |
|
|
|
15 |
|
|
|
24 |
|
|
|
15 |
|
|
|
20 |
|
|
|
23 |
|
|
|
|
|
|
|
15 |
|
|
|
23 |
|
|
|
15 |
|
|
|
15 |
|
Sensodyne franchise |
|
|
31 |
|
|
|
22 |
|
|
|
35 |
|
|
|
30 |
|
|
|
4 |
|
|
|
15 |
|
|
|
29 |
|
|
|
13 |
|
|
|
21 |
|
|
|
30 |
|
|
|
17 |
|
|
|
30 |
|
Dental care |
|
|
26 |
|
|
|
|
|
|
|
30 |
|
|
|
26 |
|
|
|
9 |
|
|
|
18 |
|
|
|
24 |
|
|
|
11 |
|
|
|
33 |
|
|
|
22 |
|
|
|
11 |
|
|
|
16 |
|
|
Nutritional healthcare |
|
|
75 |
|
|
|
14 |
|
|
|
27 |
|
|
|
81 |
|
|
|
13 |
|
|
|
16 |
|
|
|
76 |
|
|
|
21 |
|
|
|
23 |
|
|
|
83 |
|
|
|
24 |
|
|
|
32 |
|
Lucozade |
|
|
13 |
|
|
|
22 |
|
|
|
44 |
|
|
|
11 |
|
|
|
25 |
|
|
|
38 |
|
|
|
12 |
|
|
|
25 |
|
|
|
50 |
|
|
|
10 |
|
|
|
38 |
|
|
|
25 |
|
Horlicks |
|
|
41 |
|
|
|
15 |
|
|
|
24 |
|
|
|
48 |
|
|
|
14 |
|
|
|
14 |
|
|
|
43 |
|
|
|
16 |
|
|
|
16 |
|
|
|
50 |
|
|
|
24 |
|
|
|
35 |
|
Ribena |
|
|
10 |
|
|
|
|
|
|
|
25 |
|
|
|
11 |
|
|
|
25 |
|
|
|
38 |
|
|
|
9 |
|
|
|
13 |
|
|
|
13 |
|
|
|
10 |
|
|
|
|
|
|
|
11 |
|
|
|
|
|
346 |
|
|
|
13 |
|
|
|
29 |
|
|
|
342 |
|
|
|
12 |
|
|
|
22 |
|
|
|
321 |
|
|
|
13 |
|
|
|
19 |
|
|
|
331 |
|
|
|
17 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
190
GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial record continued |
|
|
|
|
|
|
|
|
|
|
|
|
Five
year record
A record of financial performance is provided, analysed in accordance with current reporting
practice. The information included in the Five year record is prepared in accordance with IFRS as
adopted by the European Union and also with IFRS as issued by the International Accounting
Standards Board.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover
by business segment |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Pharmaceuticals |
|
|
20,381 |
|
|
|
19,163 |
|
|
|
20,013 |
|
|
|
18,583 |
|
|
|
17,031 |
|
Consumer Healthcare |
|
|
3,971 |
|
|
|
3,553 |
|
|
|
3,212 |
|
|
|
3,077 |
|
|
|
2,955 |
|
|
|
|
|
24,352 |
|
|
|
22,716 |
|
|
|
23,225 |
|
|
|
21,660 |
|
|
|
19,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical turnover by therapeutic area |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Respiratory |
|
|
5,817 |
|
|
|
5,032 |
|
|
|
4,991 |
|
|
|
5,050 |
|
|
|
4,392 |
|
Anti-virals |
|
|
3,206 |
|
|
|
3,027 |
|
|
|
2,826 |
|
|
|
2,598 |
|
|
|
2,355 |
|
Central nervous system |
|
|
2,897 |
|
|
|
3,348 |
|
|
|
3,642 |
|
|
|
3,219 |
|
|
|
3,462 |
|
Cardiovascular and urogenital |
|
|
1,847 |
|
|
|
1,554 |
|
|
|
1,636 |
|
|
|
1,331 |
|
|
|
932 |
|
Metabolic |
|
|
1,191 |
|
|
|
1,508 |
|
|
|
1,870 |
|
|
|
1,488 |
|
|
|
1,245 |
|
Anti-bacterials |
|
|
1,429 |
|
|
|
1,323 |
|
|
|
1,363 |
|
|
|
1,513 |
|
|
|
1,542 |
|
Oncology and emesis |
|
|
496 |
|
|
|
477 |
|
|
|
1,069 |
|
|
|
1,016 |
|
|
|
934 |
|
Vaccines |
|
|
2,539 |
|
|
|
1,993 |
|
|
|
1,692 |
|
|
|
1,389 |
|
|
|
1,194 |
|
Other |
|
|
959 |
|
|
|
901 |
|
|
|
924 |
|
|
|
979 |
|
|
|
975 |
|
|
|
|
|
20,381 |
|
|
|
19,163 |
|
|
|
20,013 |
|
|
|
18,583 |
|
|
|
17,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pharmaceutical turnover by geographic area |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
USA |
|
|
8,894 |
|
|
|
9,273 |
|
|
|
10,353 |
|
|
|
9,106 |
|
|
|
8,425 |
|
Europe |
|
|
6,483 |
|
|
|
5,560 |
|
|
|
5,437 |
|
|
|
5,458 |
|
|
|
5,036 |
|
Rest of World: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emerging markets |
|
|
2,290 |
|
|
|
1,895 |
|
|
|
1,783 |
|
|
|
1,671 |
|
|
|
1,487 |
|
Japan |
|
|
1,027 |
|
|
|
867 |
|
|
|
860 |
|
|
|
854 |
|
|
|
769 |
|
Asia Pacific |
|
|
891 |
|
|
|
834 |
|
|
|
806 |
|
|
|
763 |
|
|
|
666 |
|
Canada |
|
|
503 |
|
|
|
477 |
|
|
|
483 |
|
|
|
443 |
|
|
|
411 |
|
Other |
|
|
293 |
|
|
|
257 |
|
|
|
291 |
|
|
|
288 |
|
|
|
237 |
|
Rest of World |
|
|
5,004 |
|
|
|
4,330 |
|
|
|
4,223 |
|
|
|
4,019 |
|
|
|
3,570 |
|
|
|
|
|
20,381 |
|
|
|
19,163 |
|
|
|
20,013 |
|
|
|
18,583 |
|
|
|
17,031 |
|
|
Pharmaceutical turnover includes co-promotion income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer Healthcare turnover |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
OTC medicines |
|
|
1,935 |
|
|
|
1,788 |
|
|
|
1,561 |
|
|
|
1,515 |
|
|
|
1,469 |
|
Oral healthcare |
|
|
1,240 |
|
|
|
1,049 |
|
|
|
993 |
|
|
|
943 |
|
|
|
913 |
|
Nutritional healthcare |
|
|
796 |
|
|
|
716 |
|
|
|
658 |
|
|
|
619 |
|
|
|
573 |
|
|
|
|
|
3,971 |
|
|
|
3,553 |
|
|
|
3,212 |
|
|
|
3,077 |
|
|
|
2,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report
2008 191 |
|
|
|
|
Shareholder information |
|
|
| |
| |
|
|
|
Financial record
continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
results total |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Turnover |
|
|
24,352 |
|
|
|
22,716 |
|
|
|
23,225 |
|
|
|
21,660 |
|
|
|
19,986 |
|
Operating profit |
|
|
7,141 |
|
|
|
7,593 |
|
|
|
7,808 |
|
|
|
6,874 |
|
|
|
5,756 |
|
Profit before taxation |
|
|
6,659 |
|
|
|
7,452 |
|
|
|
7,799 |
|
|
|
6,732 |
|
|
|
5,779 |
|
Profit after taxation |
|
|
4,712 |
|
|
|
5,310 |
|
|
|
5,498 |
|
|
|
4,816 |
|
|
|
4,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pence |
|
|
pence |
|
pence |
|
pence |
|
pence |
|
Basic earnings per share |
|
|
88.6 |
p |
|
|
94.4 |
p |
|
|
95.5 |
p |
|
|
82.6 |
p |
|
|
68.1 |
p |
Diluted earnings per share |
|
|
88.1 |
p |
|
|
93.7 |
p |
|
|
94.5 |
p |
|
|
82.0 |
p |
|
|
68.0 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial results
before major restructuring |
2008 |
|
|
2007 |
|
|
|
£m |
|
|
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover |
|
|
24,352 |
|
|
|
22,716 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
|
8,259 |
|
|
|
7,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before taxation |
|
|
7,782 |
|
|
|
7,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit after taxation |
|
|
5,551 |
|
|
|
5,571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
pence |
|
pence |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share |
|
|
104.7 |
p |
|
|
99.1 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted diluted earnings per share |
|
|
104.1 |
p |
|
|
98.3 |
p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
millions |
|
|
millions |
|
|
millions |
|
|
millions |
|
|
millions |
|
|
Weighted average number of shares in issue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
5,195 |
|
|
|
5,524 |
|
|
|
5,643 |
|
|
|
5,674 |
|
|
|
5,736 |
|
Diluted |
|
|
5,226 |
|
|
|
5,567 |
|
|
|
5,700 |
|
|
|
5,720 |
|
|
|
5,748 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
Return on capital employed |
|
|
73.1 |
|
|
|
76.2 |
|
|
|
90.6 |
|
|
|
99.7 |
|
|
|
100.2 |
|
|
Return on capital employed is calculated as total profit before taxation as a percentage of average
capital employed over the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet |
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
£m |
|
|
Non-current assets |
|
|
22,124 |
|
|
|
17,377 |
|
|
|
14,561 |
|
|
|
14,021 |
|
|
|
12,164 |
|
Current assets |
|
|
17,269 |
|
|
|
13,626 |
|
|
|
10,992 |
|
|
|
13,177 |
|
|
|
10,780 |
|
|
Total assets |
|
|
39,393 |
|
|
|
31,003 |
|
|
|
25,553 |
|
|
|
27,198 |
|
|
|
22,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
(10,017 |
) |
|
|
(10,345 |
) |
|
|
(7,265 |
) |
|
|
(9,511 |
) |
|
|
(8,564 |
) |
Non-current liabilities |
|
|
(21,058 |
) |
|
|
(10,748 |
) |
|
|
(8,640 |
) |
|
|
(10,117 |
) |
|
|
(8,443 |
) |
|
Total liabilities |
|
|
(31,075 |
) |
|
|
(21,093 |
) |
|
|
(15,905 |
) |
|
|
(19,628 |
) |
|
|
(17,007 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets |
|
|
8,318 |
|
|
|
9,910 |
|
|
|
9,648 |
|
|
|
7,570 |
|
|
|
5,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity |
|
|
7,931 |
|
|
|
9,603 |
|
|
|
9,386 |
|
|
|
7,311 |
|
|
|
5,724 |
|
Minority interests |
|
|
387 |
|
|
|
307 |
|
|
|
262 |
|
|
|
259 |
|
|
|
213 |
|
|
Total equity |
|
|
8,318 |
|
|
|
9,910 |
|
|
|
9,648 |
|
|
|
7,570 |
|
|
|
5,937 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192
GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Financial record
continued |
|
|
|
|
|
|
|
|
|
|
|
|
Number
of employees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
USA |
|
|
21,176 |
|
|
|
24,838 |
|
|
|
24,726 |
|
|
|
23,822 |
|
|
|
23,782 |
|
Europe |
|
|
44,677 |
|
|
|
46,869 |
|
|
|
45,758 |
|
|
|
43,999 |
|
|
|
44,679 |
|
Rest of World: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia Pacific |
|
|
18,983 |
|
|
|
17,525 |
|
|
|
17,570 |
|
|
|
15,991 |
|
|
|
16,109 |
|
Japan |
|
|
3,174 |
|
|
|
3,284 |
|
|
|
3,195 |
|
|
|
3,098 |
|
|
|
2,965 |
|
Middle East, Africa |
|
|
3,403 |
|
|
|
3,156 |
|
|
|
3,204 |
|
|
|
5,682 |
|
|
|
5,134 |
|
Latin America |
|
|
5,228 |
|
|
|
5,249 |
|
|
|
5,856 |
|
|
|
5,664 |
|
|
|
5,603 |
|
Canada |
|
|
2,362 |
|
|
|
2,562 |
|
|
|
2,386 |
|
|
|
2,472 |
|
|
|
1,747 |
|
|
Rest of World |
|
|
33,150 |
|
|
|
31,776 |
|
|
|
32,211 |
|
|
|
32,907 |
|
|
|
31,558 |
|
|
|
|
|
99,003 |
|
|
|
103,483 |
|
|
|
102,695 |
|
|
|
100,728 |
|
|
|
100,019 |
|
|
Manufacturing |
|
|
32,622 |
|
|
|
33,995 |
|
|
|
33,235 |
|
|
|
31,615 |
|
|
|
31,143 |
|
Selling |
|
|
42,430 |
|
|
|
44,499 |
|
|
|
44,484 |
|
|
|
44,393 |
|
|
|
44,646 |
|
Administration |
|
|
8,787 |
|
|
|
8,960 |
|
|
|
9,024 |
|
|
|
9,225 |
|
|
|
9,193 |
|
Research and development |
|
|
15,164 |
|
|
|
16,029 |
|
|
|
15,952 |
|
|
|
15,495 |
|
|
|
15,037 |
|
|
|
|
|
99,003 |
|
|
|
103,483 |
|
|
|
102,695 |
|
|
|
100,728 |
|
|
|
100,019 |
|
|
The number of employees is the number of permanent employed staff at the end of the financial
period. It excludes those employees who are employed and managed by GSK on a contract basis.
Exchange rates
As a guide to holders of ADS, the following tables set out, for the periods indicated, information
on the exchange rate of US dollars for Sterling as reported by the Federal Reserve Bank of New York
(noon buying rate).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
2004 |
|
|
Average |
|
|
1.85 |
|
|
|
2.00 |
|
|
|
1.85 |
|
|
|
1.81 |
|
|
|
1.84 |
|
|
The average rate for the year is calculated as the average of the noon buying rates for each day of
the year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb |
|
|
Jan |
|
|
Dec |
|
|
Nov |
|
|
Oct |
|
|
Sept |
|
|
|
2009 |
|
|
2009 |
|
|
2008 |
|
|
2008 |
|
|
2008 |
|
|
2008 |
|
|
High |
|
|
1.49 |
|
|
|
1.52 |
|
|
|
1.55 |
|
|
|
1.62 |
|
|
|
1.78 |
|
|
|
1.86 |
|
Low |
|
|
1.42 |
|
|
|
1.37 |
|
|
|
1.44 |
|
|
|
1.48 |
|
|
|
1.55 |
|
|
|
1.75 |
|
|
As at 31st December 2008, the Federal Reserve Bank of New York ceased publishing noon buying rates.
The Bank of England 4pm buying rates have been used for subsequent calculations.
The 4pm buying rate on 24th February 2009 was £1 = US$1.44.
|
|
|
Key |
|
|
|
|
In-license or other alliance relationship with third party |
S
|
|
Month of first submission |
A
|
|
Month of first regulatory approval (for MAA, this is the first EU
approval letter) |
AL
|
|
Month Approvable or Complete Response Letter received indicates
that ultimately approval can be given subject to resolution of
outstanding queries |
PO
|
|
Month of EU Positive Opinion |
|
|
|
BLA
|
|
Biological License Application |
MAA
|
|
Marketing authorisation application (Europe) |
NDA
|
|
New drug application (USA) |
Phase I
|
|
Evaluation of clinical pharmacology, usually conducted in volunteers |
Phase II
|
|
Determination of dose and initial evaluation of efficacy, conducted in a
small number of patients |
Phase III
|
|
Large comparative study (compound versus placebo and/or established
treatment) in patients to establish clinical benefit and safety. |
Estimated submission dates are only disclosed where they are within 12 months of the date of the
chart. This date represents the most likely year of submission where it is considered that there is
a reasonably high probability of successfully meeting the date assuming the clinical data meets the
expected end-points of the clinical trials.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated submission dates |
Compound |
|
Type |
|
Indication |
|
Phase |
|
MAA |
|
NDA/BLA |
|
Biopharmaceuticals |
|
|
|
|
|
|
|
|
|
|
249320
|
|
monoclonal antibody
|
|
stroke
|
|
I |
|
|
|
|
933776
|
|
monoclonal antibody
|
|
Alzheimers disease
|
|
I |
|
|
|
|
iboctadekin + Doxil
|
|
IL18 immunomodulator + topoisomerase II
inhibitor
|
|
ovarian cancer
|
|
I |
|
|
|
|
iboctadekin + rituximab
|
|
IL18 immunomodulator + anti-CD20
|
|
non-Hodgkins lymphoma
|
|
I |
|
|
|
|
|
|
monoclonal antibody |
|
|
|
|
|
|
|
|
315234
|
|
monoclonal antibody
|
|
rheumatoid arthritis
|
|
II |
|
|
|
|
679586
|
|
monoclonal antibody
|
|
severe asthma
|
|
II |
|
|
|
|
belimumab
|
|
anti-B lymphocyte stimulator monoclonal
antibody (s.c.)
|
|
systemic lupus erythematosus
|
|
II |
|
|
|
|
mepolizumab
|
|
anti-IL5 monoclonal antibody
|
|
severe asthma & nasal polyposis
|
|
II |
|
|
|
|
ofatumumab
|
|
anti-CD20 human monoclonal antibody
|
|
diffuse large B cell lymphoma
|
|
II |
|
|
|
|
ofatumumab
|
|
anti-CD20 human monoclonal antibody
|
|
multiple sclerosis
|
|
II |
|
|
|
|
belimumab
|
|
anti-B lymphocyte stimulator monoclonal
antibody (i.v.)
|
|
systemic lupus erythematosus
|
|
III |
|
|
|
|
ofatumumab
|
|
anti-CD20 human monoclonal antibody
|
|
follicular lymphoma
|
|
III |
|
|
|
|
ofatumumab
|
|
anti-CD20 human monoclonal antibody
|
|
rheumatoid arthritis
|
|
III |
|
|
|
|
otelixizumab
|
|
anti-CD3 monoclonal antibody
|
|
type 1 diabetes
|
|
III |
|
|
|
|
Syncria
|
|
glucagon-like peptide 1 agonist
|
|
type 2 diabetes
|
|
III |
|
|
|
|
Bosatria (mepolizumab)
|
|
anti-IL5 monoclonal antibody
|
|
hypereosinophilic syndrome
|
|
Submitted
|
|
S:Sep08 |
|
|
ofatumumab
|
|
anti-CD20 human monoclonal antibody
|
|
refractory chronic lymphocytic leukaemia
|
|
Submitted
|
|
S:Feb09
|
|
S:Jan09 |
|
|
|
|
|
|
|
|
|
|
|
|
Cardiovascular & Metabolic |
|
|
|
|
|
|
256073
|
|
high affinity nicotinic acid receptor (HM74A)
agonist
|
|
dyslipidaemia
|
|
I |
|
|
|
|
1278863
|
|
prolyl hydroxylase inhibitor
|
|
anaemia
|
|
I |
|
|
|
|
1292263
|
|
gastrin-releasing peptide (GRP) receptor agonist
|
|
type 2 diabetes
|
|
I |
|
|
|
|
1521498
|
|
mu-opioid receptor inverse agonist
|
|
obesity
|
|
I |
|
|
|
|
1614235
|
|
sodium dependent glucose transport (SGLT1)
inhibitor
|
|
type 2 diabetes
|
|
I |
|
|
|
|
2245840
|
|
SIRT1 activator
|
|
type 2 diabetes (also chronic obstructive pulmonary
|
|
I |
|
|
|
|
|
|
|
|
disease, COPD) |
|
|
|
|
|
|
221149
|
|
oxytocin antagonist
|
|
threatened pre-term labour
|
|
II |
|
|
|
|
756050
|
|
bile acid receptor agonist
|
|
type 2 diabetes
|
|
II |
|
|
|
|
184072
|
|
SIRT1 activator
|
|
type 2 diabetes (also oncology indications)
|
|
II |
|
|
|
|
losmapimod (856553)
|
|
p38 kinase inhibitor
|
|
cardiovascular disease (also COPD & depression)
|
|
II |
|
|
|
|
pazopanib
|
|
multi-kinase angiogenesis inhibitor (eye drops)
|
|
age-related macular degeneration (also cancer indications)
|
|
II |
|
|
|
|
remogliflozin etabonate
|
|
SGLT2 inhibitor
|
|
type 1 diabetes
|
|
II |
|
|
|
|
remogliflozin etabonate
|
|
SGLT2 inhibitor
|
|
type 2 diabetes
|
|
II |
|
|
|
|
rilapladib
|
|
Lp-PLA2 inhibitor
|
|
atherosclerosis
|
|
II |
|
|
|
|
ronacaleret
|
|
calcium antagonist
|
|
osteoporosis & fracture healing
|
|
II |
|
|
|
|
Avandamet XR
|
|
PPAR gamma agonist + metformin
|
|
type 2 diabetes extended release
|
|
III
|
|
N/A |
|
|
Avandia + simvastatin
|
|
PPAR gamma agonist + statin
|
|
type 2 diabetes
|
|
III
|
|
N/A |
|
|
darapladib
|
|
Lp-PLA2 inhibitor
|
|
atherosclerosis
|
|
III |
|
|
|
|
Arixtra
|
|
synthetic factor Xa inhibitor
|
|
treatment of acute coronary syndrome
|
|
Approved
|
|
A:Aug07
|
|
AL:Feb07 |
|
|
|
|
|
|
|
|
|
|
& Sep07 |
Avandia
|
|
PPAR gamma agonist
|
|
prevention of disease progression
|
|
Approved
|
|
S:Nov08
|
|
A:Jul08 |
Volibris
|
|
endothelin A antagonist
|
|
pulmonary arterial hypertension
|
|
Approved
|
|
A:Apr08
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
194 GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
Product development pipeline continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated submission dates |
Compound |
|
Type |
|
Indication |
|
Phase |
|
MAA |
|
NDA |
|
Infectious Diseases |
|
|
|
|
|
|
|
|
|
|
932121
|
|
plasmodium electron transport chain inhibitor
|
|
malaria
|
|
I |
|
|
|
|
|
|
945237
|
|
topoisomerase II inhibitor
|
|
treatment of bacterial infections
|
|
I |
|
|
|
|
|
|
1265744
|
|
HIV integrase inhibitor
|
|
HIV infections
|
|
I |
|
|
|
|
|
|
1322322
|
|
novel class antibacterial agent
|
|
treatment of bacterial infections
|
|
I |
|
|
|
|
|
|
1349572
|
|
HIV integrase inhibitor
|
|
HIV infections
|
|
II |
|
|
|
|
|
|
IDX899
|
|
non-nucleotide reverse transcriptase inhibitor
|
|
HIV infections
|
|
II |
|
|
|
|
|
|
sitamaquine
|
|
8-aminoquinoline
|
|
treatment of visceral leishmaniasis
|
|
II
|
|
|
|
|
N/A |
|
tafenoquine
|
|
8-aminoquinoline
|
|
Plasmodium vivax malaria
|
|
II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neurosciences |
|
|
|
|
|
|
|
|
|
|
163090
|
|
5HT1 antagonist
|
|
depression & anxiety
|
|
I |
|
|
|
|
|
|
424887
|
|
NK1 antagonist/SSRI
|
|
depression & anxiety
|
|
I |
|
|
|
|
|
|
586529
|
|
CRF1 antagonist
|
|
depression & anxiety
|
|
I |
|
|
|
|
|
|
598809
|
|
dopamine D3 antagonist
|
|
drug dependency
|
|
I |
|
|
|
|
|
|
618334
|
|
dopamine D3 antagonist
|
|
drug dependency
|
|
I |
|
|
|
|
|
|
729327
|
|
AMPA receptor modulator
|
|
schizophrenia
|
|
I |
|
|
|
|
|
|
1014802
|
|
sodium channel blocker
|
|
bipolar disorder
|
|
I |
|
|
|
|
|
|
1018921
|
|
type 1 glycine transport inhibitor
|
|
schizophrenia
|
|
I |
|
|
|
|
|
|
1034702
|
|
muscarinic acetylcholine agonist
|
|
dementia
|
|
I |
|
|
|
|
|
|
1144814
|
|
NK1/NK3 antagonist
|
|
schizophrenia
|
|
I |
|
|
|
|
|
|
1482160
|
|
purinergic ATP receptor antagonist
|
|
pain
|
|
I |
|
|
|
|
|
|
orvepitant
|
|
NK1 antagonist
|
|
depression & anxiety
|
|
I |
|
|
|
|
|
|
239512
|
|
histamine H3 antagonist
|
|
dementia
|
|
II |
|
|
|
|
|
|
468816
|
|
glycine antagonist
|
|
smoking cessation
|
|
II |
|
|
|
|
|
|
561679
|
|
CRF1 antagonist
|
|
depression & anxiety
|
|
II |
|
|
|
|
|
|
649868
|
|
orexin antagonist
|
|
sleep disorders
|
|
II |
|
|
|
|
|
|
681323
|
|
p38 kinase inhibitor
|
|
neuropathic pain
|
|
II |
|
|
|
|
|
|
742457
|
|
5HT6 antagonist
|
|
dementia
|
|
II |
|
|
|
|
|
|
firategrast
|
|
dual alpha4 integrin antagonist (VLA4)
|
|
multiple sclerosis
|
|
II |
|
|
|
|
|
|
losmapimod (856553)
|
|
p38 kinase inhibitor
|
|
depression (also cardiovascular disease & COPD)
|
|
II |
|
|
|
|
|
|
Solzira (1838262)
|
|
voltage-gated calcium channel modulator
|
|
migraine prophylaxis
|
|
II |
|
|
|
|
|
|
Solzira (1838262)
|
|
voltage-gated calcium channel modulator
|
|
neuropathic pain
|
|
II |
|
|
|
|
|
|
almorexant
|
|
orexin antagonist
|
|
insomnia
|
|
III |
|
|
|
|
|
|
Lamictal XR
|
|
sodium channel inhibitor
|
|
epilepsy partial generalised
tonic-clonic seizures, once-daily
|
|
III
|
|
N/A
|
|
|
2009 |
|
retigabine
|
|
neuronal potassium channel opener
|
|
epilepsy partial seizures
|
|
III |
|
|
|
|
|
|
rosiglitazone XR
|
|
PPAR gamma agonist
|
|
Alzheimers disease
|
|
III |
|
|
|
|
|
|
Lunivia
|
|
non-benzodiazepine GABA agonist
|
|
insomnia
|
|
Submitted
|
|
Po:Oct08
|
|
|
N/A |
|
Solzira (1838262)
|
|
voltage-gated calcium channel modulator
|
|
restless legs syndrome
|
|
Submitted
|
|
|
|
|
S:Sep08 &
|
|
|
|
|
|
|
|
|
|
|
|
Jan09
|
Lamictal XR
|
|
sodium channel inhibitor
|
|
epilepsy partial seizures, once-daily
|
|
Approvable
|
|
N/A
|
|
|
AL: Sep07
|
Requip Modutab/XL
|
|
non-ergot dopamine agonist
|
|
Parkinsons disease once-daily controlled release formulation
|
|
Approved
|
|
A:Mar07
|
|
|
A:Jun08
|
Treximet
|
|
5HT1 agonist + naproxen
|
|
migraine fixed dose combination
|
|
Approved
|
|
N/A
|
|
|
A:Apr08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 195 |
|
|
|
|
Shareholder information |
|
|
|
|
Product development pipeline continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated submission dates |
Compound |
|
Type |
|
Indication |
|
Phase |
|
MAA |
|
NDA |
|
Oncology |
|
|
|
|
|
|
|
|
|
|
461364
|
|
polo-like kinase inhibitor
|
|
cancer
|
|
I |
|
|
|
|
|
|
|
|
923295
|
|
centromere-associated protein E (CENP-E)
inhibitor
|
|
cancer
|
|
I |
|
|
|
|
|
|
|
|
1120212
|
|
mitogen-activated protein kinase inhibitor
(MEK1/2)
|
|
cancer
|
|
I |
|
|
|
|
|
|
|
|
totrombopag
|
|
thrombopoietin recept or agonist
|
|
thrombocytopaenia
|
|
I |
|
|
|
|
|
|
|
|
184072
|
|
SIRT1 activator
|
|
colon & haematologic cancers (also type 2 diabetes)
|
|
II |
|
|
|
|
|
|
|
|
1363089
|
|
mesenchymal-epithelial transition factor
(C-met) kinase inhibitor
|
|
papillary renal cell carcinoma, gastric cancer and
head & neck squamous cell carcinoma
|
|
II |
|
|
|
|
|
|
|
|
pazopanib
|
|
multi-kinase angiogenesis inhibitor
|
|
non-small cell lung cancer
|
|
II |
|
|
|
|
|
|
|
|
pazopanib
|
|
multi-kinase angiogenesis inhibitor
|
|
ovarian cancer
|
|
II |
|
|
|
|
|
|
|
|
pazopanib +
|
|
multi-kinase angiogenesis inhibitor
+ Her2 and epidermal growth factor receptor
|
|
metastatic breast cancer
|
|
II |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
(EGFR) dual kinase inhibitor |
|
|
|
|
|
|
|
|
|
|
|
|
Revolade/Promacta
|
|
thrombopoietin receptor agonist
|
|
oncology-related thrombocytopaenia
|
|
II |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
head & neck squamous cell carcinoma (unresectable disease)
|
|
II |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
refractory inflammatory breast cancer
|
|
II |
|
|
|
|
|
|
|
|
Avodart
|
|
5-alpha reductase inhibitor
|
|
reduction in the risk of prostate cancer
|
|
III
|
|
|
2009 |
|
|
|
2009 |
|
elesclomol*
|
|
oxidative stress inducer
|
|
metastatic melanoma
|
|
III
|
|
|
|
|
|
|
|
|
pazopanib
|
|
multi-kinase angiogenesis inhibitor
|
|
sarcoma
|
|
III |
|
|
|
|
|
|
|
|
pazopanib +
|
|
multi-kinase angiogenesis inhibitor + Her2
|
|
inflammatory breast cancer
|
|
III |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
and EGFR dual kinase inhibitor |
|
|
|
|
|
|
|
|
|
|
|
|
Revolade/Promacta
|
|
thrombopoietin receptor agonist
|
|
chronic liver disease induced thrombocytopaenia
|
|
III |
|
|
|
|
|
|
|
|
Revolade/Promacta
|
|
thrombopoietin receptor agonist
|
|
hepatitis C induced thrombocytopaenia
|
|
III |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
breast cancer, adjuvant therapy
|
|
III |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
breast cancer, first line therapy
|
|
III
|
|
|
2009 |
|
|
|
2009 |
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
gastric cancer
|
|
III |
|
|
|
|
|
|
|
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
head & neck squamous cell carcinoma (resectable disease)
|
|
III |
|
|
|
|
|
|
|
|
Duodart (Avodart +
alpha blocker)
|
|
5-alpha reductase inhibitor + alpha blocker
|
|
benign prostatic hyperplasia fixed dose combination
|
|
Submitted
|
|
|
S:Dec08
|
|
|
2009 |
|
pazopanib
|
|
multi-kinase angiogenesis inhibitor
|
|
renal cell cancer (also age-related macular degeneration)
|
|
Submitted
|
|
|
S:Feb09 |
|
|
|
S:Dec08
|
Zunrisa/Rezonic
|
|
NK1 antagonist
|
|
chemotherapy-induced & postoperative nausea & vomiting
|
|
Submitted
|
|
|
S:Jul08
|
|
|
S:May08
|
Hycamtin
|
|
topoisomerase I inhibitor (oral)
|
|
small cell lung cancer, second-line therapy
|
|
Approved
|
|
|
A:Mar08
|
|
|
A:Oct07
|
Revolade/Promacta
|
|
thrombopoietin receptor agonist
|
|
idiopathic thrombocytopaenic purpura
|
|
Approved
|
|
|
S:Dec08
|
|
|
A:Nov08
|
Tyverb/Tykerb
|
|
Her2 and EGFR dual kinase inhibitor
|
|
refractory breast cancer
|
|
Approved
|
|
|
A:Jun08
|
|
|
A:Mar07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Respiratory & Immuno-inflammation |
|
|
|
|
|
|
|
|
|
|
610677
|
|
p38 kinase inhibitor (inhaled)
|
|
COPD
|
|
I |
|
|
|
|
|
|
|
|
656933
|
|
Chemokine receptor (CXCR2) antagonist
|
|
cystic fibrosis & COPD
|
|
I |
|
|
|
|
|
|
|
|
705498
|
|
transient receptor potential vanilloid (TRPV1)
antagonist (intranasal)
|
|
non-allergic rhinitis
|
|
I |
|
|
|
|
|
|
|
|
962040
|
|
motilin receptor agonist
|
|
delayed gastric emptying
|
|
I |
|
|
|
|
|
|
|
|
1399686
|
|
anti-inflammatory macrolide conjugate (oral)
|
|
inflammatory bowel disease
|
|
I |
|
|
|
|
|
|
|
|
2245840
|
|
SIRT1 activator
|
|
COPD (also type 2 diabetes)
|
|
I |
|
|
|
|
|
|
|
|
159797
|
|
long-acting beta2 agonist
|
|
COPD, also COPD & asthma in combination with a
glucocorticoid agonist
|
|
II |
|
|
|
|
|
|
|
|
159802
|
|
long-acting beta2 agonist
|
|
COPD, also COPD & asthma in combination with a
glucocorticoid agonist
|
|
II |
|
|
|
|
|
|
|
|
256066
|
|
PDE IV inhibitor (inhaled)
|
|
asthma & COPD
|
|
II |
|
|
|
|
|
|
|
|
573719
|
|
muscarinic acetylcholine antagonist
|
|
COPD
|
|
II |
|
|
|
|
|
|
|
|
685698
|
|
glucocorticoid agonist
|
|
asthma, also COPD & asthma in combination with a
|
|
II |
|
|
|
|
|
|
|
|
835726
|
|
histamine H1/H3 dual antagonist (oral)
|
|
long-acting beta2 agonist
allergic rhinitis
|
|
II |
|
|
|
|
|
|
|
|
870086
|
|
novel glucocorticoid agonist
(inhaled)
|
|
asthma
|
|
II |
|
|
|
|
|
|
|
|
642444
|
|
long-acting beta2 agonist
|
|
COPD, also COPD & asthma in combination with a
glucocorticoid agonist
|
|
II |
|
|
|
|
|
|
|
|
961081
|
|
muscarinic antagonist, beta2 agonist
|
|
COPD
|
|
II |
|
|
|
|
|
|
|
|
1004723
|
|
histamine H1/H3 dual antagonist (intranasal)
|
|
allergic rhinitis
|
|
II |
|
|
|
|
|
|
|
|
2190915
|
|
5-lipoxygenase-activating protein (FLAP)
inhibitor
|
|
asthma
|
|
II |
|
|
|
|
|
|
|
|
darotropium
|
|
muscarinic acetylcholine antagonist
|
|
COPD
|
|
II |
|
|
|
|
|
|
|
|
darotropium + 642444
|
|
muscarinic acetylcholine antagonist +
long-acting beta2 agonist
|
|
COPD
|
|
II |
|
|
|
|
|
|
|
|
losmapimod (856553)
|
|
p38 kinase inhibitor (oral)
|
|
COPD (also cardiovascular disease & depression)
|
|
II |
|
|
|
|
|
|
|
|
Entereg
|
|
peripheral mu-opioid antagonist
|
|
post operative ileus
|
|
Approved
|
|
|
N/A |
|
|
|
A:May08
|
|
* See Note 40 to
the financial statements, Post balance sheet events
|
|
|
|
|
|
|
|
|
|
|
|
196 GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
Product development pipeline continued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated submission dates |
Compound |
|
Type |
|
Indication |
|
Phase |
|
|
MAA |
|
|
|
BLA |
|
|
Paediatric Vaccines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mosquirix
|
|
recombinant
|
|
malaria prophylaxis
|
|
II |
|
|
|
|
|
|
|
|
Hib-MenCY-TT
|
|
conjugated
|
|
Neisseria meningitis groups C & Y disease & Haemophilus
influenzae type b disease prophylaxis
|
|
III
|
|
|
|
|
|
|
2009 |
|
MenACWY-TT
|
|
conjugated
|
|
Neisseria meningitis groups A, C, W & Y disease prophylaxis
|
|
III |
|
|
|
|
|
|
|
|
Synflorix
|
|
conjugated
|
|
Streptococcus pneumoniae diseases prophylaxis in infants
& children
|
|
Submitted
|
|
|
PO:Jan09
|
|
|
|
|
Kinrix
|
|
subunit inactivated
|
|
diphtheria, tetanus, pertussis and poliomyelitis prophylaxis
(booster 5th dose)
|
|
Approved
|
|
|
|
|
|
|
A:Jun08
|
Rotarix
|
|
live attenuated (oral)
|
|
rotavirus-induced gastroenteritis prophylaxis
|
|
Approved
|
|
|
A:Feb06
|
|
|
A:Apr08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Vaccines |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cytomegalovirus
|
|
recombinant
|
|
cytomegalovirus infection prophylaxis
|
|
I |
|
|
|
|
|
|
|
|
HIV
|
|
recombinant
|
|
HIV infection prophylaxis
|
|
I |
|
|
|
|
|
|
|
|
NTHi-Pneumo
|
|
recombinant
|
|
Streptococcus pneumoniae and Haemophilus influenzae
disease prophylaxis in adults
|
|
I |
|
|
|
|
|
|
|
|
S. pneumoniae adult
|
|
recombinant conjugated
|
|
Streptococcus pneumoniae disease prophylaxis
|
|
I |
|
|
|
|
|
|
|
|
Tuberculosis
|
|
recombinant
|
|
tuberculosis prophylaxis
|
|
II |
|
|
|
|
|
|
|
|
Zoster
|
|
recombinant
|
|
Herpes Zoster prevention
|
|
II |
|
|
|
|
|
|
|
|
Flu pandemic &
pre-pandemic
|
|
H5N1 inactivated split monovalent
(Quebec)
|
|
pandemic influenza prophylaxis
|
|
III
|
|
|
2009 |
|
|
|
2009 |
|
New generation flu vaccine
|
|
inactivated split trivalent
|
|
seasonal influenza prophylaxis for the elderly
|
|
III |
|
|
|
|
|
|
|
|
Simplirix
|
|
recombinant
|
|
genital herpes prophylaxis
|
|
III |
|
|
|
|
|
|
|
|
Boostrix
|
|
subunit
|
|
adult booster for diphtheria, tetanus & pertussis
|
|
Approved
|
|
|
A:Jun00
|
|
|
A:Dec08
|
Pandemrix (Flu pandemic)
|
|
H5N1 inactivated split monovalent
(Dresden)
|
|
pandemic influenza prophylaxis
|
|
Approved
|
|
|
A:May08
|
|
|
|
|
Prepandrix
|
|
H5N1 inactivated split
monovalent (Dresden)
|
|
pre-pandemic influenza prophylaxis
|
|
Approved
|
|
|
A:May08
|
|
|
|
|
(Flu pre-pandemic)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cervarix
|
|
recombinant
|
|
human papilloma virus infection prophylaxis
|
|
Approved
|
|
|
A:Sep07
|
|
|
AL:Dec07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antigen Specific Cancer Immunotherapeutic (ASCI) |
|
|
|
|
|
|
|
|
|
|
|
|
WT1
|
|
recombinant
|
|
treatment of acute myelogenous leukaemia
|
|
I |
|
|
|
|
|
|
|
|
MAGE-A3 ASCI
|
|
recombinant
|
|
treatment of melanoma
|
|
III |
|
|
|
|
|
|
|
|
MAGE-A3 ASCI
|
|
recombinant
|
|
treatment of non-small cell lung cancer
|
|
III |
|
|
|
|
|
|
|
|
|
The Ordinary Shares of the company are listed on the London Stock Exchange and on the New York
Stock Exchange (NYSE) in the form of American Depositary Shares (ADS). For details of listed debt
and where it is listed refer to Note 32, Net debt.
Share price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
|
£ |
|
|
£ |
|
|
£ |
|
|
At 1st January |
|
|
12.79 |
|
|
|
13.44 |
|
|
|
14.69 |
|
High during the year |
|
|
13.85 |
|
|
|
14.93 |
|
|
|
15.77 |
|
Low during the year |
|
|
9.95 |
|
|
|
11.60 |
|
|
|
13.26 |
|
At 31st December |
|
|
12.85 |
|
|
|
12.79 |
|
|
|
13.44 |
|
Increase/(decrease) |
|
|
0.5 |
% |
|
|
(5 |
)% |
|
|
(9 |
)% |
|
The table above sets out the middle market closing prices. The companys share price increased by
0.5% in 2008. This compares with a decrease in the FTSE 100 index of 31% during the year. The share
price on 24th February 2009 was £11.06.
Market capitalisation
The market capitalisation, based on shares in issue excluding Treasury shares, of GlaxoSmithKline
at 31st December 2008 was £67 billion. At that date GSK was the fifth largest company by market
capitalisation on the FTSE index.
SmithKline Beecham plc Floating Rate Unsecured Loan Stock 1990/2010
The loan stock is not listed on any exchange but holders may require SmithKline Beecham plc to
redeem their loan stock at par, i.e. £1 for every £1 of loan stock held, on the first business day
of March, June, September and December. Holders wishing to redeem all or part of their loan stock
should complete the notice on the back of their loan stock certificate and return it to the
registrar, to arrive at least 30 days before the relevant redemption date.
Taxation
General information concerning the UK and US tax effects of share ownership is set out on page 200
Taxation information for shareholders.
Dividends
GlaxoSmithKline pays dividends quarterly. It continues to increase cash returns to shareholders
through its dividend policy. Dividends remain an essential component of total shareholder return
and GSK is committed to increasing its dividend over the long-term. Details of the dividends
declared, the amount and the payment dates are given in Note 16 to the financial statements,
Dividends.
Dividends per share
The table below sets out the dividends per share in the last five years.
|
|
|
|
|
|
Year |
|
pence |
|
|
|
2008 |
|
|
57 |
|
2007 |
|
|
53 |
|
2006 |
|
|
48 |
|
2005 |
|
|
44 |
|
2004 |
|
|
42 |
|
|
Dividends per ADS
The table below sets out the dividends per ADS in US dollars in the last five years, translated
into US dollars at applicable exchange rates.
|
|
|
|
|
|
Year |
|
US$ |
|
|
|
2008 |
|
|
2.01 |
|
2007 |
|
|
2.14 |
|
2006 |
|
|
1.80 |
|
2005 |
|
|
1.57 |
|
2004 |
|
|
1.53 |
|
|
Dividend calendar
|
|
|
|
|
|
|
|
Quarter |
|
Ex-dividend date |
|
Record date |
|
Payment date |
|
|
Q4 2008
|
|
11th February 2009
|
|
13th February 2009
|
|
9th April 2009 |
Q1 2009
|
|
29th April 2009
|
|
1st May 2009
|
|
9th July 2009 |
Q2 2009
|
|
29th July 2009
|
|
31st July 2009
|
|
8th October 2009 |
Q3 2009
|
|
4th November 2009
|
|
6th November 2009
|
|
7th January 2010 |
|
Financial reporting calendar
|
|
|
Publication |
|
Date |
|
Results announcements |
|
|
Quarter 1
|
|
April 2009 |
Quarter 2
|
|
July 2009 |
Quarter 3
|
|
October 2009 |
Preliminary/Quarter 4
|
|
January 2010 |
|
Annual report/summary
|
|
February/March 2010 |
|
Results announcements
Results announcements are issued to the London Stock Exchange and are available on its news
service. Shortly afterwards, they are issued to the media, are made available on the website and
sent to the US Securities and Exchange Commission and the NYSE.
Financial reports
GSK publishes an Annual Report and for the shareholder not needing the full detail of the Report, a
Summary document. These are available from the date of publication on the website. The Summary is
sent to all shareholders. Shareholders may elect to receive the Annual Report by writing to the
registrars. Alternatively shareholders may elect to receive notification by email of the
publication of financial reports by registering on www.shareview.co.uk.
Copies of previous financial reports are available on GSKs website. Printed copies can be obtained
from the registrars in the UK and from the GSK Response Center in the USA.
Corporate responsibility report
In late March 2009, GSK will publish on the website its Corporate Responsibility Report covering performance in areas including community investment,
ethics and integrity, access to medicines, R&D and environment, health and safety.
|
|
|
|
|
|
|
|
|
|
|
|
198 GSK Annual Report 2008 |
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Shareholder information continued |
|
|
|
|
|
|
|
Nature of trading market
The following tables set out, for the periods indicated, the high and low middle market closing
quotations in pence for the shares on the London Stock Exchange, and the high and low last reported
sales prices in US dollars for the ADS on the NYSE.
|
|
|
|
|
|
|
|
|
|
|
Pence per share |
|
|
|
High |
|
|
Low |
|
|
Quarter ended 31st March 2009* |
|
|
1305 |
|
|
|
1106 |
|
February 2009* |
|
|
1277 |
|
|
|
1106 |
|
January 2009 |
|
|
1305 |
|
|
|
1215 |
|
December 2008 |
|
|
1285 |
|
|
|
1102 |
|
November 2008 |
|
|
1250 |
|
|
|
1066 |
|
October 2008 |
|
|
1229 |
|
|
|
995 |
|
September 2008 |
|
|
1327 |
|
|
|
1185 |
|
Quarter ended 31st December 2008 |
|
|
1285 |
|
|
|
995 |
|
Quarter ended 30th September 2008 |
|
|
1327 |
|
|
|
1103 |
|
Quarter ended 30th June 2008 |
|
|
1153 |
|
|
|
1053 |
|
Quarter ended 31st March 2008 |
|
|
1385 |
|
|
|
1001 |
|
Quarter ended 31st December 2007 |
|
|
1333 |
|
|
|
1160 |
|
Quarter ended 30th September 2007 |
|
|
1341 |
|
|
|
1215 |
|
Quarter ended 30th June 2007 |
|
|
1488 |
|
|
|
1272 |
|
Quarter ended 31st March 2007 |
|
|
1493 |
|
|
|
1344 |
|
Year ended 31st December 2006 |
|
|
1577 |
|
|
|
1326 |
|
Year ended 31st December 2005 |
|
|
1544 |
|
|
|
1175 |
|
Year ended 31st December 2004 |
|
|
1299 |
|
|
|
1042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
US dollars per ADS |
|
|
|
High |
|
|
Low |
|
|
Quarter ended 31st March 2009* |
|
|
39.24 |
|
|
|
31.91 |
|
February 2009* |
|
|
37.36 |
|
|
|
31.91 |
|
January 2009 |
|
|
39.24 |
|
|
|
34.09 |
|
December 2008 |
|
|
37.88 |
|
|
|
32.02 |
|
November 2008 |
|
|
40.19 |
|
|
|
32.54 |
|
October 2008 |
|
|
43.39 |
|
|
|
35.41 |
|
September 2008 |
|
|
47.01 |
|
|
|
42.08 |
|
Quarter ended 31st December 2008 |
|
|
43.39 |
|
|
|
32.02 |
|
Quarter ended 30th September 2008 |
|
|
49.03 |
|
|
|
42.08 |
|
Quarter ended 30th June 2008 |
|
|
45.36 |
|
|
|
41.39 |
|
Quarter ended 31st March 2008 |
|
|
54.36 |
|
|
|
40.85 |
|
Quarter ended 31st December 2007 |
|
|
54.14 |
|
|
|
47.87 |
|
Quarter ended 30th September 2007 |
|
|
54.23 |
|
|
|
49.43 |
|
Quarter ended 30th June 2007 |
|
|
59.35 |
|
|
|
51.28 |
|
Quarter ended 31st March 2007 |
|
|
58.37 |
|
|
|
52.66 |
|
Year ended 31st December 2006 |
|
|
58.38 |
|
|
|
50.15 |
|
Year ended 31st December 2005 |
|
|
53.53 |
|
|
|
44.48 |
|
Year ended 31st December 2004 |
|
|
47.50 |
|
|
|
39.04 |
|
|
Internet
Information about the company including details of the share price is available on GSKs website at
www.gsk.com. Information made available on the website does not constitute part of this Annual
Report.
Annual General Meeting 2009
The Queen Elizabeth II Conference Centre, 20th May 2009
Broad Sanctuary, Westminster,
London SW1P
3EE
The AGM is the companys principal forum for communication with private shareholders. In addition
to the formal business there will be a presentation by the Chief Executive Officer on the
performance of the Group and its future development. There will be opportunity for questions to the
Board, and the Chairmen of the Boards Committees will take questions on matters relating to those
committees.
Investors holding shares through a nominee service should arrange with that nominee service to be
appointed as a corporate representative or proxy in respect of their shareholding in order to
attend and vote at the meeting.
ADR holders wishing to attend the meeting must obtain a proxy from The Bank of New York Mellon
which will enable them to attend and vote on the business to be transacted. ADR holders may
instruct The Bank of New York Mellon as to the way in which the shares represented by their ADR
should be voted by completing and returning the voting card provided by the bank in accordance with
the instructions given.
Documents on display
The Memorandum and Articles of Association of the company and other documents referred to in this
Annual Report are available for inspection at the Registered Office of the company.
Exchange controls and other limitations affecting security holders
There are currently no UK laws, decrees or regulations restricting the import or export of capital
or affecting the remittance of dividends or other payments to holders of the companys shares who
are non-residents of the UK. There are no limitations relating only to non-residents of the UK
under English law or the companys Memorandum and Articles of Association on the right to be a
holder of, and to vote in respect of, the companys shares.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 199
|
|
|
|
|
Shareholder information |
|
|
|
|
|
|
|
|
|
Shareholder information continued |
|
|
|
|
|
|
|
Duplicate publications
Queries relating to receipt of duplicate copies of GSKs
publications should be addressed to the registrars.
Investor relations
Investor Relations may be contacted as follows:
UK
980 Great West Road, Brentford, Middlesex TW8 9GS
Tel: +44 (0)20 8047 5000
USA
One Franklin Plaza, PO Box 7929, Philadelphia PA 19101
Tel: 1 888 825 5249 (US toll free)
Tel: +1 215 751 4000 (outside USA)
Registrar
The companys registrars are:
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
www.shareview.co.uk
Tel: 0871 384 2991 inside the UK
Tel: +44 (0)121 415 7067 outside the UK
Equiniti also provides the following services:
|
|
Nominee dealing account and Individual Savings Account (ISA) |
|
|
|
GlaxoSmithKline Corporate Sponsored Nominee |
|
|
|
Shareview service |
|
|
|
Share dealing service |
|
|
|
Dividend Reinvestment Plan |
Share dealing service
Shareholders may trade shares, either held in certificates or in the Corporate Sponsored Nominee by
internet or telephone through Shareview dealing, a share dealing service provided by Equiniti. For
internet deals log on to www.shareview.co.uk/dealing. For telephone deals call 08456 037 037
(inside the UK only).
For the nominee and ISA service, either www.shareview.co.uk/ dealing or call 0845 300 0430.
Telephone services are available between 8.00 and 18.00, Monday to Friday (market trading hours
8.00 16.30).
Glaxo Wellcome and SmithKline Beecham
Corporate PEPs
The Share Centre Limited
Oxford House, Oxford Road, Aylesbury, Bucks HP21 8SZ
Tel: +44 (0)1296 414141
ADR programme administrator
The ADR programme is administered by:
BNY Mellon Shareowner Services
PO Box 358516
Pittsburgh, PA 15252-8516
www.bnymellon.com/shareowner
Tel: 1 877 353 1154 (US toll free)
Tel: +1 201 680 6825 (outside USA)
email: shrrelations@bnymellon.com
The administrators also provide Global BuyDIRECT, a direct ADS purchase/sale and dividend
reinvestment plan for ADR holders.
GSK Response Center
Tel: 1 888 825 5249 (US toll free)
The provision of the details above is not intended to be an invitation or inducement to engage in
an investment activity. Advice on share dealing should be obtained from a stockbroker or
independent financial adviser.
This statement is based upon UK and US tax laws and practices at the date of this report. It is
intended only as a general guide. Holders are advised to consult their advisers with respect to the
tax consequences of the purchase and ownership of their shares or ADR, and the consequences under
state and local tax laws in the USA and the implications of the current UK/US Income Tax
convention.
US holders of ADR generally will be treated as the owners of the underlying shares for the purposes
of the current USA/UK double taxation conventions relating to income and gains (Income Tax
Convention), estate and gift taxes (Estate and Gift Tax Convention) and for the purposes of the US
Internal Revenue Code of 1986, as amended (the Code).
UK shareholders
Taxation of dividends
From 6th April 1999, the rate of tax credits was reduced to one ninth. As a result of compensating
reductions in the rate of tax on dividend income, there is no increase in the tax borne by UK
resident individual shareholders. Tax credits are, however, no longer repayable to shareholders
with a tax liability of less than the associated tax credit.
Taxation of capital gains
UK shareholders may be liable for UK tax on gains on the disposal of shares or ADR. For disposals
made prior to 6th April 2008, they may also be entitled to indexation relief and taper relief on
such sales. Indexation relief is calculated on the market value of shares at 31st March 1982 and on
the cost of any subsequent purchases from the date of such purchase. Indexation relief for
individual shareholders ceased on 5th April 1998. A capital gain is taxed at the marginal tax rate
of the individual. For disposals after 5th April 2008 no indexation or taper relief will be
available and a capital gain will be taxed at a flat rate of 18% rather than the marginal tax rate
of the individual.
Inheritance tax
Individual shareholders may be liable to inheritance tax on the transfer of shares or ADR. Tax may
be charged on the amount by which the value of the shareholders estate is reduced as a result of
any transfer by way of gift or other disposal at less than full market value.
Such a gift or other disposal is subject to both UK inheritance tax and US estate or gift tax. The
Estate and Gift Tax Convention would generally provide for tax paid in the USA to be credited
against tax payable in the UK.
Stamp duty
UK stamp duty or stamp duty reserve tax (SDRT) will, subject to certain exemptions, be payable on
the purchase of shares at a rate of 0.5% of the purchase price.
US shareholders
The following is a summary of certain UK taxation and USA federal income tax considerations that
may be relevant to a US holder of shares or ADR. This summary only applies to a shareholder that
holds shares or ADR as capital assets, is a citizen or resident of the USA or a domestic
corporation or that is otherwise subject to United States federal income taxation on a net income
basis in respect of the shares or ADR, and is not resident in the UK for UK tax purposes and does
not hold shares for the purposes of a trade, profession or vocation that is carried on in the UK
through a branch or agency.
Taxation of dividends
The gross amount of dividends received (without reduction for any UK withholding tax) is treated as
foreign source dividend income for US tax purposes. It is not eligible for the dividend received
deduction allowed to US corporations. Dividends on ADR are payable in US dollars; dividends on
shares are payable in Sterling. Dividends paid in pounds Sterling will be included in income in the
US dollar amount calculated by reference to the exchange rate on the day the dividends are received
by the holder. Subject to certain exceptions for short-term or hedged positions, an individual
eligible US holder will be subject to US taxation at a maximum rate of 15% in respect of qualified
dividends received before 2011. Shareholders are advised to consult their own Tax Advisers to
confirm their eligibility.
Taxation of capital gains
Generally, US holders will not be subject to UK capital gains tax, but will be subject to US tax on
capital gains realised on the sale or other disposal of shares or ADR.
Estate and gift taxes
Under the Estate and Gift Tax Convention, a US shareholder is not generally subject to UK
inheritance tax.
Stamp duty
UK stamp duty or SDRT will, subject to certain exemptions, be payable on any issue or transfer of
shares to the ADR custodian or depository at a rate of 1.5% of their price (if issued), the amount
of any consideration provided (if transferred on sale), or their value (if transferred for no
consideration).
No SDRT would be payable on the transfer of an ADR. No UK stamp duty should be payable on the
transfer of an ADR provided that the instrument of transfer is executed and remains at all times
outside the UK. Any stamp duty on the transfer of an ADR would be payable at a rate of 0.5% of the
consideration for the transfer. Any sale of the underlying shares would result in liability to UK
stamp duty or, as the case may be, SDRT at a rate of 0.5%.
|
|
|
|
|
Terms used in the Annual Report |
|
US equivalent or brief description |
|
|
|
Accelerated capital allowances
|
|
Tax allowance in excess of depreciation arising from the purchase of fixed assets that delay the
charging and payment of tax. The US equivalent of tax depreciation. |
|
|
|
|
|
American Depositary Receipt (ADR)
|
|
Receipt evidencing title to an ADS. Each GlaxoSmithKline ADR represents two Ordinary Shares. |
|
|
|
|
|
American Depositary Shares (ADS)
|
|
Listed on the New York Stock
Exchange; represents two Ordinary Shares. |
|
|
|
|
|
Basic earnings per share
|
|
Basic income per share. |
|
|
|
|
|
Called-up share capital
|
|
Ordinary Shares, issued and fully paid. |
|
|
|
|
|
CER growth
|
|
Growth at constant exchange rates. |
|
|
|
|
|
Combined Code
|
|
Guidelines required by the Listing Rules of the Financial Services Authority to address the
principal aspects of Corporate Governance. |
|
|
|
|
|
The company
|
|
GlaxoSmithKline plc. |
|
|
|
|
|
Currency swap
|
|
An exchange of two currencies, coupled with a subsequent re-exchange of those currencies,
at agreed exchange rates and dates. |
|
|
|
|
|
Defined benefit plan
|
|
Pension plan with specific employee benefits, often called final salary scheme. |
|
|
|
|
|
Defined contribution plan
|
|
Pension plan with specific contributions and a level of pension dependent upon the growth of
the pension fund. |
|
|
|
|
|
Derivative financial instrument
|
|
A financial instrument that derives its value from the price or rate of some underlying item. |
|
|
|
|
|
Diluted earnings per share
|
|
Diluted income per share. |
|
|
|
|
|
Employee Share Ownership Plan Trusts
|
|
Trusts established by the Group to satisfy share-based employee incentive plans. |
|
|
|
|
|
Finance lease
|
|
Capital lease. |
|
|
|
|
|
Freehold
|
|
Ownership with absolute rights in perpetuity. |
|
|
|
|
|
Gearing ratio
|
|
Net debt as a percentage of total equity. |
|
|
|
|
|
The Group
|
|
GlaxoSmithKline plc and its subsidiary undertakings. |
|
|
|
|
|
Hedging
|
|
The reduction of risk, normally in relation to foreign currency or interest rate movements,
by making off-setting commitments. |
|
|
|
|
|
Intangible fixed assets
|
|
Assets without physical substance, such as computer software, brands, licences, patents,
know-how and marketing rights purchased from outside parties. |
|
|
|
|
|
Non-equity minority interest
|
|
Preference shares issued by a subsidiary to outside parties. |
|
|
|
|
|
Preference shares
|
|
Shares issued at varying dividend rates that are treated as outside interests. |
|
|
|
|
|
Profit
|
|
Income. |
|
|
|
|
|
Profit attributable to shareholders
|
|
Net income. |
|
|
|
|
|
Share capital
Shareholders funds
|
|
Ordinary Shares, capital stock or common stock issued and fully paid.
Shareholders equity. |
|
|
|
|
|
Share option
|
|
Stock option. |
|
|
|
|
|
Share premium account
|
|
Additional paid-up capital or paid-in surplus (not distributable). |
|
|
|
|
|
Shares in issue
|
|
The number of shares outstanding, excluding Treasury shares. |
|
|
|
|
|
Statement of recognised income and expense
|
|
Statement of comprehensive income. |
|
|
|
|
|
Subsidiary
|
|
An entity in which GlaxoSmithKline holds a majority shareholding and/or exercises control. |
|
|
|
|
|
Treasury share
|
|
Treasury stock. |
|
|
|
|
|
Turnover
|
|
Revenue. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
202 GSK Annual Report 2008
|
|
|
|
|
|
|
|
|
|
Memorandum and Articles of Association of GlaxoSmithKline |
|
|
|
|
|
|
|
The following is a summary of the principal provisions of the companys Memorandum of Association
and Articles of Association. Shareholders should not rely on this summary, but should instead refer
to the current Memorandum and Articles of Association which are filed with the Registrar of
Companies in the UK or can be viewed on the companys website. The Memorandum contains the
fundamental provisions of the companys constitution. The Articles contain the rules for the
internal management and control of the company.
Memorandum of Association
The Memorandum of Association of GlaxoSmithKline provides that its principal objects are, among
other things, to be the holding company of Glaxo Wellcome plc and SmithKline Beecham plc and to
carry on business as a general commercial company and to carry on any trade or business or activity
of any nature which may seem to the Directors to be capable of being conveniently or advantageously
carried on.
Articles of Association
(a) Voting
All resolutions put to the vote at general meetings will be decided by poll. On a poll, every
member who is present in person or by proxy shall have one vote for every Ordinary Share of which
he is the holder. Unless the Directors otherwise decide, the right to attend a general meeting and
voting rights may not be exercised by a member who has not paid to the company all calls and other
sums then payable by him in respect of shares in the company. The right to attend a general meeting
and voting rights may not be exercised by a member who is subject to an order under Section 794 of
the Companies Act 2006 because he has failed to provide GlaxoSmithKline with information concerning
his interests in shares within the prescribed period, as required by Section 793 of the Companies
Act 2006.
(b) Transfer of Ordinary Shares
Any member may transfer his Ordinary Shares which are in certificated form by an instrument of
transfer in any usual form or in any other form which the Directors may approve. Such instrument
must be properly signed, stamped or certified and lodged with GlaxoSmithKline accompanied by the
relevant share certificate(s) and such other evidence as the Directors may reasonably require to
show the right of the transferor to make the transfer. Every transfer of Ordinary Shares which are
in uncertificated form must be carried out by means of a relevant system such as CREST. The
Directors may, in their absolute discretion and without giving any reason, decline to register any
transfer of any share which is not a fully paid share.
The Articles contain no other restrictions on the transfer of fully paid shares provided (i) the
transfer is in favour of not more than four transferees; (ii) the transfer is in respect of only
one class of shares; and (iii) the holder of the shares is not subject to an order under Section
794 of the Companies Act 2006. Notice of refusal to register a transfer must be sent to the
transferee within two months of the instrument of transfer being lodged. The Directors may decline
to register a transfer of Ordinary Shares by a person holding 0.25 per cent or more of the existing
shares of a class if such person is subject to an order under Section 794 Companies Act 2006, after
failure to provide GlaxoSmithKline with information concerning interests in those shares required
to be provided under the Companies Act, unless the transfer is carried out pursuant to an arms
length sale.
Provisions in the Articles will not apply to uncertificated shares to the extent that they are
inconsistent with:
(i) |
|
the holding of shares in uncertificated form; |
|
(ii) |
|
the transfer of title to
shares by means of a system such as CREST; and |
|
(iii) |
|
any provisions of the relevant regulations. |
(c) Dividends and distribution of assets on liquidation
The profits of GlaxoSmithKline which are available for distribution and permitted by law to be
distributed and which GlaxoSmithKline may from time to time determine, upon the recommendation of
the Directors, to distribute by way of dividend, in respect of any accounting reference period
shall be distributed by way of dividend among holders of Ordinary Shares. If in their opinion
GlaxoSmithKlines financial position justifies such payments, the Directors may, as far as any
applicable legislation allows, pay interim dividends on shares of any class, of such amounts and in
respect of such periods as they think fit. Except in so far as the rights attaching to, or the
terms of issue of, any share otherwise provide, all dividends will be declared, apportioned and
paid pro rata according to the amounts paid up on the shares during any portion of the period in
respect of which the dividend is paid. As GlaxoSmithKline has only one class of Ordinary Shares,
the holders of such shares will under general law be entitled to participate in any surplus assets
in a winding-up in proportion to their shareholdings.
(d) Variation of rights and changes in capital
Subject to the provisions of the Companies Act and to the terms of issue of the shares concerned,
the rights attached to any class of shares may be varied with the written consent of the holders of
three-quarters in nominal value of the issued shares of that class or with the sanction of a
special resolution passed at a separate meeting of the holders of shares of that class. At every
such separate meeting, the provisions of the Articles relating to general meetings shall apply,
except the necessary quorum shall be at least two persons holding or representing as proxy at least
one-third in nominal value of the issued shares of the class (but provided that at any adjourned
meeting any holder of shares of the class present in person or by proxy shall be a quorum).
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 203
|
|
|
|
|
|
|
|
|
|
Memorandum and Articles of Association of GlaxoSmithKline continued |
|
|
|
|
|
|
|
GlaxoSmithKline may by ordinary resolution increase its share capital, consolidate, or consolidate
then sub-divide all, or any of its shares into shares of a larger nominal amount, cancel any shares
not taken or agreed to be taken by any person and subject to the provisions of the Companies Act
2006, sub-divide its shares into shares of a smaller nominal amount. GlaxoSmithKline may, subject
to the provisions of the Companies Act, by special resolution reduce its share capital or any
capital redemption reserve, share premium account or other undistributable reserve. GlaxoSmithKline
may also, subject to the provisions of the Companies Act and the rights of any of the holders of
any class of shares, purchase its own shares.
(e) Unclaimed dividends
Unless the Directors decide otherwise, any dividend unclaimed after a period of 12 years from the
date when a resolution was passed for payment will be forfeited and revert to GlaxoSmithKline.
GlaxoSmithKline may stop sending dividend cheques or warrants by post, or employ such other means
of payment in respect of any shares, if, at least two consecutive payments have remained uncashed
or are returned undelivered or, if one payment has remained uncashed or is returned undelivered and
GlaxoSmithKline cannot establish a new address for the holder after making reasonable enquiries
however, in either case, GlaxoSmithKline must resume sending cheques or warrants or employ such
other means of payment if the holder or any person entitled to the shares by transmission requests
the resumption.
(f) Untraced shareholders
GlaxoSmithKline may sell any shares in GlaxoSmithKline after advertising its intention and waiting
for three months if the shares have been in issue for at least ten years and during that period at
least three dividends have become payable on them and have not been claimed and, so far as any
Director is aware, GlaxoSmithKline has not received any communication from the holder of the shares
or any person entitled to them by transmission. Upon any such sale, GlaxoSmithKline will become
indebted to the former holder of the shares or the person entitled to them by transmission for an
amount equal to the net proceeds of sale.
(g) Limitations on rights of non-resident or foreign shareholders
There are no limitations imposed by the Articles of Association on the rights of non-resident or
foreign shareholders except that there is no requirement for GlaxoSmithKline to serve notices on
shareholders outside the United Kingdom and the United States.
(h) General meetings of shareholders
GlaxoSmithKline is required by the Companies Act to hold an annual general meeting each year.
General meetings of shareholders may be called as necessary by the Board and must be called
promptly upon receipt of a requisition from shareholders.
(i) Conflicts of interest
The Directors may authorise any matter which would otherwise involve a Director breaching his duty
under the Companies Act to avoid conflicts of interest (Conflict). A Director seeking
authorisation in respect of a Conflict shall declare to the Directors the nature and extent of his
interest in a Conflict as soon as is reasonably practicable. The relevant Director and any other
Director with a similar interest shall not count towards the quorum nor vote on any resolution
giving such authority and if the other members of the Board so decide, shall be excluded from any
Board meeting while the Conflict is under consideration.
(j) Other Conflicts of Interest
Subject to the provisions of the Companies Acts, and provided the nature of a Directors interest
has been declared to the Directors, a Director is not disqualified by that office from contracting
with GlaxoSmithKline in any manner, nor is any contract in which he is interested liable to be
avoided, and any Director who is so interested is not liable to account to GlaxoSmithKline or the
members for any benefit realised by the contract by reason of the Director holding that office or
of the fiduciary relationship thereby established. However, no Director may vote on any resolution
relating specifically to his own appointment (including remuneration) or the terms of his
termination or relating to any contract in which he has an interest (subject to certain
exceptions).
A Director may (or any firm of which he is a partner, employee or member may) act in a
professional capacity for GlaxoSmithKline (other than as auditor) and be remunerated for so doing.
A Director may also hold any other office with GlaxoSmithKline (other than auditor) or be or become
director or other officer of, or be otherwise interested in, any holding company or subsidiary of
GlaxoSmithKline or in which GlaxoSmithKline may be interested and will not be liable to account to
GlaxoSmithKline or the members for any benefit received by him.
(k) Directors remuneration
Each of the Directors will be paid a fee at such rate as may from time to time be determined by the
Directors. Such fees may be satisfied in shares or in any other non-cash form. Any Director who is
appointed to any executive office, acts as Chairman, serves on any committee of the Directors or
performs any other services which the Directors consider to extend beyond the ordinary services of
a Director shall be entitled to receive such remuneration (whether by way of salary, commission or
otherwise) as the Directors may decide. Each Director may be paid reasonable travelling, hotel and
other expenses he incurs in attending and returning from meetings of the Directors or committees of
the Directors, or general meetings of GlaxoSmithKline, or otherwise incurred in connection with the
performance of his duties for GlaxoSmithKline.
|
|
|
|
|
|
|
|
|
|
|
|
204 GSK Annual Report 2008 |
|
|
|
|
|
|
|
|
Memorandum and Articles of Association of GlaxoSmithKline continued |
|
|
|
|
|
|
|
(l) Pensions and gratuities for Directors
The Directors or any committee authorised by the Directors may provide benefits by the payment of
gratuities, pensions or insurance or other allowances or benefits for any Director or former
Director or their relations, connected persons or dependants.
(m) Borrowing powers
Subject to the provisions of the Companies Act, the Directors may exercise all GlaxoSmithKlines
powers to borrow money; to mortgage or charge all or any of GlaxoSmithKlines undertaking, property
(present and future), and uncalled capital; to issue debentures and other securities; and to give
security either outright or as collateral security for any debt, liability or obligation or
GlaxoSmithKline or of any third party.
(n) Retirement and removal of Directors
A Director is subject to re-election at every annual general meeting of GlaxoSmithKline, if: (i) he
or she held office at the time of the two previous annual general meetings and did not retire by
rotation at either of them; (ii) if he or she held office for a continuous period of nine years or
more; or (iii) if he or she has been appointed by the Board since the last annual general meeting.
The company may by Special Resolution remove any Director before the expiration of his period of
office. No Director is required to retire by reason of his age, nor do any special formalities
apply to the appointment or re-election of any Director who is over any age limit. No shareholding
qualification for Directors shall be required.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 205
|
|
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange Corporate Governance Standards and GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
On 4th
November 2003, the NYSE adopted new corporate governance
standards. The application of the NYSEs standards is restricted for foreign companies, recognising
that they have to comply with domestic requirements. As a foreign private issuer, the company must comply with the following NYSE standards:
1. |
|
the company must satisfy the audit committee requirements of the SEC; |
|
2. |
|
the CEO must promptly notify the NYSE in writing after any executive officer of the company becomes
aware of any material non-compliance with any applicable provisions of the NYSEs corporate governance standards; |
|
3. |
|
the company must submit an annual affirmation to the NYSE affirming GlaxoSmithKlines compliance with applicable NYSE corporate
governance standards, and submit interim affirmations to the NYSE notifying it of specified changes to the Audit Committee; and |
|
4. |
|
the company must provide a brief description of any significant differences between its corporate governance practices and those
followed by US companies under the NYSE listing standards. |
As a company listed on the London Stock Exchange, GlaxoSmithKline plc (hereinafter
GlaxoSmithKline in the table below) is required to comply with the UK Listing Authority Listing Rules and to report
non-compliance with the Combined Code.
The table below discloses differences between GlaxoSmithKlines domestic corporate governance
practices and the NYSE corporate governance standards applicable to US companies.
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
Director Independence
1. |
|
Listed companies must have a majority of independent directors. |
GlaxoSmithKline complies with the equivalent domestic requirements contained in the Combined Code.
The last update to the Combined Code for reporting years beginning on or after 1st November 2006
took effect in June 2006. A new version was issued by the UK Financial Reporting Council (FRC) in
June 2008 but will only take effect for reporting years commencing on or after 29th June 2008.
The Combined Code requires that the Board should
include a balance of Executive and Non-Executive Directors (and, in particular, independent
Non-Executive Directors) such that no individual or small group of individuals can dominate the
Boards decision taking. At least half the Board, excluding the Chairman, should comprise
Non-Executive Directors determined by the Board to be independent.
The Board considers that Professor Sir Roy Anderson, Dr Burns, Mr Culp, Sir Crispin Davis, Sir
Deryck Maughan, Dr Podolsky, Sir Ian Prosser, Dr Schmitz, Mr de Swaan and Sir Robert Wilson are
independent under the Combined Code. Sir Ian Prosser and Dr Ronaldo Schmitz have announced their
intention to retire from the Board with effect from 20th May 2009. Mr James Murdoch will join the
Board with effect from, and subject to the approval of the shareholders of the Company at the
AGM on 20th May 2009 as an independent Non-Executive Director.
A majority of the Board members are independent Non-
Executive Directors, in accordance with the recommendations of the Combined Code.
|
|
|
|
|
|
|
|
|
|
|
|
206 GSK Annual Report 2008 |
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange
Corporate Governance Standards and
GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines
governance practice and the NYSE Corporate Governance Standards |
|
|
2. |
|
In order to tighten the definition of independent director for purposes of these standards: |
|
(a) |
|
No director qualifies as independent unless the board of directors affirmatively determines
that the director has no material relationship with the listed company (either directly or as a
partner, shareholder or officer of an organization that has a relationship with the company).
Companies must identify which directors are independent and disclose the basis for that
determination. |
|
(b) |
|
In addition, a director is not independent if: |
|
(i) |
|
The director is, or has been within the last three years, an employee of the listed company,
or an immediate family member is, or has been within the last three years, an executive officer,
of the listed company. |
|
|
(ii) |
|
The director has received, or has an immediate family member who has received, during any
twelve-month period within the last three years, more than $100,000 in direct compensation from
the listed company, other than director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not contingent in any way on
continued service). |
|
|
(iii) |
|
(A) The director or an immediate family member is a current partner of a firm that is the
companys internal or external auditor; (B) the director is a current employee of such a firm;
(C) the director has an immediate family member who is a current employee of such a firm and who
participates in the firms audit, assurance or tax compliance (but not tax planning) practice; or
(D) the director or an immediate family member was within the last three years (but is no longer)
a partner or employee of such a firm and personally worked on the listed companys audit within
that time. |
|
|
(iv) |
|
The director or an immediate family member is, or has been within the last three years,
employed as an executive officer of another company where any of the listed companys present
executive officers at the same time serves or served on the other companys compensation
committee. |
|
|
(v) |
|
The director is a current employee, or an immediate family member is a current executive
officer, of a company that has made payments to, or received payments from, the listed company
for property or services in an amount which, in any of the last three fiscal years, exceeds the
greater of $1 million, or 2% of such other companys consolidated gross revenues. |
(For the purposes of these standards executive officer is defined to have the meaning specified
for the term officer in Rule 16a-1(f) under the Securities Exchange Act of 1934, as amended).
GlaxoSmithKline complies with the corresponding domestic requirements contained in the Combined
Code, which sets out the principles for the Company to determine
whether a Director is
independent.
The Board
is required to determine and state its reasons for the determination of whether Directors
are independent in character and judgment and whether there are relationships or circumstances
which are likely to affect, or could affect, the directors judgment. In undertaking this process,
the Board is required, amongst other factors, to consider if the Director:
|
|
has been an employee of
GlaxoSmithKline within the last five years; |
|
|
|
has, or has had within the last three years, a
material business relationship with the Company either directly or as a partner, shareholder,
director or senior employee of a body that has such a relationship with the Company; |
|
|
|
has received
or receives additional remuneration from the Company apart from a directors fee, participates in
the Companys share option or a performance-related pay scheme, or is a member of the Companys
pension scheme; |
|
|
|
has close family ties with any of the Companys
advisers, Directors or senior
employees; |
|
|
|
holds cross-directorships or has significant links with other directors through
involvement in other companies or bodies; |
|
|
|
represents a significant shareholder; or |
|
|
|
has served on
the Board for more than nine years from the date of his or her first election. |
The Board considers all its Non-Executive Directors to be independent in character and judgement
and has concluded that all its Non-Executive Directors are independent in accordance with the
Combined Code.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 207
|
|
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange Corporate Governance
Standards and GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
3. |
|
To empower non-management directors to serve as a more effective check on management, the
non-management directors of each listed company must meet at regularly scheduled executive
sessions without management. |
GlaxoSmithKline complies with the equivalent domestic
requirements set out in the Combined Code, which requires that
the Chairman of GlaxoSmithKline should hold meetings with the
Non-Executive Directors without executives present. The
Non-Executive Directors also met without the Chairman present to
appraise the Chairmans performance.
Nominating / corporate governance committee
4.
(a) |
|
Listed companies must have a nominating/corporate governance
committee composed entirely of independent directors. |
|
(b) |
|
The nominating/corporate governance committee must have a
written charter that addresses: |
|
(i) |
|
the committees purpose and responsibilities which, at minimum, must be to: identify
individuals qualified to become board members, consistent with criteria approved by the board, and
to select, or to recommend that the board select, the director nominees for the next annual meeting
of shareholders; develop and recommend to the board a set of corporate governance guidelines
applicable to the corporation; and oversee the evaluation of the
board and management; and |
|
|
(ii) |
|
an
annual performance evaluation of the committee |
GlaxoSmithKline complies with the corresponding domestic
requirements set out in the Combined Code, which require that
GlaxoSmithKline have a Nominations Committee that is comprised of a
majority of independent Non-Executive Directors.
GlaxoSmithKlines
Nominations Committee has written terms of reference in accordance
with the Combined Code. The terms of reference are available on the
companys website and explain the Nomination Committees role and
the authority delegated to it by the Board.
The Board is responsible for regularly reviewing its corporate
governance standards and practices. The Company Secretary is the
Groups Compliance Officer and oversees corporate governance
matters for the Group. The Company Secretary is responsible for
advising the Board through the Chairman on all corporate
governance matters. Domestic requirements do not mandate that
GlaxoSmithKline establish a corporate governance committee.
Management resources and compensation committee
5.
(a) |
|
Listed companies must have a compensation committee
composed entirely of independent directors. |
|
(b) |
|
The
compensation committee must have a written charter that
addresses: |
|
(i) |
|
the committees
purpose and responsibilities which, at minimum, must be to have direct responsibility to: |
|
|
(A) |
|
review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEOs
performance in light of those goals and objectives, and, either as a committee or together with the
other independent directors (as directed by the board), determine and approve the CEOs
compensation level based on this evaluation; |
|
|
(B) |
|
make recommendations to the board with respect to
non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are
subject to board approval; and |
GlaxoSmithKline complies with the equivalent domestic
requirements set out in the Combined Code, which requires that
GlaxoSmithKline have a Remuneration Committee that is comprised
entirely of independent Non-Executive Directors (which may
include the company Chairman).
GlaxoSmithKlines Remuneration Committee has written terms of
reference in accordance with the Combined Code. The terms of
reference are available on the companys website.
The Combined Code provides that the Remuneration Committee:
(a) |
|
should consult with the Chairman and/or CEO about their proposals relating to the remuneration
of Executive Directors and should delegate responsibility for setting remuneration for all
Executive Directors and the Chairman, including pension rights and any compensation payments; |
|
(b) |
|
should recommend and monitor the level and structure of remuneration for senior management; and |
|
(c) |
|
should consider what compensation commitments (including pension contributions and all other
elements) the Directors terms of appointment would entail in the event of early termination. |
|
|
|
|
|
|
|
|
|
|
|
|
208 GSK Annual Report 2008 |
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange
Corporate Governance Standards and
GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
(C) |
|
produce a compensation committee report on executive officer compensation as required by the
SEC to be included in the listed companys annual proxy statement or annual report on Form 10-K
filed with the SEC; |
|
(ii) |
|
an annual performance evaluation of the compensation committee. |
Audit committee
6. |
|
Listed companies must have an audit committee that satisfies
the requirements of Rule 10A-3 under the Securities Exchange
Act of 1934, as amended. |
GlaxoSmithKline complies with equivalent domestic requirements set
out in the Combined Code, which require that GlaxoSmithKline have
an Audit Committee that is comprised entirely of independent
Non-Executive Directors.
GlaxoSmithKlines Audit Committee meets the requirements of Sarbanes-Oxley in that:
|
|
each member of the Audit Committee is deemed to be independent in accordance with the Securities
Exchange Act of 1934, as amended, and applicable NYSE and UK requirements; |
|
|
|
the Audit Committee,
amongst other things, is responsible for recommending the appointment, compensation, maintenance of
independence and oversight of the work of any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit, review or attest
services for the company, and each such accounting firm must report directly to the Audit
Committee; |
|
|
|
the Audit Committee has established a procedure for the receipt, retention and
treatment of complaints regarding accounting, internal accounting controls or auditing matters, and
for the confidential, anonymous submission by employees of concerns regarding questionable
accounting or auditing matters; |
|
|
|
the Audit Committee has the authority to engage independent
counsel and other advisors as it determines necessary to carry out its duties; and |
|
|
|
GlaxoSmithKline
must provide appropriate funding for the Audit Committee. |
The Board has determined that Mr de Swaan has the appropriate
qualifications and background to be an Audit Committee Financial
Expert as defined in rules promulgated by the SEC under Sarbanes-Oxley.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 209
|
|
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange Corporate Governance
Standards and GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
7.
(a) |
|
The audit committee must have a minimum of three members. |
|
(b) |
|
In addition to any requirement of Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934, as amended, all audit committee
members must satisfy the requirements for independence set out in
Section 303A.02 of the NYSE Listed Company Manual. |
|
(c) |
|
The audit committee must have a written charter that addresses: |
|
(i) |
|
the committees purposewhich, at minimum, must be to: |
|
|
(A) |
|
assist board oversight of (1) the integrity of the listed
companys financial statements, (2) the listed companys compliance with legal and regulatory
requirements, (3) the independent auditors qualifications and independence, and (4) the
performance of the listed companys internal audit function and independent auditors; and |
|
|
(B) |
|
prepare an audit committee report as required by the SEC to be included in the listed companys
annual proxy statement; |
|
|
(ii) |
|
an annual performance evaluation of the audit committee; and |
|
|
(iii) |
|
the
duties and responsibilities of the audit committee which, at a minimum, must include those set
out in Rule 10A-3(b)(2), (3), (4) and (5) of the Securities Exchange Act of 1934, as amended as
well as to: |
|
|
(A) |
|
at least annually, obtain and review a report by the independent auditor
describing: the firms internal quality-control procedures; any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the firm, and any steps taken to deal with
any such issues; and (to assess the auditors independence) all relationships between the
independent auditor and the listed company; |
|
|
(B) |
|
meet to review and discuss the listed companys
annual audited financial statements and quarterly financial statements with management and the
independent auditor, including reviewing the companys specific disclosures under Managements
Discussion and Analysis of Financial Condition and Results of Operations; |
GlaxoSmithKline complies with the equivalent domestic
requirements set out in the Combined Code, which require that the
Audit Committee should be comprised of a minimum of three
independent Non-Executive Directors.
GlaxoSmithKlines Audit Committee has written terms of reference
in accordance with the Combined Code. The terms of reference are
available on the companys website.
The Combined Code requires that a separate section in the
Companys Annual Report describe the work of the Committee in
discharging its duties.
The Combined Code requires that the main role and responsibilities of the Audit Committee should
include:
|
|
monitoring the integrity of the financial statements and management discussion and
analysis (MD&A) of the company and any formal announcements relating to the companys financial
performance, and reviewing significant financial reporting judgments contained in them; |
|
|
|
developing
and implementing policy on the engagement of the external auditor to supply non-audit services,
taking into account relevant ethical guidance regarding the provision of non-audit services by the
external audit firm, and reporting to the Board, identifying any matters in respect of which it
considers that action or improvement is needed and making recommendations as to the steps to be
taken; |
|
|
|
reviewing and monitoring the external auditors independence and objectivity and the
effectiveness of the audit process, taking into consideration the relevant UK professional and
regulatory requirements; |
|
|
|
making recommendations to the Board for it to put submissions to the
companys shareholders for their approval at the general meeting in relation to the appointment,
re-appointment and removal of the external auditor; |
|
|
|
approving the remuneration and terms of
engagement of the external auditor; |
|
|
|
monitoring and reviewing the effectiveness of the companys
internal audit function; and |
|
|
|
reviewing the companys internal financial controls and the system of
internal controls. |
|
|
|
|
|
|
|
|
|
|
|
|
210 GSK Annual Report 2008 |
|
|
|
|
|
|
|
|
Comparison of New York Stock Exchange
Corporate Governance Standards and
GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
|
(C) |
|
discuss the listed companys earnings press releases, as well as financial information and
earnings guidance provided to analysts and rating agencies; |
|
|
(D) |
|
discuss policies with respect to
risk assessment and risk management; |
|
|
(E) |
|
meet separately, periodically, with management, with
internal auditors (or other personnel responsible for the internal audit function) and with
independent auditors; |
|
|
(F) |
|
review with the independent auditor any audit problems or difficulties
and managements response; |
|
|
(G) |
|
set clear hiring policies for employees or former employees of the
independent auditors; and |
|
|
(H) |
|
report regularly to the board of directors. |
(d) |
|
Each listed company must have an internal audit function. |
8. |
|
Shareholders must be given the opportunity to vote on all
equity-compensation plans and material revisions thereto,
except for employment inducement awards, certain grants,
plans and amendments in the context of mergers and
acquisitions, and certain specific types of plans. |
GlaxoSmithKline complies with corresponding domestic requirements
in the Listing Rules of the UK Listing Authority, which mandate
that the company must seek shareholder approval for employee
share schemes.
Corporate governance guidelines
9. |
|
Listed companies must adopt and disclose corporate
governance guidelines. |
GlaxoSmithKline complies with corresponding domestic requirements
in the Listing Rules of the UK Listing Authority and the Combined
Code, which require that GlaxoSmithKline include an explanation in
its Annual Report of how it complies with the principles of the
Combined Code and that it confirm that it complies with the Codes
provisions or, where it does not, provide an explanation of why it
does not comply. In addition, for accounting periods beginning on or
after 29th June 2008, issuers are required to make certain
mandatory corporate governance statements in the Directors Report
in accordance with new UK Disclosure and Transparency Rules, DTR 7,
which was issued by the UK Financial Services Authority to
implement the eighth Company Law Directive, and GlaxoSmithKline
will comply with these requirements in its 2009 Annual Report.
|
|
|
|
|
|
|
|
|
|
|
|
GSK Annual Report 2008 211
|
|
|
|
|
|
|
|
|
|
Comparison
of New York Stock Exchange Corporate Governance Standards and
GlaxoSmithKline plcs
corporate governance practice |
|
|
|
|
|
|
|
|
|
|
|
NYSE
Corporate Governance Standards
|
|
Description of differences between GlaxoSmithKlines governance
practice and the NYSE Corporate Governance Standards |
|
|
10. |
|
Listed companies must adopt and disclose a code of business
conduct and ethics for directors, officers and employees, and
promptly disclose any waivers of the code for directors or
executive officers. |
GlaxoSmithKlines Code of Conduct for employees is available on the
companys website, as is the Code of Ethics for the CEO and CFO and
other senior financial officers.
Description of significant differences
11. |
|
Listed foreign private issuers must disclose any significant
ways in which their corporate governance practices differ from
those followed by domestic companies under NYSE listing
standards. |
|
|
|
Listed foreign private issuers are required to provide this
disclosure in the English language and accessible on their
website, which must be accessible from the United States). |
GlaxoSmithKline
fulfils this requirement by publishing this comparison of NYSE
Corporate Governance Standards and GlaxoSmithKline plcs corporate
governance practice on the companys website.
GlaxoSmithKline fulfils this requirement by publishing this comparison of NYSE
Corporate Governance Standards and GlaxoSmithKline plcs corporate
governance practice on the companys website.
|
|
|
|
|
|
|
|
|
|
|
|
212 GSK Annual Report 2008 |
|
|
|
|
|
|
|
|
Item 19 Exhibits Exhibit Index |
|
|
|
|
|
|
|
|
|
|
1.1
|
|
Memorandum and Articles of Association of the Registrant as in effect on the date hereof. |
|
|
|
|
|
|
|
2.1
|
|
Deposit Agreement among the Registrant and The Bank of New York, as Depositary, and the
holders from time to time of the American Depositary Receipts issued thereunder, including the
form of American Depositary Receipt, is incorporated by reference to the Registration Statement on
Form F-6 (No. 333-148017) filed with the Commission on December 12, 2007. |
|
|
|
|
|
|
|
4.1
|
|
UK Service Agreement between GlaxoSmithKline Services Unlimited and Julian Heslop is
incorporated by reference to Exhibit 4.1 to the Registrants Annual Report on Form 20-F filed with
the Commission on March 3, 2006. |
|
|
|
|
|
|
|
4.2
|
|
Service Agreement between
SmithKline Beecham Corporation and Monsif Slaoui is incorporated by
reference to Exhibit 4.2 to the Registrants Annual Report on Form 20-F filed with the Commission
on February 29, 2008. |
|
|
|
|
|
|
|
4.3
|
|
UK Service Agreement between GlaxoSmithKline Services Unlimited and Andrew Witty is
incorporated by reference to Exhibit 4.3 to the Registrants Annual Report on Form 20-F filed with
the Commission on February 29, 2008. |
|
|
|
|
|
|
|
4.4
|
|
Amendment to UK Service Agreement between GlaxoSmithKline Services Unlimited and Andrew
Witty. |
|
|
|
|
|
|
|
8.1
|
|
A list of the Registrants principal subsidiaries is incorporated by reference to pages 169 to 171 of
this Annual Report on Form 20-F. |
|
|
|
|
|
|
|
12.1
|
|
Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 -
Andrew Witty. |
|
|
|
|
|
|
|
12.2
|
|
Certification Required by Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 -
Julian Heslop. |
|
|
|
|
|
|
|
13.1
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of
Section 1350, Chapter 63 of Title 18, United States Code). |
|
|
|
|
|
|
|
15.1
|
|
Consent of PricewaterhouseCoopers LLP. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cross reference to Form 20-F
|
|
|
This table has been provided as a cross reference from the information included in this Annual
Report to the requirements of Form 20-F.
|
|
|
|
|
|
|
Item |
|
|
|
Page |
|
|
1 |
|
Identity of directors, senior management and advisers |
|
|
n/a |
|
|
2 |
|
Offer statistics and expected timetable |
|
|
n/a |
|
|
3 |
|
Key information |
|
|
|
|
A |
|
Selected financial data |
|
|
190-192,197 |
|
D |
|
Risk factors |
|
|
50-53 |
|
|
4 |
|
Information on the company |
|
|
|
|
A |
|
History and development of the company |
|
|
16,47,150-154 |
|
B |
|
Business overview |
|
|
|
|
|
|
Products |
|
|
17-20 |
|
|
|
Economy and market |
|
|
33,35-37 |
|
|
|
Manufacture and supply |
|
|
20 |
|
|
|
Marketing and distribution |
|
|
20 |
|
|
|
Intellectual property |
|
|
17-20 |
|
|
|
Competition |
|
|
17,20 |
|
|
|
Regulation |
|
|
32 |
|
|
|
Research and development |
|
|
21-25 |
|
|
|
Environment, health and safety |
|
|
30-31 |
|
|
|
Corporate responsibility and community investment |
|
|
27-29 |
|
C |
|
Organisational structure |
|
|
169-171 |
|
D |
|
Property, plant and equipment |
|
|
43 |
|
|
|
Note 6 Segment information |
|
|
114-117 |
|
|
|
Note 17 Property, plant and equipment |
|
|
125-127 |
|
|
4A |
|
Unresolved staff comments |
|
|
n/a |
|
|
5 |
|
Operating and financial review and prospects |
|
|
|
|
A |
|
Operating results |
|
|
|
|
|
|
2008 and 2007 |
|
|
34-42 |
|
|
|
2007 and 2006 |
|
|
54-59 |
|
B |
|
Liquidity and capital resources |
|
|
43-49 |
|
C |
|
Research and development, patents and licenses, etc. |
|
|
17-25 |
|
D |
|
Trend information |
|
|
12,50-53 |
|
E |
|
Off-balance sheet arrangements |
|
|
n/a |
|
F |
|
Tabular disclosure of contractual obligations |
|
|
45 |
|
|
6 |
|
Directors, senior management and employees |
|
A |
|
Directors and senior management |
|
|
60-63 |
|
B |
|
Compensation |
|
|
|
|
|
|
Remuneration Report |
|
|
78-98 |
|
C |
|
Board practices |
|
|
|
|
|
|
Corporate governance |
|
|
64-77 |
|
D |
|
Employees |
|
|
26 |
|
|
|
Note 10 Employee costs |
|
|
120 |
|
|
|
Note 28 Pensions and post-employment benefits |
|
134-142 |
|
|
|
Financial record |
|
|
192 |
|
E |
|
Share ownership |
|
|
|
|
|
|
Note 42 Employee share schemes |
|
|
164-168 |
|
|
|
Share options |
|
|
81,85,91-94 |
|
|
|
Incentive plans |
|
|
84,94-96 |
|
|
|
Directors interests |
|
|
92 |
|
|
|
|
|
|
|
|
|
Item |
|
|
|
Page |
|
|
7 |
|
Major shareholders and related party transactions |
|
|
|
|
A |
|
Major shareholders |
|
|
68-69,181 |
|
B |
|
Related party transactions |
|
|
|
|
|
|
Note 35 Related party transactions |
|
|
149 |
|
|
8 |
|
Financial information |
|
|
|
|
A |
|
Consolidated statements and other financial information |
|
|
|
|
|
|
Financial statements |
|
See item 18 |
|
|
Note 44 Legal proceedings |
|
|
172-180 |
|
B |
|
Significant changes |
|
|
|
|
|
|
Note 40 Post balance sheet events |
|
|
155 |
|
|
9 |
|
The offer and listing |
|
|
|
|
A |
|
Offer and listing details |
|
|
|
|
|
|
Share price listing |
|
|
181,197-198 |
|
C |
|
Markets |
|
|
144,198 |
|
|
10 |
|
Additional information |
|
|
|
|
B |
|
Memorandum and Articles of Association |
|
|
202-204 |
|
D |
|
Exchange controls |
|
|
198 |
|
E |
|
Taxation |
|
|
200 |
|
H |
|
Documents on display |
|
|
198 |
|
|
11 |
|
Quantitative and qualitative disclosures about market risk |
|
|
|
|
|
|
Treasury policies |
|
|
49 |
|
|
|
Note 41 Financial instruments and related disclosures |
|
|
156-164 |
|
|
12 |
|
Description of securities other than equity securities |
|
n/a |
|
|
13 |
|
Defaults, dividend arrearages and delinquencies |
|
|
n/a |
|
|
14 |
|
Material modifications to the rights of security holders and use of proceeds |
|
|
n/a |
|
|
15 |
|
Controls and procedures |
|
|
71-72,76-77 |
|
|
16 |
|
[Reserved] |
|
|
|
|
|
16A |
|
Audit Committee financial expert |
|
|
73 |
|
|
16B |
|
Code of ethics |
|
|
74 |
|
|
16C |
|
Principal accountant fees and services |
|
|
119 |
|
|
|
Note 9 Operating profit |
|
|
|
|
|
16D |
|
Exemptions from the listing standard for audit committees |
|
|
n/a |
|
|
16E |
|
Purchases of equity securities by the issuer and affiliated purchasers |
|
|
|
|
|
|
Note 33 Share capital and share premium account |
|
|
146 |
|
|
16G |
|
Corporate Governance |
|
|
205-211 |
|
|
17 |
|
Financial statements |
|
|
n/a |
|
|
18 |
|
Financial statements |
|
|
|
|
|
|
Independent auditors report |
|
|
101 |
|
|
|
Consolidated income statement |
|
|
102 |
|
|
|
Consolidated balance sheet |
|
|
103 |
|
|
|
Consolidated cash flow statement |
|
|
104 |
|
|
|
Consolidated statement of recognised income and expense |
|
|
105 |
|
|
|
Notes to the financial statements |
|
|
106-180 |
|
|
19 |
|
Exhibits |
|
212 |
|
We want to work in a way that reflects our values Head Office and Registered Office and the
expectations of our stakeholders. Ethical, GlaxoSmithKline plc social and environmental
considerations are integral 980 Great West Road |
Brentford, Middlesex TW8 9GS |
to our business decision making. They are also central |
to achieving our challenging and inspiring mission |
of improving the lives of people worldwide. |
Registered number: 3888792 |
Find out more about our approach to corporate |
Printed in the UK. The paper used in responsibility at the production of this document is made
from 100% post consumer waste. www.gsk.com/responsibility The pulp is bleached using a totally
chlorine free process. |
Signature
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
|
|
|
|
|
|
|
|
|
|
|
GlaxoSmithKline plc |
|
|
|
|
|
|
|
|
|
March 4, 2009
|
|
By:
|
|
/s/ Julian Heslop
Julian Heslop
|
|
|
|
|
|
|
Chief Financial Officer |
|
|