GSK Announces Q2 Results for 2010

LONDON, July 21, 2010--

GSK Has Focused Its Business Around The Delivery Of Three Strategic Priorities, Which Aim To increase growth, reduce risk and improve GSK's long-term financial performance: 
• Grow a diversified global business 
• Deliver more products of value 
• Simplify GSK's operating model 

Chief Executive Officer's Review 

Two years ago I set out GSK's strategic priorities designed to increase growth, reduce risk and  improve long-term performance.

We are making good progress to build our group of healthcare businesses which offer  sustainable growth and have complementary risk/value profiles. At the same time, we have  also taken action to drive improved returns on invested capital in our core R&D operation.

This combination is creating a balanced business with a lower overall risk profile and the  option for significant potential upside from the pharmaceutical pipeline.

This is our response to the pressures we identified in our sector; an unprecedented period of  genericisation and increasing payer demand for cost-effective healthcare.

This quarter has seen further evidence of these pressures and, to my mind, has reinforced that we  have taken the right strategic approach.

For the quarter, GSK sales were impacted by several individual factors and adverse prior year  comparisons. For example, we saw an acceleration of generic competition to Valtrex in the USA  and temporary suspension of Rotarix in the quarter.

In the first half total sales grew 7% and excluding pandemic products grew 1%. I believe this  performance is encouraging and I remain confident in our prospects for the full year.

Our diversified sales base is helping to reduce reliance on sales generated in ‘white pills/western  markets' and offset the decline in sales seen in our US pharmaceuticals business.

In Emerging Markets we have sought to build our current market shares and therapeutic breadth  through organic means and targeted acquisitions. During the quarter, for example, we invested in  new ‘bolt-on' business opportunities in Korea and Argentina.

In Consumer Healthcare, total sales were £1.25 billion and grew 3% in the quarter. This was  ahead of estimated market growth of 2%. Excluding the impact of European alli launch stocking in  the second quarter of last year, underlying sales growth was 6%.

An area particularly worth mentioning is our Oral care business. Sensodyne now accounts for 4 of  the top 10 US toothpaste SKUs and grew 19%. This is a clear example of what sustained  investment in brand innovation and A&P can achieve.

As I have said previously, reported sales for our Vaccines business are subject to fluctuation due to  tender purchasing as well as variability of supply for both GSK and competitors. Both these factors  impacted sales reported in the second quarter along with the temporary suspension of Rotarix in the  USA. Over the course of the year, I fully expect this business to deliver continued strong growth.

For the last two years, one of our top priorities has been to improve the effectiveness of our  US pharmaceutical operations. This is essential given the changing US environment, in which we  are seeing fundamental adjustments in pricing, and to meet the needs of our new product portfolio.