3rd Qtr & 9 Mths Rslts - Pt 1

GlaxoSmithKline PLC 23 October 2001 Issued: 23rd October 2001, London GlaxoSmithKline plc Results Announcement for the Third Quarter 2001 PART ONE OF A TWO PART ANNOUNCEMENT =================================== Results Announcement for the Third Quarter 2001 ----------------------------------------------- Strong Third Quarter Performance Drives GlaxoSmithKline Earnings Per Share Growth to 20% (18% at Constant Exchange Rates) GlaxoSmithKline plc (GSK) today announces its results for the third quarter ended 30th September 2001. The business performance results are summarised below. BUSINESS PERFORMANCE RESULTS ---------------------------- Increase Increase ------------ 9 months ------------ Q3 2001 CER% £% 2001 CER% £% £m £m ------- ------------ ------ ------------ Sales 4,994 12 13 14,873 10 14 Trading profit 1,416 18 20 4,327 14 20 Profit before tax 1,349 16 17 4,439 12 17 Earnings per share 15.8p 18 20 52.0p 14 20 Q3 2001 HIGHLIGHTS ------------------ - Pharmaceutical sales up 13% (excluding divested products). - All regions performing strongly with sales growth in the USA 14%; Europe 8%; Rest of World 18%. - New products up 59% to over £1 billion, representing 24% of sales. - Respiratory business up 36% to £871 million. - Over two million prescriptions written in the USA for Seretide/Advair since launch in April. - £4 billion share buy-back programme announced. - GSK on track to deliver 2001 earnings per share growth target of around 13% CER. Commenting on the performance for the third quarter, Jean-Pierre Garnier, Chief Executive Officer, said:- 'GlaxoSmithKline had a strong third quarter, delivering sustained growth across all regions. I am especially pleased to see the way our new products (up 59%) continue to help drive this growth - the performance of Seretide/Advair, in particular, was excellent. Our respiratory and anti-viral franchises also performed strongly this quarter. We are on track to deliver our earnings per share growth target of around 13% CER for the year and remain confident we will achieve our earnings guidance for 2002 of mid-teens earnings per share growth at comparable exchange rates.' --------------------------------------------------------------------- Business performance results exclude merger items, integration and restructuring costs and disposals of subsidiaries. Growth rates are at constant exchange rates (CER) unless otherwise stated. --------------------------------------------------------------------- Pharmaceuticals --------------- Pharmaceuticals sales growth for the quarter, excluding divested products, was 13% with all regions performing strongly. Sales in the USA grew 14% to £2.2 billion. Although US wholesaler stocking patterns affected sales growth rates of some products, the underlying growth for the US business in total is broadly consistent with reported sales growth. In Europe, sales grew 8% to £1.1 billion and in the Rest of World sales increased 18% to £0.9 billion. All regions benefited from continued growth in the key therapy areas of central nervous system (CNS), respiratory and anti-virals as well as strong performances from new products Seretide/Advair and Avandia. CNS - continued strong underlying growth with sales of £983 million ------------------------------------------------------------------- Total Seroxat/Paxil sales were in line with last year. Strong growth in Europe,up 12% and Rest of the World, up 55% offset a 10% decline in the USA. Despite good underlying demand in the USA, sales growth was negatively affected by wholesaler buying patterns. Seroxat/Paxil is currently the only SSRI approved in the USA for Generalised Anxiety Disorder (GAD) and a DTC campaign for this new indication was launched at the beginning of October. Wellbutrin sales grew 40% to £168 million and sales for Imigran/Imitrex increased 9% to £198 million. Imigran/Imitrex tablets were launched successfully in Japan and achieved sales of over £6 million in just one month on the market. Respiratory products - Seretide/Advair, Serevent and Flixotide/Flovent grew 53% to over £600 million ---------------------------------------------------------------------- Total Seretide/Advair sales were £240 million. In the USA, more than two million prescriptions have been written for Seretide/Advair since its launch in April. The speed at which patients have adopted Seretide/Advair in the USA makes it the most successfully launched asthma treatment in the past decade. Seretide/Advair continues to drive growth in Europe. An indication for the use of Seretide/Advair to treat chronic obstructive pulmonary disease (COPD) was filed in Europe in September, following the US filing in May. The three key products - Seretide/Advair, Serevent, Flixotide/Flovent - grew 74% in the USA; 35% in Europe and 37% in the Rest of the World. Anti-bacterial sales over £500m ------------------------------- Total sales of anti-bacterial products were £543 million, with Augmentin contributing £278 million. Despite good underlying demand in the USA, sales of Augmentin at £168 million were in line with last year, negatively affected by wholesaler buying patterns. New Augmentin ES (extra strength), the only product with an indication to treat children at risk of otitis media caused by antibiotic resistant strep. pneumoniae, was launched in the USA in October. Anti-viral sales up 15% to over £530 million - driven by HIV products and Valtrex ---------------------------------------------------------------------- Total HIV sales were £340 million, up 16%. US sales were up 11% to £203 million, driven by strong uptake of Trizivir, the new HIV triple combination product. Sales in Europe, up 17%, and the Rest of World, up 48%, improved as a result of further launches of Trizivir and strong performances by Ziagen. Valtrex sales were £89 million, up 54%. Sales in the USA grew to £55 million, helped by the new 3-day indication for recurrent genital herpes. Strong performance from Avandia drives metabolic and gastro-intestinal sales ---------------------------------------------------------------------- Total sales of metabolic and gastro-intestinal products were up 24% to £400 million. Sales for Avandia were up 94% to £226 million, inflated by advanced US wholesaler stocking. Total US prescription growth for Avandia was 30% for the quarter reflecting increased acceptance of the product in the oral diabetes market. Zantac sales continued to decline in most markets. Cardiovascular and Oncology sales growth driven by Coreg and Zofran ------------------------------------------------------------------- Total sales for Coreg grew 24% to £60 million. In the USA, Coreg received an approvable letter from the FDA for the treatment of severe heart failure. Coreg is the only beta-blocking agent that has clinical data showing survival in severe heart failure patients. In oncology, Zofran sales increased 20% to £153 million owing to new growth in the post operative market. Vaccines - worldwide sales grew 9% ---------------------------------- Total vaccines sales were up 9% to £241 million. Infanrix (our new DTPa range of combination vaccines) was up 28% to £54 million. Other vaccines, including Priorix, Tritanrix and Typherix, all achieved strong growth of over 30%. Growth from these vaccines more than offset an 8% decline in the hepatitis portfolio. Pipeline -------- GSK has completed a review and prioritisation of its product development portfolio and today issued an update of its product pipeline. The company currently has 113 projects in clinical development, which include 50 new chemical entities (NCE's), 22 new vaccines and 41 line extensions. The review of the portfolio has concluded that GI262570, a peroxisome proliferator activated receptor (PPAR) agonist, in Phase III clinical trials for the treatment of type 2 diabetes, did not meet its target profile. Development of the compound for this indication has now ceased and alternative indications are being explored. GSK continues to actively pursue external collaborations to further enhance its product development pipeline and has initiated six new collaborations, so far, in 2001. In the third quarter, GSK completed an agreement to form a joint venture with Shionogi & Co., Ltd. and a collaboration to research, develop and commercialise several compounds with Tanabe Seiyaku Co. Ltd. During the quarter, regulatory filings were made in Europe for Seretide/Advair to treat COPD and dutasteride for the treatment of benign prostatic hyperplasia (BPH). Consumer Healthcare ------------------- Consumer Healthcare sales grew 27% to £810 million; sales excluding Block Drug grew 4% to £663 million. Worldwide sales of oral care products, excluding Block Drug, were £165 million, up 1%; US sales were down 15%, but in Europe sales were up 9%, benefiting from new product launches. Block Drug added oral care product sales of £111 million. Nutritional Healthcare products increased 13% to £153 million, led by strong growth from Lucozade, Ribena and Horlicks. Worldwide sales of over-the-counter medicines were £381 million. The performance of smoking control products improved, up 2%, as a result of stabilisation of market share in the USA and a strong performance in Europe. Sales of Analgesic products, up 39%, were also drivers of growth in this category. Consumer Healthcare trading profit increased 27%, reflecting sales growth and the contribution from Block Drug. Share Buy-Back Programme ------------------------ GSK plans to spend up to L4 billion buying its shares in the market. The programme covers purchases by the company's employee trusts relating to share option grants and other share based incentives, of which £0.7 billion has already been spent in 2001. It also covers purchases by the company of shares for cancellation. The exact amount and timing of future purchases will be determined by the company and is dependent on market conditions and other factors. Merger & Restructuring ---------------------- GSK continues to implement the manufacturing restructuring plans initiated by both SmithKline Beecham and Glaxo Wellcome, and is proceeding with the integration of the SB and GW businesses in accordance with the merger plans developed during 2000. Merger savings in excess of £400 million are expected in 2001. Costs of £659 million were incurred in the quarter in respect of the merger, integration and restructuring and disposal of subsidiaries. After tax relief of £73 million, the net charge was £586 million. Together with business performance earnings of £960 million, this produces total earnings of £374 million for the quarter. Trading Profit and Earnings Per share ------------------------------------- Trading profit growth was 18%, reflecting improved trading margins. The trading margin improved 1.7% to 28.4% as a result of cost savings from merger integration, partly offset by the divestment of certain high margin products required by regulatory authorities as a condition of the merger. Third quarter EPS was up 18% in CER terms and 20% in sterling terms, benefiting from favourable exchange rates in the USA and Europe. Dividend -------- The Board has declared a third quarter interim dividend of 9 pence per share. The equivalent dividend receivable by ADR holders is 25.584 cents per ADS based on an exchange rate of £1/$1.42133. The dividend will be paid on 3rd January 2002 to shareholders and ADR holders of record on 2nd November 2001. GlaxoSmithKline - one of the world's leading research-based pharmaceutical and healthcare companies - is committed to improving the quality of human life by enabling people to do more, feel better and live longer. For company information and a copy of the company's updated product development pipeline, visit GSK on the World Wide Web at www.gsk.com. ---------------------------------------------------------------------- Enquiries: UK Media Martin Sutton (020) 8966 8372 Philip Thomson (020) 8966 8372 Alan Chandler (020) 8966 8372 US Media Nancy Pekarek (215) 751 7709 Mary Anne Rhyne (919) 483 2839 European Analyst / Investor Jennie Younger (020) 8966 8378 Duncan Learmouth (020) 8966 5961 Anita Kidgell (020) 8966 8369 US Analyst / Investor Frank Murdolo (215) 751 7002 Tom Curry (215) 751 5419 ---------------------------------------------------------------------- GSK prepares its financial results in £ sterling. Accordingly this Announcement is issued in £ sterling. A convenience translation in US$ is also issued. Both £ sterling and US$ versions of the Announcement are available on 'Corporate Home' at www.gsk.com. 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 2000, filed with the US Securities and Exchange Commission. PROFIT AND LOSS ACCOUNT Three months ended 30th September 2001 ------------------------------------------------------- Merger, integration and restructuring and disposal Business performance of subsidiaries Total ----------------------- --------------- --------------- Q3 2001 Q3 2000 Q3 2001 Q3 2000 Q3 2001 Q3 2000 £m £m CER% £m £m £m £m ----- ----- ---- ----- ---- ----- ----- Sales Pharmaceuticals - Existing portfolio 4,184 3,663 13 - - 4,184 3,663 - Divested products - 123 - - - 123 ----- ----- ----- ---- ----- ----- - Total 4,184 3,786 10 - - 4,184 3,786 ----- ----- ----- ---- ----- ----- Consumer Healthcare - Existing portfolio 663 639 4 - - 663 639 - Acquisition - Block 147 - - - 147 - Drug ----- ----- ----- ---- ----- ----- 810 639 27 - - 810 639 - Divested products - 4 - - - 4 ----- ----- ----- ---- ----- ----- - Total 810 643 27 - - 810 643 ----- ----- ----- ---- ----- ----- SALES 4,994 4,429 12 - - 4,994 4,429 Cost of sales (1,071) (919) (16) (79) (24) (1,150) (943) ----- ----- ----- ---- ----- ----- Gross profit 3,923 3,510 10 (79) (24) 3,844 3,486 Selling, general and (1,867) (1,690) (9) (262) (39) (2,129) (1,729) administration Research and development (640) (636) 1 (17) (3) (657) (639) ----- ----- ----- ---- ----- ----- Trading profit: Pharmaceuticals 1,272 1,070 17 (336) (60) 936 1,010 Consumer Healthcare 144 114 27 (22) (6) 122 108 ----- ----- ----- ---- ----- ----- TRADING PROFIT 1,416 1,184 18 (358) (66) 1,058 1,118 Other operating (59) 6 - - (59) 6 income/(expense) ----- ----- ----- ---- ----- ----- Operating profit 1,357 1,190 13 (358) (66) 999 1,124 Profits/(losses) of 19 23 - (2) 19 21 associates Business disposals - - (301) - (301) - Merger transaction costs - - - (24) - (24) ----- ----- ----- ---- ----- ----- Profit before interest 1,376 1,213 (659) (92) 717 1,121 Net interest payable (27) (59) - - (27) (59) ----- ----- ----- ---- ----- ----- PROFIT BEFORE TAXATION 1,349 1,154 16 (659) (92) 690 1,062 Taxation (360) (316) 73 22 (287) (294) ----- ----- ----- ---- ----- ----- Profit after taxation 989 838 17 (586) (70) 403 768 Minority interests (23) (22) - - (23) (22) Preference share dividends (6) (14) - - (6) (14) ----- ----- ----- ---- ----- ----- EARNINGS 960 802 19 (586) (70) 374 732 ===== ===== ===== ==== ===== ===== EARNINGS PER SHARE 15.8p 13.2p 18 6.1p 12.1p ===== ===== ===== ===== To illustrate 'Business performance', merger items, integration and restructuring costs and disposal of subsidiaries have been excluded and an adjusted EPS presented. Appropriations of profit attributable to shareholders are set out under 'Appropriations' below. PROFIT AND LOSS ACCOUNT Nine months ended 30th September 2001 --------------------------------------------------------- Merger, integration and restructuring and disposal Business performance of subsidiaries Total ------------------------- --------------- -------------- 9 months 9 months 9 months 9 months 9 months 9 months 2001 2000 2001 2000 2001 2000 £m £m CER% £m £m £m £m ----- ----- ---- ----- ----- ----- ----- Sales Pharmaceuticals - Existing portfolio 12,486 10,781 12 - - 12,486 10,781 - Divested products - 344 - - - 344 ----- ----- ----- ----- ----- ----- - Total 12,486 11,125 9 - - 12,486 11,125 ----- ----- ----- ----- ----- ----- Consumer Healthcare - Existing portfolio 1,950 1,912 - - - 1,950 1,912 - Acquisition - Block 437 - - - 437 - - Drug ----- ----- ----- ----- ----- ----- 2,387 1,912 23 - - 2,387 1,912 - Divested products - 13 - - - 13 ----- ----- ----- ----- ----- ----- - Total 2,387 1,925 22 - - 2,387 1,925 ----- ----- ----- ----- ----- ----- SALES 14,873 13,050 10 - - 14,873 13,050 Cost of sales (3,166) (2,763) (13) (141) (62) (3,307) (2,825) ----- ----- ----- ----- ----- ----- Gross profit 11,707 10,287 10 (141) (62) 11,566 10,225 Selling, general and (5,533) (4,874) (9) (754) (223) (6,287) (5,097) administration Research and (1,847) (1,794) - (61) (3) (1,908) (1,797) development ----- ----- ----- ----- ----- ----- Trading profit: Pharmaceuticals 3,964 3,315 14 (870) (246) 3,094 3,069 Consumer Healthcare 363 304 17 (86) (42) 277 262 ----- ----- ----- ----- ----- ----- TRADING PROFIT 4,327 3,619 14 (956) (288) 3,371 3,331 Other operating 32 126 - - 32 126 income/(expense) ----- ----- ----- ----- ----- ----- Operating profit 4,359 3,745 11 (956) (288) 3,403 3,457 Profits/(losses) of 54 51 - (7) 54 44 associates Disposal of interests in 96 144 - - 96 144 associates Business disposals - - (302) - (302) - Merger transaction costs - - - (46) - (46) ----- ----- ----- ----- ----- ----- Profit before interest 4,509 3,940 (1,258) (341) 3,251 3,599 Net interest payable (70) (138) - - (70) (138) ----- ----- ----- ----- ----- ----- PROFIT BEFORE TAXATION 4,439 3,802 12 (1,258) (341) 3,181 3,461 Taxation (1,185) (1,038) 182 76 (1,003) (962) ----- ----- ----- ----- ----- ----- Profit after taxation 3,254 2,764 13 (1,076) (265) 2,178 2,499 Minority interests (68) (86) - - (68) (86) Preference share (27) (41) - - (27) (41) dividends ----- ----- ----- ----- ----- ----- EARNINGS 3,159 2,637 15 (1,076) (265) 2,083 2,372 ===== ===== ===== ===== ===== ===== EARNINGS PER SHARE 52.0p 43.5p 14 34.3p 39.1p ===== ===== ===== ===== Weighted average 6,074 6,064 6,074 6,064 number of shares ===== ===== ===== ===== (millions) To illustrate 'Business performance', merger items, integration and restructuring costs and disposal of subsidiaries have been excluded and an adjusted EPS presented. Appropriations of profit attributable to shareholders are set out under 'Appropriations' below. PHARMACEUTICAL SALES - EXISTING PORTFOLIO Three months ended 30th September 2001 ----------------------------------------- Total USA Europe RoW £m CER% £m CER% £m CER% £m CER% ----------- ------------ ------------- ----------- CENTRAL NERVOUS SYSTEM 983 8 702 5 183 5 98 43 Depression 607 8 457 3 89 12 61 53 Seroxat/Paxil 439 - 293 (10) 89 12 57 55 Wellbutrin 168 40 164 40 - - 4 34 Migraine 221 10 166 6 39 8 16 68 Imigran/Imitrex 198 9 151 6 32 8 15 74 Naramig/Amerge 23 12 15 13 7 6 1 33 Lamictal 89 23 45 27 34 20 10 20 Requip 23 48 12 75 10 23 1 24 Zyban 22 (34) 11 (4) 8 (61) 3 (8) RESPIRATORY 871 36 429 55 304 20 138 26 Flixotide/Flovent, 613 53 316 74 226 35 71 37 Serevent, Seretide/Advair Flixotide/Flovent 219 7 122 22 57 (19) 40 15 Serevent 154 7 96 20 49 (12) 9 2 Seretide/Advair 240 >100 98 - 120 >100 22 >100 Flixonase/Flonase 116 20 93 21 11 29 12 11 Ventolin 69 (1) 6 (5) 31 (9) 32 9 Becotide 37 (17) - - 28 (21) 9 (3) ANTI-BACTERIALS 543 - 258 2 147 1 138 (5) Augmentin 278 (1) 168 - 67 (1) 43 (5) Zinnat/Ceftin 74 - 25 (11) 22 (5) 27 16 Fortum 50 9 13 20 21 10 16 2 Amoxil 33 (17) 8 9 11 (5) 14 (32) ANTI-VIRALS 533 15 277 16 141 12 115 18 HIV 340 16 203 11 97 17 40 48 Trizivir 46 >100 32 - 14 >100 - - Combivir 150 3 90 (4) 42 (1) 18 72 Epivir 74 (3) 40 (5) 22 (6) 12 9 Retrovir 14 - 7 12 5 (5) 2 (14) Ziagen 42 1 24 (12) 12 6 6 >100 Agenerase 14 (1) 10 (23) 2 97 2 >100 Herpes 154 8 64 32 37 - 53 (5) Valtrex 89 54 55 39 15 20 19 >100 Zovirax 65 (22) 9 4 22 (11) 34 (31) Zeffix 27 49 2 42 3 55 22 49 METABOLIC & GASTRO- 400 24 228 48 68 (4) 104 9 INTESTINAL Avandia 226 94 205 90 8 >100 13 >100 Zantac 111 (14) 22 (29) 35 (16) 54 (4) VACCINES 241 9 68 6 103 1 70 28 Hepatitis 110 (8) 45 (9) 46 (4) 19 (14) Infanrix 54 28 21 82 23 (8) 10 57 ONCOLOGY & EMESIS 217 20 162 24 34 7 21 15 Zofran 153 20 111 22 27 13 15 19 Hycamtin 27 16 21 26 5 (5) 1 (1) CARDIOVASCULAR 141 9 94 11 30 8 17 1 Coreg 60 24 58 22 - - 2 88 ARTHRITIS (Relafen) 32 (46) 27 (48) 2 (33) 3 (31) OTHER 223 (3) 1 (93) 59 8 163 30 ----------- ------------ ------------- ----------- 4,184 13 2,246 14 1,071 8 867 18 =========== ============ ============= =========== PHARMACEUTICAL SALES - EXISTING PORTFOLIO Nine months ended 30th September 2001 ----------------------------------------- Total USA Europe RoW £m CER% £m CER% £m CER% £m CER% ----------- ------------ ------------- ----------- CENTRAL NERVOUS SYSTEM 2,870 14 2,018 11 569 14 283 38 Depression 1,768 16 1,320 13 277 14 171 42 Seroxat/Paxil 1,310 11 875 5 277 14 158 44 Wellbutrin 458 32 445 32 - - 13 31 Migraine 617 5 460 4 120 5 37 27 Imigran/Imitrex 550 4 419 3 99 3 32 26 Naramig/Amerge 67 14 41 13 21 12 5 32 Lamictal 253 19 126 24 100 16 27 10 Requip 59 38 30 55 27 23 2 30 Zyban 103 30 41 (13) 32 55 30 >100 RESPIRATORY 2,565 26 1,198 44 935 14 432 14 Flixotide/Flovent, 1,746 43 857 61 678 27 211 40 Serevent, Seretide/Advair Flixotide/Flovent 708 12 382 30 199 (14) 127 18 Serevent 506 11 306 29 171 (9) 29 1 Seretide/Advair 532 >100 169 - 308 >100 55 >100 Flixonase/Flonase 373 18 275 19 42 22 56 10 Ventolin 223 (8) 23 13 98 (11) 102 (9) Becotide 118 (24) - (98) 91 (20) 27 (24) ANTI-BACTERIALS 1,838 2 922 11 500 (3) 416 (9) Augmentin 972 10 611 19 230 (2) 131 (1) Zinnat/Ceftin 299 (2) 138 (4) 84 5 77 (6) Fortum 151 (5) 31 (4) 66 (3) 54 (7) Amoxil 109 (27) 28 (34) 37 (20) 44 (28) ANTI-VIRALS 1,527 9 756 8 433 8 338 12 HIV 975 14 568 8 299 17 108 40 Trizivir 102 >100 70 - 31 >100 1 - Combivir 448 7 263 (1) 137 8 48 67 Epivir 223 (4) 116 (7) 72 (6) 35 10 Retrovir 40 (13) 18 (9) 15 (16) 7 (13) Ziagen 124 5 72 (9) 38 20 14 84 Agenerase 38 (7) 29 (23) 6 88 3 >100 Herpes 463 3 177 25 117 (7) 169 (6) Valtrex 247 46 150 36 48 12 49 >100 Zovirax 216 (23) 27 (14) 69 (17) 120 (27) Zeffix 76 62 5 50 9 71 62 62 METABOLIC & GASTRO- 1,156 17 613 33 218 (3) 325 8 INTESTINAL Avandia 597 75 541 66 22 >100 34 >100 Zantac 364 (13) 72 (25) 120 (16) 172 (5) VACCINES 693 8 191 14 295 - 207 16 Hepatitis 328 (9) 135 4 135 (17) 58 (14) Infanrix 176 37 53 98 89 18 34 30 ONCOLOGY & EMESIS 626 18 460 22 105 7 61 8 Zofran 445 20 319 23 80 14 46 12 Hycamtin 75 8 53 16 17 (4) 5 (8) CARDIOVASCULAR 413 16 263 19 99 18 51 - Coreg 167 40 161 39 - - 6 55 ARTHRITIS (Relafen) 133 (22) 116 (20) 7 (44) 10 (24) OTHER 665 (4) 34 (69) 172 2 459 10 ------------ ------------ ------------- ----------- 12,486 12 6,571 16 3,333 7 2,582 9 ============ ============ ============= =========== CONSUMER HEALTHCARE SALES ------------------------- Three months ended 30th September 2001 ------------------- Including Block Drug £m CER% ----- ----- Over-the-counter medicines 381 12 Analgesics 80 39 Dermatological 42 53 Gastro intestinal 81 7 Respiratory tract 40 11 Smoking control 81 2 Vitamins & naturals 38 7 Oral care 276 70 Nutritional care 153 13 ----- ----- Total 810 27 ===== ===== Excluding Block Drug Over-the-counter medicines 345 2 Oral care 165 1 Nutritional healthcare 153 13 ----- ----- 663 4 Block Drug 147 - ----- ----- Total 810 27 ===== ===== Nine months ended 30th September 2001 Including Block Drug £m CER% ----- ----- Over-the-counter medicines 1,137 6 Analgesics 240 22 Dermatological 138 55 Gastro intestinal 248 4 Respiratory tract 108 (3) Smoking control 228 (15) Vitamins & naturals 117 9 Oral care 815 70 Nutritional healthcare 435 9 ----- ----- Total 2,387 22 ===== ===== Excluding Block Drug Over-the-counter medicines 1,023 (4) Oral care 492 2 Nutritional healthcare 435 9 ----- ----- 1,950 - Block Drug 437 - ----- ----- Total 2,387 22 ===== ===== FINANCIAL REVIEW - PROFIT AND LOSS ---------------------------------- Total sales ----------- An analysis of total sales between existing portfolio, divested and acquired products is set out below: Q3 2001 Q3 2000 Growth 2000 £m £m CER% £m ----- ----- ----- ----- Existing portfolio: Pharmaceuticals 4,184 3,663 13 14,982 Consumer Healthcare 663 639 4 2,631 ----- ----- ----- ----- 4,847 4,302 12 17,613 Products divested on merger - 127 - 466 ----- ----- ----- ----- 4,847 4,429 8 18,079 Acquired products - Block Drug 147 - - - ----- ----- ----- ----- 4,994 4,429 12 18,079 ===== ===== ===== ===== Sales of existing portfolio products in Q3 2001 increased in aggregate by 12% over Q3 2000. The revenue lost from products divested at the end of 2000 to fulfil regulatory conditions for the Glaxo Wellcome/SmithKline Beecham merger, principally Kytril and Famvir, is more than offset by the additional revenue from the acquired Block Drug portfolio. Pharmaceutical sales -------------------- Sales of existing portfolio products increased 13%, which represents additional sales of £480 million (in CER). An analysis of sales between new products (those launched in a major market within the last five years), franchise products (established products), and older products now less actively promoted is set out below: Q3 2001 ---------------------------------- £m % total CER% CER £m ----- ----- ----- ----- New 1,003 24 59 365 Franchise 2,250 54 8 172 Other 931 22 (6) (57) ----- ----- ----- ----- 4,184 100 13 480 ===== ===== ===== ===== The growth of the new products, notably Seretide/Advair and Avandia, more than offsets the decline of older products, such as Zantac and they build an increasing share of the total portfolio. Regional analysis ----------------- In the third quarter 54% of the Group's total pharmaceutical revenue was earned in the USA where overall sales growth was 14%. Advair (Seretide) for asthma recorded sales approaching £100m in the quarter and Wellbutrin also continued its strong growth record. A number of products were impacted by changes in wholesaler stocking patterns, some, such as Avandia, beneficially, others, such as Paxil and Augmentin, adversely. The net effect of these buying patterns in the quarter is not considered to be material. Zantac sales continued to decline in the face of increased generic competition. Europe region sales accounted for 25% of the Group's total pharmaceutical sales. Seretide was the major driver of the 8% overall sales growth in the region. The continued strength of Seroxat/Paxil together with growth of the HIV portfolio, particularly Trizivir, offset declines in a number of other products. France, Italy and Spain all returned good performances in the quarter. Sales growth of 18% in the Rest of the World, an improvement on the second quarter results, reflected better conditions in most markets, notably India and Latin America, and a number of tender orders in the Middle East and Africa. Japan continued to perform well with sales growth in the quarter of 20%, driven by the recent launches of Paxil, Valtrex and Imigran tablets. Trading profit - business performance ------------------------------------- Q3 2001 Q3 2000 -------------- -------------- Growth 2000 £m % £m % CER% £m ----- ------ ----- ----- ----- ----- Sales 4,994 100.0 4,429 100.0 12 18,079 Cost of sales (1,071) (21.4) (919) (20.7) (16) (3,811) Selling, general and (1,867) (37.4) (1,690) (38.2) (9) (6,732) administration Research and development (640) (12.8) (636) (14.4) 1 (2,510) ----- ------ ----- ----- ----- ----- Trading profit 1,416 28.4 1,184 26.7 18 5,026 ===== ====== ===== ===== ===== ===== Cost of sales increased as a percentage of sales as the loss of the high-margin products divested in December 2000 and the inclusion of lower margin Block Drug products were only partly offset by the benefits of merger and manufacturing restructuring savings. Selling, general and administration (SG&A) costs also benefited from merger savings, principally in general and administration expenditure, but the inclusion of Block Drug costs distorts the quarterly comparison. Excluding Block Drug expenses, growth in SG&A costs would have been 5% and SG&A expressed as a percentage of sales would have been 1.3% lower. Research and development expenditure increased at below the rate of sales growth. It is expected that growth in research and development costs will increase as merger savings begin to be reinvested in this area. Overall the trading margin improved 1.7%, which is consistent with expectations of an improvement for the full year of up to 2%. Profit before tax - business performance ---------------------------------------- Q3 2001 Q3 2000 2000 £m £m £m ----- ----- ----- Trading profit 1,416 1,184 5,026 Other operating income/(expense) (59) 6 274 Profits of associates 19 23 65 Disposal of interests in associates - - 144 Net interest payable (27) (59) (182) ----- ----- ----- Profit before tax 1,349 1,154 5,327 ===== ===== ===== Other operating income in Q3 2001 includes costs associated with product withdrawals, and equity investment write downs due to adverse stock market conditions. Net interest payable was lower due to a lower average level of net debt in Q3 2001 than in Q3 2000 and to lower interest rates. Overall profit before tax increased by 16%. Merger items, integration and restructuring costs and disposal of subsidiaries ------------------------------------------------------------------------------ Q3 2001 Q3 2000 2000 £m £m £m ----- ----- ----- Manufacturing and other restructuring (37) (28) (171) Merger integration costs (299) (38) (400) Block Drug integration costs (22) - - ----- ----- ----- Effect on operating profit (358) (66) (571) Share of associate - (2) (8) Product divestments - - 1,416 Merger transaction costs - (24) (121) Loss on disposal of businesses (301) - (14) ----- ----- ----- Effect on profit before tax (659) (92) 702 ===== ===== ===== The loss on disposal in Q3 2001 arose on the sale of Affymax. It includes a £299 million write off of goodwill which has no net effect on Group reserves. Taxation -------- Q3 2001 Q3 2000 2000 £m £m £m ----- ----- ----- Business performance (360) (316) (1,454) Merger items, integration and restructuring costs 73 22 (245) and disposal of subsidiaries ----- ----- ----- (287) (294) (1,699) ===== ===== ===== The charge for taxation on business performance profit in Q3 2001 represents an effective rate of tax of 26.7%, which is the rate expected to apply for the year. This represents a reduction compared to the effective rate of 27.3% in the full year 2000. The credit for taxation on merger items, integration and restructuring costs and disposal of subsidiaries in Q3 2001 reflects the estimated actual tax rate applicable to the transactions in the territories in which they arise. Earnings -------- Q3 2001 Q3 2000 2000 £m £m £m ----- ----- ----- Net profit attributable to shareholders --------------------------------------- Earnings 374 732 4,154 Adjustment for merger items, integration and 586 70 (457) restructuring costs and disposal of subsidiaries ----- ----- ----- Adjusted earnings 960 802 3,697 ===== ===== ===== Earnings per share pence pence pence ------------------ ----- ----- ----- Basic earnings per share 6.1 12.1 68.5 Adjustment for merger items, integration and 9.7 1.1 (7.5) restructuring costs and disposal of subsidiaries ----- ----- ----- Adjusted earnings per share 15.8 13.2 61.0 ===== ===== ===== Appropriations -------------- £m £m £m ----- ----- ----- Earnings (profit attributable to shareholders) 374 732 4,154 Dividends (546) (163) (2,097) ----- ----- ----- Retained (loss)/profit (172) 569 2,057 ===== ===== ===== The dividend in Q3 2001 is the declared GSK dividend of 9p per share. In Q3 2000 the dividend charge reflects the third quarter dividend payable by SmithKline Beecham plc. Glaxo Wellcome plc did not declare quarterly dividends. STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES ---------------------------------------------- 9 Months 9 Months 2001 2000 2000 £m £m £m ----- ----- ----- PROFIT ATTRIBUTABLE TO SHAREHOLDERS 2,083 2,372 4,154 Exchange movements on overseas net assets (125) (30) (23) UK tax on exchange movements (6) (11) 16 ----- ----- ----- TOTAL RECOGNISED GAINS AND LOSSES 1,952 2,331 4,147 ===== ===== ===== END OF PART ONE PART TWO FOLLOWS ================

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