Annual Report 2019 - GSK

1 Annual Report 2019 ContentsStrategic reportOur business model 01 Chairman s statement 03 CEO s statement 04 Financial performance 06 Our long-term priorities 09 Our culture 10 Key performance indicators 11 Industry trends 12 Stakeholder engagement 15 Pharmaceuticals 17 Vaccines 23 Consumer Healthcare 27 trust 30 Risk management 43 Group financial review 49 Corporate GovernanceChairman s Governance statement 76 Our Board 78 Our Corporate Executive Team 82 Responsible leadership 84 Division of responsibilities 90 Composition, succession and evaluation 92 Nominations Committee Report 92 Audit.

2 Risk and internal control 96 Audit & Risk Committee Report 96 Science Committee Report 107 Corporate Responsibility Committee Report 109 Section 172 statement 111 Directors' Report 113 Remuneration reportChairman s Annual statement 116 Annual Report on remuneration 1192020 Remuneration policy summary 1402020 Remuneration policy Report 141 Financial statementsDirectors statement of responsibilities 152 Independent Auditor s Report 154 Financial statements 166 Notes to the financial statements 170 Financial statements of GlaxoSmithKline plc prepared under UK GAAP 252 Investor informationQuarterly trend 258 Five-year record 263 Product development pipeline 269 Products, competition and intellectual property 272 Principal risks and uncertainties 275 Share capital and share price 288 Dividends 290 Financial calendar 291 Annual General Meeting 2020 291 Tax information for shareholders 292 Shareholder services and contacts 294US law and regulation 296 Group companies 299 Glossary of terms 311 Cautionary statementSee the inside back cover of this document for the cautionary statement regarding forward-looking measuresWe use a number of adjusted, non-IFRS, measures to Report the performance of our business.

3 Total reported results represent the Group's overall performance under IFRS. Adjusted results, pro-forma growth rates and other non-IFRS measures may be considered in addition to, but not as a substitute for or superior to, information presented in accordance with IFRS. Adjusted results and other non-IFRS measures are defined on pages 50 to 52 and reconciliations to the nearest IFRS measures are on pages 62 and believe that Adjusted results, when considered together with Total results, provide investors, analysts and other stakeholders with helpful complementary information to understand better the financial performance and position of the Group from period to period, and allow the Group's performance to be more easily compared against the majority of its peer companies.

4 These measures are also used by management for planning and reporting purposes. They may not be directly comparable with similarly described measures used by other purposeTo improve the quality of human life by helping people do more, feel better, live goalTo become one of the world s most innovative, best-performing and trusted healthcare strategyTo bring differentiated, high-quality and needed healthcare products to as many people as possible, with our three global businesses, scientific and technical know-how and talented people. Our long-term prioritiesOur priorities are underpinned by our ambition to build a more performance- focused culture, aligned to our values and invest in scientific and technical excellence to develop and launch a pipeline of new products that meet the needs of patients, payers and deliver growth-based performance by investing effectively in our business, developing our people and executing are a responsible company and commit to use our science and technology to address health needs, make our products affordable and available and to be a modern values and expectationsOur values patient focus, transparency.

5 Respect and expectations courage, accountability, development and are a science-led global healthcare company Investor informationFinancial statementsStrategic reportGovernance and remunerationGSK Annual Report 2019 01 Our business modelWe have three global businesses that discover, develop and manufacture innovative medicines, vaccines and consumer healthcare products. Every day, we help improve the health of millions of people around the world. PharmaceuticalsOur Pharmaceuticals business has a broad portfolio of innovative and established medicines in respiratory, HIV, immuno-inflammation and oncology. We are strengthening our R&D pipeline through a focus on immunology, human genetics and advanced technologies to help us identify transformational new medicines for patients.

6 Read more on page 17 VaccinesWe are the world s largest vaccines company by revenue, delivering vaccines that protect people at all stages of life. Our R&D focuses on developing vaccines against infectious diseases that combine high medical need and strong market potential. Read more on page 23 Consumer HealthcareOur world-leading Consumer Healthcare business combines science and consumer insights to create innovative everyday healthcare brands that consumers trust and experts recommend. In 2019, we finalised an agreement with Pfizer to combine our two consumer healthcare businesses. Read more on page 27 Our operations span the value chain from identifying, researching, developing and testing ground-breaking discoveries, to regulatory approval, manufacturing and commercialisation.

7 We have over 99,000 employees across 95 countries with outstanding scientific and technical know-how and deep expertise in regulation, intellectual property and commercialisation. We also work with world-leading experts and form strategic partnerships to complement our existing is critical to how we improve health and create financial value. As a research-based healthcare company we rely on intellectual property protection to help ensure a reasonable return on our investments so we can continue to research and develop new and innovative medicines. In 2019 we invested billion in R&D. In Pharmaceuticals and Vaccines we focus on science related to the immune system, human genetics and advanced technology.

8 In Consumer Healthcare we leverage our scientific expertise and deep consumer insights to create healthcare products that meet consumer demands. Our ability to launch new products successfully and grow sales from our existing portfolio is key to our commercial success. For patients and consumers we deliver transformational medicines, vaccines and consumer healthcare products. In 2019 that included billion packs of medicines, 701 million vaccine doses and billion consumer healthcare products. As part of our capital allocation framework we invest in our three businesses and provide returns to shareholders in the form of dividends and share value growth.

9 In 2019 we paid a dividend of 80p per share and delivered billion of free cash make a positive contribution to the communities in which we operate by creating employment, working with suppliers and paying tax. We offer a broad range of employee benefits, including preventative healthcare services, so that we are able to attract and retain the best people. By delivering on our purpose, the greatest contribution we make is to improve the health of people around the world with our medicines, vaccines and consumer healthcare mRespiratory3,081 HIV4,854 Immuno-inflammation613 Oncology230 Established Pharmaceuticals8,776 Total17,554 Turnover mMeningitis1,018 Shingles1,810 Influenza541 Established Vaccines3,788 Total7, 1 5 7 Turnover mWellness4,526 Oral health2,673 Nutrition1,176 Skin health620 Total8,99502 GSK Annual Report 2019 Investing in R&D and new productsIn order to be successful, we are increasing investment in R&D and new products to deliver future growth.

10 Since announcing our new approach to R&D in 2018, we have made significant progress to strengthen our pipeline, particularly in oncology. We now have 39 medicines and 15 vaccines in the pipeline, and in 2019 we had three major approvals, eight regulatory submissions, six positive read-outs from pivotal studies and we progressed four new assets into pivotal studies. During 2019 we also completed transactions with Tesaro and with Merck KGaA, further strengthening our position in oncology, and initiated alliances to build out our platform technologies, in genomics with the University of California, and in cell therapy with Lyell Immunopharma. The positive clinical data we are generating and the progress we have made to strengthen the pipeline underpins our decision to further increase investment in R&D over the next two two new companiesIn early 2020, consistent with our strategic priorities and previous announcements, we started a two-year programme to prepare GSK for separation into two new leading companies: New GSK, a biopharma company, with an R&D approach focused on science related to the immune system, use of genetics and new technologies.