GlaxoSmithKline PLC
28 October 2004
Issued: 28th October 2004, London
Results Announcement for the Third Quarter 2004
GSK delivers EPS of 18.7 pence - on track for 2004 guidance
GlaxoSmithKline plc (GSK) today announces its results for the third quarter
ended 30th September 2004. The full UK GAAP results are presented under 'Profit
and loss account' on pages 7 and 8 and are summarised below.
FINANCIAL RESULTS*
Q3 2004 Q3 2003 9 months 9 months
2004 2003
(restated) Growth (restated) Growth
£m £m CER% £% £m £m CER% £%
Turnover 5,019 5,466 - (8) 15,026 16,063 1 (6)
Business performance
Trading profit 1,594 1,753 5 (9) 4,868 5,434 1 (10)
Profit before tax 1,522 1,694 4 (10) 4,729 5,420 (2) (13)
Earnings per share 18.7p 20.7p 5 (10) 58.2p 66.2p (1) (12)
Statutory results
Trading profit 1,594 1,720 7 (7) 4,868 5,206 5 (6)
Profit before tax 1,522 1,661 6 (8) 4,729 5,195 2 (9)
Earnings per share 18.7p 20.2p 7 (7) 58.2p 63.3p 3 (8)
Q3 2004 SUMMARY*
• Total turnover remained level with last year, despite the significant
impact of generic competition to Paxil and Wellbutrin. Excluding sales of
these products, turnover grew 12% in the United States and 8% globally.
• GSK's broad portfolio of products continues to drive performance - 14
products with sales over £100 million in the quarter. Seretide/Advair for
asthma/COPD, which is now the world's 5th largest-selling pharmaceutical
product, continues to demonstrate strong momentum with sales up 20% to
£609 million.
• Several key product launches expected within the next six months including:
Vesicare for over-active bladder, Avandaryl for type-II diabetes and Requip
for restless leg syndrome.
• GSK gives pipeline update on several new NCE's including products for the
treatment of depression, pain, HIV, cervical cancer and blood disorders.
• GSK remains on track to deliver 2004 EPS (at constant exchange rates) at
least in line with business performance EPS in 2003.
* The Group's practice is to discuss its results in terms of constant
exchange rate (CER) growth. For 2004, the Group is reporting results
on a statutory basis only. Growth rates are presented comparing 2004
results both with 2003 business performance results (see page 21) and
2003 statutory results. All commentaries compare 2004 results with
2003 business performance results in CER terms unless otherwise
stated. Results in 2003 have been restated following the
implementation of UITF 17 (revised) and UITF 38. See 'Accounting for
own shares' on page 5 and 'Accounting Presentation and Policies' on
page 21 for fuller explanations of these matters.
Commenting on the performance for the quarter and GSK's outlook, JP Garnier,
Chief Executive Officer, said: 'These results confirm GSK's success in managing
to absorb over £1.2 billion of lost sales to generic Paxil IR and Wellbutrin SR
during the first nine months of the year and keeping overall pharmaceutical
sales level. This is being driven by the strong performance of our key product
growth drivers including Avandia for diabetes and Advair for asthma/COPD, both
of which continue to grow very strongly in the USA and Europe. As the impact
from Paxil generics now diminishes, we look forward to improved earnings growth
in the fourth quarter and in 2005.
We are also continuing to make progress with our pipeline of potential new
medicines which will fuel the company's performance over the years to come.
Several key NCEs - such as lapatinib for cancer, Allermist (698) for rhinitis
and Cervarix a vaccine for cervical cancer - are now in Phase III clinical
development and a wave of other exciting compounds for diseases such as pain,
HIV, and blood disorders are making good progress.'
KEY PHARMACEUTICAL GROWTH DRIVERS
• Seretide/Advair for asthma and COPD remains GSK's biggest selling product,
with sales of £609 million, up 20% in the quarter.
Advair had a strong quarter in the USA with sales up 22% to £342 million,
benefiting from strong patient demand in asthma and COPD. Seretide also
grew strongly in Europe (+21% to £213 million) where it continues to gain
market share faster than its closest competitor, Symbicort. Growth in
Europe should continue to benefit from the recently published GOAL study.
• GSK's diabetes treatments Avandia/Avandamet continue to perform very
strongly, with overall sales of £284 million (+31%) in the quarter. In the
United States (+24% to £216 million), growth is being driven by the
excellent performance of Avandamet and will benefit further from the
approval of Avandaryl (a once-daily combination of Avandia + Aventis'
Amaryl) which is expected by the end of the year.
Use of Avandia/Avandamet is also growing strongly in Europe, with sales up
49% to £27 million, and in International markets where sales rose 73% to
£41 million.
• GSK's epilepsy and bi-polar disorder treatment Lamictal performed very
strongly in the quarter with sales up 29% to £172 million. In the United
States, sales growth (+42% to £106 million) continues to be driven by the
indication for the treatment of bipolar disorder received last year.
• Sales of Coreg, GSK's alpha-beta blocker for heart disease, grew 29% to
£110 million. Coreg continues to benefit from its wide range of
indications. Results are expected shortly from a new study (GEMINI)
looking at the benefits of Coreg versus the beta blocker metoprolol in
diabetic patients with hypertension.
• Valtrex (for herpes) sales rose 27% to £147 million, driven by a continuing
strong performance in the USA (+34% to £96 million) where the product is
the clear market leader in treatments for genital herpes.
• Total HIV sales were up 8% to £372 million. In the United States, GSK
remains the HIV market leader with a 45% share of total weekly
prescriptions, despite competition from new products. GSK's HIV franchise
was further enhanced by the launch of Epzicom, a new combination product
(Epivir/Ziagen) in the USA at the end of August. Telzir (fosamprenavir) a
new protease inhibitor was launched in the EU at the end of September.
• GSK's vaccines business had a particularly strong quarter with sales up 22%
to £328 million, driven by sales of Infanrix/Pediarix which rose 22% to £95
million. Sales increased 40% in International markets to £111 million,
boosted by increased tender business.
LINE EXTENSIONS CONTINUE TO MITIGATE GENERIC COMPETITION
• Total sales of Wellbutrin products fell 30% to £173 million. Wellbutrin IR
and SR sales fell 79% to £45 million as a result of generic competition.
This impact was partially offset, however, by the exceptionally strong
performance of Wellbutrin XL, the new once-daily product, which achieved
sales of £128 million and now constitutes approximately 52% of total US
Wellbutrin SR/XL prescriptions.
• Total sales of the Paxil franchise were down 51% to £246 million as a
result of generic competition to Paxil IR (sales of which declined 65% to
£144 million). Paxil CR generated sales of £102 million (+4%).
PIPELINE UPDATE
New product launches
• Vesicare for the treatment of overactive bladder, which GSK will co-promote
with Yamanouchi Pharma America, is expected to be approved later this year.
• An FDA approvable letter was received for diabetes product Avandaryl, a
once daily combination of Avandia + Aventis' Amaryl. Final approval is
expected before year-end.
• Requip is expected to be approved by the FDA for the treatment of restless
leg syndrome, an area of significant unmet need, in H1 2005.
• Boniva, a potent oral bisphosphonate for the treatment of osteoporosis with
a convenient once-monthly dosing regimen, was filed with the FDA in May and
approval is expected in H1 2005. A quarterly i.v. dosing regimen will be
filed in Q4. Boniva is being co-developed by GSK and Roche.
• Entereg, the first product expected to be approved for the management of
post operative ileus was filed with the FDA in June and approval is
expected in H1 2005. GSK and Adolor are collaborating on the worldwide
development and commercialisation of Entereg.
Expected 2004/05 filings
• Lapatinib ('016) is progressing on schedule through multiple phase II/III
studies in a variety of solid tumours. Results from clinical trials are
expected over the next 18 months on breast, bladder, renal cell and lung
cancer.
• Rotarix, a new vaccine for the prevention of rotavirus gastroenteritis in
infants was approved in Mexico during the quarter and has now been filed in
over 20 international markets. It is expected to be filed in Europe in
2005. Results from a large 60,000 patient study on Rotarix were received
in October and are to be presented as a 'late breaker' at ICAAC+ on 30th
October.
• Improved once-daily formulations for three agents are planned to be filed
in 2005: Avandamet XR, Requip CR and Coreg CR.
• Trexima, a unique multi-mechanism product to treat migraine, which is
expected to result in improved efficacy and sustained pain free results for
migraine patients, is scheduled to be filed in 2005. Trexima contains
sumatriptan and naproxen sodium.
• Nelarabine, for childhood T-cell leukemia, is scheduled for filing in Q4
2004.
News update on other key NCE's
• Following positive phase II results, Allermist ('698) entered phase III
studies for rhinitis during the third quarter.
• Results from Phase II clinical trials that evaluated lower doses of '162
for the treatment of depression will be presented at GSK's CNS seminar on
23rd November. These trials did not meet primary efficacy end points in
depression and consequently further phase II studies at higher doses will
be undertaken before advancing the compound into phase III trials.
Accordingly the expected filing date for this indication has been
rescheduled from 2006 to 2007. In the completed phase II trials there was
evidence of a dose dependent weight loss response. Based on this data, GSK
is now also planning to develop this compound for the treatment of obesity.
+ Interscience Conference on Antimicrobial Agents and Chemotherapy
• Phase II data on '381, GSK's dual acting COX-2 inhibitor for pain, will
also be presented at the CNS Seminar in November. In the light of recent
developments regarding a drug in the COX-2 class, GSK will be meeting with
regulatory authorities to discuss their clinical trial requirements for
'381 going forward.
• Recruitment in phase III studies of Cervarix, GSK's new HPV vaccine for
cervical cancer, is running significantly ahead of schedule and the
expected filing date has been moved forward to 2006 (previously 2008).
Cervarix has already demonstrated 100% efficacy against the two main viral
sub-types which cause cervical cancer (HPV 16 and 18). This new vaccine is
expected to make a major contribution to improved healthcare globally.
Cervical cancer is the number 2 cancer killer of women worldwide.
• Positive initial data was received during the quarter on '115, potentially
the first oral product for the treatment of thrombocytopenia (low blood
platelet levels brought about by chemotherapy, chronic liver disease and
other conditions). '115 is about to enter phase II studies in a variety of
indications and filing has been brought forward from 2007 to 2006.
• Phase II results on '140, an oral CCR5 inhibitor for the treatment of HIV,
showing substantial viral load reduction and a clean safety profile, were
received in the quarter. These data will be presented as a 'late breaker'
at ICAAC+ on 31st October. Filing is scheduled for 2007.
CONSUMER HEALTHCARE
Consumer Healthcare quarterly sales were up 3% to £806 million, driven by
particularly strong growth in International markets (+11% to £205 million).
The strongest performances were for Smoking control products (+17% to £79
million), Respiratory tract products (+21% to £39 million) and Oral care (+6% to
£278 million). This was offset to some extent by Dermatological product sales
which fell 12% to £47 million primarily as a result of generic competition to
Cutivate in the USA.
FINANCIAL REVIEW
Trading profit and earnings per share
Trading profit for Q3 2004 was £1,594 million, a 5% increase in CER terms (9%
decline in sterling terms) compared with Q3 2003 business performance. The
trading margin declined 0.3 percentage points compared with Q3 2003, due to
adverse currency movements, higher R&D expenditure, and a higher cost of goods
due to a less favourable product mix. These higher costs were partially offset
by lower selling, general and administration (SG&A) costs. These costs declined
compared with Q3 2003 due to cost savings in general and administration, lower
provisions for legal matters and lower asset write-downs.
Other operating expense was £33 million which was the same sterling amount as Q3
2003.
EPS of 18.7 pence increased 5% in CER terms (10% decline in sterling terms)
compared with Q3 2003 business performance EPS. The adverse currency impact on
EPS of 15 percentage points principally resulted from the significant weakening
of the US dollar relative to last year.
Compared with Q3 2003 statutory results, which included merger and manufacturing
restructuring costs and disposals of businesses, EPS increased 7% in CER terms,
but declined 7% in sterling terms.
Currencies
The third quarter 2004 results are based on average exchange rates, principally
£1/$1.82, £1/Euro 1.48 and £1/Yen 199. The period-end exchange rates were
£1/$1.81, £1/Euro 1.46 and £1/Yen 199. If exchange rates were to hold at these
levels for the remainder of 2004 the negative currency impact on earnings per
share growth would be approximately 9% to 10% for the full year.
Dividend
The Board has declared a third interim dividend of 10 pence per share. This
compares with a dividend of 9 pence per share for Q3 2003. The equivalent
dividend receivable by ADR holders is 36.519 cents per ADS based on an exchange
rate of £1/$1.82595. The dividend will have an ex-dividend date of 3rd November
2004 and will be paid on 6th January 2005 to shareholders and ADR holders of
record on 5th November 2004. The total dividend for the full year 2004 is
expected to increase in line with the 2003 increase of 1 penny per share.
Earnings guidance
In 2004, despite an expected substantial loss of sales due to generic
competition to Paxil and Wellbutrin, GSK expects to deliver EPS (at constant
exchange rates) at least in line with business performance EPS in 2003. As the
impact of generics becomes less significant, GSK looks forward to a return to
EPS growth in CER terms in 2005.
Share buy-back programme
In October 2002, GSK commenced a new £4 billion share buy-back programme. Of
this new programme, £219 million was accounted for in 2002, £980 million in
2003, £279 million in Q1 2004, £221 million in Q2 2004 and £250 million in Q3
2004. 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.
Accounting for own shares
In 2004, the Group has adopted UITF 17 (revised) and UITF 38 - see 'Accounting
Presentation and Policies' on page 21. As a result of the reclassification of
own shares to equity shareholders' funds net assets at 31st December 2003
decreased by £2,661 million. Additionally, trading profit and profit before
taxation in Q3 2003 have been increased by £1 million and earnings have been
increased by £2 million. The full year 2003 effect is that trading profit, and
profit before taxation have been reduced by £16 million and earnings have been
reduced by £6 million.
Legal and other disputes
The GSK accounting policy for legal and other disputes is set out on page 96 of
the Annual Report 2003. The policy states that a provision is made for the
anticipated settlement costs and legal and other expenses associated with claims
received and legal and other disputes against the Group where a reasonable
estimate can be made of the outcome of the dispute. No provision has been made
for unasserted claims or where obligations exist under a dispute but it has not
been possible to make a reasonable estimate.
GSK has undertaken a review of its product liability claims and assessed that a
number of products now 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 Group's exposure for unasserted claims in
relation to those products.
The IBNR basis is currently used by a number of other pharmaceutical companies
to estimate product liability provisions.
For those product liability matters that have a sufficient history of claims
made and settlements, GSK is undertaking a determination on an IBNR basis of the
ultimate liability for such matters and expects to provide accordingly in the
fourth quarter 2004. The impact of any additional charge is not expected to
lead to any change to GSK's previously announced earnings guidance.
International Financial Reporting Standards (IFRS)
The Group's programme to convert its financial reporting from UK GAAP to IFRS is
well advanced. Restatements of full year 2003, Q1 2004 and Q2 2004 results will
be published on 29th October 2004. The remaining restatements (Q3 2004, Q4 2004
and full year 2004) will be issued with the 2004 UK GAAP Preliminary Results
Announcement on 10th February 2005.
GlaxoSmithKline - one of the world's leading research-based pharmaceutical and
healthcare companies - is committed to improving the quality of human life by
enabling people to do more, feel better and live longer. For company
information including a copy of this announcement and details of the company's
updated product development pipeline, visit GSK at www.gsk.com.
Enquiries: UK Media Philip Thomson (020) 8047 5502
David Mawdsley (020) 8047 5502
Chris Hunter-Ward (020) 8047 5502
US Media Nancy Pekarek (215) 751 7709
Mary Anne Rhyne (919) 483 2839
Patricia Seif (215) 751 7709
European Analyst / Investor Duncan Learmouth (020) 8047 5540
Anita Kidgell (020) 8047 5542
US Analyst / Investor Frank Murdolo (215) 751 7002
Tom Curry (215) 751 5419
Brand names appearing in italics throughout this document are trade marks of GSK
or associated companies with the exception of Levitra, a trade mark of Bayer,
Vesicare, a trade mark of Yamanouchi Pharmaceutical, Entereg, a trade mark of
Adolor and Boniva, a trademark of Roche, which are used under licence by the
Group.
Cautionary statement regarding forward-looking statements
Under the safe harbor provisions of the US Private Securities Litigation Reform
Act of 1995, the company cautions investors that any forward-looking statements
or projections made by the company, including those made in this Announcement,
are subject to risks and uncertainties that may cause actual results to differ
materially from those projected. Factors that may affect the Group's operations
are described under 'Risk Factors' in the Operating and Financial Review and
Prospects in the company's Annual Report on Form 20-F for 2003.
PROFIT AND LOSS ACCOUNT
Three months ended 30th September 2004
Q3 2003
Merger,
Business restructuring
Q3 2004 Performance and disposal of Statutory
Statutory Growth* (restated) (restated)
businesses
£m CER% £m £m £m
--- --- --- --- ---
Turnover:
Pharmaceuticals 4,213 (1) 4,634 - 4,634
Consumer Healthcare 806 3 832 - 832
--- --- --- ---
TURNOVER 5,019 - 5,466 - 5,466
Cost of sales (1,096) 8 (1,063) (67) (1,130)
--- --- --- ---
Gross profit 3,923 (2) 4,403 (67) 4,336
Selling, general and administration (1,647) (12) (1,969) 34 (1,935)
Research and development (682) 6 (681) - (681)
--- --- --- ---
Trading profit:
Pharmaceuticals 1,412 4 1,579 (27) 1,552
Consumer Healthcare 182 13 174 (6) 168
--- --- --- ---
TRADING PROFIT 1,594 5 1,753 (33) 1,720
Other operating income/(expense) (33) (33) - (33)
--- --- --- ---
Operating profit 1,561 5 1,720 (33) 1,687
Profits of associates 22 20 - 20
--- --- --- ---
Profit before interest 1,583 1,740 (33) 1,707
Net interest payable (61) (46) - (46)
--- --- --- ---
PROFIT BEFORE TAXATION 1,522 4 1,694 (33) 1,661
Taxation (418) (465) 9 (456)
--- --- --- ---
Profit after taxation 1,104 1,229 (24) 1,205
Minority interests (39) (30) - (30)
Preference share dividends - (3) - (3)
--- --- --- ---
EARNINGS 1,065 4 1,196 (24) 1,172
--- --- --- ---
EARNINGS PER SHARE 18.7p 5 20.7p 20.2p
--- --- ---
Diluted earnings per share 18.5p 20.2p
--- ---
* Growth rates are calculated comparing Q3 2004 statutory results with Q3 2003
business performance results. Results in 2003 have been restated following the
implementation of UITF 17 (revised) and UITF 38 - see 'Accounting Presentation
and Policies' on page 21.
Appropriations of profit attributable to shareholders are set out under
'Appropriations' on page 14.
PROFIT AND LOSS ACCOUNT
Nine months ended 30th September 2004
9 months 2003
Merger,
9 months Business restructuring
2004 Performance and disposal Statutory 2003
Statutory Growth* (restated) of (restated) (restated)
businesses
£m CER% £m £m £m £m
--- --- --- --- --- ---
Turnover:
Pharmaceuticals 12,659 - 13,666 - 13,666 18,181
Consumer Healthcare 2,367 4 2,397 - 2,397 3,260
--- --- --- --- ---
TURNOVER 15,026 1 16,063 - 16,063 21,441
Cost of sales (3,151) 7 (3,072) (233) (3,305) (4,544)
--- --- --- --- ---
Gross profit 11,875 - 12,991 (233) 12,758 16,897
Selling, general and administration (5,014) (4) (5,602) 19 (5,583) (7,597)
Research and development (1,993) 8 (1,955) (14) (1,969) (2,791)
--- --- --- --- ---
Trading profit:
Pharmaceuticals 4,420 - 5,003 (209) 4,794 5,933
Consumer Healthcare 448 12 431 (19) 412 576
--- --- --- --- ---
TRADING PROFIT 4,868 1 5,434 (228) 5,206 6,509
Other operating income/(expense) (100) 34 - 34 (133)
--- --- --- --- ---
Operating profit 4,768 (2) 5,468 (228) 5,240 6,376
Profit on disposal of interests in 41 - - - -
associates
Business disposals - - 3 3 5
Profits of associates 72 70 - 70 93
--- --- --- --- ---
Profit before interest 4,881 5,538 (225) 5,313 6,474
Net interest payable (152) (118) - (118) (161)
--- --- --- --- ---
PROFIT BEFORE TAXATION 4,729 (2) 5,420 (225) 5,195 6,313
Taxation (1,300) (1,488) 60 (1,428) (1,729)
--- --- --- --- ---
Profit after taxation 3,429 3,932 (165) 3,767 4,584
Minority interests (86) (71) - (71) (94)
Preference share dividends (2) (11) - (11) (12)
--- --- --- --- ---
EARNINGS 3,341 (2) 3,850 (165) 3,685 4,478
--- --- --- --- ---
EARNINGS PER SHARE 58.2p (1) 66.2p 63.3p 77.1p
--- --- --- ---
Diluted earnings per share 58.0p 63.2p 76.9p
--- --- ---
Weighted average number of 5,745 5,816 5,816 5,806
shares (millions)
--- --- --- ---
* Growth rates are calculated comparing 9 months 2004 statutory results with 9
months 2003 business performance results. Results in 2003 have been restated
following the implementation of UITF 17 (revised) and UITF 38 - see 'Accounting
Presentation and Policies' on page 21.
Appropriations of profit attributable to shareholders are set out under
'Appropriations' on page 14.
PHARMACEUTICAL TURNOVER
Three months ended 30th September 2004
Total USA Europe International
-------------- -------------- ------------ ------------
£m CER% £m CER% £m CER% £m CER%
----- ----- ----- ----- ----- ----- ---- -----
RESPIRATORY 1,070 10 556 15 358 7 156 -
Seretide/Advair, 832 10 431 12 295 11 106 3
Flixotide/Flovent, Serevent
Seretide/Advair 609 20 342 22 213 21 54 5
Flixotide/Flovent 141 (8) 59 (13) 43 (5) 39 (3)
Serevent 82 (13) 30 (22) 39 (11) 13 14
Flixonase/Flonase 145 28 119 32 12 7 14 14
CENTRAL NERVOUS SYSTEM 835 (26) 544 (32) 181 (10) 110 (7)
Seroxat/Paxil 246 (51) 117 (64) 58 (32) 71 (11)
Paxil IR 144 (65) 17 (92) 58 (32) 69 (13)
Paxil CR 102 4 100 2 - - 2 >100
Wellbutrin 173 (30) 168 (30) - - 5 (8)
Wellbutrin IR, SR 45 (79) 41 (81) - - 4 (18)
Wellbutrin XL 128 >100 127 >100 - - 1 >(100)
Imigran/Imitrex 175 (3) 127 (5) 36 2 12 (2)
Lamictal 172 29 106 42 54 10 12 12
Requip 29 22 13 21 14 22 2 43
ANTI-VIRALS 597 11 307 19 170 (1) 120 10
HIV 372 8 198 13 132 - 42 11
Combivir 144 7 73 12 54 3 17 -
Trizivir 79 (6) 47 (4) 30 (10) 2 (2)
Epivir 73 6 35 6 27 5 11 11
Ziagen 42 7 20 3 14 (3) 8 54
Retrovir 11 5 5 12 4 (3) 2 4
Agenerase, Lexiva 18 >100 13 >100 3 28 2 >100
Herpes 179 15 99 32 31 (8) 49 2
Valtrex 147 27 96 34 22 6 29 19
Zovirax 32 (21) 3 (19) 9 (31) 20 (15)
Zeffix 33 13 3 30 6 37 24 7
ANTI-BACTERIALS 353 (10) 71 (25) 154 (8) 128 (1)
Augmentin 156 (7) 42 (14) 63 (14) 51 14
Augmentin IR 125 (9) 14 (31) 62 (16) 49 12
Augmentin ES 14 32 13 26 - - 1 >100
Augmentin XR 17 (12) 15 (18) 1 >100 1 >100
Zinnat/Ceftin 45 (16) 1 (77) 25 1 19 (24)
METABOLIC 320 25 216 24 36 15 68 35
Avandia, Avandamet 284 31 216 24 27 49 41 73
VACCINES 328 22 67 9 150 17 111 40
Hepatitis 102 7 34 1 52 17 16 (5)
Infanrix, Pediarix 95 22 33 20 41 14 21 47
ONCOLOGY & EMESIS 246 9 182 13 42 6 22 (11)
Zofran 201 12 152 16 32 4 17 (9)
Hycamtin 26 - 17 (6) 7 14 2 15
CARDIOVASCULAR & UROGENITAL 233 14 142 2 64 53 27 15
Coreg 110 29 108 33 - - 2 (53)
Levitra 11 (53) 3 (82) 5 99 3 47
Avodart 17 >100 10 77 7 >100 - -
OTHER 231 (13) 21 (2) 67 (13) 143 (15)
Zantac 66 (12) 17 10 17 (26) 32 (14)
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 4,213 (1) 2,106 (4) 1,222 3 885 3
-------------- -------------- ------------- -------------
Pharmaceutical turnover includes co-promotion income.
PHARMACEUTICAL TURNOVER
Nine months ended 30th September 2004
Total USA Europe International
-------------- -------------- ------------ ------------
£m CER% £m CER% £m CER% £m CER%
----- ----- ----- ----- ----- ----- ---- -----
RESPIRATORY 3,242 8 1,615 9 1,135 8 492 2
Seretide/Advair, 2,508 10 1,252 9 925 12 331 10
Flixotide/Flovent, Serevent
Seretide/Advair 1,793 21 963 22 664 23 166 13
Flixotide/Flovent 451 (7) 187 (13) 139 (5) 125 2
Serevent 264 (15) 102 (27) 122 (10) 40 25
Flixonase/Flonase 435 7 345 11 45 7 45 (15)
CENTRAL NERVOUS SYSTEM 2,626 (18) 1,735 (22) 565 (8) 326 (6)
Seroxat/Paxil 821 (43) 411 (55) 196 (29) 214 (5)
Paxil IR 523 (57) 118 (82) 196 (29) 209 (7)
Paxil CR 298 19 293 18 - - 5 >100
Wellbutrin 587 (9) 576 (8) - - 11 (39)
Wellbutrin IR, SR 254 (59) 245 (59) - - 9 >(100)
Wellbutrin XL 333 >100 331 >100 - - 2 (48)
Imigran/Imitrex 505 (3) 362 (4) 107 3 36 (7)
Lamictal 496 32 301 45 161 14 34 11
Requip 84 25 38 22 41 27 5 39
ANTI-VIRALS 1,754 8 874 12 536 1 344 7
HIV 1,088 3 561 4 413 2 114 6
Combivir 424 4 210 4 166 5 48 (2)
Trizivir 247 (7) 139 (9) 98 (6) 10 14
Epivir 221 7 107 5 85 9 29 8
Ziagen 117 (1) 56 (5) 44 (3) 17 28
Retrovir 32 - 13 1 12 1 7 (2)
Agenerase, Lexiva 42 86 31 >100 8 7 3 49
Herpes 535 16 285 33 103 (7) 147 6
Valtrex 425 25 277 33 67 4 81 20
Zovirax 110 (11) 8 24 36 (23) 66 (7)
Zeffix 96 10 8 22 16 33 72 5
ANTI-BACTERIALS 1,165 (5) 271 (15) 517 (4) 377 2
Augmentin 538 - 173 (1) 220 (8) 145 15
Augmentin IR 398 (1) 40 6 217 (9) 141 12
Augmentin ES 69 (10) 66 (13) - - 3 >100
Augmentin XR 71 15 67 10 3 >100 1 >100
Zinnat/Ceftin 160 (4) 7 (55) 97 8 56 (10)
METABOLIC 929 30 634 29 98 21 197 40
Avandia, Avandamet 829 36 634 29 74 57 121 70
VACCINES 846 7 189 (1) 367 3 290 20
Hepatitis 297 - 100 (4) 145 3 52 5
Infanrix, Pediarix 257 5 89 3 114 7 54 7
ONCOLOGY & EMESIS 705 1 514 1 128 7 63 (8)
Zofran 573 8 425 9 98 6 50 (3)
Hycamtin 75 (2) 49 (4) 21 13 5 (21)
CARDIOVASCULAR & UROGENITAL 653 24 412 24 166 33 75 13
Coreg 317 35 311 38 - - 6 (40)
Levitra 37 32 15 (16) 15 >100 7 >100
Avodart 41 >100 23 >100 17 >100 1 >100
OTHER 739 (11) 67 (8) 219 (14) 453 (10)
Zantac 204 (14) 54 (3) 55 (22) 95 (14)
-------------- -------------- ------------- -------------
TOTAL PHARMACEUTICALS 12,659 - 6,311 (1) 3,731 2 2,617 3
-------------- -------------- ------------- -------------
Pharmaceutical turnover includes co-promotion income.
CONSUMER HEALTHCARE TURNOVER
Three months ended 30th September 2004
Growth
£m CER%
--------- --------
Over-the-counter medicines 364 4
Analgesics 87 6
Dermatological 47 (12)
Gastrointestinal 63 -
Respiratory tract 39 21
Smoking control 79 17
Natural wellness support 38 (2)
Oral care 278 6
Nutritional healthcare 164 (3)
--------- --------
Total 806 3
--------- --------
CONSUMER HEALTHCARE TURNOVER
Nine months ended 30th September 2004
Growth
£m CER%
--------- --------
Over-the-counter medicines 1,074 3
Analgesics 261 10
Dermatological 145 (14)
Gastrointestinal 189 (1)
Respiratory tract 100 5
Smoking control 234 16
Natural wellness support 113 (1)
Oral care 805 5
Nutritional healthcare 488 6
--------- --------
Total 2,367 4
--------- --------
FINANCIAL REVIEW - PROFIT AND LOSS ACCOUNT
Trading profit
Q3 2003
------------------
Business
Q3 2004 performance
Statutory % of (restated) % of Growth
£m turnover £m turnover CER% £%
------ ------ ------ ------ ----- ----
Turnover 5,019 100.0 5,466 100.0 - (8)
Cost of sales (1,096) (21.8) (1,063) (19.4) 8 3
Selling, general and (1,647) (32.8) (1,969) (36.0) (12) (16)
administration
Research and development (682) (13.6) (681) (12.5) 6 -
------ ------ ------ ------ ----- ----
Trading profit 1,594 31.8 1,753 32.1 5 (9)
------ ------ ------ ------ ----- ----
Overall the trading margin declined 0.3 percentage points and sterling trading
profit declined 9% on a sterling turnover decline of 8%. At constant exchange
rates trading profit grew 5% and the margin increased 1.7 percentage points
principally reflecting a 12% decline in selling, general and administration
(SG&A), partly offset by a 8% increase in cost of sales and a 6% increase in
research and development (R&D) expenditure while turnover was flat.
Cost of sales increased as a percentage of turnover by 2.4 percentage points.
At constant exchange rates the increase was 1.7 percentage points reflecting the
loss of higher margin Paxil IR and Wellbutrin SR sales, and an adverse regional
mix.
SG&A as a percentage of turnover declined 3.2 percentage points. At constant
exchange rates the decline was 4.2 percentage points. The principal reasons for
the decline relative to Q3 2003 were lower provisions for legal matters, reduced
asset write-downs and other general savings.
R&D expenditure was flat in sterling terms, but increased 6% reflecting
increased clinical trial activity. Pharmaceuticals R&D expenditure represented
15.6% of pharmaceutical turnover.
Other operating income/(expense)
Other operating income/(expense) includes litigation costs and provisions
relating to legal claims on withdrawn products, product withdrawals and anti-
trust matters, equity investment carrying value adjustments arising from stock
market price changes, royalty income, product disposals and equity investment
sales.
Net other operating expense was £33 million compared with £33 million in Q3
2003. The net charge in 2004 reflects lower legal provisions and lower sales of
equity investments.
Taxation
The charge for taxation on profit amounting to £418 million represents an
effective tax rate of 27.5%, which is the expected rate for the year.
Transfer pricing issues are described in the 'Taxation' note to the Financial
Statements included in the Annual Report 2003. Developments since the date of
that report are below.
With respect to the claims of the Internal Revenue Service (IRS) for the years
1989-1996, which are described in the note, the company contested these claims
for additional taxes of $2.7 billion (£1.5 billion) and related interest of $2.5
billion (£1.4 billion) net of federal tax relief by filing a petition in the US
Tax Court on 2nd April 2004. Similar tax issues remain open for 1997 to date.
The company expects to receive a statutory notice covering the years 1997-2000
in 2005. A provisional date for the trial for the years 1989-2000 has been set
for October 2006.
GSK continues to believe that the profits reported by its US subsidiaries for
the period 1989 to date, on which it has paid taxes in the United States, are
more than sufficient to reflect the activities of its US operations. As stated
in previous updates, there continues to be a wide difference of views between
the company and the IRS.
GlaxoSmithKline uses the best advice in determining its transfer pricing
methodology and in seeking to manage transfer pricing issues to a satisfactory
conclusion and, on the basis of external professional advice, 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
significantly from the amounts provided and is dependent upon the outcome of
litigation proceedings and negotiations with the relevant tax authorities.
Earnings
Q3 2003 2003
Q3 2004 (restated) (restated)
£m £m £m
Net profit attributable to shareholders ---- ---- ----
Earnings 1,065 1,172 4,478
Adjustment for merger items, integration and restructuring costs and
disposal of businesses - 24 281
---- ---- ----
Adjusted earnings 1,065 1,196 4,759
---- ---- ----
pence pence pence
Earnings per share ---- ---- ----
Basic earnings per share 18.7 20.2 77.1
Adjustment for merger items, integration and restructuring costs and
disposal of businesses - 0.5 4.9
---- ---- ----
Adjusted earnings per share 18.7 20.7 82.0
---- ---- ----
Appropriations Q3 2003 2003
Q3 2004 (restated) (restated)
£m £m £m
---- ---- ----
Net profit attributable to shareholders 1,065 1,172 4,478
Dividends (571) (520) (2,374)
---- ---- ----
Retained profit 494 652 2,104
---- ---- ----
Pence per 2004 Pence per 2003
share share £m
£m
Dividends ---- ---- ---- ----
First interim - paid 1st July 2004 10 575 9 524
Second interim - paid 30th September 2004 10 573 9 522
Third interim - payable 6th January 2005 10 571 9 520
Fourth interim 14 808
---- ----
41 2,374
---- ----
The number of shares in issue, excluding those held by the ESOP Trusts and those
held as Treasury shares, at 30th September 2004 was 5,712 million (30th
September 2003: 5,780 million).
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
9 months
9 months 2003 2003
2004 (restated) (restated)
£m £m £m
---- ---- ----
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 3,341 3,685 4,478
Exchange movements on overseas net assets (101) 192 113
Tax on exchange movements and unrealised gains (35) (1) (92)
Unrealised gains on equity investments - 7 7
---- ---- ----
TOTAL RECOGNISED GAINS AND LOSSES RELATING
TO THE PERIOD 3,205 3,883 4,506
---- ----
Prior period adjustment - implementation of UITF 17 (revised)
and UITF 38 368
----
TOTAL RECOGNISED GAINS AND LOSSES SINCE
31st DECEMBER 2003 3,573
----
SUMMARY STATEMENT OF CASH FLOW AND MOVEMENT IN NET DEBT
Three months ended 30th September 2004
Q3 2003
Q3 2004 (restated)
£m £m
---- ----
OPERATING PROFIT 1,561 1,687
Depreciation and other non-cash items 257 326
(Increase)/decrease in working capital (14) 108
Increase in net liabilities 202 220
---- ----
NET CASH INFLOW FROM OPERATING ACTIVITIES 2,006 2,341
Dividends received from associates 4 1
Returns on investment and servicing of finance (58) (44)
Taxation paid (391) (449)
---- ----
1,561 1,849
---- ----
Purchase of tangible fixed assets (214) (194)
Sale of tangible fixed assets 24 1
Purchase of intangible fixed assets (77) (61)
---- ----
(267) (254)
Purchase of equity investments (6) (7)
Sale of equity investments 18 31
---- ----
Capital expenditure and financial investment (255) (230)
---- ----
Purchase of businesses (306) (3)
Investment in joint ventures and associates - (2)
---- ----
Acquisitions and disposals (306) (5)
---- ----
Equity dividends paid (1,092) (523)
---- ----
NET CASH (OUTFLOW)/INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES
AND FINANCING (92) 1,091
Issue of ordinary share capital 9 8
Proceeds from own shares for employee share options 4 6
Purchase of shares for cancellation - (280)
Purchase of Treasury shares (247) -
Other financing cash flows 55 (51)
Exchange movements (2) (54)
Other non-cash movements (95) -
---- ----
(INCREASE)/DECREASE IN NET DEBT IN PERIOD (368) 720
NET DEBT AT BEGINNING OF PERIOD (2,023) (2,162)
---- ----
NET DEBT AT END OF PERIOD (2,391) (1,442)
---- ----
SUMMARY STATEMENT OF CASH FLOW AND MOVEMENT IN NET DEBT
Nine months ended 30th September 2004
9 months
9 months 2003 2003
2004 (restated) (restated)
£m £m £m
---- ---- ----
OPERATING PROFIT 4,768 5,240 6,376
Depreciation and other non-cash items 705 731 1,066
Increase in working capital (98) (240) (387)
Decrease in net liabilities (254) (33) (50)
---- ---- ----
NET CASH INFLOW FROM OPERATING ACTIVITIES 5,121 5,698 7,005
Dividends received from associates 8 1 1
Returns on investment and servicing of finance (197) (193) (231)
Taxation paid (1,116) (1,566) (1,917)
---- ---- ----
3,816 3,940 4,858
---- ---- ----
Purchase of tangible fixed assets (541) (533) (869)
Sale of tangible fixed assets 38 32 46
Purchase of intangible fixed assets (133) (117) (193)
---- ---- ----
(636) (618) (1,016)
Purchase of equity investments (77) (22) (63)
Sale of equity investments 55 117 125
---- ---- ----
Capital expenditure and financial investment (658) (523) (954)
---- ---- ----
Purchase of businesses (306) (12) (12)
Disposal of interests in associates 56 - -
Business disposals - 3 3
Investment in joint ventures and associates (2) (3) (3)
---- ---- ----
Acquisitions and disposals (252) (12) (12)
---- ---- ----
Equity dividends paid (2,419) (1,810) (2,333)
---- ---- ----
NET CASH INFLOW BEFORE MANAGEMENT OF LIQUID RESOURCES AND
FINANCING 487 1,595 1,559
Issue of ordinary share capital 25 26 41
Proceeds from own shares for employee share options 16 18 26
Purchase of shares for cancellation (201) (807) (980)
Purchase of Treasury shares (532) - -
Redemption of preference shares issued by a subsidiary (489) - -
Other financing cash flows 30 93 82
Exchange movements 19 (32) (37)
Other non-cash movements (98) - (4)
---- ---- ----
(INCREASE)/DECREASE IN NET DEBT IN PERIOD (743) 893 687
NET DEBT AT BEGINNING OF PERIOD (1,648) (2,335) (2,335)
---- ---- ----
NET DEBT AT END OF PERIOD (2,391) (1,442) (1,648)
---- ---- ----
BALANCE SHEET
30th September 31st December
30th September 2003 2003
2004 (restated) (restated)
£m £m £m
---- ---- ----
Goodwill 136 151 143
Intangible fixed assets 1,993 1,710 1,697
Tangible fixed assets 6,450 6,526 6,441
Investments 379 310 294
---- ---- ----
FIXED ASSETS 8,958 8,697 8,575
---- ---- ----
Equity investments 137 159 164
Stocks 2,250 2,251 2,109
Debtors 6,880 6,738 6,897
Liquid investments 2,981 2,189 2,493
Cash at bank 756 1,670 962
---- ---- ----
CURRENT ASSETS 13,004 13,007 12,625
---- ---- ----
Loans and overdrafts (1,157) (1,596) (1,452)
Other creditors (6,441) (6,795) (7,019)
---- ---- ----
CREDITORS: amounts due within one year (7,598) (8,391) (8,471)
---- ---- ----
NET CURRENT ASSETS 5,406 4,616 4,154
---- ---- ----
TOTAL ASSETS LESS CURRENT LIABILITIES 14,364 13,313 12,729
---- ---- ----
Loans (4,971) (3,705) (3,651)
Other creditors (267) (227) (232)
---- ---- ----
CREDITORS: amounts due after one year (5,238) (3,932) (3,883)
---- ---- ----
PROVISIONS FOR LIABILITIES AND CHARGES (3,002) (3,227) (3,042)
---- ---- ----
NET ASSETS 6,124 6,154 5,804
---- ---- ----
Called up share capital 1,484 1,490 1,487
Share premium account 288 249 264
Other reserves (710) (839) (804)
Profit and loss account 4,804 4,469 4,112
---- ---- ----
EQUITY SHAREHOLDERS' FUNDS 5,866 5,369 5,059
Non-equity minority interests - 542 503
Equity minority interests 258 243 242
---- ---- ----
CAPITAL EMPLOYED 6,124 6,154 5,804
---- ---- ----
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
9 months
9 months 2003 2003
2004 (restated) (restated)
£m £m £m
---- ---- ----
Equity shareholders' funds as previously reported 7,720 6,581 6,581
Prior period adjustment - implementation of UITF 17 (revised)
and UITF 38 (2,661) (2,741) (2,741)
---- ---- ----
Equity shareholders' funds at beginning of period as restated 5,059 3,840 3,840
Total recognised gains and losses for the period 3,205 3,883 4,506
Dividends (1,719) (1,566) (2,374)
Ordinary shares issued 25 26 41
Ordinary shares purchased and cancelled (201) (836) (980)
Ordinary shares purchased and held as Treasury shares (549) - -
Proceeds from own shares for employee share options 16 16 26
Credit in respect of employee share schemes 15 22 7
Goodwill written back 5 - -
Exchange movements on goodwill written off to reserves 10 (16) (7)
---- ---- ----
Equity shareholders' funds 5,866 5,369 5,059
---- ---- ----
FINANCIAL REVIEW - CASH FLOW AND BALANCE SHEET
Cash flow
Operating cash flow was £2,006 million in Q3 2004. This represents a decrease
of £335 million over Q3 2003. This reduced inflow was mainly due to the
negative impact of foreign exchange and increases in working capital. The
operating cash flow is in excess of the funds needed for the routine cash flows
of tax, capital expenditure on tangible assets and dividend payments, together
amounting to £1,697 million. This was higher than in Q3 2003 as two quarterly
dividend cash payments were made in this quarter rather than the usual one
payment. The £306 million purchase of business in the quarter relates to the
acquisition of Fraxiparine and Arixtra product rights together with an
associated manufacturing plant from Sanofi-Synthelabo. Receipts of £13 million
arose from the exercise of share options: £4 million from the utilisation of
shares held by the Employee Share Ownership Plan (ESOP) Trusts and £9 million
from the issue of new shares. In addition, £247 million was spent on purchasing
Treasury shares. The company did not purchase any of its own shares for
cancellation in the period.
Net assets
The book value of net assets increased by £320 million from £5,804 million at
31st December 2003 to £6,124 million at 30th September 2004.
Fixed asset investments comprise investments in associates, joint ventures and
long-term equity investments. The carrying value of associates, joint ventures
and equity investments was £516 million and the market value was £1,399 million.
Following the implementation of UITF 38 investments in own shares held by the
ESOP Trusts are now shown as a deduction from equity shareholders' funds.
Equity shareholders' funds
Equity shareholders' funds have been restated at 31st December 2003 to £5,059
million. At 30th September 2004 these had increased to £5,866 million. The
increase arises from retained earnings partially offset by shares purchased and
cancelled, Treasury shares purchased and exchange movements on overseas net
assets.
At 30th September 2004 the ESOP Trusts held 174.6 million GSK ordinary shares,
at a book value of £2,639 million and a market value of £2,079 million, against
the future exercise of share options and share awards, which have been deducted
from other reserves. At 30th September 2004 GSK also held 48.6 million shares
as Treasury shares, at a cost of £549 million, which has been deducted from
profit and loss account reserves.
Legal matters
The Group is involved in various legal and administrative proceedings,
principally product liability, intellectual property, tax, anti-trust and
governmental investigations and related private litigation. The Group makes
provision for those proceedings on a regular basis as summarised under 'Legal
and other disputes' on page 5. The Group may make additional significant
provisions for such legal proceedings, as required in the event of further
developments in those matters, consistent with generally accepted accounting
principles. Litigation, particularly in the USA, is inherently unpredictable
and excessive awards that may not be justified by the evidence can occur. The
Group could in the future incur judgments 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 Group's financial condition and
results of operations.
Intellectual property claims include challenges to the validity of the Group's
patents on various products or processes, and/or 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 consequence 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, relating to the defence of the Group's intellectual
property, and litigation costs and provisions related to product liability
claims on existing products, are charged to selling, general and administration
costs. Litigation costs and provisions relating to legal claims on withdrawn
products, anti-trust and pricing matters are charged to other operating
income/expense. At 30th September 2004 the Group's aggregate provision for
legal and other disputes (not including tax matters described under 'Taxation'
on page 13) was almost £1 billion. The ultimate liability for legal claims may
vary from the amounts provided and is dependent upon the outcome of litigation
proceedings, investigations and possible settlement negotiations.
Developments since the date of the Annual Report as previously updated by the
legal proceedings note to the results announcements for the first and second
quarters of 2004 are set out below:
The Group made application to the US Patent and Trademark Office (USPTO) in
September 2004 for re-issue of its combination patent for Advair, an inhaled
combination of salmeterol and fluticasone propionate, which expires in September
2010.
With respect to the Group's infringement action against Teva Pharmaceuticals, in
August 2004, following a full trial, the US District Court for the District of
Delaware ruled in the Group's favour, upholding the validity of the Group's
method of use patent for Zofran which expires in December 2006, including
expected paediatric extension. Teva has appealed the decision to the US Court
of Appeals for the Federal Circuit (CAFC). A decision from the CAFC is expected
in 2005. The trial of the Group's actions against Reddy-Cheminor and West-ward
Pharmaceuticals in the US District Court for the District of New Jersey for
infringement of the Group's method of use and process patents for Zofran has
been completed with closing arguments expected to be heard during the fourth
quarter. Prior to trial both Reddy-Cheminor and West-ward withdrew their
challenges to the compound patent for ondansetron, the active ingredient in
Zofran, amended their respective ANDAs and acknowledged that neither party is
seeking approval of its ANDA prior to the expiry of the Group's compound patent
in July 2005 (taking into account an expected extension for paediatric
exclusivity).
With respect to the Group's patent infringement action filed against Teva
Pharmaceuticals regarding the compound patent for lamotrigine (the active
ingredient in Lamictal), the US District Court for the District of New Jersey
has set an 18th January 2005 trial date.
With respect to anti-trust litigation regarding Paxil the Group has reached
settlements with classes of direct and indirect purchasers pursuant to which the
Group has agreed to pay $165 million (£91 million). Those settlements are
subject to approval of the US District Court for the Eastern District of
Pennsylvania. Similar claims made by chain drugstores have also been settled.
All these settlements have been covered using existing provisions. Litigation
remains outstanding with Apotex and certain other generic manufacturers as part
of their anti-trust counterclaims to the patent infringement actions filed by
the Group in the same court.
With respect to the anti-trust litigation regarding Relafen, the Group has
reached a settlement agreement with a class of indirect purchasers pursuant to
which the Group has agreed to pay $75 million (£41 million) which have been
covered using existing provisions. That settlement is subject to approval of
the US District Court for the District of Massachusetts.
In August 2004 the Group reached a settlement with the New York State Attorney
General's office over the state's lawsuit regarding the disclosure of data on
the use of Paxil in children and adolescents with depression. Under the terms
of the settlement the Group has agreed to pay the State of New York $2.5 million
(£1.4 million) and to make all reasonable efforts to post within stated time
frames on the Group's open Internet clinical trial register summaries of
clinical trial reports on its marketed medicines completed after a stated time.
Similar cases, some of which purport to be class actions, have been filed in
state and federal courts by private plaintiffs. All those cases are in their
early stages.
The Group has been named in seven purported class action lawsuits along with
eight other pharmaceutical companies. Following the Group's actions in 2003 to
combat illegal importation of prescription drugs from Canada, the lawsuits
allege that the companies entered an unlawful conspiracy to prevent Canadian
pharmacies from selling their products to US customers. The Group has also been
named as a defendant, along with thirteen other drug companies, in a state court
action in California, in which the plaintiffs, independent pharmacies, allege
that the defendants unlawfully conspired to keep prices artificially high in the
USA to the detriment of the plaintiffs. In relation to the same matter, the
Minnesota State Attorney General has served the Group with a complaint alleging
that the Group has violated state anti-trust and commercial laws; however, this
complaint has not yet been filed. All those state court actions are in their
early stages.
Developments with respect to tax matters are described in 'Taxation' on page 13.
EXCHANGE RATES
The results and net assets of the Group, as reported in sterling, are affected
by movements in exchange rates between sterling and overseas currencies. GSK
uses the average of exchange rates prevailing during the period to translate the
results and cash flows of overseas Group subsidiary 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, are:
9 months 9 months 2003
2004 2003
Average rates: ---- ---- ----
£/US$ 1.82 1.61 1.64
£/Euro 1.48 1.45 1.45
£/Yen 197.00 191.00 191.00
Period end rates:
£/US$ 1.81 1.66 1.79
£/Euro 1.46 1.43 1.42
£/Yen 199.00 185.00 192.00
During Q3 2004 average sterling exchange rates were stronger against the US
dollar, the Euro and the Yen compared with the same period in 2003. Comparing
Q3 2004 period end rates with Q3 2003 period end rates, sterling was stronger
against the US dollar, the Euro and the Yen.
ACCOUNTING PRESENTATION AND POLICIES
This unaudited Results Announcement for the period ended 30th September 2004 is
prepared in accordance with the accounting policies expected to apply in 2004.
These are unchanged from those set out in the Annual Report 2003, except that
during 2004 UITF Abstract 38 'Accounting for ESOP trusts' and related amendments
to Abstract 17 'Employee share schemes' have been implemented. UITF 38 changes
the presentation of an entity's own shares held in an ESOP trust from requiring
them to be recognised as assets to requiring them to be deducted in arriving at
shareholders' funds. UITF 17 (revised) requires that the minimum expense should
be the difference between the fair value of the shares at the date of award and
the amount that an employee may be required to pay for the shares (i.e. the
intrinsic value of the award).
Data for market share and market growth rates relate to the year ended 30th
September 2004 (or later where available). These are GSK estimates based on the
most recent data from independent external sources, valued in sterling at
relevant exchange rates. Figures quoted for product market share reflect sales
by GSK and licensees.
During the years 2000 to 2003, business performance was the primary performance
measure used by management and was presented after excluding merger items,
integration and restructuring costs and disposals of businesses, as management
believed that exclusion of these items provided a better comparison of business
performance for the periods presented. For 2004, with the completion of these
programmes, the Group is reporting results on a statutory basis only. Growth
rates are presented comparing 2004 results both with 2003 business performance
results and 2003 statutory results. Management considers that the comparison of
2004 statutory results with 2003 business performance results gives the most
appropriate indication of the Group's performance for the period under review
and therefore commentaries are presented on this basis unless otherwise stated.
In order to illustrate underlying performance, it is the Group's 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. All commentaries are presented in terms of CER unless
otherwise stated.
The profit and loss account, statement of total recognised gains and losses and
cash flow statement for the year ended, and the balance sheet at, 31st December
2003 have been derived from the full Group accounts for that period, after
adjusting for the implementation of UITF 17 (revised) and UITF 38, which have
been delivered to the Registrar of Companies and on which the report of the
auditors was unqualified and did not contain a statement under either section
237(2) or section 237(3) of the Companies Act 1985.
INVESTOR INFORMATION
Announcement of Q3 2004 Results
This Announcement was approved by the Board of Directors on Thursday 28th
October 2004.
Financial calendar
The company will announce preliminary results for 2004 and fourth quarter 2004
results on 10th February 2005. The fourth interim dividend for 2004 will have
an ex-dividend date of 16th February 2005 and a record date of 18th February
2005 and will be paid on 7th April 2005.
Internet
This Announcement, and other information about GSK, is available on the
company's website at: http://www.gsk.com.
This information is provided by RNS
The company news service from the London Stock Exchange ND
QRTPUGQUUUPCGGR
